SuperStorm Sandy Aftermath: Power Companies Unnecessarily Immiserated Millions

By John Lawrence / San Diego Free Press

Weeks after Hurricane Sandy struck, millions of people were still without electricity. At its peak Sandy left 8.5 million without power. A lot of people were angry. Why did it take so long to get the power back on even with crews coming from as far away as San Diego? One power company in New Jersey came in for a lot of criticism – Jersey Central Power and Light (JCP&L)- owned by First Energy based in Ohio.

After Hurricane Irene in August of 2011 and another major storm that October, Governor Chris Christie commissioned a report, Performance Reviews of EDCs in 2011 Major Storms. That report found that JCP&L was deficient in communications with public officials and the general public leading to widespread anger and disappointment with the utility. But they were also deficient on a lot of other accounts.

Although we San Diegans have blessedly been spared from the ravages of hurricanes, tornadoes and other weather disasters, we are still at the mercies of aging utilities much in need of repair and upgrading. In particular, our local power and light company, San Diego Gas and Electric (SDG&E) has been neglecting maintenance and upgrading similar to what JCP&L did prior to the devastation of Hurricane Sandy.

An era of deregulation has left power companies more interested in cutting costs and maximizing profits than in keeping the lights on. You maximize profits by laying off workers, the workers who are supposed to be doing maintenance on the power grid such as replacing wooden power poles. Old power poles can jackknife and snap in a storm, even a storm far less ferocious than Sandy.

Besides replacing wooden power poles, such things as locating substations away from flood zones and tree trimming or vegetation management could have gone a long way to lessen the impact of Sandy. You also can put in concrete power poles instead of wooden ones, raise wooden ones above the tree line and underground utilities. There is a lot that can be done to strengthen our electrical grid, prevent massive outages and shorten the time to restoration of power.

In “The Fine Print,” David Cay Johnston writes:

“The problem … with poorly maintained equipment is widespread.Americais using up its infrastructure instead of rebuilding it. We grow slowly poorer as roads crumble, dams weaken on their way to deadly collapses, and the electric utilities siphon off funds customers pay for reliable power.

“One indicator of this? From 1983 to 2010, the number of Americans rose 36 percent, but the number of utility workers fell 15 percent. As the electric grid and the pipes carrying water and natural gas under high pressure age, more workers are needed for maintenance, repair and replacement, not fewer.”

So to satisfy Wall Street, keep the stock price high and consequently maximize top executives’ pay, maintenance is deferred and workers are laid off. This means that in a disaster such as Sandy, while FEMA has pre-positioned supplies and done all it could to get ready, the most important asset of all – electric power – has been neglected to the point that the electric utilities such as JCP&L are in no position to repair massive damage that could have been been prevented in the first place if the electric grids had been kept up to snuff with scheduled maintenance. We have reported previously in the San Diego Free Press how Sempra Energy, parent corporation of SDG&E works out of the same playbook:

“It’s standard operating procedure for San Diego based SEMPRA Energy, parent corporation of San Diego Gas and Electric, to delay costly maintenance and then, when there is a breakdown in the system such as the 2007 Witch Creek Fire which burned 198,000 acres, killed two people, injured 40 firefighters and destroyed more than 1,100 homes, to go to the California Public Utilities Commission (CPUC) and get a ruling that would allow them to charge the ratepayers for costs associated with that disaster.”

In California our old friend Pacific Gas and Electric (PG&E) went before the California Public Utilities Commission to request a rate hike to replace 46,000 power poles annually. They said they needed to charge higher rates to replace poles every 50 years. But instead of replacing power poles, PG&E diverted much of that money. It replaced just 15,000 poles in 2002 and 2003, less than a third of the number its own experts said needed to be replaced. Then it replaced even fewer poles in subsequent years falling to about 3300 poles a year. At that rate 700 years would be required to replace all of PG&E’s poles.

This is how a monopoly like PG&E or SDG&E (parent company Sempra) orJCP&L (parent company First Energy) makes money. It lets the power grid become decrepit and then goes before the regulator for a rate increase. With the rate increase, it adds to the bottom line instead of carrying out scheduled maintenance which would subtract from it. That makes executives and investors happy, but not so much the customers when a disaster happens. How much do you want to bet that JCP&L already has plans to ask for a rate increase to replace power poles and aging equipment destroyed by Sandy?

Writing in Newsweek/The Daily Beast.com Johnston says:

“Demand that electric utilities replace power poles as they wear out and maintain equipment, especially changing oils in large transformers before they congeal and stick, to reduce long-term costs. And hire more utility workers. When utilities keep enough staff on hand to maintain systems, taxpayers will not need to fly linemen and cherry pickers in military cargo planes from California to New York.”

JCP&L had to replace 6000 poles and over 400 miles of wire after Sandy. They had to remove 65,000 trees. Numerous substations blew up. If they had done preventative maintenance on these items, there would have been far fewer outages and those outages that did occur could have been dealt with far sooner.

But what is most important is having a large number of boots on the ground in hour one after a disaster hits, people knowledgeable about the particular system and neighborhoods. Crews imported from elsewhere cannot make up for this, but deregulation in the 1990s allowed utilities to lay off trained personnel in order to increase profits. When the power crews came in from different parts of the country, they sat idle in parking lots for days awaiting orders from JCP&L.

JCP&L has had record reductions in its work force. In 1998 JCP&L had 1650 union workers in its work force, according to a November 20, 2012 report by Dan Rather, “In the Dark.” Today they have about 1100. This is a nationwide trend that’s reflected in the declining ranks of the utility workers’ union, the IBEW, the International Brotherhood of Electrical Workers. Nationwide the number of union members has been halved in the last ten years at a time when electricity has become increasingly more vital especially because of the widespread use of cell phones and the internet.

But at the Association of Electric Utilities annual meeting, they’re still talking about cutting workers and the inventory of spare parts, cutting everywhere in order to satisfy the demands of Wall Street for cutting costs and increasing profits even after Hurricane Sandy.

True to the utility company playbook ratepayers will pick up the tab for JCP&L’s negligence prior to Hurricane Sandy. Ratepayers already face more than a quarter of a billion dollars in increases from last year’s two powerful storms. All of the utilities are entitled to seek recovery of those costs in future rate cases, provided those expenses are deemed prudent by the New Jersey Board of Public Utilities. So the PUCs are essentially in on the game. Sound familiar? SDG&E pulled the same thing after the Witch Creek fire.

Instead of doing preventative maintenance JCP&L cut costs, laid off workers and then did a lousy job responding to the disaster. All of this cost much more than would have been the case if scheduled maintenance had been done properly. But now in the aftermath,JCP&L wants ratepayers to pick up the tab. This is the power companies’ playbook: 1) defer maintenance in order to cut costs and maximize profits; 2) wait for a disaster to happen; 3) hike rates on ratepayers to pay for the recovery.

Widespread and sustained power outages following Superstorm Sandy amount to negligence, breach of contract and consumer fraud,New Jersey residents and business owners say in a lawsuit filed November 28, 2012 in state court. The suit against Jersey Central Power & Light and its parent company, First Energy Corp., claims the utility didn’t provide electric service customers contracted for. It also claims the utility failed to prepare for weather conditions, to maintain its equipment and to hire enough personnel, and that the utility misrepresented its ability to restore power.

We here in San Diego cannot afford to be smug. While the preponderance of natural and weather disasters have occurred elsewhere, we are still subject to the same power outages which we had a taste of in the blackout of 2011 which left 5 million people in the dark. The playbook is the same for SDG&E as it is for JCP&L. Remember that.