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Regulatory VisionReliabilityAbigail Ross Hopper, Esq.Director, Maryland Energy AdministrationEnergy Advisor, Governor O’Malley
Social ExpectationsSafe & Reliable Service
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• Marylanders expect reliable electric service, during both blue sky days and major storms, at a low cost.
• However, a significant disconnect exists between the public’s expectation of reliability and the ability of the present-day electric distribution system and utility business model to meet those expectations.
Major Storms in MarylandThe Cost of Unreliable Service
• “Snowmageddon” (2010)Interruptions: BGE: 142,228; Pepco: 251,769; PE: 12,478
• Hurricane Irene (2011)Interruptions: BGE: 756,395; Pepco: 410,313; PE: 19,702
• Derecho (2012)Interruptions: BGE: 762,781; Pepco: 958,563; PE: 90,467
Estimated cost of three storms to customers:
$1.1 billion3
Regulatory OptionsTo Increase Grid Resiliency
• Option 1: Specify changes from top down (i.e., trim trees in a particular way; address worst performing feeders).
• Option 2: Set reliability “floor” and require utilities to meet it.
• Option 3: Create financial incentives for utilities to improve reliability (i.e., performance based ratemaking).
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Grid Resiliency Task ForceRecommendations
• Accelerate existing vegetation management program from four to two years.
• Improve and accelerate existing worst performing feeders program.
• Accelerate existing reliability requirements.
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But what about cost?Cost Recovery
• Maryland needs a compromise between the social expectation of low cost and reliable service and utility constraints.
• Asking the utilities to exceed their regulatory requirements comes with additional costs in an era of financial pressure.
• As such, the Task Force recommended authorization of a tracker-like mechanism exclusively for accelerated and incremental investments and with appropriate ratepayer safeguards.
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Long Term AssessmentsThe Cost of Resiliency
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• In the “Derecho Order,” the PSC required the utilities to submit studies addressing long term investments and staffing levels that would shorten restoration times in different outage scenarios.
• The utilities submitted final reports on September 3, 2013.
Long Term AssessmentsThe Cost of Resiliency
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• Utilities concluded that significantly shortening restoration times would require billions of dollars of investments – doubling or even tripling residential rates.
• Similarly, substantially increased staffing levels is not cost effective.
• This suggests States should focus on cost-effective investments that keep the power from going off in the first place.
Regulatory VisionReliabilityAbigail Ross Hopper, Esq.Director, Maryland Energy AdministrationEnergy Advisor, Governor O’Malley
Thank you.