BusinessReport.com

‘We got our electricity up just in time to lose it again” was a frequent refrain last week. It gave voice to frustration felt by those whose homes were rendered dark once again by Hurricane Ike’s comparatively mild gusts—in some cases, mere hours after finally having power restored after the destructive Gustav.

What inevitably followed was a simple question: Why?

Why, in an era when we are more reliant upon electricity than ever before, when Entergy and Cleco bills are like a second mortgage, and when we are acutely aware of the punch that hurricanes pack, do we not have a more reliable power system?

Since seven hurricanes battered Florida in a 15-month period, Florida Power & Light has spent $150 million upgrading its lines to hospitals, gas stations and grocery stores; inspecting nearly 300,000 poles and 4,400 miles of power lines a year; and trimming trees to prevent outages.

After severe winter storms knocked out power for 1.5 million people in St. Louis, AmerenUE is spending $500 million in three years to put power lines underground, inspect and replace poles and other equipment and chop trees to prevent outages.

“We know what our customers want,” AmerenUE President/CEO Thomas R. Voss says. “When they flip a switch, they want the lights to come on, and these initiatives will help us reliably supply that electricity—now and into the future.”

So what about Louisiana, where Gustav knocked out power to more than 1 million people, and took out hundreds of transmission lines and substations, thousands of distribution poles and transformers and miles of wire—some for as long as two weeks?

Two weeks ago, the Louisiana Public Service Commission agreed to launch an independent investigation into whether the state’s power infrastructure is adequately protected against major storms. The measure calls for a consultant to recommend whether transmission towers should be more wind resistant, overhead lines should be buried and utilities need to get tough about trimming trees. PSC Commissioner Jimmy Field of Baton Rouge proposed the review, saying it is “incumbent upon this commission to review the performance of those companies under our jurisdiction.”

Sen. Mary Landrieu also is working on legislation to amend the Stafford Disaster Relief and Emergency Assistance Act to give the federal government the ability to harden transmission and distribution lines “so that when disaster strikes, our communities will not be faced with needless and endless power outages. The widespread power outage that Gustav created is a reminder of the important need to invest in our infrastructure, including our power lines.”

Louisiana isn’t alone in its need for an improved power transmission and distribution system. The North American Electric Reliability Corporation, which self-regulates the bulk power industry, last year concluded investment in the transmission system as a whole fell from $5 billion annually in the 1970s to just $3 billion in the 1990s, even as the amount of power flowing through them doubled. Now the electric companies must spend $56 billion by 2011 just to maintain adequate transmission levels. In the past year, however, only 2,000 miles of transmission were added to the U.S. bulk power system—an increase of only about 1%.

“Lagging investment in transmission resources has been an ongoing concern for a number of years,” NERC concluded in its 2007 Long-Term Reliability Assessment. “More investment is required, as each peak season puts more and more strain on the transmission system.” In a NERC survey, power industry professionals cited aging infrastructure and limited new construction as the No. 1 challenge to reliability.

The state’s biggest power provider, Entergy Gulf States, spent $552 million from 2000 to 2006 to upgrade its transmission and distribution lines in the Baton Rouge area. During that same period, Entergy Louisiana spent $300 million-plus.

But Phillip May, Entergy’s vice president for regulatory affairs, couldn’t say whether any of those expenditures were aimed at hardening the system in preparation for storms. “What is clear,” he says, “is that we have invested significantly in transmission facilities.”

Underground vs. overhead

Whether the Gustav experience will bring about substantive improvements to Louisiana’s power grid remains to be seen.

Since the Labor Day storm took its toll on Baton Rouge, a growing number of residents have expressed interest in underground lines. Bury the lines, the theory goes, and the wind and trees can’t take them down.

Opposition to that is strong, however. Even before Field could propose his independent review, Entergy Vice President of Transmission Randy Helmich told the Public Service Commission the economics of underground lines “just don’t work,” and insisted it would take tens of billions of dollars to bury Entergy’s lines.

The company currently has just one underground transmission line under the Mississippi River in New Orleans because the overhead line was too low for cruise ships to pass. Some communities—East Baton Rouge Parish among them—require underground distribution lines in new subdivisions, a cost Entergy passes on to the developer.

As for toughening the system against storms, Helmich says, “there aren’t a lot of things you can do to prevent Mother Nature from breaking trees and flooding. A lot of technology exists, it just doesn’t exist at a price that makes sense.” Other communities that have considered such measures, he adds, “almost always come to the conclusion that it just doesn’t warrant it because of the cost.”

He is right.

A 2006 study by the Edison Electric Institute—an association of shareholder-owned electric companies—found that burying overhead power lines cost about $1 million a mile, or about 10 times what it costs to install overhead power lines.

Studies of statewide undergrounding initiatives in Florida and North Carolina suggested undergrounding would require rate increases from 80% to 125%. A Virginia study estimated the annual cost of statewide undergrounding would be roughly $3,500 per customer.

The Dutch energy consultant KEMA confirmed this at an LSU Center for Energy Studies symposium on rebuilding the utility infrastructure after Hurricane Katrina. The private firm estimates a hardening of the overhead transmission and distribution system costs two to four times a typical overhead system, while an underground one costs five to ten times.

“It’s not the no-brainer that a lot of people think it is,” says David Dismukes, the Center for Energy Studies’ associate director. “It is a pretty expensive proposition to go underground.”

No doubt that’s why just 30% of the country’s distribution lines and even fewer of its transmission lines are underground.

Not even underground lines are impervious to damage. Baton Rouge communities with underground lines still lost power during Gustav. And after Hurricane Wilma struck South Florida in 2004, 98% of Broward County customers lost power, even though more than half of them were served by underground lines.

Repairs to underground lines also can take longer than those to overhead lines, particularly if flooding delays access. A five-year study of North Carolina’s investor-owned electric utilities found that the frequency of outages on underground systems was 50% less than overhead systems, but that the average duration of an underground outage was 58% longer.

Other motives?

Kent Parsons and Luke Piontek, two Baton Rouge lawyers who have filed class-action lawsuits against Entergy on behalf of customers and also represent a number of competing merchant power plants, suspect Entergy “has an enormous self-interest not to invest in the upgrading of its transmission lines.”

The two say the company stopped investing in its transmission system nearly two decades ago to avoid being forced to buy more wholesale power from qualified independent producers as they are required to do through retail deregulation.

IT’S A GAS: Because of its location near Interstate 10 and Highland and Perkins road, this Exxon station could be considered an essential service provider. Florida Power & Light is upgrading main lines to gas stations, grocery stores and pharmacies to prevent lengthy power outages from future hurricanes.

Their theory is that the company uses the excuse that its aging system can’t handle the extra load from transmission lines connecting those competing plants.

“In turn, the poles and lines are old and outdated, and when a storm hits, we lose massive amounts of power,” Piontek says. “Nobody complains about it when it works, until we have a storm and it all gets knocked down.”

That allegation “is absolutely false,” May says. Since 1999, the power that Entergy produces with its older, gas-fired units for its customers has dropped from 35% to 15%, while the power it purchases from other producers has doubled from less than 20% to nearly 40%. However, those statistics do not include power produced by Entergy’s newer plants.

Says May: “We’ve cut our own generation 40% while doubling the amount purchased from the market.”

What to do?

Hurricane Gustav left Arjen Boin without electricity for nine days in his Highland Trace home, which, incidentally, has underground power lines.

As much as he’d love Entergy to harden electricity for each and every home, he thinks a compromise is needed. Authorities should determine how much they are willing or able to spend to mitigate power loss, and then prioritize what needs hardening to bring the city back to its feet quickly in a major storm.

“The debate should not be, ‘Should we underground the entire system,’ but, ‘What are the critical nodes; the stuff we absolutely have to have wired to come back after a disaster,” says Boin, the director of the Stephenson Disaster Management Institute at LSU.

“Gustav was very instructive. Of course we need public services, like law enforcement, hospitals and local government. But we’ve also seen that it’s probably a good idea to have a minimum number of gas stations. We also need shopping areas. And another one I’d put high on the list is schools. If you can put the kids in school, you can be productive. And stoplights need to be powered.”

According to KEMA, energy companies can also harden the power grid against severe storms by utilizing stronger poles, undergrounding of lines to critical facilities and aggressive vegetation management [otherwise known as tree trimming].

That’s the approach both Missouri and Florida took. AmerenUE, for example, is undergrounding lines only in areas that have been most affected by the severe weather. Florida Power & Light is upgrading main lines to 77 acute-care facilities and 55 essential-service providers like grocery stores, gas stations and pharmacies. The company is also hardening 75 critical highway crossings.

But what’s considered hardening in one community may simply be a basic system in another. While the National Electric Safety Code provides guidance for utility systems, there is no such thing as a minimum standard for the industry. That means requirements can vary from state to state.

Eric Smith, associate director of the Tulane Energy Institute, doesn’t think Louisiana’s system is necessarily better or worse than any other.

“You can build it so strong in hopes that it will never break and pay the cost, or you can build it to where it breaks at a point and you can fix it fairly quickly,” Smith says. “The problem is that whether you’re talking about ice storms in Michigan or hurricanes in Louisiana, there’s always a point where these systems will break. There are always going to be storms that simply exceed any standards.”