Evidence-Driven Utility Policy with Regard to Storm Hardening Activities

Evidence-Driven Utility Policy with Regard to Storm Hardening Activities: A Model for the Cost-Benefit Analysis of Underground Electric Distribution Lines

Theodore Kury, Public Utility Research Center, University of Florida

Introduction

In 2008, wind storm events in the United States caused nearly $5.5 billion1 in property damages and more than 27 million customers2 to lose electrical power. In addition to losses due to property damage from storms events, customers tend to suffer ancillary losses with interruptions in their electrical service. Furthermore, these losses tend to grow exponentially as the outage persists. Outages that persist for an hour or two may not result in ancillary losses. However, as outages persist for hours, or days, residential customers, restaurants and grocery stores may lose perishable items through spoilage. Customers will incur additional expenses through the purchase of necessities such as batteries or potable water. Many businesses may be forced to suspend operations, and their workers may suffer an interruption in their income. Customers who are fortunate enough to have access to on-site generation must still incur fuel expenses in order to run their generators. Storm events can cause significant financial losses and disruptions to everyday life.

In the aftermath of any storm event, there are inevitable questions. Customers ask why damage occurred and what, if anything, could have been done to prevent it. Customers and utilities seek ways to mitigate the effects of storm events in the future. Often, the relative costs and benefits of these mitigation strategies aren’t clear, and that can prevent utilities or regulators from enacting public policies that could benefit customers and utilities. The application of evidence-based utility policy and the quantification of these benefits can be essential to improving utility service and reducing costs for the service provider and the customer alike.

Following the storm seasons of 2004 and 2005, regulators and utilities in the state of Florida embarked on an initiative to study the effects of storm damage mitigation strategies. One outcome of this initiative is a model that can be used to quantify the benefits of storm hardening activities. The model is capable of simulating hurricane years and assessing how the distribution of storm damages to a project area changes with the application of storm hardening strategies. The changes in this distribution can be considered with the cost of that strategy to assess its cost-effectiveness.

The 2004 and 2005 Hurricane Seasons in Florida

The hurricane seasons of 2004 and 2005 had a marked effect on the state of Florida. These seasons saw 10 named storms impact the state and cause $28 billion in property damages alone, as shown in Table 1. On January 23, 2006, the staff of the Florida Public Service Commission (FPSC) conducted a workshop with State and local government officials, independent technical experts, and representatives of the electric utilities. The purpose of this workshop was to discuss damage to electric utility facilities resulting from the recent hurricanes and to explore ways of mitigating the effects of future storm damages and customer outages.

1 National Climatic Data Center Events database.

2 OE-417 Major Disturbance Database maintained by the United States Department of Energy’s Energy Information Administration. The 27 million customers represents outages related to transmission system failures only.

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