Are utilities failing at restoration? Experts chide post-Sandy efforts (though I disagree)


I am happy to include this guest editorial from FTI Consulting, because it highlights a crucial issue. Regulators, ratepayers and policymakers are all screaming for utilities to improve their outage response times. But nobody wants to pay for it.


The FTI gang says that workforce reductions are to blame. And that workforce increases are the solution.


More line workers would certainly be welcome. But as the authors themselves admit, many utilities can't get permission from regulators. In addition, we are seeing more and more evidence that simply hardening infrastructure (such as moving substations out of flood prone areas) can make a big difference. What's more, we are seeing more and more examples of "self-healing" grids that can drastically reduce the scale and duration of outages.


I believe the best long-term solutions are those that reduce the need for line workers.


Even though I think the authors' proposed solution is only a partial one, I do think they do a great job of laying out the issue. Take a look, and use the Comment form at the bottom to say who's right. - Jesse Berst


By Ellen Smith, R.J. Arsenault, Conor Branch


Why we shiver in the dark
Hurricane Sandy hit Atlantic City, New Jersey, on October 29, 2012. The U.S. Department of Commerce estimated that Sandy caused more than $50 billion in damage and 100 direct storm-related deaths. On October 31, over six million people were without power. More than half of New Jersey was without power; a fifth of New York State was dark. And the outages would go on and on.


In Sandy’s wake, states convened committees and issued reports. A consensus emerged. The reports said utilities should:

·      Invest in modernizing their infrastructure.

·      Bury power lines and create redundant power-generation and distribution capabilities.

·      Be held accountable for storm response targets and, if found by authorities to too slow, be subject to heavy fines and penalties.

·      Improve mutual aid programs.


All good suggestions. How have they worked out?


Winter, 2014
On February 5, 2014, the Philadelphia region was hit by a major ice storm. Philadelphia Electric (PECO) had its second-largest outage ever with, at the peak, 623,000 customers without power. Two days later, almost 290,000 PECO customers had not had their service restored. Some customers were left in the dark for over a week.


February was a brutal month across the U.S. In Georgia, an ice storm left about 350,000 people without electricity and the outages followed an all-too-familiar pattern. The number of people and businesses affected increased rapidly during the first 24 hours and it took three-to-five days to restore power to most people.


By day three, people were getting angry.


It’s hard not to conclude that despite the worthwhile suggestions that emerged after Sandy, actual improvement in utility company response to extreme weather events is hard to find. After significant storms, the peaks (the number of households and businesses that lose power) are just as high; the tails (the time during which customers are left without power) are just as long.


Missing the Big Picture
Post-Sandy reports looked to the future but offered few suggestions for fixing the present. And the present is full of problems.


Where have all the workers gone? Over the past 15 years, utility companies have consolidated to improve their competitive capabilities and leverage economies of scale to keep rates low. Between 1995 and 2012 the number of investor-owned utilities shrank by nearly 50%.


This consolidation has had an unintended consequence -- a serious shortage of skilled labor.


In this highly-regulated sector, agency approval is necessary for any M&A, and that approval consistently has been contingent upon the merging companies meeting cost-reduction targets.

The workforce battle is one companies must fight now.


Utilities must collaborate with regulators and governing authorities to free up the money to rebuild their workforces and training programs. At the same time, they must strive to replace retiring workers by offering good salaries and benefits to attract applicants.


Right now, utilities should ensure that they have people who can be deployed to the right places, at the right time, with the right equipment. That means conducting surveys of their service areas to ensure that their trucks can get where they need to go. Once a line worker has to leave his truck to start climbing a tree, the race to restore power to customers speedily has already been lost.


A Matter of Survival
Continuing public anger at utilities cannot be wished away. It inevitably will encourage the development of alternative energy distribution systems that will lower demand for utility services and result in lost revenue. This lost revenue will further hamper the utilities’ ability to harden the infrastructure, invest in new technologies, and rebuild its workforce.


The threat to U.S. public utilities presented by conducting business-as-usual, or planning for the future without dealing with the challenges of the present, is real, increasing, and demands both long-term and short-term action before next winter’s storms hit.


FTI Consulting Senior Managing Director Ellen Smith has 35 years experience in the energy sector and specializes in the analysis of electricity market design and performance. She has provided testimony on utility storm preparedness and response, as well as utility infrastructure and capital requirements.


FTI Consulting Senior Director R. J. Arsenault has spent 10 years in the energy and financial sectors. His expertise in the electricity industry covers the investment cycle and commercial optimization of asset portfolios.


FTI Consulting Director Conor Branch has performed modeling and analytics used in expert witness testimony and litigation support in various natural gas and power-sector proceedings before domestic courts and regulatory agencies as well as international arbitration panels.


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