Utilities must accept the reality of climate change

BGE, Pepco have struggled with recent storms because they consider them extraordinary

October 9, 2012

Whether or not they accept the scientific evidence that climate change is man-made, Maryland businesses and families with electric lights know that climate change has already had a dire economic impact on our region.

Unprecedented weather extremes have pummeled our state and power distribution system. Crippling storms and heat in the summer and snow storms in the winter, previously rare in Maryland, have become commonplace.

Such extreme weather events dramatically increase the risk to Maryland's old-fashioned electric utilities, which were built and are managed for a 1950s economy — and climate. In the past several years, increasingly frequent and ferocious storms have repeatedly knocked out power for dangerously long periods.

Despite claims from such utilities as Pepco and Baltimore Gas & Electric Co. (BGE) that they have improved their storm response and helped to correct power interruption, the truth is that hundreds of thousands of Maryland families had to wake up, for several days or even a week, to homes without electricity this year.

The results of utilities' failure to modernize in the face of climate change are clear — food rotting in refrigerators, hourly workers laid off, small businesses closed for days, and hundreds of millions of dollars in goods, services and productivity lost by Maryland's economy.

States that take steps to ensure reliable electric service in the face of these new weather extremes are going to reap economic advantages. More than ever, reliable electric service is critical to the economy — from digital commerce and cloud computing to 911 emergency services, home offices and smart phones.

This summer, we wrote to the CEOs of BGE and Pepco to warn them of the substantial financial risk that climate change poses. We urged them to accept, not deny, the science and to take aggressive steps to modernize — to update their business strategy for a 21st century climate with both more frequent and severe weather disturbances and an increased peak demand for electricity caused by extreme temperatures. Unfortunately, their responses dodged the issue. Instead they repeated helpful but small-bore initiatives such as tree-trimming and smart meter programs.

The state of Maryland has officially recognized climate change and explicitly built it into its business plans and regulatory policy. The state's electric utilities should do the same. That means that utilities must do more to anticipate weather extremes, not respond to observed changes that are already affecting customers.

Clearly, Maryland utilities' traditional approach to major outages — paying overtime for employees and relying on utilities from outside Maryland — has failed. As an alternative, utilities should consider an electric power "surge reserve" of trained technicians, similar to volunteer fire departments and the National Guard. Retired utility workers, retired military, independent electricians and other building trades would all be candidates to take part. With more equipment on hand, this back-up team would cut the cost of power failures dramatically by restoring service promptly.

Despite the clear need to modernize, utilities' investments in energy technology have been scaled back. They have slashed maintenance efforts and failed to invest in the latest technology such as automatic circuit re-closers, which can isolate faults or automatically close circuits to restore power.

This year, following legislation we passed in 2011, the Public Service Commission (PSC) set service and reliability standards for electric utilities. We also gave authority to impose financial penalties of $25,000 per customer per day on utilities that fail to meet the standards — fines that are required to be paid by stockholders, not consumers. It's time for the PSC to use their authority, thereby creating the right financial incentives for the utilities to modernize.

Common sense and experience around the world show that selectively burying wires underground is the most successful and cost-effective long-term fix. BGE and Pepco have recently said they'd consider more undergrounding. That's a step forward. Now, the PSC should compare such costs against the cost of power failures as measured in lost work time and business activity, spoiled food, and risks to public safety and health — and order the utilities to make the cost-effective investment.

Just last week Gov. Martin O'Malley urged the PSC to adopt a new plan that would incentivize utilities to accelerate several years of serious maintenance upgrades so that the electric grid will be stronger and more reliable within 24 months. The governor's task force made 11 recommendations for protecting Maryland's economy from costly power failures. Many of the suggestions, particularly selective undergrounding of utility lines, make sense.

But the larger issue, and the one which needs to be addressed first, is the utilities' continuing refusal to join the governor, the General Assembly, the scientific community, and the majority of their customers in frankly and publicly accepting that climate change is real and that their business strategy needs to move into the 21st century. Until they correctly understand the problem, they will continue to fail to solve it.

We know the consequences of not acting. It's past time for the utilities to accept the science and act on it for the benefit of Maryland's economy. The PSC must make sure that they do.

Sen. Brian Frosh (brian.frosh@senate.state.md.us) represents Montgomery County. Sen. Jim Rosapepe (jim.rosapepe@senate.state.md.us) represents Prince George's and Anne Arundel County. Both are Democrats.