SEPTEMBER/OCTOBER 2014
FIRSTENERGY’S TONY ALEXANDER:
Reaching
New Heights
32
BUILDING A
STRONGER GRID
54
STREAMLINING THE
RESTORATION PROCESS
EXPERIENCE
MATTERS
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SAFER, SMARTER, GREENER
features
S E P T E M B E R / O C TO B E R 2 014 • V O L U M E 3 9 , N U M B E R 5
20
20
Reaching New Heights
Grid enhancement and effective
policymaking are essential ingredients to a
sustainable 21st-century electric system.
BY TO NY ALEXAN D E R
32
Building a Stronger Grid
Utilities are investing billions in the nation’s
transmission system to improve reliability,
relieve congestion, facilitate competition,
and support a diverse and changing
generation portfolio.
BY E LI SA WO O D
32
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ELECTRIC
PERSPECTIVES
STAFF
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departments
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54
powering change
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58
news + trends
Utility fleets lead electrification charge…
and more.
the edge
Getting solar pricing right.
60
plugging innovation
Diversifying renewable energy in
Michigan.
19
VICE PRESIDENT, ENERGY SUPPLY
AND FINANCE
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/($':,7+ (;3(5,(1&(
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SEPTEMBER | OCTOBER 2014 5
powering change
T H O U G H T S O N T H E E V O LV I N G E L E C T R I C I T Y
LANDSCAPE.
Empowerment Through Engagement
By Brian L. Wolff, executive vice president, public policy and external affairs, Edison Electric Institute.
lectric companies around the country have been transforming how they
communicate and engage with customers, and for good reason.
According to Accenture’s energy consumer research, customers in the United
States spend less than seven minutes each year interacting with their electric
companies. Studies show, however, that engaged customers are those who are happier
with their service and more actively participate in utility innovations. Disengaged customers, says market research company J.D. Power, are less satisfied and most likely to
resist new utility initiatives, ranging from smart grid infrastructure updates to rate increases.
In short, the future belongs to companies that actively engage their customers and
empower them to drive change—and that engagement is happening digitally. J.D. Power’s
research shows that customers prefer—and recall—email and website updates over
traditional brochures and other print media. And with modern technology, companies
can personalize those updates based on customer demographics and
meet the needs of individual consumers who crave added value and a
personal connection that aligns with their lifestyles.
In this evolving energy consumer landscape, another key takeaway is
that customer satisfaction increases when utilities communicate more
frequently and tell their own story—and our industry has quite a story
to tell. Electricity does more than just power our homes and businesses.
It allows us to connect to each other in new ways, creates local jobs to
strengthen our economy, enables us to push the boundaries of technological
innovation in nearly every industry, and is helping to secure a bright
future for all Americans.
Edison Electric Institute’s We Stand For Energy campaign helps us tell
this story. From the importance of fuel diversity to the security of the grid,
We Stand For Energy reinforces that electricity is fundamental to our everyday lives, and all electricity consumers deserve a greater voice in the
energy policies that affect how reliable, affordable, and sustainable electricity is.
As the campaign gets underway, we are inviting consumers and other key stakeholders
to get involved. In the weeks and months ahead, we’ll focus on specific energy policies
that impact the industry and affect the communities and customers our companies serve:
Z maintaining and transforming our nation’s electric grid—the backbone of our
energy supply;
Z promoting accessibility and fairness for all electricity customers;
Z achieving balance by using all sources of energy and developing new technologies;
and
Z helping Americans use energy wisely.
Driving world-class customer engagement requires dedicated leaders, great managers,
and committed employees. Working together, we can build this community and make a
difference while helping secure a bright energy future for all Americans. EP
E
The future belongs to
companies that actively
engage their customers
and empower them
to drive change—and
that engagement is
happening digitally.
WeStandForEnergy.com
Connecting People. Powering Us Forward.
6
ELECTRIC PERSPECTIVES
|
www.eei.org/EP
Hard hats to black hats,
Leidos knows utility security.
)NJUSTONECONVERSATIONYOULLlNDTHATWESPEAK
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UTILITYDOMAINEXPERIENCEANDPROVENNATIONALSECURITY
PROTECTIONMAKE,EIDOSTHEEXPERTCOMPANYTOTALKTO
ABOUT.%2##)0,EARNHOW,EIDOSTRANSLATESYOUR
UTILITYSNEWSECURITYREQUIREMENTSINTOFULLCOMPLIANCE
leidos.com/utility-security
©Leidos. All rights reserved.
news + trends
T H E L AT E S T U P DAT E S A N D E V E N T S I M PA C T I N G
TO DAY ’ S E L E C T R I C P O W E R I N D U S T R Y.
Utility Fleets Lead Electrification Charge
T
he Edison Electric Institute (EEI) recently released a white paper, “Transportation Electrification:
Utility Fleets Leading the Charge,” that focuses on the electric power industry’s effort to accelerate the expansion of electric transportation in commercial and retail markets, beginning with electric
utility fleets. The paper encourages investor-owned electric utilities to meet an industry-wide goal to
spend at least 5 percent of annual fleet acquisition budgets on plug-in electric vehicles (PEVs) and
technologies.
“The electric power industry is a tremendous leader in supporting electric transportation, but we
must continue to strengthen our efforts and lead by example. One way we can do that is by leveraging our industry’s buying power to purchase more PEVs for our fleets,” said EEI President Tom Kuhn.
“The white paper released today is a road map for a long-term, coordinated effort to further spur the
development of electric vehicle technologies in the electric transportation market.”
To help guide the effort, investor-owned electric utility CEOs designated Tony Earley, chairman, CEO, and president of PG&E
Corporation, and Jim Piro, CEO and president of Portland General Electric (PGE), as co-chairs of the EEI Electric Transportation Task Force. The mission of the task force is to increase the awareness, opportunities, and activities related to electrification
within the utility industry; collaborate with automakers and other stakeholders; and educate the public at large about the
benefits of electric vehicles and technologies.
“Plug-in cars and trucks can make good business sense whether you’re a utility or any other business that operates a fleet of
vehicles,” said Piro. “At PGE, we’ve been working hard to support electric vehicle policy and infrastructure in Oregon, but we’ve also
done the internal analysis and piloting needed to confirm it’s time to build fleet electrification into our own budget. We encourage
other utilities to do the same.”
According to the paper, electrification of the transportation sector is a potential “quadruple win” for electric utilities and
society, and it will enable electric utilities to support environmental goals, build customer satisfaction, reduce operating costs,
and assure the future value of existing assets.
“Expanding the use of plug-in technologies is one of the most important opportunities we have as a country to continue
diversifying our energy usage and to achieve our clean energy goals,” said Earley. “Electrifying our fleets is about showing
consumers that plug-in technology is thriving and delivers real benefits that make sense for us and our customers.”
The expansion of electric-based vehicles in utility fleets will help utilities:
Z reduce operating costs for fuel and maintenance;
Z extend the useful life of the units based on their mechanical simplicity;
Z improve crew safety through noise reduction (such as the ability to
operate a bucket truck at height and still communicate with crew
members on the ground);
Z extend work hours of crews performing non-emergency work in
communities with noise restrictions;
Z reduce carbon emissions; and
Z provide another avenue to engage customers about the products and
services electric utilities provide.
The white paper is part of an effort to accelerate the adoption of
PEVs and plug-in technologies by utilities and was written by a steering
committee comprised of utility fleet directors from across the country.
To download the full report, visit www.eei.org/issuesandpolicy/
electrictransportation/FleetVehicles.
Plug-in cars and trucks can make
good business sense
whether you’re a utility or any
other business that operates a
fleet of vehicles.
–Jim Piro, CEO and president
Portland General Electric Corporation
8
ELECTRIC PERSPECTIVES
|
www.eei.org/ep
POWER SUPPLY DIVERSITY
A
diversified portfolio is the most cost-effective tool available to manage the inherent production cost risk involved
in transforming primary energy fuels into electricity, according
to a recent study by IHS Energy.
“The Value of U.S. Power Supply Diversity”
finds that a combination of factors—
including chronically depressed wholesale
power prices and proposed environmental
regulations—is currently moving the United
States toward a significant reduction in
power supply diversity.
“The new IHS study further reinforces
the critical importance to the U.S. economy
and to electricity customers of a diverse
portfolio of fuel sources for the production of
reliable and affordable electricity,” said David
Owens, the Edison Electric Institute’s executive
vice president of business operations and regulatory
affairs. “The study finds that a less diverse U.S. power supply
would increase electricity prices, lead to roughly one million
fewer jobs, and decrease the typical household’s annual
disposable income by around $2,100. We look forward to
continuing to work with policymakers at all levels to preserve
fuel diversity and flexibility to enable the industry to deliver
reliable, affordable, and increasingly clean electricity to all
customers.”
The study noted that incidents during last
winter’s polar vortex demonstrated the value of
diversity. Greater demand for natural gas and
electricity to heat homes and businesses in the
Northeast strained the capability of pipeline
systems, which led to localized price spikes.
At some points for brief periods, additional
natural gas was not available at any price.
Oil-fired power generation—although
accounting for only 0.35 percent of
generation in the Northeast in 2012—
provided a critical alternate supplement to
the over-strained natural gas supply system
during the polar vortex, generating power that
would have required delivery of 140 million cubic
feet per day of additional natural gas supplies if gas
generation had been the only generating source available,
the study said. In the Midwest, the increased utilization of
coal-fired power plants played a similar role by providing a
necessary substitute for constrained natural gas-fired power
plants during the cold snap.
To download the full report, visit www.ihs.com/powerdiversity.
Free to EEI Utility Members
Statistical Yearbook of the
Electric Power Industry - Full Year 2012 Data
and Year 2013 Data as Available
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Free electronic access for EEI Utility
Members. Print copies available for
additional cost.
EEI Daily Energy News
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Free electronic access for EEI Utility Members. Subscriptions
also available.
Access online at: www.eei.org
SEPTEMBER | OCTOBER 2014 9
news + trends
ICEBOX DERBY
T
hirty-one aspiring female inventors competed over the summer to build
and race electric cars created from old refrigerators as part of a new
initiative launched by ComEd. Co-sponsored by Girls4Science, Girl Scouts
of Greater Chicago and Northwest Indiana, and the Chicago Urban League,
the Icebox Derby was designed to educate and empower young women to
explore opportunities in science, technology, engineering, and math (STEM).
The six-week-long Icebox Derby project challenged six teams of girls, aged
13-18, to build electric race cars out of recycled refrigerators. The girls relied on
teamwork and ingenuity to complete the assignment but also had the support
of mentors from ComEd and its community partners, as well as STEM experts,
to guide them. This exciting educational competition provided the girls realworld experience and an understanding of the practical applications of STEM
education.
“We are excited to launch this year’s inaugural Icebox Derby, which underscores our commitment to STEM education, and look forward to providing a
creative platform for these young women to develop their skills, while showcasing their tenacity, ingenuity, and talent,” said Anne Pramaggiore, president and
CEO of ComEd, when the initiative was launched in mid-July. “As the local electric utility in Northern Illinois, we understand that it is our responsibility to help
power the communities we serve, not just today, but in the future. In addition to
our commitment to advancing the reliability and sustainability of the services
we provide, we are invested in helping to cultivate the young people who will
become the nation’s next generation of innovators.”
The initiative began with a series of challenges each week that allowed the
teams to put their STEM skills to the test as they built their Icebox Derby cars
and ended with Race Day at The Field Museum in late August. Fans followed
each team’s progress as the race cars came together and showed their support
for individuals and teams along the way at www.theiceboxderby.com.
The Icebox Derby also leverages ComEd’s Fridge & Freezer Recycling
program aimed at driving energy efficiency. The Fridge & Freezer Recycling
program is among a wide variety of tools and resources ComEd offers through
its Smart Ideas® energy efficiency programs to help its customers stay environmentally conscious, conserve energy, and save money. ComEd recently
announced that it achieved a milestone of recycling its 200,000th unit through
the program.
Announcing the Production
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10
ELECTRIC PERSPECTIVES
|
www.eei.org/ep
UNDERSTANDING POVERTY IN AMERICA
R
epresentatives Barbara Lee (D-CA), Chris Gibson (R-NY), Richard Hudson
(R-NC), and James McGovern (D-MA) hosted a poverty simulation for members
of Congress and their staffs on Capitol Hill in mid-July. Coordinated and run by
Entergy Corporation and Catholic Charities USA, this simulation provided a way for
policymakers and their staffs to experience the harsh realities of living in poverty in
America.
Rep. Steny Hoyer (D-MD), in his opening remarks, encouraged attendees to
participate, engage, and advocate to make sure America is growing its middle class.
“This is not a partisan issue,” Hoyer said.
Rep. Hudson agreed. “What we need to look at is how you lift people out of
poverty… America is the greatest country in the world because of the opportunity,”
he said.
During the simulation, participants assumed the role of a low-income family
member living with a shortage of money and an abundance of stress. Participants
interacted with volunteers playing the roles of school administrators, service
providers, bill collectors, and other people and institutions low-income Americans
interact with in daily life.
“Being poor in America is hard work,” said Rep. McGovern. “The working poor
don’t know what to do...We all should make sure that people can get out of poverty
in this country.”
Originally developed by the Missouri Community Action Agency, this training
module has been used by non-profits, government service agencies, and business
leaders to increase knowledge and understanding of the dynamics of poverty and
the hard choices and barriers that stand in the way of achieving self-sufficiency.
Entergy has hosted more than 100 simulations with 8,000 participants in Arkansas,
Louisiana, Mississippi, and Texas.
In 2012, 46.5 million people were living in poverty in the United States—the
largest number in the 54 years the Census has measured poverty. The poverty rate
(the percentage of all people in the United States who are poor) also remains high:
15 percent for all Americans and 21.8 percent for children under age 18.
UNITED STATES
POVERTY RATE
15% 21.8%
ALL AMERICANS
CHILDREN UNDER 18
What we need to
look at is how you
lift people out
of poverty...
America is the
greatest country in
the world because
of the opportunity.
–Rep. Richard Hudson (R-NC)
Entergy Corporation’s Linda Barnes, Rep. Chris Gibson (R-NY), and Rep. Jim McGovern (D-MA) encourage attendees to take action to
combat poverty.
SEPTEMBER | OCTOBER 2014 11
news + trends
ELECTRIC HOG
H
Osmose knows Poles
Experience
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Innovation
With more than 75 years of diverse experience as a foundation, Osmose
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12
ELECTRIC PERSPECTIVES
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A Trusted Name in Utilities
Services since 1934
Harley-Davidson
arley-Davidson revealed Project LiveWire—the first Harley-Davidson electric motorcycle—
in late June.
The Project LiveWire Experience invites customers to test ride, provide feedback, and learn more
about the story of the motorcycle. Even those who don’t yet ride will have the opportunity to feel the
power of Project LiveWire through Jumpstart—a simulated riding experience.
A 2014 U.S. tour—kicking off with a journey down Route 66—will visit more than 30
Harley-Davidson dealerships through the end of
the year. In 2015, the Project LiveWire Experience
will continue in the United States and expand into
Canada and Europe.
The bike offers a visceral riding experience with
tire-shredding acceleration and an unmistakable
new sound. “The sound is a distinct part of the
thrill,” said Harley-Davidson’s Mark-Hans Richer.
“Think fighter jet on an aircraft carrier. Project
LiveWire’s unique sound was designed to differentiate it from internal combustion and other electric
motorcycles on the market.”
Long-term plans for retail availability of Project
LiveWire will be influenced by feedback from
riders along the tour. Fans can learn more about
Project LiveWire, as well as specific dates and
locations for stops, at www.projectlivewire.com.
EEI Fall
National Key
Accounts
Workshop
October 12-15, 2014
Sheraton San Diego Hotel & Marina
San Diego, CA
#EEInka
Visit
www.eei.org/meetings
and register today!
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SEPTEMBER | OCTOBER 2014 13
news + trends
SMART GRID BATTERY STORAGE
A
$3.2 million grant from Washington Governor Jay
Inslee and the state Department of Commerce
will help three Washington utilities invest in research
to address one of the biggest challenges facing the
energy industry—how to integrate power generated
from variable renewable sources, such as wind and
solar, into the electric grid.
Inslee recently announced more than $14 million in
smart grid matching grants from the governor’s Clean
Energy Fund that will be used by Avista, Puget Sound
Energy (PSE), and Snohomish Public Utility District
to better understand how to capture, store, and
distribute renewable energy.
Avista’s installation will include 10 single-level battery units such as these on
“PSE is the Pacific Northwest’s largest owner and
display at UniEnergy Technologies’ manufacturing plant in Mukilteo, WA.
operator of wind power. We know from experience that
storage is critical, and we applaud the state for making
this investment,” said Kimberly Harris, PSE’s president and CEO.
the energy our customers need with renewable energy if the
The utility-led projects will develop and validate “use cases”
wind isn’t blowing or the sun isn’t shining. We believe that batcombining energy storage and information technology solutery storage could be the missing piece in this puzzle.”
tions. The goal is to promote widespread deployment of these
Avista will use the grant money to install a large-scale
technologies and create a power grid that is more efficient,
energy storage battery system in a substation in Pullman, WA.
flexible, resilient, greener from generation to consumer, and
These batteries will store power when it’s abundant, such as
better able to withstand the consequences of climate change.
when the wind is blowing. The battery power then can be
“Today’s investment in the exciting possibilities of battery
distributed when it’s needed, regardless of wind speed or
storage technology represents a significant step forward in
weather patterns.
helping create our energy future,” said Don Kopczynski,
Power from battery storage is available almost instantaAvista’s vice president of energy delivery. “The challenge
neously—within 50 milliseconds. This rapid response time
with energy is that as soon as it’s produced, it must be used
provides the flexibility required to quickly react to a sudden
immediately. That makes it difficult to plan ahead to supply
drop in power supply or increase in demand.
KID GRID
T
ABB
he United States might be lagging behind other countries in science and math, but some companies are taking unique
steps to encourage future engineers. ABB and the Marbles Kids Museum in Raleigh, NC, recently launched a one-ofa-kind, play-based power grid exhibit to generate children’s interest in science, technology, engineering, and math (STEM).
Kid Grid introduces young children to electricity and power grid technology through hands-on, minds-on play. Kids learn how
to make smart energy choices and explore a pretend power grid complete with play versions of cables, control systems, motors,
towers, and transformers, as well as real equipment provided by ABB. The exhibit promotes early learning in STEM education,
inspiring the next generation of great minds through interaction and
energy stimulation to power up a bright future.
Companies have a vested interest in maintaining an educated workforce and breaking through traditional gender stereotypes. A shortage
of American engineering graduates leaves many high-tech companies
struggling to fill jobs. Projects such as Kid Grid are designed to give
children positive encouragement in STEM education at an early age.
According to STEM Advantage, a non-profit coalition, STEMrelated jobs are anticipated to increase by nearly 17 percent over the
next decade. Of the jobs currently filled across the United States, more
than 20 percent will require STEM education by 2018. According to
the Department of Commerce’s Economics and Statistics Administration,
individuals employed in STEM jobs consistently earn wages up to
26 percent higher than their non-STEM counterparts. In fact, eight of
the top 10 college degrees, as ranked by income, are in STEM fields.
Kid Grid introduces young children to electricity and power
grid technology.
14
ELECTRIC PERSPECTIVES
|
www.eei.org/ep
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The Industry’s
#1 Magazine
Check out the digital interactive edition!
MAY/JUNE 2014
MARCH/APRIL 2014
NV ENERGY’S MICHAEL YACKIRA:
XCEL ENERGY’S BEN FOWKE:
The Intersection
of Innovation
and Communication
30
VIEWS FROM
THE HILL
36
THE SPECTRUM
CRUNCH
The Value of
Electricity
30
BUILDING A RESILIENT
POWER GRID
44
SUPPLIER DIVERSITY:
NEW OPPORTUNITIES FOR GROWTH
NEXTERA ENERGY’S JIM ROBO
New Opportunities
For Innovation
ELECTRIC PERSPECTIVES
|
www.eei.org/ep
FIRSTENERGY’S TONY ALEXANDER:
Reaching
New Heights
28
EEI 2014 ANNUAL CONVENTION
HIGHLIGHTS
32
BUILDING A
STRONGER GRID
32
SAFETY IN
NUMBERS
54
STREAMLINING THE
RESTORATION PROCESS
Visit eei.org / EP
16
SEPTEMBER/OCTOBER 2014
JULY/AUGUST 2014
ENERGY INNOVATION AT
HOME
M
ore than half of global energy
consumers would consider installing
connected-home solutions in the next
five years, or purchasing an electric
vehicle in the next 10 years, according to
a recent survey by Accenture.
Interest in connected-home products
and services is projected to rise from 7
percent to 57 percent in the next five
years. These energy management and
other monitoring and control solutions
are expected to help reduce energy bills,
increase comfort and convenience, and
enable remote control of home devices.
“In these nascent, rapidly expanding,
and converging markets, the opportunity
to capture market share is a wide-open
field,” said Greg Guthridge, managing
director in Accenture’s utilities industry
group. “Success will come down to those
providers who perfect the digital customer experience.”
The latest installment of Accenture’s
annual New Energy Consumer research,
“Architecting for the Future,” surveyed
more than 13,000 individuals in 26
countries and found that a majority of
consumers are interested in a range of
next-generation home and energy solutions from their energy provider, including
advice on energy efficiency.
Connected-home and alternative
energy technologies appeal to consumers concerned about their energy spending. In fact, 71 percent of consumers
believe that their energy provider could
do more to help them reduce their
energy bills, and only 21 percent said
that they were comfortable with the reasons provided for recent price increases.
A significant majority (more than 80
percent) of customers said that they
expect the same or better
digital service from
their energy providers as they
do from online
retailers, banks,
phone and cable companies,
and government agencies.
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“The digital revolution is causing industry lines to blur and barriers to entry
to all but disappear,” Guthridge concluded. “This is creating opportunities to
provide new, interconnected platforms
for innovation that bring the connectedhome, electric vehicles, and alternative
energy sources together. The battle for
the home has become a cross-industry
one. With traditional business models at
risk, leading energy providers will need
to move quickly to differentiate from
new entrants.”
SEPTEMBER | OCTOBER 2014 17
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energycareers@work
C R E AT I N G T H E N E X T
G E N E R AT I O N O F E N E R G Y
WORKERS.
Getting Into Energy
By Thomas H. Graham, CEWD chair and vice president, people strategy and human resources, Pepco Holdings, Inc.
oday’s electric power industry is focused on the
future. As our customers change how they think
about and use energy in their everyday lives, utility
companies are transforming and evolving as well.
Today’s industry is about advanced technologies, energy
efficiency, and new opportunities. Most of all, however,
it is about the people who work to create this new era of
innovation.
Our electric power industry depends on a smart,
skilled, and diverse and talented workforce, and energy
jobs offer promising opportunities to both experienced
workers and those starting
their careers. These jobs
are active, hands-on, rewarding, and available in
every state.
To celebrate these opportunities and inspire
t he yout h of A mer ica,
October 13-19, 2014, is
Careers in Energy Week.
States a nd compa n ies
across the United States
are working with high school and college students who
are thinking about their future job prospects. Others
are holding events to get military veterans and transitioning adults into skilled utility and engineering programs. Many companies are hosting summer camps
for children to teach them about the value of science,
technology, engineering, and math (STEM) education.
Across the country, energy companies are eager and enthusiastic to open their doors to their communities and
to workers who may be unaware of the promising careers
available in the energy utility industry.
T
Careers in Energy Week is part of an annual, nationwide effort by the Center for Energy Workforce Development (CEWD) to increase awareness of the innovative,
future-focused workforce that provides a vital service to
our nation. From line workers to customer service representatives and electrical engineers, the men and women
who work in energy careers ensure that businesses and
homes across the country always have the safe and reliable energy they need.
For 2013’s Careers in Energy Week, Ameren Illinois
partnered with Illinois State University and the Illinois Learning Exchange
to boost h ig h school
teachers’ STEM teaching skills. Participating
teachers took a trip to one
of Ameren’s substations
to learn about power systems. In addition, Ameren
hosted career fairs at high
schools, col leges, a nd
even grade schools. The
utility knows that as it
makes investments in technology, smart meters, and
other grid enhancements to meet customers’ expectations, their workforce needs will grow.
San Diego Gas & Electric (SDG&E) joined other
California utilities last year to target student outreach
to educational institutions in the state, including high
schools, community colleges, and universities, to
reinforce the opportunities around STEM curriculum within the energy industry. SDG&E awarded
prizes to students who developed videos and apps
describing why a career in the energy utility industry
is exciting, innovative, and engaging.
I encourage companies to get involved in this exciting
and growing effort this year. Talk to students about the
great, well-paying careers available in the energy field.
Host an open house so that community members can
have a “behind-the-scenes” look at how the local utility
operates. Use bill stuffers to encourage customers to explore Careers in Energy Week. The CEWD website at www.
cewd.org has a full portfolio of materials and resources for
states and companies and for all levels of education.
Working together, we can connect our communities
to these valuable, rewarding jobs and develop the next
generation of electric utility leaders.
Careers in Energy Week is
part of an annual, nationwide
effort to increase awareness of
the innovative, future-focused
workforce.
Formed in March 2006, the Center for Energy Workforce Development (CEWD) is a non-profit consortium of electric, natural gas and nuclear utilities and their
associations: the Edison Electric Institute (EEI), American Gas Association (AGA), Nuclear Energy Institute (NEI), and National Rural Electric Cooperative Association (NRECA).
SEPTEMBER | OCTOBER 2014 19
A helicopter guides high-voltage transmission lines onto towers in Ohio.
FirstEnergy
20
ELECTRIC PERSPECTIVES
|
www.eei.org/ep
It’s
New
fascinating to consider the stark
contrast between the complexities of our industry and the
relatively basic needs of our
customers. The vast majority of
electric customers want two things—for the lights
to come on at the flip of a switch, and to be billed
a reasonable amount for that service each month.
While this basic value proposition has evolved to
some extent—with a greater emphasis on cleaner,
more-efficient energy; higher power quality; and
increased reliability—the intrinsic demands of
our customers have
remained relatively
unchanged over the
years.
Yet, these basic
demands are fulfilled
by an incredibly complex industry guided
by a dynamic set of
rules largely unseen
by the customer. Maintaining the world’s most reliable, affordable electric system—often considered
the most sophisticated, complex machine on the
planet—requires us to continuously evolve and innovate and navigate an ever-changing set of rules
and regulations that can impact the reliability and
affordability of our product.
At FirstEnergy, we are taking ambitious steps
to meet our customers’ need for safe, reliable, and
affordable energy in environmentally sound ways.
With one of the nation’s largest investor-owned
electric systems and a diverse generating fleet with
a total capacity of nearly 18,000 megawatts, our
employees maintain and operate a vast infrastructure to keep our customers connected 24 hours a
day, seven days a week.
Heights
By Tony Alexander
Grid enhancement and
effective policymaking are
essential ingredients to
a sustainable 21 st-century
electric system.
continue
SEPTEMBER | OCTOBER 2014 21
Maintaining
the world’s most
reliable, affordable
electric system
requires us to
continuously evolve
and innovate
and navigate an
ever-changing
set of rules and
regulations.
FirstEnergy
When storms and other factors
occasionally interrupt service, we
mobilize crews from across our service area to restore service as quickly
and safely as possible. We are also
leveraging digital technologies and
social media tools to keep our customers informed about our restoration efforts and safe during storms.
FirstEnergy is aggressively advocating for an energy policy that fosters
economic growth and affordability
while supporting environmental sustainability. It’s a policy goal we pursue with great enthusiasm, and one
we believe is necessary to sustain
our economy in a competitive global
marketplace and protect our national
security.
A BETTER GRID
FirstEnergy’s commitment to service
reliability starts with the transmission grid—the backbone of our electric system—extending across seven
states and linking more than six
million customers. Our “Energizing
the Future” initiative, a $4.2-billion
Tony Alexander is president and CEO of FirstEnergy Corp., one
of the nation’s largest electric utilities that owns and operates
generating facilities serving more than six million customers
in six states.
22
ELECTRIC PERSPECTIVES
|
www.eei.org/ep
investment through 2017, involves
upgrading and strengthening our
transmission system to meet the future demands of our customers and
communities. Three key factors are
driving this major investment in our
electric system: replacing existing
equipment with advanced technologies designed to enhance system reliability; meeting expected load growth
primarily from shale gas-related activity in our region; and reinforcing
the current system in light of power
plant deactivations related to the
Environmental Protection Agency’s
(EPA’s) Mercury and Air Toxics Standards (MATS) and other regulations.
Initial efforts focus on evaluating
thousands of circuit miles of transmission lines and renovating substations
serving FirstEnergy’s Ohio Edison,
The Illuminating Company, Toledo
Edison, and Penn Power utilities. The
program is expected to expand eastward over time as FirstEnergy continues to strengthen one of the nation’s
largest transmission systems—comprising 24,000 miles of wires and
approximately 2,700 substations. “Energizing the Future” projects include
replacing equipment with advanced
technology that can be operated remotely to help prevent or minimize
the duration of outages, reinforcing
substation facilities with surveillance
and security technologies, and rebuilding transmission lines. This year
alone, we are on course to complete
$1.3 billion in investments spanning
more than 1,300 projects, and we
have completed more than one-third
of the nearly 100 projects associated
with coal-fired plant deactivations.
Nearly 1,500 workers are actively
engaged to support this effort that
is expected to bring enhanced service reliability to our customers, with
minimal disruption to homeowners
and communities affected by these
construction projects.
Controlling the upgraded transmission system are FirstEnergy’s advanced control centers, which play a
vital role in operating and monitoring
the company’s bulk transmission system from the Ohio-Indiana border
to the Jersey Shore. These facilities
are considered among the most advanced transmission control centers
in the country.
KEEPING CUSTOMERS
PLUGGED IN
More than ever, today’s customers
rely on electricity to stay connected
and to power their everyday lives, so
FirstEnergy’s commitment to service
reliability starts with the transmission grid—
the backbone of our electric system.
they experience an even greater inconvenience when there is a power
outage. Thanks to new digital tools,
we have the ability to more effectively
engage with our customers, sharing
vital information using websites,
apps, text alerts, and email messages.
We use Facebook and Twitter to
keep our customers connected, with
tips for staying safe around electricity
and using energy wisely; storm
preparation information when major weather events are forecast; restoration updates during large outages;
and dedicated assistance for customers who contact us via Facebook. Last
spring, we launched a new outage
reporting app on our Facebook pages.
LEADING THE CHARGE
FOR VITAL REFORM
Despite these investments in customer service and our interconnected
system of poles and wires, we remain
very concerned about market issues
and policy decisions that pose risks to
the nation’s electricity system.
Last winter, a mass of frigid arctic
air that came to be known as the polar vortex descended over much of
the country, shutting down schools,
locking communities in a deep freeze,
and costing the U.S. economy billions
of dollars in just a few days.
This event revealed power supply
weaknesses and a dependency on less
reliable resources, culminating in energy shortages and severe spikes in
wholesale power prices, particularly
in competitive markets.
The overriding reason that states
in competitive markets are facing
these issues, while regulated states
generally have not, is because competitive markets currently do not recognize the value of a diverse supply
or differing types of generation. All
generation in competitive markets is
treated equally—whether the generation is baseload or peaking, has firm
fuel supplies, is intermittent, is a hard
FirstEnergy’s Akron Control
Center in Ohio monitors the
transmission system serving
the company’s electric utility
operating companies.
FirstEnergy
SEPTEMBER | OCTOBER 2014 23
Coal deliveries maintain on-site fuel inventories at
the Fort Martin Power Station in Maidsville, WV.
FirstEnergy
asset, or even whether it is in a regional transmission organization’s
control. In fact, parties can propose
to build anything, needed or not,
and regardless of whether or not they
build it, it is treated the same as assets that are already relied upon to
assure service. In regulated states,
these issues are managed to produce
the best long-term results for the
customer, recognizing that electricity is an essential service and that a
balance must be reached to support
the substantial investments needed—
and that have to be made—to assure
reliable service.
Utilities in regulated states located
within or close to competitive markets also have an advantage since
they can sell their reserves into competitive markets to lower the costs
of otherwise maintaining reliable
service. As a result, not only are the
reliability and stability of competitive
markets placed at greater risk, but
24
ELECTRIC PERSPECTIVES
|
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the prices for capacity and energy
are suppressed and inadequate to
support the significant capital investments required to meet environmental mandates or to maintain the
reliability of the competitive fleet.
According to the Edison Electric
Institute, more than 450 coal-based
units in 38 states—or about 20 percent of the U.S. coal fleet’s capacity—
More than ever,
today’s customers
rely on electricity
to stay connected
and to power
their everyday
lives.
are already expected to close or cease
burning coal by the end of the decade,
due to a number of factors, including
the costs associated with meeting
EPA rules. In states with competitive
energy markets, additional units may
be shut down, including some nuclear units, as regulatory compliance
costs climb and ever-changing rules
and unreasonable pricing persist.
While we are beginning to see signs
of progress in the capacity market
construct, more work is required. The
most recent capacity auction, which
is supposed to ensure that an adequate supply of generating capacity
will be available for electric customers, included less participation by
non-physical sources due to limits
imposed on imports and demand
response. Even so, these resources
cleared while some nuclear plants
and super-critical coal plants did not.
And while capacity prices climbed
somewhat, the clearing prices were
IT’S GOOD TO
KNOW WHERE
THE FAULT IS
Locating transmission line faults can be costly
and time-consuming. Since 1984, when SEL
introduced the first digital relay with fault
location, we have continued innovation of this
important feature. With the introduction of the
SEL-411L Advanced Line Differential Protection,
Automation, and Control System, we created
the only relay with traveling wave fault location
to make it easier than ever to accurately
pinpoint faults. Save time and money by sending
maintenance crews to the tower nearest the fault,
and get the line back in service faster.
To learn how SEL relays can help make your
power system safer, more reliable, and more
economical, visit www.selinc.com/9ep.
still inadequate to cover the true cost
of operating baseload generating facilities, and more plants may be shut
down unless market rules change.
ALL GENERATION
SOURCES ARE NOT
CREATED EQUAL
One of the key factors driving
non-functioning markets is the
increased reliance on non-physical
resources, such as demand response,
which compensate customers to voluntarily stop using electricity upon
request when demand is highest.
For example, in the 2016-2017
Reliability Pricing Model auction, about 81 percent of the PJM
reserves came from demand response, energy efficiency, and import sources. When renewables are
included, which may or may not
be available when needed, the percentage climbs to about 85 percent.
These products are displacing critical baseload generators, particularly
those in competitive states that rely
solely on the market to cover their
operating costs. No regulated market
that I am aware of relies so heavily
on these types of products to assure
reliability and stable pricing.
Policymakers must recognize that
all generation sources are not created
equal, and that electric service is not a
commodity. In fact, unlike any other
utility service, electric service is essentially provided to all customers in
all areas, and the system is designed
and operated to benefit all customers.
More important, our energy security
and quality of life depend on it, and
nothing works without it. Yet, all too
often, investor-owned utility balance
sheets, income statements, and billing
systems are used to implement social
policy and support products without
consideration of their impact on our
ability to provide all customers with
reasonable prices and reliable service.
In many respects, these policies
and products are taking advantage
of the universal network service we
provide by forcing the vast majority of
customers to pay for the benefits that
are only provided to a select few. The
fact is, many customers simply don’t
or can’t benefit or won’t be selected to
participate because of their usage or
income, where they live, or whether
they rent or own.
As an industry, we must continually evolve and innovate to meet
customers’ increasing demands for
higher levels of service. At the same
time, we must be diligent in our efforts
to protect all customers from
schemes that single out a select few
customers for benefits—at a considerable cost to the vast majority
of customers not selected or unable
to participate.
A monopole is constructed to replace a steel structure in East Hanover,
NJ, as part of FirstEnergy’s $4.2 billion “Energizing the Future” initiative.
FirstEnergy
26
ELECTRIC PERSPECTIVES
|
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Powering Change
229 MW Wild Horse
Wind Project
'(9(/230(17|(1*,1((5,1*
&216758&7,21 | 23(5$7,216
Since 1997, RES Americas has been providing solutions
to the North American renewable energy, transmission,
and energy storage markets.
Technologies
Wind and Solar: Construction portfolio in excess of
7,000 MW, including:
‡3,300 MW of self-developed projects.
‡5,000 MW built for utility clients.
Transmission: 534 miles of lines up to 345kV constructed.
Energy Storage: 8 MW (16 MW range) built/under
construction & 100 MW in development.
4 MW (8 MW range) Ohio Energy Storage Project
Services Offered
‡CustomizedGHYHORSPHQWÀQDQFLQJHQJLQHHULQJ
construction, & operations solutions tailored to meet
the unique needs of our clients.
‡Operations and maintenance of utility-scale wind,
solar, and energy storage assets.
Proud to construct over 1,000 MW of
wind projects in 2014–2015:
Renewable Energy Systems Americas Inc.
11101 W. 120th Ave. | Suite 400
%URRPÀHOG&2| 303.439.4200
res-americas.com info@res-americas.com
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‡.HHFKL0:
‡3OHDVDQW9DOOH\0:
‡/RQJKRUQ0:
‡7XFDQQRQ5LYHU0:
SEPTEMBER | OCTOBER 2014 27
STRIKING A BALANCE
FirstEnergy will continue to make important investments in its transmission grid, distribution system, and
communications technologies to assure we meet customers’ desire for
safe, reliable, and affordable electric
service.
At the same time, as an industry, we
must focus on resolving market and
policy issues impacting critical baseload generation facilities, as well as
our ability to treat all customers fairly.
(See the sidebar on page 30, “The True
Value of Baseload Generation.”) Last
winter’s brutal weather was a chilling
reminder that we need to maintain a
diverse fleet that includes generating
assets such as coal and nuclear units,
as well as natural gas plants with firm
contracted fuel supply, so we can
ensure reliable, affordable service to
customers over the long term.
There are no easy choices, but the
time is right for action. Electricity
continues to be the foundation for
our quality of life, economic vitality,
competitiveness, and security. It is
the cleanest end-use source of energy, and as a nation and an industry
we must never jeopardize this truly
essential service. Energy policy needs
to strike the right balance to ensure
affordable, reliable, and environmentally sound electric service for all customers while supporting economic
expansion and national security.
New low-pressure turbine rotors were installed to improve the reliability
and efficiency of Unit 1 at FirstEnergy’s Beaver Valley Power Station in
Shippingport, PA.
FirstEnergy
28
ELECTRIC PERSPECTIVES
|
www.eei.org/ep
Electricity
continues to be
the foundation
for our quality
of life, economic
vitality,
competitiveness,
and security.
SEPTEMBER | OCTOBER 2014 29
The True Value of
Baseload Generation
Two new steam generators were
installed at the Davis-Besse Nuclear
Power Station in 2014 to support the
safe continued operation of the facility
for decades to come.
L
FirstEnergy
Baseload
facilities
like DavisBesse provide
unmatched
reliability and
stability to
our country’s
electric system.
30
ELECTRIC PERSPECTIVES
|
ast spring, FirstEnergy’s 900-megawatt Davis-Besse Nuclear Power
Station in Oak Harbor, OH, accomplished a significant milestone: we
replaced two massive steam generators—470-ton components that produce
the superheated steam used to drive the
turbine generator and produce electricity.
The $600-million replacement project
is a major investment in Ohio’s energy
future, ensuring that Davis-Besse continues
to drive the state’s economy by providing
safe, reliable, and clean energy for decades to come.
Baseload facilities like Davis-Besse provide unmatched reliability and stability to
our country’s electric system. Yet, current
market rules are failing to compensate
these vital facilities for their true operational costs. Necessary investment in these
baseload facilities will be jeopardized if
their value is not recognized and reflected
in the market.
Reliability does not just depend on the
condition of the substations, poles, wires,
and other grid equipment but also on the
availability of predictable, efficient generation. The need for reliable baseload
generation became apparent during last
January’s polar vortex, when the system
was dangerously close to depleting reserves. Davis-Besse operated at full capacity that week, continuously providing the
around-the-clock power customers needed.
Since restarting in May (after the steam
generator replacement), the plant has continued to operate at 100-percent power.
Baseload plants like Davis-Besse also
are key drivers of the economy in the communities in which they reside. With about
700 full-time employees and an annual
www.eei.org/ep
payroll of approximately $65 million,
Davis-Besse is one of the largest employers in Ottawa County. The plant contributes about $9 million each year in local
and state taxes; and sales and income
tax paid by Davis-Besse employees is estimated at more than $5 million per year.
Additionally, Davis-Besse spends more
than $25 million locally each year and
about $71 million statewide. Local vendors, along with the many stores, restaurants, and other consumer facilities
patronized by Davis-Besse employees,
provide an additional 1,200 jobs in the
area. Many of these are small businesses
that surround the plant and rely on plant
employees for their success.
As the country considers the best approach for reducing greenhouse gas
emissions, baseload nuclear generating
facilities such as Davis-Besse must be
an integral part of the solution. Nuclear
facilities are by far the largest emission-free sources of electricity and the
only non-emitting sources that can produce large amounts of electricity around
the clock. In fact, according to the Energy
Information Administration, Davis-Besse,
along with our company’s Perry Nuclear
Power Station located east of Cleveland,
generate 92 percent of the carbon-free
electricity produced in Ohio.
Baseload generation powers the economy through affordable, reliable, and
environmentally sound electric service
that will drive our country forward. We
must adopt a national energy policy that
encourages reliability and economic expansion, and enact market reforms to preserve these essential generating assets
and ensure a bright future.
32
ELECTRIC PERSPECTIVES
|
www.eei.org/ep
BUILDING A
STRONGER
GRID
Utilities are investing billions of dollars in the nation’s
transmission system to improve reliability, relieve
congestion, facilitate competition, and support a
diverse and changing generation portfolio.
By Elisa Wood
T
he U.S. electric grid is the cornerstone of one of the
world’s most technologically sophisticated economies.
This engineering feat includes more than 200,000 miles
of high-voltage transmission lines, supports more
than 1,100 gigawatts (GW) of generating capacity, and serves 314
million people.
While the grid has served the country reliably for decades,
society is increasing its demands on the system, and the electric
utility industry is responding. With an estimated $17.2 billion in
transmission investment this year (and $60.6 billion through 2024),
Edison Electric Institute (EEI) members are maintaining the grid’s
characteristic high reliability, as well as strengthening, expanding,
and enhancing the transmission system. (See Figure 1.)
Several of these projects offer benefits of size and scale by
spanning hundreds, if not thousands, of miles. Some reduce
congestion and lower costs. Others bring new sources of supply
to load centers, reduce line losses, and improve reliability. About
13,000 miles use 345-kilovolt (kV) wire or above—a particularly
efficient way to bring additional capacity to the system.
CONTINUE
SEPTEMBER | OCTOBER 2014 33
Investment in large transmission
is especially important in light of the
Clean Power Plan under review by the
Environmental Protection Agency.
The plan currently being considered
would hasten coal-fired plant retirements and encourage greater integration of renewables, natural gas-fired
generation, and energy efficiency.
The Clean Power Plan and other
environmental trends play a key role
in spurring today’s transmission expansions and improvements, according to Jim Fama, EEI’s vice president
of energy delivery.
“We’re going through a transitional
period where the resource mix is
changing, and our ability to transition to a new mix relies on our ability
to build new transmission,” he said.
To remain cost-effective and reliable, the industry must be able to
deliver the optimal mix of supply at
the right time along the most efficient
path. With older plants closing and
new plants being sited in different
areas, alternate transmission routes
must sometimes be established to
move generation from where it is produced to where it is used.
Elisa Wood is a Virginia-based writer who has specialized in
energy reporting for more than two decades.
34
ELECTRIC PERSPECTIVES
|
www.eei.org/ep
The expansion of the country’s
renewable generating capacity
creates even greater demand for
long-distance transmission.
“To the extent that coal plants will
be closed in the future, part of the
way to deal with that is to enhance
the transmission system to be able
to move generation within regions or
from one region to another,” Fama
continued. “Transmission is key. It
gives you flexibility.”
The expansion of the country’s
renewable generating capacity creates even greater demand for longdistance transmission. Utility-scale
wind farms and solar installations often are built in remote areas, far from
cities. Transmission provides a link
between the two.
This article will examine five major
transmission projects stretching from
the East Coast to the West Coast that
are strengthening and securing the
grid. America’s investor-owned electric utilities are meeting the changing needs of their customers through
these efficient and cost-effective
transmission projects, ranging from
45 miles to 2,000 miles in length.
A CRITICAL COMPONENT
California has one of the nation’s
most aggressive renewable portfolio standards, requiring that 33 percent of the power from electricity
providers come from renewables by
2020. Fortunately, the state also has
significant wind and solar resources.
But as is often the case, the cities that
Partner with a leader — like the largest utility in the nation, with more than
seven million customers, and the nation’s first transmission-only utility with a perfect
track record of successfully completed transmission projects.
Partner with Duke-American Transmission Co.
www.datcllc.com
SEPTEMBER | OCTOBER 2014 35
FIGURE 1
ACTUAL AND PLANNED TRANSMISSION INVESTMENT BY INVESTOR-OWNED UTILITIES (2007-2016)
($ Millions [Real $2012])
18,000
17,464
16,000
15,780
14,768
14,000
12,000
15,083
11,953
10,000
8,000
17,201
8,902
9,488
10,344
10,711
2009
2010
6,000
4,000
2,000
0
2007
2008
2011r
2012
2013
2014
Actual
2015
2016
Planned*
*Planned total industry expenditures are preliminary and estimated from data obtained from the EEI Transmission Capital Budget & Forecast Survey, supplemented with data obtained from company 10-K reports and investor
presentations. Actual expenditures are from EEI’s Annual Property & Plant Capital Investment Survey and from the FERC Form 1 reports.
r = revised
Source: Edison Electric Institute, Business Information Group.
36
ELECTRIC PERSPECTIVES
|
www.eei.org/ep
SCE utilizes a sky crane to build transmission towers.
use the power are far from the open
land where large wind and solar farms
can be built.
Southern California Edison (SCE) is
connecting the two—the renewables
and the people of Los Angeles—with
the Tehachapi Renewable Transmission Project. When completed in 2016,
the 220 kV/500 kV line will serve as
conduit for 4,500 megawatts (MW )
of wind, solar, and other forms of
generation from the barren Tehachapi
Wind Resource Area, about 75 miles
north of downtown Los Angeles. The
$3.2-billion project spans an area of
approximately 173 miles and includes
new and upgraded infrastructure
between Kern County and San Bernardino County.
“This line is a critical component
for our meeting the state’s renewable
portfolio standard’s goals,” said Les
Starck, SCE’s senior vice president,
regulatory policy and affairs. “Right
Southern California Edison
The $3.2-billion
project spans
an area of
approximately
173 miles and
includes new
and upgraded
infrastructure
between Kern
County and
San Bernardino
County.
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The eighth annual publication of Edison
Electric Institute’s (EEI’s) “Transmission
Projects: At A Glance” showcases a
cross-section of major transmission
projects that EEI members completed
in 2013 or have planned for the next
10 years, and highlights EEI members’
continuing focus on making needed
transmission investments.
To download the full report, visit
www.eei.org/issuesandpolicy/
transmission.
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SEPTEMBER | OCTOBER 2014 37
now the company is at about 22
percent from renewables. The law
in California says that we have to be
at 33 percent by 2020. Tehachapi is
really going to help us meet that
33-percent goal.”
As with many other transmission
projects, Tehachapi offers multiple
benefits. In addition to connecting
renewables to the grid, the 500-kV
double-circuit upgrade will expand
transfer capability on Path 26, a major
north-south power corridor in California. The line also will help ease
transmission constraints in the Los
Angeles Basin.
“The Tehachapi Wind Resource
Area is outside the Los Angeles Basin,” Starck continued. “All of this
wind energy is going to be delivered at the Vincent Substation, then
brought over the mountains into the
Los Angeles Basin. This transmission
line is another pathway to get to the
Basin, which helps us relieve transmission congestion in other parts of
our system. So that’s also a reliability/
resiliency benefit.”
SCE also is tackling an engineering
challenge not yet accomplished by
any other utility in the United States:
Tehachapi will be the first 500-kV line
to run underground. The California
Public Utilities Commission ordered
SCE to bury a 3.5-mile section that
goes through Chino Hills after the
community protested the overhead
line in a dispute that lasted several
years. SCE currently is working on
design of the underground portion
of the project and plans to begin construction later in 2014.
Although, it will be challenging to
construct due to the terrain, the underground line will cost $372 million
more than an overhead line. “We are
fully dedicated to constructing this
underground portion of the line so
that it is safe and reliable,” Starck said.
“We hope and expect people from
around the world will benchmark
against this project.”
38
ELECTRIC PERSPECTIVES
|
www.eei.org/ep
The National Renewable Energy
Laboratory estimates Kansas’
onshore wind potential at
952,371 MW—more than 90 times
the state’s current electricity needs.
IMMEDIATE ECONOMIC
BENEFITS
Kansas has the second-highest wind
energy potential in the United States.
It added 254 MW of new wind capacity
in 2013, and currently ranks eighth in
the country for installed wind capacity
—about 3,000 MW, according to the
American Wind Energy Association.
In fact, the National Renewable Energy Laboratory estimates Kansas’
onshore wind potential at 952,371
MW—more than 90 times the state’s
current electricity needs.
Two major projects in Kansas that
make up the Y-Plan—Prairie Wind
Transmission’s portion and ITC Great
Plains’ portion—are helping to transmit this wind power and other forms
of generation more efficiently over
long distances, while easing congestion and improving the resiliency of
the grid. These two projects, like the
other large transmission projects in
the state and the Southwest Power
Pool (SPP) nine-state region, were
identified by the SPP in its long-term
planning process as needed investments.
Prairie Wind Transmission’s project
is being constructed by Kansas’ largest electric utility, Westar Energy, in
partnership with Electric Transmission America, a joint venture of subsidiaries of American Electric Power
and Berkshire Hathaway Energy.
A 345-kV double-circuit project
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The Prairie Wind project is expected to be
completed on time in late 2014 at a cost that is
about 25 percent less than the original estimate
of $225 million.
Westar Energy
Kansas, Prairie Wind Transmission
will create a strong transmission
backbone for the state. The 109-mile
line links an existing 345-kV substation near Wichita to the new 345-kV
Thistle substation northeast of Medicine Lodge, near the Flat Ridge 1
Wind Farm. It then travels south to
the Oklahoma border. The line traverses a variety of terrain, from the
garden area of Kansas with its wheat
fields and farmland, to the hilly western region with its cattle farms, said
David Peck, Westar’s project manager.
The estimated $170-million cost of
the project is being borne equally by
the two partners. They broke ground
in August 2012, and about 78 miles
went into service last June. The rest is
expected to be completed on time in
late 2014 at a cost that is about 25 percent less than the original estimate of
$225 million.
Kansas has seen immediate economic benefits from the portion of the
line already built, particularly when
40
ELECTRIC PERSPECTIVES
|
www.eei.org/ep
it comes to efficient operation of the
Flat Ridge 1 Wind Farm. Lack of transmission in the area had been forcing
the wind farm operators (BP Wind
Energy) to curtail generation. Even on
some days when the wind was plentiful, the wind farm shut down some or
all of the turbines because of inadequate transmission capacity.
“They built the wind farm so that
they can make power, and if they can’t
make power, they can’t pay for the
wind farm,” Peck said. “Now that our
line is in service, those curtailments
have been lifted. Once a portion of our
line was placed in service, there was
an immediate impact on the system.”
The next leg of the transmission
project will create a connection from
eastern Kansas to western Oklahoma,
offering more opportunity for power
generation in the area. The line also
will enhance the state’s ability to export
power to areas of the country that have
strong demand for renewables but lack
open land to build wind farms.
“This is a big transmission line,
double-circuit 345. It can transport
power to the eastern part of the state
where there are more high voltage
lines feeding the major urban areas.
From this point, there are more potential routes to export power from
Kansas likely toward the East Coast,”
Peck continued.
The line also is expected to increase
reliability; its long expanse includes
only three substations, one located
60 miles into Oklahoma. “One hundred sixty-nine miles with three substations; you have really long hauls,”
he concluded. “It’s like an interstate
highway—the fewer exits you have, the
less chance you have for accidents.”
ENSURING AFFORDABLE
ENERGY
The 200-mile Kansas V-Plan, another 345-kV double-circuit line,
is under construction to connect
central and western Kansas. In
cooperation with Sunflower Electric
JULY | AUGUST 2014 41
Power and Mid-Kansas Electric,
ITC Great Plains designed and is
constructing two segments of the
V-Plan—or approximately 120 miles.
The line runs from Spearville south
to the new Clark County substation,
then east to the Thistle substation.
From there, it connects to the Prairie
Wind project.
ITC Great Plains is investing about
$300 million in its portion of the project, which began construction in November 2012. The line is expected to
be in service by late 2014—on time
and on budget.
The project was necessary to connect western and eastern Kansas
for reliability and to improve the resiliency within that area of the SPP,
according to Kristine Schmidt, president of ITC Great Plains, a subsidiary
of ITC Holdings.
The V-Plan also complements
ITC’s Kansas Electric Transmission
Authority (KETA) project, a 345-kV
line energized in late 2012. KETA
spans a 227-mile north-south route
from Spearville, KS, to Axtell, NE. ITC
Great Plains built the 174-mile Kansas
portion of KETA and the Nebraska
Public Power District constructed the
Nebraska portion.
Both KETA and the V-Plan are intended to move power long distances
so that wind farms can connect into
the grid—but moving wind power is
only one reason for the project.
Schmidt said the line is meant to
relieve grid congestion, improve reliability in the region, deliver power on
a broader scale across the SPP footprint, and export to other SPP states
from Kansas, as necessary.
The line will allow delivery not
only of wind energy but also natural
gas- and coal-fired generation. ITC
sees the new transmission lines as
a way to enhance the competitive
power market so that not only Kansas
consumers but all consumers in the
SPP footprint can access more costeffective supplies.
Without the V-Plan and KETA, SPP
had “a significant void of transmission
in western Kansas,” Schmidt continued. “If you lose transmission lines or
power plants in other parts of the system, you can’t just re-dispatch power
very efficiently if you don’t have this
type of infrastructure in place.”
FirstEnergy has embarked on an ambitious transmission expansion
and improvement plan that improves reliability with new 138-kV and
345-kV lines, substations, and other system reinforcements.
FirstEnergy
42
ELECTRIC PERSPECTIVES
|
www.eei.org/ep
The project is in line with ITC’s
business model to invest in the grid
to improve reliability, expand access
to markets, and lower the overall cost
of delivered energy. “Through a combination of efforts we were able to
identify a longer-term need,” Schmidt
added.
Generation capacity quickly populated the KETA line; and Schmidt
expects the same demand to manifest
itself for the V-Plan in early 2015.
The bottom line is that Kansas and
the SPP region need new transmission to maximize power supplies such
as wind—and much more. Longdistance transmission lines are providing a conduit for all forms of power
to flow most efficiently, whether for
local use or export, creating greater
access for power plant developers,
and ultimately a more favorable market for energy users.
IMPROVING RELIABILITY
The Energy Information Administration forecasts that 60 GW of coal-fired
generation will retire by 2020. Economics drive much of the deactivation. It is becoming more expensive
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ELECTRIC PERSPECTIVES
|
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The Energy Information Administration
forecasts that 60 GW of coal-fired
generation will retire by 2020.
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to operate coal-fired plants because
of environmental restrictions, particularly the Environmental Protection Agency’s Mercury and Air Toxics
Standards (MATS). The new rules,
which take effect in April 2015, limit
emissions of mercury, acid gases, and
toxic metals.
To ready its system for the retirements, FirstEnergy has embarked on
an ambitious transmission expansion
and improvement plan. The company, which operates 10 utilities in
six states, plans to invest $1.8 billion
in transmission projects related to its
“Energizing the Future” strategy. The
plan improves reliability with new
138-kV and 345-kV lines, substations,
and other system reinforcements.
The 114.5-mile Glenwillow-Bruce
Mansfield line is one of the first under
development. The single-circuit 345kV transmission line will run from
FirstEnergy’s Bruce Mansfield Plant
in Pennsylvania to the Glenwillow
Substation near Cleveland, OH.
Most of the $151.2-million line will
be built within existing rights of way.
Still, as is often the case with longdistance lines, the project has faced
development challenges. FirstEnergy
has managed them through careful
communication with affected parties
and by going the extra mile to minimize impacts.
“As the project approaches its
final destination, the proposed
Glenwillow Substation, the line
route crosses densely populated
communities in suburban Cleveland,” said FirstEnergy spokesman Doug Colafella. “FirstEnergy
proactively reached out to communities and property owners early on in
the process to inform them about the
project and to set expectations about
the nature of upcoming construction
work. The line route in northeast Ohio
also crosses significant wetland areas,
and the construction teams are using
helicopters to string the conductors
from the air to reduce our impact on
sensitive environmental habitats.”
FirstEnergy expects the project to
significantly reinforce the electric
SEPTEMBER | OCTOBER 2014 45
The Susquehanna-Roseland
Transmission Line Project,
which includes a 45-mile line in
New Jersey and a 101-mile line
in Pennsylvania, is being built in
response to reliability concerns.
PSE&G
46
ELECTRIC PERSPECTIVES
|
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PSE&G
The project
offers a good
example of how
utilities can find
ways to ease
the concerns of
stakeholders—
whether they
are nature
enthusiasts or
homeowners.
system in northeast Ohio, including
the Cleveland metropolitan area.
It is scheduled to begin service in
June 2015.
INNOVATIVE
CONSTRUCTION METHODS
The Susquehanna-Roseland 500-kV
Transmission Line Project, which includes a 45-mile line in New Jersey
and a 101-mile line in Pennsylvania,
is being built in response to reliability
violations within the 13-state PJM
Interconnection. With demand growing in the area, PJM was concerned
that without improvements, regional
lines would overload during peak
periods and possibly cause outages.
Public Service Electric and Gas
(PSE&G) is constructing the New
Jersey portion of the line, and PPL
To minimize environmental impacts
on certain sensitive areas of the
project, PSE&G used helicopter
construction.
Electric Utilities is building the Pennsylvania segment. SusquehannaRoseland will extend from the Berwick area in Pennsylvania to the
Roseland area in northern New Jersey.
The project also includes two new
500-kV switching stations in New
Jersey; one in Hopatcong and one in
Roseland. The Roseland to Hopatcong portion of the project went into
service in April 2014, and the remainder is on schedule to be completed
by June 2015. PSE&G will contribute
$790 million of the project’s $1.33billion total cost, according to John
Ribardo, PSE&G’s director of transmission projects.
“There were numerous reliability criteria violations that existed
when PJM analyzed this project back
in 2007,” Ribardo said. “The best
solution was a new 500-kV line. It
relieves congestion in northern
New Jersey.”
In addition to new shield wire
and fiber optics that will create better
line monitoring and communications
between stations, the project swaps
out aging infrastructure with newer
construction. The line has a new
500-kV line on one side of the towers
and a rebuilt 230-kV line on the
other side.
However, the project presented
special challenges for PSE&G. The
line had to traverse rugged terrain
in northern New Jersey, through the
Delaware Water Gap National Recreation Area (requiring an extensive
federal Environmental Impact Statement review that took more than
three years), across the Appalachian
Trail, and through a sensitive wetland
in Morris County.
The company helped mitigate
environmental impact in sensitive
areas and tackle the difficult-toaccess terrain by using innovative
helicopter construction. That meant
not only transporting concrete, structural steel, equipment, and materials
by helicopter, but also doing tower
assembly at the location by air.
“It requires a lot of planning, but
it lessens the environmental impact
of building large roads to get there,”
Ribardo continued.
The project also uses a new type of
lighting system required by the Federal Aviation Administration that is
triggered by plane entry into the area.
The lighting was a concern because
there are multiple airports in the area
and part of the line runs through
residential neighborhoods. The trigger system, which PSE&G pioneered
and is still working on, creates less
imposition on homeowners, since the
lights will not be shining constantly
at night.
“We met early on with many of
the stakeholders, which included a
lot of residents, and tried to listen to
and accommodate their concerns,”
Ribardo concluded.
The project offers a good example
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of how utilities can find ways to
ease the concerns of stakeholders—
whether they are nature enthusiasts
or homeowners—as they build new
infrastructure to replace an aging
system and prepare for the new demands of an increasingly connected
and electrified society.
INVESTMENT INCENTIVES
While EEI members have reported
plans to invest $17.2 billion in
transmission projects for 2014,
utilities tend to forecast conservatively,
according to EEI’s Fama. This year’s
investments could exceed 2013’s
record $17.5 billion.
SEPTEMBER | OCTOBER 2014 47
Strengthening the transmission
grid offers a tremendous boost to an
economy that is increasingly dependent on electricity for its communications, transactions, comfort, and
transportation. However, utilities can
make large investments in transmission only if policymakers maintain a
level playing field. Transmission and
other electricity resources must have
the opportunity to compete against
each other fairly.
“We want the most cost-effective
mix,” Fama said.
Federal Energy Regulatory Commission (FERC) decisions on allowed
returns on equity (ROE) will play a
key role in determining utilities’ appetite for large transmission projects
going forward. EEI is watching closely
as FERC prepares to make a series of
ROE decisions. The commission in
June issued an order on a new methodology for determining ROE for New
48
ELECTRIC PERSPECTIVES
|
www.eei.org/ep
England investor-owned utilities. The
commission suggested lowering their
ROE from 11.14 to 10.57 percent subject to application of the new methodology. At the same time, FERC moved
forward with proceedings on five
pending challenges to utility ROEs.
The commission expects the New
England decision to guide evidence
and analyses presented by stakeholders
in the pending challenges.
But for now, transmission is clearly
booming. The grid is changing,
strengthening, and reconfiguring
to accommodate more renewables
and other forms of supply. The expanded system will offer greater access and create more resilient and
reliable power. The information
economy demands nothing less. Electricity service must be of the highest quality, and utilities are planning
and investing to make sure the grid
can deliver.
Federal Energy
Regulatory
Commission
decisions on
allowed returns
on equity will
play a key role
in determining
utilities’ appetite
for large
transmission
projects going
forward.
Rely on superior experience and expertise.
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credit ratings
EIX’s credit profile and has business
fundamentals that are “slightly better”
than most of its integrated electric utility
peers. S&P noted that SCE’s service
territory is “improving but still struggling,”
its financial health is protected by
“strict and restrictive” oversight by the
California Public
Utilities Commission,
the company’s earned
The year’s actions so far
returns are “normally
have been largely positive,
healthy,” and cash
of regulatory risk, as well
with 92 upgrades far
flow is supported by
as company-specific
outnumbering three
various rate mechafactors. As of July 1,
nisms. S&P also
approximately 82 percent
downgrades.
commented that
of companies’ ratings
SCE’s operating
outlooks were stable,
risk is worse than average, as was
11 percent were positive or watch-positive,
highlighted by the problems it faced at
and 7 percent were negative or
the San Onofre nuclear plant.
watch-negative.
Regarding EIX’s financial metrics,
The industry’s revised rating of BBB+
S&P commented that it expects the
reflects a rounding-up of EEI’s calcuutility’s leverage to increase modestly
lated average. Following is a summary
with rising capital spending. The
of 2014’s parent-level ratings actions
agency forecasts funds from operations
through June 30, all of which occurred
(FFO) to debt of about 21 percent to
in the second quarter.
23 percent in the near term and debt
Edison International
to earnings before interest, taxes,
On April 8, S&P raised its corporate
depreciation, and amortization (EBITDA)
credit rating on Edison International
of more than three times over the next
(EIX) by two notches, to BBB+ from
several years.
BBB-, on the emergence from bankWhile S&P’s upgrade of EIX was
ruptcy of the company’s former unregudriven largely by the successful resolated subsidiary, Edison Mission Energy
lution of EME’s bankruptcy, the agency
(EME). At the same time, S&P affirmed
also noted that management’s “stated
its rating on EIX’s primary subsidiary,
plans to focus mainly on regulated
regulated utility Southern California
activities,” as well as its commitment to
Edison (SCE), at BBB+. S&P observed
maintaining a stable financial profile,
that SCE “represents virtually all” of
were important considerations.
Industry’s Average Credit
Rating Improves
BY AARON TRENT
T
he industry’s average credit
rating improved to BBB+ by
mid-year 2014 after holding
steady at BBB for more than 10 years.
Total ratings activity, at 95 changes
through June 30, was much higher
than in the first half of 2013, reflecting
Moody’s decision in late January to
upgrade most regulated utilities by one
notch. (See Figure 1.) As a result, the
year’s actions so far have been largely
positive, with 92 upgrades far outnumbering three downgrades. (See Figures
2 and 3.) The Edison Electric Institute
(EEI) records upgrades and downgrades at the subsidiary level; therefore,
multiple actions within a single parent
holding company are included in
upgrade/downgrade totals.
During 2014’s first half, parentlevel ratings were impacted by three
upgrades and no downgrades. The
upgrades centered on companies’
continued focus on regulated
operations and effective management
Aaron Trent is manager of financial analysis at Edison Electric
Institute.
FIGURE 1
TOTAL RATINGS ACTIONS
U.S. Investor-Owned Electric Utilities
2008
2009
2010
2011
2012
2013
2014*
Fitch
17
14
24
25
26
23
10
Moody's
6
23
20
11
20
17
80
Standard & Poor's
27
20
36
24
30
40
5
Total
50
57
80
60
76
80
95
Note: Full year, except where noted./*Through June 30.
Source: SNL Financial and EEI Finance Department.
SEPTEMBER | OCTOBER 2014 51
credit ratings
FIGURE 2
DIRECTION OF RATINGS ACTIONS
U.S. Investor-Owned Electric Utilities
100%
300
Upgrade %
Total Actions
250
75%
200
50%
150
100
25%
50
0
0%
2006
2007
2008
2009
Note: Full year, except where noted.
Source: SNL Financial and EEI Finance Department.
AS OF
JULY 1, 2014
companies’ ratings
OUTLOOKS
82
%
11
%
7
%
stable
positive or
watch-positive
negative or
watch-negative
52
ELECTRIC PERSPECTIVES
|
www.eei.org/ep
2010
2011
2012
2013
6 Mo.
2014
to recover its costs.
S&P forecast
Westar’s FFO to debt
at 18 percent to 20
percent over the next
three years and cash
flow from operations
(CFO) to debt at 17.5
percent. The agency
noted it expects capital
expenditures to decline
following completion
of the LaCygne plant’s
emissions-control program and discretionary
cash flow therefore
to be “much less
negative,” reducing the
need for new debt and
equity capital.
Great Plains Energy
On May 1, S&P raised
its corporate ratings
Westar Energy
on Great Plains Energy
On April 29, S&P
(GPE) and subsidiary
S&P stated that
raised its corporate
Kansas City Power &
Westar’s reduced business Light to BBB+ from
ratings on Westar
Energy and utility
BBB. The agency’s ratiorisk had led to stable
subsidiary Kansas Gas
nale was largely the same
profits and stronger
& Electric to BBB+
as for Westar and Kansas
financial metrics.
from BBB. The upGas & Electric: managegrade reflected S&P’s
ment’s continuing focus
assessment of the
on regulated operations,
parent company’s improved business
effective management of regulatory
risk profile as a result of managerisk, and improving cost recovery within
ment’s continuing focus on regulated
the regulatory process. Each of these
operations, effective management of
developments improved the companies’
regulatory risk, and “strengthening
business risk profiles. As with Westar,
cost recovery through the regulatory
S&P stated that Great Plains Energy’s
process.”
capital spending program likely will
S&P stated that Westar’s reduced
benefit from timely recovery through
business risk had led to stable profits
base rates and rate surcharges, thereby
and stronger financial metrics. The
strengthening cash flow.
agency commented that the company’s
S&P forecast GPE’s FFO to total debt
ongoing capital spending would require
at 18 percent over the next three years
timely recovery through “various rate
and CFO to debt at 16 percent. Similar
mechanisms including base rates
to the case with Westar, as capital
and rate surcharges” that were likely
spending declines following completion
to improve cash flow. Furthermore,
of the LaCygne plant’s emissions conS&P noted that Westar’s investment
trols, S&P expects GPE’s discretionary
in emissions-control equipment at the
cash flow to strengthen.
LaCygne coal plant, which it jointly owns
Looking Ahead: A More Regulated
with Great Plains Energy’s Kansas City
Business
Power & Light, does not benefit from
While 2013 marked the tenth consecurider recovery, meaning that Westar
tive year of a BBB rating for the industry
would need to seek base rate changes
FIGURE 3
S&P UTILITY CREDIT RATINGS DISTRIBUTION
U.S. Investor-Owned Electric Utilities
Below BBBA or higher
4%
4%
BBB8%
When company leaders are
At 6/30to and BBB
committed
,34%
focused
on
safety
2014
A23%
it will trickle down
through each level of
management to all employees.
BBB+
28%
Below BBB9%
A or higher
5%
BBB20%
A14%
At 12/31
2012
BBB
29%
BBB+
23%
Note: Rating applies to utility holding company entity.
Source: SNL Financial and EEI Finance Department.
(based on EEI’s unweighted average
of S&P ratings at the parent-company
level), it also saw the highest percentage
of positive ratings actions in at least
as many years. That trend persisted
during the first half of 2014, moving the
industry’s average rating to BBB+ by
mid year.
Early in 2014, both S&P and Moody’s
published industry-level outlooks describing why they expect U.S. regulated
utilities to maintain stable credit profiles
over the remainder of the year. And
while both agencies described positive
factors that included the de-risking
of utility business models through
continued focus on regulated activities,
Moody’s emphasized that improving
industry regulation was the “most
important” driver of its outlook.
Moody’s detailed its view of an
improving regulatory environment
Moody’s said it expects
the overall regulatory
environment will remain
“supportive and constructive”
for at least the next three
to five years.
more fully in its report, “U.S. Utility
Sector Upgrades Driven by Stable and
Transparent Regulatory Frameworks,”
released on February 3. The report
discussed reasons behind the agency’s
November 2013 move to place most
regulated utilities on review for upgrade
and its January 2014 upgrade of most
companies by one notch. Moody’s
describes how state-level regulation has
evolved over the past several years for
the better, including implementation of
a “suite of transparent and timely cost
and investment recovery mechanisms.”
Moody’s said it expects the overall
regulatory environment will remain
“supportive and constructive” for at least
the next three to five years.
In a February 19 report, “Regulation
Will Keep Cash Flow Stable as Major
Tax Break Ends,” Moody’s said the
end of bonus depreciation in 2013
would cause many utilities’ financial
metrics to weaken, but the improved
regulatory framework—featuring both
cost-recovery mechanisms and annual
base-rate increases—would play a
significant offsetting role. Moody’s
offered several examples of positive
rate case outcomes that are driving
its industry outlook, such as Puget
Sound Energy’s case in Washington
and Westar Energy’s in Kansas. Moody’s
also said improved regulation is helping
utilities manage the effects of sluggish
customer demand. Moody’s commented
that “a more contentious regulatory
environment” or a “widespread adoption”
of more aggressive financial strategies
could lead to a negative outlook, while a
“marked increase” in allowed returns on
equity or steps to scale back dividends
and stock repurchases might lead to a
positive outlook.
In a January 22 report, S&P discussed various factors behind its
assessment of the industry’s stability,
such as improving economic conditions,
sustained demand for a “very critical”
commodity, the “generally supportive”
posture of regulators toward cost
recovery for capital expenditures, and
continued demand by investors for
utility equity and debt securities. S&P
stated that “we see little alteration in
the sector’s business and financial risk
profiles during periods of economic
change” because of the essential nature
of electricity, the regulated character
of the business, and the constructive
regulatory environment. The agency also
suggested that if the economy grows
faster than it is expecting, there could
be “some modest improvement” in the
industry’s credit profile.
Throughout these reports, neither
S&P nor Moody’s raised major concerns
about risks to the sector’s credit profile
in the near to medium term.
SEPTEMBER | OCTOBER 2014 53
operations
energy storage
Streamlining the Service
Restoration Process
BY CHERYL MALETICH
personnel engaged in managing the
storm restoration effort.”
Like Central Maine Power, ComEd’s
old crew management process couldn’t
track how it was building crews. ComEd
has had a fully automated callout
system since 2002, which identifies in
minutes who is available for work. But
ComEd lacked the other piece—
automatically putting two-, three-, and
four-person crews together—so the
company did its “crew building” on a
magnetic board by hand.
ike many utilities, ComEd, an
A More Centralized Approach
Whether a utility relies on spreadsheets,
Exelon company, has made
whiteboards, or an in-house stormnumerous recent enhancements
An 11-Step Process
management system to assemble and
to its storm restoration process, such
At the onset of each event, 19 local
track crews, the process isn’t always
as installing GPS and mobile dispatch
ComEd offices and first-line supervisors
centralized. For example, at Iberdrola
technology to more efficiently manage
reviewed a spreadsheet, notated crew
USA’s operating companies in New
crews to expedite restoration; dispatchassignments on magnetic boards, and
York, groups of supervisors used to
ing mobile operations centers; and
entered those data into a computer
manually piece together crews at local
utilizing more efficient management of
spreadsheet. Supervisors sent and
service centers and then handed these
contractor crews. New areas of focus
received updated crew data via email.
data over to dispatchers to match to
this year include an enhanced damage
ComEd relied on its resource coorditheir daily reporting location and availassessment process, better coordinanators to assign crews to storm shifts.
ability for work.
tion of vegetation management crews,
If the number of customers affected by
“Keeping count of crews could take
and improved material staging to ensure
an event exceeded 50,000 accounts, or
more than 500 spreadsheets at times,”
readiness during severe weather. Over
the risk of a severe forecast was great
said Kerri Foster, manager of transmisthe past two years, process improveenough, ComEd opened each of its four
sion and distribution support, programs
ments already in place have resulted
regional storm centers.
and projects, for Central Maine Power
in a 30-percent improvement in restoAs the storm work passed, resource
Company, part of Iberdrola USA.
ration time.
coordinators began releasing crews
“Whether in Maine or
One new tool
from storm shifts as crew data were
New York, providing
ComEd has just
passed back and forth among local ofcrew deployment
begun using is a
One new tool ComEd has
fices, crews, and the storm center. In all,
reports to regulators
cloud-based system
it took 11 steps to manage up to 800
and executives during
that enables supervijust begun using is a cloudcrews (including ComEd’s, and those
a major event was a
sors to tap a “virtual
based system that enables
of contractors, contractor affiliates, and
major burden for
board” for tracking
supervisors to tap a “virtual
crews in real time
board” for tracking crews in
by job classificaWith this software, supervisors can direct contractors and
real time by job classification,
tion, staging area,
other utility crews and show their precise status during a
elapsed-time worked,
staging area, elapsed-time
major event.
and status. With this
worked, and status.
software, supervisors
can direct contractors and other utility
crews, and show their precise status
during a major event—speeding restoration times. Developing this software
took time and required the collaborative
efforts of multiple utilities.
L
Cheryl Maletich is vice president of distribution system
operations for ComEd, where she is responsible for the safe
operation of the electric distribution system for the entire
ComEd service territory in Northern Illinois.
54
ELECTRIC PERSPECTIVES
|
www.eei.org/ep
ComEd
ComEd currently has 800 full-time equivalents in its
automated crew management and callout systems along
with another 200 overhead electricians and several
groups from the utility’s transmission and substation
team.
other utility resources). Once managers opened the storm center, it could
take ComEd up to 12 hours to get an
understanding of the hardest-hit areas
of its service territory and decide where
to deploy crews.
ComEd’s experience with crew
management reflects the challenges
facing many other utilities across
North America. As a result, Iberdrola
USA began collaborating with NSTAR
(an operating company of Northeast
Utilities), Pepco Holdings, Inc. (PHI), and
a software developer called ARCOS in
the spring of 2012 to develop a system
to automate the management of crews.
The system generates virtual boards
to replace spreadsheets, whiteboards,
and other in-house systems. The virtual
boards provide supervisors and executives a centralized, web-based database
to assess the makeup of crews during
blue-sky days and to manage employee,
contractor, and other utility crews during
major events. As ARCOS wrote the
code, the utilities jointly tested the early
versions and gave feedback.
Iberdrola USA, NSTAR, and PHI
subsidiary Delmarva Power piloted
the finished product during the fall of
2013. The new system, named “Crew
Manager,” helps managers visually
organize and mobilize crews required
during large power restoration events
and normal working hours.
ComEd had been discussing the
possibility of streamlining its crew
management processes as far back as
2011. In fact, in the wake of any major
event, ComEd supervisors’ number-one
complaint was about filling out the
spreadsheets tied to the 11-step
process.
Automated Crew Management
In 2013, ComEd presented the idea of
automating the crew management process to senior management. Making the
process faster and efficient was a key
selling point, but ensuring that front-line
supervisors would use the application
widely was just as important. To implement the automated system, ComEd
trained certain supervisors as ambassadors who then trained others in their
territory to become experts. Additionally,
ComEd decided to use the new system
during normal business hours, as well
as during major events, to increase
its acceptance. ComEd launched the
software on May 30, 2014.
ComEd had an open conference line
all day when the system went live, but
operators didn’t get many questions
from the field. When weather reports
showed a storm front forecast, ComEd
asked managers to use Crew Manager
to do some extra staffing. The first
storm test of the system went off with
minimal issues.
Managing Crews Virtually
The application includes color-coded
icons designating different classes of
employees, contact information, shift
start and end times, accommodation
needs, etc. The automated system
The virtual boards provide
supervisors and executives
a centralized,
web-based database
to assess the makeup of
crews during blue-sky days and
to manage employee, contractor, and
other utility crews during major events.
SEPTEMBER | OCTOBER 2014 55
operations
Iberdrola USA
Iberdrola USA, NSTAR, and PHI subsidiary
Delmarva Power piloted the crew management
system during the fall of 2013.
Save the Date for
These Upcoming
Meetings
September 15-17, 2014
AGA/EEI Accounting for
Energy Derivatives
Workshop & Seminar
Chicago, IL
also tracks the
preparedness for
cumulative hours a
ComEd.
Being able to simulate different
crew has worked
It’s one thing to
staffing scenarios and react
and provides a
automate a callout.
in real time to complex and
minute-by-minute
But when a utility
changing conditions improves
account of how long
has to pair or build
each crew member
crews (such as
the efficiency of the crew
has been on the
matching a crew
management process by an
clock. Working
leader with an
order of magnitude.
shifts, rest time,
electrician), there’s
emergency callouts,
another layer of
and work exceptions
complexity involved.
appear as movable icons, so utility
Being able to simulate different staffing
supervisors can forecast potential
scenarios and react in real time to comneeds. ComEd reorganizes its crews
plex and changing conditions improves
with a click to address the constant
the efficiency of the crew management
inflow of questions and information
process by an order of magnitude.
that comes with restoration work.
There’s still much work to be done
This information is then automatically
with the automated crew management
sent to front-line supervisors via tablets
system at ComEd. As ComEd and other
and laptops.
utilities learn more about automating
“With four electric operating compacrew management, they are working
nies at Northeast Utilities, we share line
closely with ARCOS to develop new
crews, support personnel, and supervifeatures. The utility has experienced one
sors to restore service to customers,”
storm, but future events will surely test
said Steve Gilkey, vice president of
assumptions and help ComEd develop
electric field operations for Connecticut
best practices. ComEd currently has
Light & Power, a subsidiary of Northeast
800 full-time equivalents (FTEs) in
Utilities. “Using one centralized database
its automated crew management and
system across NU will enhance the
callout systems along with another
effectiveness of our restoration teams.”
200 overhead electricians and several
“Our magnetic boards listed our
groups from the utility’s transmission
crew leaders’ names, and our first-line
and substation team. (Crew is defined in
supervisors would manually match
many different ways across the industry,
people with one another based on their
so for consistency purposes, the mutual
schedule. The new automated crew
assistance discussions are based on
management system eliminates that
FTE counts.) This new system will
manual process, so that everyone
enable ComEd to utilize these resourcsees how a crew is being built,” said
es more efficiently—and provide better
Kimberly A. Smith, director of emergency customer service at the same time.
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ELECTRIC PERSPECTIVES
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www.eei.org/ep
September 28 - October 1, 2014
Fall Occupational Safety
and Health Committee
Conference
Big Sky, MT
October 5-8, 2014
Fall Transmission,
Distribution and Metering
Conference
St. Louis, MO
October 8-9, 2014
Fall Mutual Assistance
Conference
St. Louis, MO
October 12-15, 2014
EEI/NRECA Utility Siting
Workshop
Albuquerque, NM
October 12-15, 2014
Fall National Key Accounts
Workshop
San Diego, CA
October 23-24, 2014
Cybersecurity Networking
Reception and
Law Conference
New York, NY
For a more detailed list
of EEI meetings,
visit www.eei.org/meetings
REGISTER TODAY!
49th FINANCIAL
CONFERENCE
November 11-14, 2014 • Hilton Anatole • Dallas, TX
Chief executives, chief financial officers, treasurers and investor relations executives
from the electric power industry come together with the financial community at the
49th EEI Financial Conference.
Conference highlights include:
• Industry leaders discussing the challenges and opportunities of distributed generation
and how the industry is addressing cyber and physical security.
• An address by bestselling author and political satirist P. J. O’Rourke.
• Formal financial presentations and company visits that provide utility executives
and members of the financial community an opportunity to discuss business and
financial strategies.
Join us in Dallas for the premier industry conference of the year.
© 2014 by the Edison Electric Institute. All rights reserved.
Register now at www.eei.org/meetings-finconf
For more information, contact Debra Henry at
(202) 508-5496 or dhenry@eei.org
the edge
W H E R E I N N O VAT I O N
AND EFFICIENT
W H E R E I N N O VAT I O N A N D
T E C H N O LO G I E S M E E T.
E F F I C I E N T T E C H N O LO G I E S
M E E T.
Getting Solar Pricing Right
By Lisa V. Wood, executive director of the Institute for Electric Innovation and vice president of The Edison Foundation.
he integration of distributed resources and renewable energy is well underway. Distributed generation (DG) resources, such as rooftop solar systems,
are growing and comprise a larger share of the
energy resources on the nation’s power grid. As the costs
of DG decline, it is critical that these resources are priced
appropriately and that the subsidies that support DG are
transparent to all parties—customers, regulators, legislators, solar providers, and DG advocates.
The Institute for Electric Innovation’s (IEI’s) recent
issue brief, “Net Energy Metering: Subsidy Issues and
Regulatory Solutions,” illustrates the subsidy created
by current net energy metering (NEM) practices based
on a typical residential customer in Southern California
with a rooftop solar photovoltaic (PV) system. The results show that the size of the NEM subsidy in California
today is overly generous and not transparent; most of the
NEM subsidies go to affluent households (and are largely
paid by less affluent households through their electric
bills); and when a customer chooses to lease—rather
than own—rooftop solar, most of the NEM subsidy is
transferred to the leasing company. These are unintended consequences and need to be modified.
When a DG customer produces onsite energy, this
T
reduces the amount of energy the customer purchases
from the local utility. The customer avoids paying the
portion of the energy rate that is designed to recover
that customer’s share of the utility’s fi xed costs for grid
services. Hence, the source of the NEM subsidy is that
DG customers do not fully pay for the grid services that
they use. In addition, this NEM subsidy is mostly paid by
non-DG customers. While the IEI issue brief looks specifically at the size of the NEM subsidy using California as
an example, the lessons learned can be applied to other
states with NEM policies.
Undo the Unintended Consequences
The legitimate purpose of a subsidy is to provide an incentive to pursue a desirable public policy. Subsidies
should not be overly generous; the amount of the subsidy should be transparent; and the recipient of the subsidy should be clearly identified. The issue brief demonstrates that the current NEM approach in California
fails all three tests.
DG customers who lease rooftop solar or enter into
power purchase agreements (PPAs) with solar leasing
companies accounted for about 75 percent of all new
residential rooftop solar PV in California in 2013. Unfortunately, these customers
receive only a small fraction of the NEM subsidy;
the bulk of the subsidy
goes to rooftop solar leasing companies.
According to t he issue brief, the NEM subsidy alone is more than
$20,000 for a 4-kilowatt
(K W ) rooftop solar PV
facility that costs about
$14,500 i n Ca l i for n ia.
This far exceeds what is
necessary to incent rooftop solar PV. Combining
both the NEM subsidy in
California and the federal tax credit of roughly
$4,300 (about 30 percent
of t he purchase cost),
The Institute for Electric Innovation focuses on advancing the adoption and application of new technologies that will strengthen and transform the power grid. The Institute’s
members are investor-owned electric utilities that represent about 70 percent of the U.S. electric power industry and are committed to an affordable, reliable, secure, and
clean energy future.
58
ELECTRIC PERSPECTIVES
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when a DG customer purchases rooftop solar, that
customer receives more
than $24,000 in subsidies
for that rooftop solar PV
facility.
It is important not just
to understand the magnitude of the subsidy, but
also to clearly identify the
subsidy recipients. When
a customer leases that same 4-KW rooftop solar PV facility, the entire federal tax credit of roughly $4,300 goes to
the leasing company, and the NEM subsidy is distributed
between the customer and the solar leasing company.
Of the $24,000 in combined subsidies, the solar leasing
company receives more than $17,000 (from both the
NEM subsidy and the federal tax credit) and the customer receives about $7,000 (from the NEM subsidy).
structure in Ca lifornia
with a single energy rate) or
implementing a buy-sell
approach for DG customers.
The time to change net
metering is now, and regulatory tools are available
to do so. In fact, several
states across the United
States are now considering
“value of rooftop solar”
(VOS) approaches to DG; the VOS approach is a version
of the buy-sell approach.
Subsidies should not be overly
generous; the amount of the
subsidy should be transparent;
and the recipient of the subsidy
should be clearly identified.
Use Available Regulatory Tools
Regulatory tools are available today, and in use in some
jurisdictions, to reduce the unintended and excessive
NEM subsidies to both customers and solar leasing
companies, while also reducing the cost shifting onto
non-DG customers.
Z The most straightforward regulatory approach is to
require DG customers to pay for more of the grid
ser v ic es t he y u se
t h rou g h a h ig her
mont h ly customer
charge and to simplify the tiered-rate
structure in California. Increasing the
mont h ly customer
charge significantly
re duc e s t he N E M
subsidy.
Z A “buy-sell” approach
where DG customers
purchase all of the
power they use onsite
at the utility’s retail
rate and sell all of the solar power produced onsite at
the utility’s avoided costs could eliminate the NEM
subsidy and the cost shifting. However, the subsidy
and cost shifting would be eliminated only if the prices
paid for the solar energy produced by the DG facility
were truly equal to the utility’s avoided costs.
The issue brief provides estimates of how much
the NEM subsidy would be reduced by using available
regulatory tools, such as increasing the monthly customer charge (coupled with replacing the tiered-rate
Moving from NEM to VOS
The VOS approach has two parts. First, the DG customer
purchases all of the energy he or she consumes onsite
from the utility at the utility’s retail rate. This ensures
that the DG customer fully pays for the grid services he
or she utilizes. Second, the utility purchases all of the
solar energy produced onsite by the DG facility at the
VOS rate (which hopefully represents the utility’s avoided costs). As indicated earlier, the subsidy and cost shifting are eliminated only if the prices paid for the solar
energy produced by the DG facility are truly equal to the
utility’s avoided costs.
Both the components of avoided costs and how to
value each of them are highly controversial issues. In
terms of the components of avoided costs,
most would agree that
avoided costs include:
energy costs; transmission and distribution
energy losses; and generating capacity costs.
However, controversy
t y pica lly a rises over
how to compute avoided
transmission and distribution capacity costs
and whether avoided
environmental costs are
appropriate to include.
The components of avoided costs, the value of each cost
component, and using consistent valuation approaches
are equally important for a fair analysis.
VOS may be one approach for addressing the unintended consequences associated with NEM. However,
the devil is in the details. To date, many of the proposed
VOS approaches have resulted in simply swapping the
NEM subsidy for the VOS subsidy. If the goal is to make
progress toward pricing solar right, creating a new set of
subsidies under VOS is not the answer.
SEPTEMBER | OCTOBER 2014 59
plugging innovation
I N N O VAT I V E U T I L I T Y P R OJ E C T S
R E V O L U T I O N I Z E T H E F U T U R E O F E L E C T R I C I T Y.
Diversifying Renewable Energy in Michigan
onsumers Energy recently announced that it is
“We are excited to move forward with this new prodiversifying its energy supply and helping the gram to develop dependable, renewable energy proenvironment by selecting four Michigan farms duced here in our state for the Michigan homes and
to produce renewable energy with anaerobic businesses we serve,” said Timothy Sparks, vice presidigesters. The farms will be offered the opportunity to dent of energy supply operations for Consumers Energy.
generate electricity under long-term contracts that collec- “The addition of anaerobic digestion brings more divertively provide 2.6 megawatts of electric capacity.
sity to our existing renewable energy supply from wind,
Consumers Energy developed the new anaerobic solar, biomass, and hydroelectric dams.”
digester program along with Michigan State University
The United States currently has about 2,000 sites proand the state’s agriducing biogas: 293
cultural community. Consumers Energy
a n a e r obic d i ge s tAnaerobic digesters
ers on farms, 1,241
An anaerobic digester at Michigan State University.
generate electricity
w a s t e w a t e r t r e atConsumers Energy selected four Michigan farms to generate
from biodegradable
ment plants (approxelectricity using anaerobic digesters.
mater ia l—in t his
imately 860 use the
case from four Michbiogas they produce),
igan farms: Beaver
and 636 landfill gas
Creek Farms in Cooprojects, according to
persville, Brook View
the American Biogas
Da ir y in Freepor t,
Council.
Green Meadow Farms
In July, Consumers
in Elsie, and Scenic
Energ y was ranked
View Dair y in Fenthe top “environmennville. The program
tal champion” among
a lso reduces sol id
providers of electrica nd liquid wastes,
ity and natural gas
improves water runin the Midwest by an
off quality, and provides building heating.
independent national survey. Cogent Reports, a division
The process begins with organic materials that are of Market Strategies International, surveyed 19,000 cusfed into the digester system, such as animal waste, tomers of 125 natural gas, electric, and combined profood scraps, agricultural residue, or wastewater solids. viders throughout the United States. The 2014 “Utility
(See Figure 1.) The anaerobic digester breaks down the Trusted Brand and Customer Engagement” study also
organic materials into digested material and biogas ranked Consumers Energy as the second-most-trusted
using natural biological processes. The digested material electric and natural gas provider in the Midwest and
is processed into fertilizer, compost, and a variety of third in the country. The anaerobic digester program is a
other agricultural products that can be marketed to key part of the company’s environmental commitment.
agricultural, commercial, and residential customers.
Consumers Energy, Michigan’s largest utility, is the
The raw biogas is processed and can be used in the same principal subsidiary of CMS Energy, providing natural
way as natural gas—it can produce heat, electricity, or gas and electricity to 6.5 million of the state’s 10 million
vehicle fuel, or can be injected into natural gas pipelines. residents in all 68 Lower Peninsula counties.
C
FIGURE 1
HOW IT WORKS: ANAEROBIC DIGESTER
Heat/Electricity
Biogas
Cleanup
Methane
Electricity
Waste Gas
Animal Waste
Digester Reactor
Source: Consumers Energy
60
ELECTRIC PERSPECTIVES
|
www.eei.org/ep
Separation
Process
Electricity
Generator
Fertilizer
Capital Allocation Under Uncertainty–
Are You Up to the Challenge?
Making informed capital allocation decisions under uncertainty is an increasingly
challenging proposition in today’s regulated and de-regulated power market.
Electric utility returns are increasingly at risk in the face
of flattening load growth, rising system upgrade and
expansion requirements, exposure to consumer-focused
technology and dis-intermediation, and a more challenging,
competitive, and regulatory landscape. Utilities that meet
these challenges will structure their capital allocation
processes to effectively address market and regulatory
risk and projected returns in a consistent, risk-integrated
manner across the organization.
Pace Global assists utilities in addressing these challenges
by evaluating risks and projected performance in a
probabilistic framework, utilizing consistent metrics
across the parent, regulated, and un-regulated units.
We build institutional capacity while assisting clients in
evaluating capital allocation across alternative strategic
resources under consistent methodologies. Our approach
informs management, shareholders, and regulators of
the risk-reward trade-offs across diverse competitive
market and resource investment environments.
Pace Global bounds complexity, mitigates risks, protects
and grows top lines, while preserving stability in the
bottom line.
To learn more, contact Gary Vicinus or Bo Poats at
703.818.9100.
www.paceglobal.com
ONE PROVIDER
MANY SOLUTIONS
Visit us at booth 4225 or www.quantaservices.com
DASHIELL
UTILTMAP CORPORATION