Pepco exec: Industry dealing with ‘unintended consequences’ from FERC Order 1000

The jury is still out on how FERC Order 1000 is going to affect the electric industry, as there are unintended consequences in terms of how entities work together, Michael Maxwell, vice president, asset management with Pepco Holdings (NYSE:POM), said on Oct. 30.

In some instances, it has been seen that while there was camaraderie in the utility world before Order 1000, “now there’s this competitive streak that Order 1000 has kind of laid out,” he said during a panel on extreme weather and T&D, part of TransmissionHub’s TransForum East in Washington, D.C.

Additionally, it is not just the utilities identifying the projects and working together, he said, adding that PJM Interconnection must also deal with evaluating those projects.

“[I]f you think about what you have to do now in terms of presenting a project to PJM, you end up having to build whole organizations to support that level of effort moving forward,” he said. “So, we’re having to adjust to this new world order. I’m not sure what’s going to be [on] the other side of this rainbow … but we’re going to have to work hard to figure it out as we go along.”

Since utilities cannot replace everything at one time, they must have a strategy and approach that entails a plan to replace assets over a sustained period of time, Maxwell said.

“The electric system … was built over 100 years – you’re not going to rebuild it within 10 or 12,” he said.

Also speaking on the panel, Griffin Reilly, engineer with Consolidated Edison’s (NYSE:ED) Consolidated Edison Company of New York (Con Edison), noted that building its infrastructure is “business as usual” for Con Edison, adding that what electric storm hardening does is “essentially just accelerating our replacement program with these investments.”

Another panelist, Ken Collison, vice president at ICF International, noted that other factors like generation retirements involving coal plants, for instance, are also a factor in transmission planning, as is the gas-electric integration matter.

FERC Order 1000, with its focus on interregional planning and looking “at all resources, not just transmission,” but demand response, energy efficiency and distributed generation, for instance, as well as public policy projects, if it is applied properly, Collison said, “has the possibility to help the planning process overall.”

On the one-year anniversary of Hurricane Sandy’s landfall on the East Coast, the panel, which also included Karen Onaran, manager, federal regulatory affairs with the Edison Electric Institute (EEI), discussed the challenges associated with storm restoration and the future of maintaining grid reliability.

In recent experience, “pretty much, every couple of years, you have a 500-year storm,” Maxwell said, adding, “Whether or not you believe in climate change or anything like that, there’s a pattern that’s starting to develop and … I think we’re in a place where we do have a new normal going on.”

Each one of the jurisdictions Pepco serves – which are the District of Columbia, as well as parts of Maryland, Delaware and New Jersey – has different views on what is considered reliability, resiliency and hardening efforts, as well as their response to recent weather events, including Hurricane Sandy, he said.

Some of the “bread and butter types of projects” that Pepco presents to state regulators when asked what it is doing to improve reliability include vegetation management.

In New Jersey, Gov. Chris Christie reached out to Pepco’s Atlantic City Electric and all the utilities in the state to develop a package of resiliency projects – including micgrogrids – to help ensure that if another event like Hurricane Sandy occurs, the state will be better prepared.

In Maryland, the governor and state regulators reached out to Pepco’s Potomac Electric Power Company (Pepco) and Delmarva Power as well as the other utilities in the state to come up with different resiliency projects to improve the system.

In Washington, D.C., the mayor has noted that as the nation’s capital, the city should not have any outages that last more than a couple of days and requested a game-changer, Maxwell said.

As TransmissionHub reported, Mayor Vincent 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.

An interim report accepted by Gray last May 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. The task force has recommended a financing arrangement through an approximately even split between the D.C. and Pepco.

All of the jurisdictions Pepco operates in take different approaches, but “the idea at the end of the day is to make sure that the customers don’t [lose power] in the middle of a storm.”

Reilly also addressed the idea of “the new normal,” noting that five of the top 10 storms in the company’s history in terms of electric customer outages happened within the last four years, including Hurricanes Sandy and Irene and the October 2011 snowstorm.

“[W]e see a trend, whether or not you want to call it climate change … there’s definitely something happening in our region and we need to address that,” he said.

Reilly described the magnitude of Sandy’s impact on Con Edison’s system last year, including the damage to its East 13th Street substation from flooding and the wind damage to its overhead system.

“We hit the ground running when the waters receded and the winds died down,” he said. “Our goal is to restore as fast as we possibly can but we also need to make sure that this never happens to us again.”

Con Edison on Oct. 21 said it has made numerous improvements to its energy delivery systems as part of a $1bn plan to fortify critical infrastructure and protect New Yorkers from major storms, including, as Reilly mentioned in his presentation, building more than a mile of concrete flood walls around stations and critical equipment.

After Sandy, various state regulators launched investigations into utilities’ responses, including the Connecticut Public Utility Regulatory Authority, which found that utilities performed in a “generally acceptable manner” regarding that storm.

Maxwell noted that it is the regulators’ role to hold utilities accountable, but regulators also react to political and public pressures. “[D]espite what they had been doing prior in terms of regulating us, and looking at reliability and looking at how the utilities operate, when the heat is turned on, the behaviors of the commission changes and they will launch investigations.”

Regulators must balance understanding their role as a regulator and determining what is the appropriate cost for measures and what are the appropriate things to be done, he said.

Similarly, Reilly noted that Con Edison’s $1bn plan to address flood risk and the potential for wind damage would have likely been met differently by regulators three years ago than it is now.

“The public is now seeing that there is the risk [and] they’ve all been impacted by it,” which is helping regulators make these decisions, he said, adding, “However, it is incredibly important that we take our time and make sure that we invest wisely.”

Collison agreed that it has become easier after extreme weather events to get investments into the system. Utilities must find a way to measure the effectiveness of the efforts being done.

“Is there a way to show how those investments have improved the system?” he added. “If there’s a way to show that, it may be easier to build on that in the future.”

Some utilities, for instance, have described how smart grid equipment that they installed helped them to restore power faster.

Another thing that could help is to look at what other utilities, regions and countries have done to improve resiliency on their systems, Collison said, adding: “[W]e found examples where certain countries, certain regions [and] certain states had policies that allowed for selective undergrounding. It’s expensive, but if you see how others have addressed it, that could be a way that you could also find ways to do that for your system.”

Onaran said that utilities need to be held accountable to some extent, but the approach should be from more of a learning experience and in a collaborative fashion rather than just having regulators implement fines on utilities.

She noted that EEI’s report, “Before and after the storm: A compilation of recent studies, programs and policies related to storm hardening and resiliency,” released in January, serves as a tool for EEI’s member companies to work with state regulators and customers “and pick what are the options that work best for them.”

In working on its report, EEI reviewed efforts underway in various regions including undergrounding, microgrids, vegetation management, increased labor forces and smart grid initiatives. 

“This gave a general idea of what are the options out there that are available and what works best for your state, your utility,” she said, adding that EEI is in the process of updating the report, which should be released again in January 2014.

An EEI initiative that came directly out of Sandy, Onaran said, is the “national response event,” which occurs when several regions become depleted in their resources and “what we have is a national response executive committee made up of utility CEOs and senior execs, who overlook this process,” which involves pooling all of the requests for crews and equipment, for instance, and allocating that based on need.

Onaran said, “We want to make sure that at this point, we are responding as one industry and not individual utilities.”

About Corina Rivera-Linares 3160 Articles
Corina Rivera-Linares, chief editor for TransmissionHub, has covered the U.S. power industry for the past 15 years. Before joining TransmissionHub, Corina covered renewable energy and environmental issues, as well as transmission, generation, regulation, legislation and ISO/RTO matters at SNL Financial. She has also covered such topics as health, politics, and education for weekly newspapers and national magazines. She can be reached at clinares@endeavorb2b.com.