Currently viewing the tag: "Electric utility"

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Shifts in language fascinate me. When did “reach out to” replace “contact”? The battle for hearts and minds often involves subtle nuances in language but deep changes in meaning. “Medicare for all” connotes something far different from “government-run medical system.”

For the first few decades of my career in electricity, reliability was the paramount performance characteristic and metric for the industry. Over the last ten years, I sense that “reliability” is being replaced by “resiliency,” perhaps not in the back offices of utility management and engineering, but in public discourse.

A few years ago, I heard a presentation by a power plant engineer who made this distinction with a boxing analogy: Reliability is avoiding the punch, resiliency is taking the punch.

I didn’t think much about it at the time, but I sure have thought about it a great deal since, and especially now in the midst of this COVID19 global pandemic. 

There’s a subtle shift in meaning and design/operating philosophy implied here. The “grid” has always been over-built (gold-plated to some in other industries) to achieve very high reliability standards, to “always keep the lights on.” The goal was to avoid outages. This, one could say, is the core competency of a utility company. 

Resiliency means accepting that outages will occur, and perhaps also means that the next catastrophic event will unlikely resemble the last one. In other words, you can’t design for the worst flood that occurred in the last 100 years, because the next one will likely be worse. You also design so that the critical parts of the grid can “survive,” and the non-critical ones can “recover.”

So rather than avoiding an outage, you design the system so that you can bounce back from an outage as expeditiously as possible. And you divide the grid into two buckets – critical and non-critical.

To me, this subtle distinction actually represents a sweeping change in attitude and philosophy. Rather than striving to maintain the overall grid serving everyone to be as robust as possible, you are now conceding that outages are unavoidable and some areas served by the grid are less critical than others.

Another way of looking at it is that reliability is the outcome and resiliency is the means by which you achieve reliability. From a Microsoft webpage about cloud-based services comes this: “Resiliency is the ability…to withstand certain types of failure and yet remain functional from the customer perspective.”

For electricity, I interpret this to mean something like this: a site standby power system takes over immediately when a grid tie failure is detected. It could also mean that the electricity grid is designed to withstand the worst catastrophic event we can imagine; however, I doubt there is ever enough money in the budget for that.

The COVID19 pandemic is causing all manner of reflection and projection, as catastrophic events tend to. An article by an emergency room doctor I read this morning in The New Yorker asked, “Will we be forced to shift the emphasis of our bio-ethical values away from our “do everything” approach. “The American medical system is focused on aggressive healing at all costs, sometimes in the face of medical futility to the detriment of the patient’s comfort,” the article went on, “Emergency rooms are the country’s safety net.”

Does this imply a subtle shift from avoiding a death “at all costs” to “facing difficult decisions” about who has to die. The former means having the medical resources on hand, a gold-plated system, if you will, to avoid death. The latter means accepting that everything you can do for the patient is now less than it was. Avoiding the punch or taking the punch?

Somehow buried in this replacement of reliability by resiliency, I fear, is that gold-plated reliability for everyone will be replaced by an acceptable level of reliability for everyone. Above that and you’re on your own. I hope I am wrong.

It appears we’ve accepted a future in which catastrophic events get worse and more frequent, and there’s less we can do about that. That to me is different than the mentality which prevailed from WWII to recently in the electricity industry– a period during which we built the greatest and most reliable just-in-time inventory system, one gigantic machine delivering 24/7/365 to everyone an essential service, the backbone of the economy.

It may all seem like an esoteric discussion but shifts in language have consequences over time.

In recent news reports on COVID19 pandemic, I’m glad to hear pundits and politicians refer to the electric utility model for emergency response. Utilities assist each other during major outages, sharing and moving personnel and resources to hard-hit areas, to keep the lights on and save lives. This has been a traditional part of utility operations for decades, and thankfully has survived the deregulation/competitive era which nominally began in the late 1970s. It’s part of utility culture.

At that time, many industries were eventually transformed by what is commonly known as neo-liberal/conservative economic and cultural philosophy which argued, in effect, that everything is better with competition and markets. The list includes trucking, airlines, natural gas, electricity, water, education, and health care. Given today the disparities in wealth, dislocations in resources, and the environmental issue of our time, global climate disruption, it’s easy to blame this philosophy for the ills we seem to be facing as a nation and society.

Maybe the better way to look at it is that this “strain of economic thought” has run its course and it is time to work within a new framework.

In my mind, that framework is the traditional regulated utility. The basic business model is the utility invests to expand and maintain its infrastructure to serve everyone in its “service territory” and a government entity, the public utility commission, sets a regulated rate of return on that investment. Approved operating costs are passed along to the ratepayer. This way, investors earn a fair return, the system is equitable to all, and rates are kept reasonable. While electricity prices vary around the country, there isn’t a person that pays a rate that is excessive to the value of the service.

Most importantly, this approach keeps things predictable enough so that utilities can plan on a multi-decade basis. This is critical for infrastructure businesses.

As I argue in Carbon IRA & YouTility: How to Address Climate Change & Reward Carbon Reduction Before It’s Too late, we could solve at least one half of our carbon discharge problem by quickly returning to the traditional utility business model, this time allowing utilities to own customer infrastructure – such as smart thermostats, efficient AC systems, storage devices and rooftop photovoltaic systems – which help optimize the grid for everyone.

Now, I’m not a health care industry expert but I don’t seen why this business model can’t be applied in the same way. Public and private hospitals compete for resources, segregating care based on who can pay, etc.; insurance companies adversarially fight to keep costs in check, and state government agencies struggle to create standards, fund innovation, and oversee the whole mess. Rather than debate the merits of socialism or capitalism applied to health care, why not a third way?

Consider each large health care organization (i.e., hospitals, doctor network, accepted insurance providers, etc.) a “public utility” and regulate the businesses’ financials and performance using a public government commission. It’s worked well for other “essential services.” Why shouldn’t it work for health care?

I don’t think anyone reflects on a personal health care event with the words, “Gee, that worked well!” And I don’t think anyone witnessing this morass called the COVID19 pandemic response is saying, “Damn: This is working really great!”

Market-based economics work best for new industries and innovation. Markets don’t work well for critical or essential services or commodities (that’s why commodity businesses tend to have three major suppliers and are reduced to an oligopoly). Markets work worst during crises, why you see price-gouging and hoarding.

Anyway, I’m glad the pundits and politicians are invoking utilities and their ability to collaborate for crisis response and perhaps will apply some of their processes over the long haul. Because what we are witnessing during COVID19, the lack of coordinated analyses, communication, response, could very well embarrass this country forever.

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