An interim report accepted by District of Columbia Mayor Vincent Gray on May 15 calls for a multi-year program estimated at almost $1bn in a first phase to selectively underground up to 60 high voltage lines that are most affected by storms and overhead-related storms.
The move is expected to improve service for Pepco Holdings’ (NYSE:POM) Potomac Electric Power Company (Pepco) customers on those feeders by 95%, according to a statement from Gray’s office.
Gray established his Power Line Undergrounding Task Force, which includes government officials, regulators, local utility executives, public advocates and residents, in August 2012 to address the power outages that District residents and businesses endured as a result of the derecho thunderstorm system that left extensive wind damage across the region in June 2012.
The statement also noted that the task force, which is co-chaired by Pepco Chairman President and CEO Joseph Rigby, is recommending a financing arrangement through a combination of financing split approximately evenly between the District and Pepco. Funds would be obtained through a combination of traditional Pepco funding of debt and equity for $500m, $375m in District-securitized bonds, and between $62m and $125m in District Department of Transportation (DDOT) street-paving funds that will be leveraged to support undergrounding.
For residential customers, the rate impact will begin at about $1.50 per month, increasing to a maximum of $3.25 after seven years, or about a 3.23% increase in rates. The statement added that low-income customers will be exempt from the rate impact. For commercial customers, the rate impact will vary by the class of service and will generally average between 5% and 9.25%, the statement added.
As part of its work on the task force, Pepco developed a model that will evaluate the cost and benefits from undergrounding each overhead line in the District.
The utility will develop a plan and submit it to the Public Service Commission (PSC) of the District of Columbia for approval. The statement further noted that no work will be performed until the PSC has the opportunity to review the selection criteria and receive public comments on the plan.
The areas identified will include the high-voltage feeders most affected by overhead-related outages in Wards 3, 4, 5, 7 and 8 of the city, which have existing overhead distribution lines. About half of the city is served by underground lines.
There will still be secondary and service lines running overhead on the existing poles, the statement added, noting that typically, those facilities are a small factor in outage events. Historically, outages on these circuits are not prolonged. The proposal will require legislation to approve the undergrounding plan and authorize the regulators to approve a financing order for recovery of the costs associated with the District-issued bonds and for Pepco’s costs.
The statement also noted that the PSC will need to issue a financing order that authorizes the establishment of a surcharge for the recovery of the cost of bond repayment and of Pepco’s capital costs and expenses associated with the undergrounding effort.
The PSC will then approve the selection of the overhead lines to be undergrounded based on the selection process recommended by the task force, according to the statement.
Gray called the proposal “a win for the District.”
Rigby said in the statement, “We are meeting and even exceeding service reliability standards in the District, but this work will help our system better withstand severe weather events.”
Pepco: Opportunities exist for ‘some level of undergrounding’
The overwhelming majority of the higher voltage lines in the District of Columbia are already underground, William Gausman, senior vice president of strategic initiatives with Pepco Holdings, told TransmissionHub in an interview prior to Gray’s May 15 announcement.
“When electricity was first being developed, Congress passed a law that prohibited the construction of overhead facilities in what was then Washington, D.C.,” Gausman told TransmissionHub, referencing the city’s original boundaries.
Pepco is supportive of undergrounding, he said. “However, we also recognize that to convert from overhead to underground is a very expensive process, so there has to be identified reliability benefits to be gained by doing the undergrounding,” he said.
Generally, it costs $3m to $5m a mile to underground new facilities, he said.
Undergrounding the entire overhead distribution system should not be done “just for the sake of undergrounding, but identifying the appropriate areas and what portions of the system provide the greatest reliability benefits,” he said. “I think there are opportunities to perform some level of undergrounding.”
The decision to place existing overhead lines underground is made as part of an effort to improve the performance of the electric system during major storms, “if you have a hurricane or a derecho, something like that, where you have multiple trees coming down [and] you have very high winds that can break poles,” Gausman said.
If a utility is just trying to solve for summer afternoon thunderstorms, “there are other reliability enhancements that we’re doing to improve the general reliability of the electric system,” he added.
For major events like hurricanes, a load-serving entity cannot build a distribution system along residential streets that will withstand such storms, especially in a city like Washington, D.C., where there is a high density of large, mature trees above the wires. “[T]here’s no distribution system that’s going to withstand that type of damage, so you have to first really identify what you’re trying to solve for,” he said.
Undergrounding in appropriate locations to solve for major events is the right answer, Gausman said.
Pepco is looking at its entire distribution system, identifying areas where there have been outages and looking at possible changes to that portion of the distribution system. “[W]e put larger, stronger poles up, larger wires … it’s really just finding the portions of the distribution system to rebuild, to harden it, to be able to withstand higher winds [and] more severe outages,” he said. “But, as I said, nothing that you can do from an overhead standpoint is going to withstand the full force of a hurricane in a metropolitan area with heavy tree concentration.”
Tree trimming and other reliability measures will reduce the number of outages under all storm conditions, even the most severe, he added.
“If you can reduce the number of outages during a hurricane, then … you can redirect the crews to other events faster and it can help to reduce the overall restoration times,” he said.
Efforts in Maryland, New Jersey
Gausman said that the task forces in the District of Columbia and Maryland evaluated the benefits of undergrounding lines to help increase the resiliency of the electric system during storm conditions.
Maryland Gov. Martin O’Malley in October 2012 released the state’s task force’s report, which contains 11 recommendations, including a four-step implementation plan that would accelerate investment designed to strengthen the electric distribution grid, according to a statement from the governor.
The report stems from an executive order that O’Malley issued in July 2012 to look into how to strengthen the electric distribution system.
According to the report, several recommendations were made to build upon the foundation of the Rule Making 43 (RM43) regulations. RM43 is the Maryland Public Service Commission’s recent regulatory process to implement changes to the reliability metrics.
For instance, the task force recommended accelerating several years’ worth of RM43 investments into a condensed timeframe.
“While the task force was intentionally not proscriptive regarding which specific remediation measures should be implemented by the utilities, data collected through the working groups demonstrates that selective undergrounding is an effective way to harden the grid,” the report added.
Gausman said all the utilities in New Jersey, including Pepco Holdings’ Atlantic City Electric, are working with the state Board of Public Utilities (BPU) to evaluate different options and make proposals to the BPU in relation to resiliency initiatives. The utilities are preparing filings over the next few months to propose recommendations.
“[Y]ou have to evaluate where you want to underground [and] pick the right locations so that you can maximize the reliability improvements,” he said, noting that placing 100% of the lines underground is too expensive a proposition to just go in and try to do. “[Y]ou really have to be more selective in where you can identify the appropriate areas to underground.”