Utility regulators and utilities need a better and more commonly understood definition of the term “resilience” as an increasing number of utilities seek approval to charge consumers for investments designed to improve their systems’ ability to withstand damage from major storms and other disruptions, according to a new report by National Association of Regulatory Utility Commissioners (NARUC) staff.
“Our job as regulators is to manage risks and ensure that consumers pay fair, just, and reasonable rates for safe and reliable utility services,” Philip Jones, NARUC president, said in releasing the report at the organization’s 125th Annual Meeting in Orlando, Fla., Nov. 18. “Hardening the system against massive storms and other disruptions may require new regulatory tools that better evaluate these risks, along with a broader understanding about how we use and value utility services.”
While terms like “reliability” have standards and metrics, the word “resilient” is commonly used but not necessarily commonly defined, the report’s authors said.
The report proposed a place for resilience within the well-understood terminology of reliability, perhaps based on the working definition of resilience contained in a 2010 report by the National Infrastructure Advisory Council (NIAC), which defines it as, “[r]obustness and recovery characteristics of utility infrastructure and operations, which avoid or minimize interruptions of service during an extraordinary and hazardous event.”
Among the challenges of defining a resilience investment is that the investment needs to pay for itself and create value for ratepayers, even when it is not being used. The report also noted that utilities’ investments in reliability already cover much of the investments they are making under that definition.
The report acknowledged that the definition was left intentionally broad to allow for sector-specific applicability, and proposed further narrowing of that definition to consider a system’s robustness, resourcefulness, rapid recovery and adaptability.
“The frameworks used to evaluate reliability may need tweaking to recognize a good investment in resilience,” including considering non-traditional hazards like sophisticated terrorist attacks, large-scale catastrophic events that resist restoration, events with the capacity to induce long-term outages and cascading failures, the report’s authors said.
In addition, the report said that traditional reliability metrics should be fine-tuned to more accurately value the impact of large-scale events. They should also be modified to include large-scale events that are presently excluded from metrics like system average interruption duration index (SAIDI) and customer average interruption duration index (CAIDI) because they “hopelessly swamp the math by costing far more in terms of restoration costs than individual smaller-scale events.”
The paper suggested that a risk-based approach to resilience may be necessary. Utilizing that approach will ensure that the elements of the grid that are most vulnerable will be addressed first, thus minimizing costs to consumers, according to the report. A resilience investment may be particularly valuable in the face of high-impact disasters and threats that utility systems have not faced before, like national-scale natural disasters or man-made cyber and physical attacks.
The report acknowledged that further work is needed to develop the evaluative frameworks that allow for strong regulatory review of resilience investments that may deliver more reliable and affordable service to utility customers.
It also stated that its purpose is to launch a discussion as to the term’s meaning within a regulatory construct. Accordingly, utility commissioners and other interested parties will be able to attend a four-hour workshop that will convene after the close of NARUC’s Annual Meeting on Nov. 20 to begin the process of further defining the term “resilience.”