Safe and Reliable Service at Just and Reasonable Rates: The Economics of Storm Hardening

Transcription

1 Safe and Reliable Service at Just and Reasonable Rates: The Economics of Storm Hardening Presented to: NRRI Webinar November 8, 2017 Ted Kury Director of Energy Studies Public Utility Research Center University of Florida

2 Public Utility Research Center Research Expanding the body of knowledge in public utility regulation, market reform, and infrastructure operations (e.g. benchmarking studies of Peru, Uganda, Brazil and Central America) Education Teaching the principles and practices that support effective utility policy and regulation (e.g. PURC/World Bank International Training Program on Utility Regulation and Strategy offered each January and June) Service Engaging in outreach activities that provide ongoing professional development and promote improved regulatory policy and infrastructure management (e.g. in-country training and university collaborations) 2

3 The Body of Knowledge on Infrastructure Regulation 3

4 PURC Public-Private Partnerships (P3) Certification Training Program Foundation Level Certificated P3 Professional (CP3P) Program PURC is the first academic institution in the US to become an Accredited Training Organization (ATO) of the APMG International s PPP Certification Program. APMG s certification program aims to foster a common minimum level of knowledge and understanding amongst individuals working on PPPs It is the only globally recognized PPP certification 4

5 Acknowledgements I want to thank Duke Energy Florida, the Florida Electric Cooperative Association, the Florida Municipal Electric Association, Florida Power & Light, Florida Public Utility Company, Gulf Power, Lee County Electric Cooperative, and Tampa Electric Company for their generous support of this initiative. A portion of this presentation is based on a paper coauthored with Lynne Holt. The Washington DC case study was originally presented by Chairman Betty Ann Kane of the DC PSC. 5

6 Summary The storm hardening question Model for cost effectiveness of relocating power lines Model preparation Model results 6

7 2004 Atlantic Hurricane Season 7

8 2005 Atlantic Hurricane Season 8

9 Florida Storm Damage Year Named Storm Damage (000$) Bonnie 100 Charley 5,533,680 Frances 5,602,120 Ivan 4,090,400 Jeanne 840,205 Arlene 3,740 Cindy 300 Dennis 1,569,232 Katrina 208,600 Wilma 10,215,700 Total 28,064,077

10 Aftermath of 2004 and 2005 Seasons 10 named storms $28 billion in damages PSC convenes workshop for market participants, commission staff, and policymakers on January 23,

11 FPSC Order PSC PAA-E1 On April 25, the FPSC issued Order Number PSC PAA-E1 requiring that each investor owned utility file a plan, and the associated implementation costs, for a storm preparedness program with ten initiatives: a three- year vegetation management cycle for distribution circuits; an audit of joint-use attachment agreements; a six-year transmission structure inspection program; hardening of existing transmission structures; a transmission and distribution geographic information system; post-storm data collection and forensic analysis; collection of detailed outage data differentiating between the reliability performance of overhead and underground systems; increased utility coordination with local governments; collaborative research on effects of hurricane winds and storm surge; and a natural disaster preparedness and recovery program. 11

12 FPSC Order PSC PAA-E1 Florida would be better served by consolidating utility resources through a centrally coordinated research and development effort with universities as well as research organizations. The purpose of such effort would be to further the development of storm resilient electric utility infrastructure and technologies that reduce storm restoration costs and outages to customers. 12

13 Cooperative Initiatives Annual meetings to assess storm readiness and preparation Model to assess the cost effectiveness of storm hardening strategies Vegetation management workshops for sharing best practices and discussing management issues Deployment of 50 high resolution wind monitoring stations throughout Florida 13

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18 Vegetation Management Workshops Two workshops bringing together utility management personnel and PSC staff Utility presentations on vegetation management practices Discussion of best practices in vegetation management cycles and standards Discussion of municipal barriers to vegetation management 18

19 Wind Monitoring Stations

20 State of North Carolina Investigation following 2002 ice storm Study focused on costs and benefits of undergrounding existing infrastructure Concluded that project would cost $41B (nearly six times asset book value) and take 25 years Electric bills would increase 125% Recommended that each utility identify trouble areas and develop plans to convert those facilities to underground Recommended that utilities continue current undergrounding practices regarding new construction 20

21 Pepco Area in Washington, DC Study in 2010 of the reliability implications, technical and economic feasibility of undergrounding DC power lines Reviewed 16 reports from 8 states from 2000 through 2009 and found that no study found quantifiable benefits for undergrounding existing facilities on a system-wide basis Did not model environmental impacts, business and tourist impacts of construction, resident s inconvenience, or monetary value of aesthetics Concluded that 65% of outages could be avoided at a cost of $1.1B, but that an additional $4.7B would be necessary to avoid the remainder of outages Mayor s Undergrounding Task Force ultimately recommended a strategic $1B investment that would result in 3.23% rate increase 21

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27 Underground Model Flowchart

28 Simulated Storm Frequency

29 Model Output Probability distribution: Restoration cost Customer opportunity costs Service interruptions Before and after relocation of power lines 29

30 Model Output Utility Annual Cost Before After Benefit Equipment O&M $65, $29, $36, Other O&M $1, $3, ($1,910.28) Lost Revenue (Storm) $15, $13, $1, Lost Revenue (Non-Storm) $6, $2, $4, Repairs (Storm) $2, $1, $1, Repairs (Non-Storm) $14, $6, $7, Others $0.00 $0.00 $0.00 Total $105, $56, $48, Customer Opportunity Cost Storm $296, $259, $37, Non-Storm $135, $53, $81, Total $431, $313, $118, Customer Reliability CMI (Storm) 5,956,809 5,201, ,926 CMI (Non-Storm) 2,709,150 1,083,409 1,625,741 Total 8,665,958 6,285,292 2,380,667

31 Storm Damage Probability

32 Benefit Varies by Location Region Southeast (Ft. Lauderdale) Northeast (Jacksonville) Southwest (Naples) Northwest (Pensacola) Storms Affecting Project Area in 10,000 Hurricane Years Average Annual Damage before Hardening Average Annual Damage after Hardening Average Storm Damage before Hardening Average Storm Damage after Hardening 95 th Percentile Storm Damage before Hardening 95 th percentile Storm Damage after Hardening 1, $2,700 $900 $1,000 $2,500 $1,700 $600 $600 $1,700 $16,000 $12,000 $23,000 $29,000 $10,000 $8,000 $14,000 $19,000 $67,000 $57,000 $96,000 $85,000 $42,000 $38,000 $64,000 $60,000

33 Conclusions Stakeholders can accomplish goals as a cooperative that they cannot achieve alone Regulatory leadership required to initiate this cooperative effort Cost effectiveness of relocating power lines depends on many factors no easy answers Modeling effort can lead to better allocation of scarce utility resources 33

34 Ted Kury Contact Information 34