Educating Decision-Makers on Managing Utility Risk

During my years as a state representative, my policy work has benefited from my prior employment as an executive for a vertically integrated oil and gas company and an electric and natural gas utility. 

As a legislator, I have had numerous opportunities to learn and serve. First, as a member of DOE, FCC, and EPA advisory committees. Also by hosting FERC and FCC commissioners and DOE and DOD assistant secretaries for summits with Kansas stakeholders.

I have visited a nuclear generation plant during shutdown. I have also visited coal and natural gas-fired generators, a carbon capture and sequestration pilot project, a live wire 345-KV line reconductoring, a utility-sponsored integrated "green" house, wind and solar farms, a river-run hydroelectric plant and more.

Not every state legislator has opportunities for such a comprehensive education. 

Even more valuable than the site visits and briefings were several simulations and tabletop exercises sponsored by DOE and NARUC. The DOE's Alice Lippert hosted several emergency preparedness exercises in which disaster scenarios were postulated and participants developed plans to meet those potential emergencies.

Some of the aspects of planning were relatively straightforward. For example, having an element of redundancy in the transmission grid or having the capability of shedding load so that customer choices are recognized.

Other aspects were more problematic. For example, what should be the priority for emergency generator fuel deliveries: who should come first? Hospitals, police/fire/EMS, utilities, others?

Each scenario required a prioritization of actions and the deliberate recognition of the associated economic and political costs. Even for a relatively simple choice, there are numerous aspects to be evaluated. Building redundant transmission capacity involves several decisions. Should there be one hundred percent, fifty percent, or some other amount of capacity redundancy? More than one pathway to provide the redundancy? Need to site new lines? Cost of redundancy and timeline to develop it? Impact on customer rates with political and litigation implications?

Further questions included how long will it take for utility employees from other communities or states to be mobilized and on-site? Where will the mutual assistance crews be housed and fed? What type of communications system will be necessary to coordinate the non-local teams' efforts? What happens if the emergency event eliminates local cellular phone service?

The DOE model emphasized two points as an aid to making decisions. First, the probability that such an event could occur; second, the scope of consequences if the event occurs.

Utilities regularly engage in such deliberations out of sight of legislators. Perhaps it is time to change that situation. Not all utilities and communities will experience a hurricane, but massive snow or ice storms, tornadoes, fire at a facility, natural gas supply interruption, or other situations can create an emergency. 

Legislators, commissioners, commission staff and governors' staffs would benefit from a tabletop exercise to see how much pre-planning is necessary. They would explore how much planning and preparation for an emergency costs, and how utilities prioritize service restitution. 

This is also an opportunity to discuss ratemaking issues related to emergency preparedness, service restoration, and the general issues related to system resiliency.

Miles Keogh at NARUC developed several tabletop simulations for PUC commissioners and legislators. They revolve around selecting the appropriate generation mix to meet public policy objectives. The exercises force participants to confront their policy preferences. For example, renewables at thirty percent penetration, DG/DR at twenty percent, or nuclear, and contrast them with the realities of generation costs and system reliability. There were obvious costs associated with building new natural gas generation. The costs associated with the need for transmission line capacity to deliver low cost high plains states' wind energy to East and West coast utilities were less obvious.

There are also decisions to make about retiring existing generation units as well as the timelines and investments needed to bring new generation online. Also, decisions regarding support for distributed generation and energy conservation programs.

There are economic and system operation costs of which policymakers are largely ignorant. They are associated with policy preferences such as high renewable penetration and system reliability. The NARUC tabletop exercise forces participants to make decisions about the mix of generation, DG, transmission, and other factors based on system costs and operational efficiencies. It forces policymakers and regulators to confront the consequences and opportunities of their policy preferences.

Cost of electricity to consumers is a key driver for participants in the NARUC tabletop exercises. System reliability, resiliency, and adequacy are tangentially addressed, but for policymakers, they probably need to be emphasized more. 

Legislators can do more damage to the electric system through ignorance than through deliberate efforts. Educating us on the implications of our policy choices is essential if the utility's management hopes to guide policymaking.

While some legislators will accept information on the costs associated with utility planning and public policy decisions as valid, many will not. Engaging those legislators and commission staff members in real-world decision-making exercises can be very beneficial. Some utilities have included legislators, commissioners and staff in nuclear generation event scenarios that involve public safety officials from the state and local communities. 

I have participated in such an event and came away with new respect for the coordination between the utility operator and public safety, media, and other partners. While not as extensive, the DOE or other risk assessment and planning process can be a valuable and, dare we say, fun educational opportunity. To that end, please consider:

• Partnering with your PUC. Requesting a NARUC simulation team to visit your commissioners, commission staff, legislators, and governor's staff.
• Contacting DOE and your state's emergency management team about conducting tabletop exercises for legislators, governor's staff, and commission staff.
• Tailoring the tabletop exercises to address issues of specific interest or concern to your company or customers. For example, model the costs associated with promoting DG and DR or utility-size renewable generation within your state versus importing lower cost renewable energy from the Midwest or Southwest. Costs should include the direct cost of service to customers and the indirect costs of maintaining system capabilities, reliability, and resiliency.

As you partner with the DOE, NARUC, your commission and legislators, make sure that public officials understand that your concerns and theirs are the same. Everyone wants an affordable, reliable, resilient, environmentally responsible electric system. The key is to identify policies and economic opportunities to capitalize on the shared objectives.