Thursday, July 5, 2012

Storm Proofing Electric Grid Requires Doubling Electricity Bills: Would That Be Worth It?

The massive outages in sweltering heat have triggered criticism of electric distribution utilities and another round of questioning why electric lines are not buried under ground.  The single biggest reason why electric customers lose service is weather caused damage to distribution lines.  Ice storms, wind damage, tree limbs falling all cause havoc with electricity service and can require days and even weeks to repair service to all customers.

No doubt burying all or most distribution or transmission lines would improve reliability of the electric service, but such improvement would require a doubling of electric bills.  The typical residential electric bill would jump from about 11 cents per kilowatt-hour to 20 cents or more per kilowatt-hour.

Indeed, following a massive storm in 2003, the North Carolina Public Utility Commission studied the possibility of burying electric lines and concluded it would raise electric bills by 125% and require $41 billion of investment and decades of work.

A typical residential customer in the US pays today an electric bill between $100 to $120 per month and so monthly bills would skyrocket to $200 to $240 or more to storm proof the electric grid.  Would that investment be worth it?

A lot of people dealing with 100 degree heat without electricity would say, "Yes, absolutely."  But $1,200 more for electricity would hit hard the pocketbooks of most families.

Moreover, a doubling of grid electric bills would turbocharge investment in solar, CHP, and other on-site generation technologies.  The grid today faces real competition and cannot price itself out of the market.

Finally, utility regulators must always vigilantly monitor the capital budgets of electric distribution utilities to make sure that they are investing appropriately in grid reliability.  The electric distribution utilities remain state-sanctioned monopolies everywhere in America, and their rates and the use of ratepayer money are typically regulated by government officials appointed for that purpose.

Since electric distribution customers have no choice or competition to protect them, utility regulators must provide smart, thorough oversight.  It is a critical and difficult function that requires judgment about how much to charge ratepayers to make the grid ever more reliable.  To date, regulators and utilities have judged that most customers have not been willing to double their electric bills in order to storm proof the grid.


  1. Hi John -- your discussion about state sanctioned monopolies is very familiar to those of us in Boulder. We just voted yes to the idea of looking seriously at municipalizing our electric service (generation + distribution). And in the process we heard much from communities that already did so -- such as Winter Park FL which municipalized specifically for the sake of undergrounding its lines for the sake of fewer black outs. They withered a huge fight from the incumbent utility (FPL?) but in the end they were highly satisfied.
    When TS Irene rolled thru New England last fall, news came out that 5 or more communities suffering power outages had their power back up remarkably faster than the rest -- all muni's. Municipally owned electric service districts.
    I doubt the folks of DC area are ready of inclined to put up a real fight for municipalization in relation to these hideous outages -- but one or more area may look at it. It's one way to "take back your power" and make sure that those managing your electric supply make humble salaries and work close to their rate payers they serve, instead of making gi-normous corporate salaries and then referring to rate payers as a guaranteed revenue resource.
    And Thomas Insull, the inventor or local distribution systems and utilities did note that having a huge monopoly regulated by a group of regulators whom you can easily manipulate is highly preferable if you're in the business to make real money.

  2. I think that very local solar/wind, e.g., rooftop solar would be a good step toward a more resilient "grid."

    Stanley R Scobie, Ph.D., Binghamton, NY

  3. You identify the cost to storm proof the electric grid but fail to identify the costs incurred (historically and projected forward with increasing extreme weather which climate change is bringing based on the evidence to date and independent expert studies) when we don't storm proof the grid. The costs are very real and accumulative, and include direct (emergency repair) costs and associated rate hikes, and insurer/reinsurer costs and future premiums.

    That makes it impossible to make any meaningful conclusions from your post about what the public might prefer or what is more financially prudent public policy.

    Your post comes across like this kind of "journalism" which many conservatives like to embrace: "A new study reveals that a decision today to buy health insurance means doubling most people's health care costs for the month of July. Do people really want to double their monthly health care costs by having insurance? End of story."

    1. I started my career representing low-income families in Philadelphia who could not pay their utility bills. They experienced "storms" every month, if not week. Tens of thousands were shut-off every year. Some used dangerous heating and lighting substitutes in desperation that caused fires and led to the deaths of children, as many as 43 in about a ten year period. Doubling the costs of electric service would have enormous impact on low-income and even middle income families.

      The next point I would offer is that electric service is moving toward decentralized on-site generation with storage systems. Solar, CHP, fuel cells. That should be considered when judging the wisdom of a massive investment in transmission and distribution.

      Finally I served as a PUC Commissioner and a Public Advocate for consumers. Consumers and their representatives regularly fought vigorously rate increases that were double digits and described them as rate shock.

      So I am skeptical that the public would support such huge increases and understand why many would not.