“Innovative Plan, Historic Financing Expected to Boost Electric Reliability by 95 Percent”

Photo by PoPville flickr user UrsulaAntares

From the Mayor’s office:

Mayor Vincent C. Gray accepted the recommendations of his Power Line Undergrounding Task Force, which he established in August 2012 to address the significant power outages that District residents and businesses suffered as a result of the severe derecho thunderstorm system that left extensive wind damage across the region in June.

The co-chairs of the 15-member task force — City Administrator Allen Y. Lew and Joseph M. Rigby, Chairman, President and CEO of Pepco Holdings, Inc. — presented an interim report to Mayor Gray that calls for a multi-year program estimated at nearly $1 billion in a first phase to selectively underground up to 60 high-voltage lines that are most affected by storms and overhead-related outages. The move is expected to improve service for Pepco customers on those feeders by 95 percent.

The task force includes government officials, regulators, local utility-industry executives, public advocates, and residents of neighborhoods most frequently affected by power outages.

“This proposal is a win for the District. I asked these task force members to find a solution to this problem worthy of the nation’s capital, and it appears they have been successful at that,” Mayor Gray said. “I thank them for their months of work and dedication to finding a way to deal with the devastation caused by severe storms.”

The task force is recommending a unique financing arrangement through a combination of about 50-50 of District and Pepco financing. The funds will be obtained through a combination of traditional Pepco funding of debt and equity for $500 million, $375 million in District-securitized bonds, and between $62 million and $125 million in District Department of Transportation (DDOT) street-paving funds that will be leveraged to support undergrounding.

“This financing arrangement is the first of its kind,” Lew said. “It speaks to the partnership between the District and Pepco to improve the quality of service for District residents and businesses.”

“We are meeting and even exceeding service reliability standards in the District, but this work will help our system better withstand severe weather events,” Pepco CEO Rigby said.

For residential customers, the rate impact will start at about $1.50 per month and will increase to a maximum of $3.25 after seven years, or about a 3.23 percent increase in rates. Low-income customers will be exempt from the rate impact. For commercial customers, the rate impact will vary by the class of service and will generally average between 5 and 9.25 percent.

Continues after the jump.

In its role on the task force, Pepco has developed a detailed model that will evaluate the cost and benefits from undergrounding each overhead line in the District. Pepco will develop a plan and submit it to the Public Service Commission (PSC) for review and approval. No work will be performed until the PSC has the opportunity to review the selection criteria and receive public comments on the plan.

The areas identified will include the high-voltage feeders most affected by overhead-related outages in Wards 3, 4, 5, 7 and 8, where overhead distribution lines currently exist. About half of the District is already served by underground lines. There will still be secondary and service lines running overhead on the existing poles. Typically, these facilities are a small factor in outage events. Historically, outages on these circuits are not prolonged. Restoration time for these low-voltage lines normally is much shorter than restoring the high-voltage primary lines, which can require several hours for repair.

The proposal will require legislation to approve the undergrounding plan and authorize the PSC to approve a financing order for recovery of the costs associated with the District-issued bonds and for Pepco’s costs.

In order to implement the recommendations, the PSC will need to issue a financing order that authorizes the establishment of a surcharge for the recovery of the cost of bond repayment and of Pepco’s capital costs and expenses associated with the undergrounding effort. The PSC also will then approve the selection of the overhead lines to be undergrounded based on the selection process recommended by the task force.

“I want to thank Mayor Gray for creating the task force on power-line undergrounding and for bringing together the key players who can address this important issue,” said PSC Chairman Betty Ann Kane. “The task force report builds on the findings of a Public Service Commission study that strategic undergrounding can make a significant difference in electricity reliability. The recommendations also provide for accountability and transparency, both of which are important goals for the Public Service Commission.”

The construction work also will bring other benefits, including an estimate of about 950 new jobs each year of the project.

“This is the ‘game change’ that will finally allow District electricity consumers to come out of the dark and get the reliable service they deserve at an affordable rate,” said D.C. People’s Counsel Sandra Mattavous-Frye. “As People’s Counsel, I was committed to finding a solution to a seemingly insoluble problem of power outages that has plagued our city for over a decade. The Task Force plan is responsive to our citizens’ calls for action and goes a long way toward achieving our reliability goals.”

18 Comment

  • Is it really that unreliable? In the last five years, I’ve never lost power while living in DC. From the press release above, this would be a $1b investment, which will be funded by tax payers and utility customers.

    Sure, it sucks that the power goes out a few times a year from time to time during inclement weather and high heat, but I do not see it as a large enough problem to justify a $1b investment.

    • These power outages are either feast or famine – you don’t get hit at all, or if you are hit your power is out for days if not weeks.
      Maybe it’s an overreaction. But on the other hand, 50-year storms have become 5-year storms. We are likely to see more of these weather events than in the past and they are going to get worse.

    • ah

      It’s a reasonable question to ask re $1b, and indeed it has been.

      But your experience is lucky. There are large parts of the city that seem to be hit repeatedly with power outages from both summer and winter storms, where underground lines likely would not have led to the same problems.

      I happen to live in one such neighborhood, and we lost power for 3 days a couple of winters ago and 5 days after the Derecho last summer, in addition to several shorter outages. And we were luckier than some.

      So the issue is real . . . whether the solution is worth the cost is for debate.

    • Where do you live It’s quite possible that you live somewhere in central DC where the power lines are ALREADY underground. That’s the whole point, place with underground power lines hardly ever have outages but those parts of DC that still have above-ground lines suffer. I live near 16th and U and have never had a problem. My boss lives near Van-Ness/Cleveland Park and his power goes out at least once a year if not two or three times. My mom lost power last winter (she’s by Friendship Heights) and she lives on the 9th floor!

    • In the last five years, I’ve lived in three different DC neighborhoods. In the first two, we never lost power. In the third (and current) neighborhood, we’ve lost power many times over the last year and a half.

      So based on my experience, I would say it varies by neighborhood. All fine and good when you almost never lose power, but not so cool, for example, when you’re discarding the contents of your refrigerator/freezer, again.

      Is it worth a $1b investment? Maybe. I guess it depends on what your time horizon is.

    • I’m in the same boat– have never ONCE lost power in the 8 years I’ve owned my house here.

      However… I have hosted enough friends who were without power for a week or more during the worst heat and the worst cold to know that I’m one of the very lucky ones.

    • Last five years I dont recall, but in the great hurricane (isabel?) of ’03 parts of Glover Park lost power for a week mostly due to down trees.

      • OP: I do live in a central part of the city so it is entirely possible that my lines are underground. That being said, I am still not sold on this $1b plan. Maybe if the city/ Pepco performed proper tree trimming they would not fall on lines during the storms? Maybe the utility company needs to update outdated equipment (poles, transformers, etc). I just see this $1b investment as a knee jerk reaction to a problem that has not been properly diagnosed yet.

        • When the power went out last year, the temperature soared to 108 degrees and stayed near there for a very long time. I did not lose power, but I (and anyone living in a top floor apartment like mine) would have been facing life threatening heat. I am still rather young, but I feared for anyone who was elderly or ill and living in that kind of with no options. You have to keep in mind the different conditions people live in. This year, if this happens again, I have a plan to simply go elsewhere or leave town but I am not sure that is how I should be living when it comes to my power supply? It is the 21st century afterall.

          • An addendum: Although I did not lose power, many in my area did so during the heatwave, I felt under constant threat that my power would go out and I had to make alternate plans. But there WERE people in my spot who lost power and they would not have been able to make it in a high floor apartment (heat rises, etc.)

  • Get ready for road construction!

  • ah

    I assume none of the actually lines proposed for undergrounding have been publicly identified . . . and I assume that’s for a reason.

  • The devil is in the detail and “public-private” is always filled with devils.

  • I would rather $1B be spent on a separated blue line and other Metro improvement. More time is wasted on Metro than power outages. If we were flush with piles of cash then sure but since wages have been flat I’d rather the money be spent on Metro construction.

    • Metro is already spending $5B on improvements. I guess another 1 billion wouldn’t hurt, but it doesn’t have to be one or the other.

    • Metro is a lost cause. Any $$$ you throw their way will either be mismanaged, wasted on subpar work resulting from contracts given to companies with friends in high places, or simply embezzled. I wouldn’t give that outfit another dime until they get a new board that actually uses the system, fire all of the executives and station managers, and unburden themselves of that horrific workers’ union.

      • Agreed. The most dysfunctional-organization in D.C., a city that is synonymous with the term.

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