Power outage outrage follows storm Isaias through Northeast
On top of a pandemic, a severe recession and massive civil unrest, Isaias barreled up the East Coast alternately as hurricane and tropical storm in the latest catastrophe for 2020.
And the season is still early. Tropical Storm Josephine — the earliest 10th-named storm on record — is next, percolating in the Caribbean Sea.
The slow response to Isaias by Northeast power providers has triggered legal action and calls for changes that range from carrot-and-stick contracting agreements to a municipal takeover.
“I am chagrined — that’s probably a good word for it,” said Alan Rubin, a principal at New York law firm Blank Rome LLP and co-head of its severe weather emergency recovery team.
“This is not the first time we’ve had these types of winds come through the Northeast, and we consistently make the same mistakes. I’m not sure why the states, Connecticut, New York, New Jersey, don’t have a good handle on how to do this.”
Legislatures in all three states have scheduled oversight hearings.
“I think the politicians a just reacting to how upset a lot of customers are and I think the storm caught a lot of the utilities off guard,” said Howard Cure, director of municipal bond research for Evercore Wealth Management.
Local officials braced for heavy rain and instead got severe wind, some at tornado levels. Many states having to deal with their own outages also hindered collaboration efforts.
“The storm had a pretty widespread impact on all the states,” Cure said. “And everything has been slowed because of the coronavirus. You have to take extra precautions if you’re a worker.
“There was pretty bad communication between the utility and the customers. That didn’t help, either.”
New Jersey Gov. Phil Murphy said he couldn’t get straight answers from Jersey Central Power & Light Co. when he lost power at his home in coastal Middletown. State Sen. Joseph Pennacchio, R-Rockway Township, is calling for public utilities to file certain information concerning emergency preparedness with New Jersey’s Board of Public Utilities and increases certain penalties.
New York City Public Advocate Jumaane Williams, meanwhile, has called for a municipal takeover of Consolidated Edison Inc., the nation’s largest utility.
“It’s time to put something in place,” Williams said. “Between this past summer’s major blackouts, this year’s rate hikes and what seems like no repercussions for the utility companies, it is clear that we need a major systematic change.”
Typical residential electric bills from Con Edison in New York will rise by an average 4.2% in 2020, with 4.7% and 4% projected for the following two years.
“It’s not a sunny-day business, it’s an everyday business. They have to perform it,” New York Gov. Andrew Cuomo said of Con Edison. “If it’s only for sunny days, then we should pay them less.”
In Connecticut, three ratepayers, including the owner of an acupuncture business, filed a class action against Eversource in Hartford Superior Court on Wednesday, alleging negligence by failing to prevent service, inadequate tree trimming and insufficient staffing. They seek class-action status.
Also in Connecticut, U.S. Sen. Richard Blumenthal called on Eversource chief executive James Judge to resign, while Gov. Ned Lamont and environmental secretary Katie Dykes are exploring a performance-based contracting system.
The state’s Public Utilities Regulatory Authority is investigating the preparedness of Eversource and United Illuminating Co. The latter serves the Bridgeport and New Haven areas.
An Eversource official said that in some ways, Isaias posed more problems than Hurricane Sandy in 2012 and Tropical Storm Irene a year earlier. Western Connecticut, including the Danbury area, was especially hammered.
“The damage locations were larger. The customer impact was larger,” president of regional electric operations Craig Hallstrom told reporters.
Eversource also took a public-relations hit with media reports, which cited a filing with the Securities and Exchange Commission, that executive vice president and general counsel Gregory Butler sold about $500,000 worth of company shares – 5,625 shares at $88.81 per share – on Aug. 3, the day before Isaias hit the tri-state region. A company press officer told NBC Connecticut that the move was completely legal.
“I don’t know what happened to the lazy, hazy, crazy days of summer,” Lamont said, invoking a 1963 song by Nat King Cole. “They’re certainly not lazy, maybe hazy and certainly crazy.”
New York State’s deregulated energy policy structure requires a twofold approach for municipalization including citywide and statewide regulatory changes, according to Williams. Legislative action would move to condemn the section of the transmission and distribution grid that covers the city. A municipal or state bond would then buy the condemned grid assets from Con Edison.
The next step, Williams said, would be to expand the scope of the New York Power Authority into development and ownership of renewable generation.
“Their ready access to cheap capital through bond issuing will help keep costs down and their public ownership will keep the value generated by the assets in the public coffers. This will cut out the waste of needing to continuously pay out dividends.”
“It separates the generation, which would be expanded to [NYPA], and for the part that would do the transmission, we want to municipalize that.”
Williams would also grant a “first-pass option” to NYPA whenever an independent system operator identifies a need for new capacity.
Public-private partnerships could provide a more practical answer, according to Rubin. For example, non-technical people could remove debris, which he said could also help deal with the massive unemployment that took effect when the coronavirus escalated.
“An absolute takeover is a difficult process but a public-private partnership between the utility and the experienced people and between the governments and the politicians would allow the financing and the feasibility of improvements to be done by those folks and then the actual utility functioning could be done by the professionals who know what they are doing,” he said.
Regardless of ownership, an aging grid poses a challenge. For example, much of the wiring in New York City is above ground, which leaves the grid vulnerable to trees and fires. Con Edison President Tim Cawley has said putting wires underground could cost about $50 billion.
“Doing things to make the network more secure and resilient costs money. Making the wires underground is expensive,” Cure said. “It’s a long, expensive process to upgrade the system. And storms will be more frequent.”
Rubin said states and cities could tap money available under the Disaster Recovery Reform Act of 2018.
“Between that and bonding that could be done by states or the municipalities that have bonding capability, the debt service could be taken care of by the cost from the government and we could begin the process of burying these lines.”
Also, Rubin said, states and municipalities should have tree-topping and thinning programs every May, notably in heavily suburban environments, to make sure wind goes through trees and are not in direct lines.
Aging wooden poles in the Northeast aggravate the situation. By contrast, poles in hurricane-active Florida are made of cement or composite.
While more than 200 municipal utilities and more than 900 co-ops exist in the U.S., few sprung up in recent decades. Most municipalizations were in smaller communities, although Los Angeles, San Antonio, Austin, Cleveland and the state of Nebraska are among the owners of publicly owned utilities.
Investor-owned PSEG took over public utility Long Island Power Authority’s operations after the LIPA Reform Act of 2013. The legislation also paved the way for LIPA to refinance a portion of its $7.6 billion debt through the issuance of up the $4.5 billion bonds through its Utility Debt Securitization Authority.
San Francisco has offered to buy bankrupt Pacific Gas & Electric Co. for $2.5 billion. The utility filed for bankruptcy under Chapter 11 last year. A bill before the California calls for a takeover.
In Chicago, where severe winds have left about 188,000 people in the region still without power as of Wednesday, a franchise agreement with Commonwealth Edison Co. expires at the end of the year, prompting some calls for a takeover.
“Each municipalization effort faces unique conditions and there is no single playbook or set of best practices for the process, but these case studies demonstrate how municipalization could unfold in New York City,” Williams’ report said.