PCCA Journal|4
th
Quarter 2012
16
storm damage in the Northeast has attracted much attention
to the severity of the damage and the perception that the
utilities were slow to respond. We have analyzed the speed of
restoration for selected major storms since 1996, and a well-
developed trend is evident showing increasing storm severity
resulting in a larger number of customers out of service and
consequently longer response time (Exhibit 4).
While it cannot be proven from this analysis, we believe
that utilities on average are performing admirably given the
increasing severity of the storm damage to which they are
subject. In the period from 1996 through 2003, for the select-
ed storms, only two storms put more than 1 million custom-
ers out. Between 2004 and 2012, five storms have put more
than 1 million customers out, and another four storms nearly
put 1 million customers out. Simply dividing the outage days
by the number of customers out generates a ratio defining
the speed at which customers are put back into service. This
recovery rate on a per-customer basis is 20 percent faster
in the 2004-2012 period than it is in the 1996-2003 period.
Associated Press writer Jonathan Fahey performed a similar
analysis on 16 different utilities or state impacts from storm-
response performance and came to a similar conclusion.
1
Regulatory activity on the electric side is also a driver of
construction spending,
just not nearly as fast
or as far as it is on the
gas pipeline side. As one
example, Ameren Illinois
must invest $360 million
in transmission, distri-
bution, and smart grid
system upgrades over a
10-year period.
2
Rate case
activity has been on a
long-term upward trend
since 2000, and this activ-
ity will yield increasing
distribution construction
spending activity over the
next decade.
3
The 2012/2013 peak-
ing of transmission
spending is in part due
to uncertainty around
renewable power sources
demand for transmis-
sion lines. The prospect
for renewal of the wind
energy production tax credit is improved after the recent
election but still uncertain. In October, the Federal Energy
Regulatory Commission (FERC) began enforcing order 1000,
removing the right-of-first-refusal for incumbent generators to
build transmission projects, which should allow for increased
spending to tie in alternative energy production, specifically
wind, into the grid.
Critics of FERC order 1000 argue that changes in the electri-
cal energy market since it was proposed have lowered the
need for long distance transmission projects. They specifi-
cally point out that the shift to natural gas and the dramatic
drop in photovoltaic (PV) pricing provides the opportunity to
meet environmental and supply goals with more local solu-
tions.
4
Despite the concerns noted by the critics, the drivers
of overall transmission spending include many factors be-
yond renewables such as reliability, capacity, and efficiency.
Though the final impact is unknown, FERC order 1000 will
be a driver of a resurgence in transmission spending in 2015
and beyond.
The volatility in the electric and gas transmission and
distribution construction market is in part driven by regula-
tory impacts and controversy over a host of different issues.
It is in this type of volatile market that the “safest” course is
2013 Utility Outlook
Continued from page 15
Exhibit 4
Increasing Outage Severity & Duration
Source: Compiled by Continuum from various research papers, articles and published reports.
1...,6,7,8,9,10,11,12,13,14,15 17,18,19,20,21,22,23,24,25,26,...68