regulation of public utilities in the face of disasters thomas pearce chair, naruc staff...
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Regulation of Public Utilities in the Face of Disasters
Thomas PearceChair, NARUC Staff Subcommittee on Critical Infrastructure
Senior Utility Specialist, Public Utilities Commission of Ohio
7 July 2011
Workshop: Risk Management and Economic Regulation
for Water and Sanitation Utilities
Bogotá, Columbia
DISCLAIMER
• Nothing contained within this presentation shall be deemed to represent any positions or views of the National Association of Regulatory Utility Commissioners (NARUC), its officers, its staff, its Committees, its Subcommittees, any or all of its individual member commissions, the state of Ohio, its governor, the Public Utilities Commission of Ohio, its commissioners, its staff, nor even those of the author…1
1 Remainder of the legal disclaimer: if you’re paying attention, that last item was injected for purposes of humor; it’s okay to laugh and to take neither the presenter nor the presentation too seriously
The future dependson what we doin the present.
Mahatma Gandhi3
Critical Infrastructure and the
Role of Public Utilities Commissions
Emergency Managers
Surrounding Nations/ States
National, State & Local Police; Military
Local Government
Public Health Agencies
Public UtilitiesComission
Utilities & Interdependent Systems
Other National Governmental Agencies
Executive Office/President/Governor
Governmental Response in Emergencies
Public Utilities Commission Responsibilities in the U.S.
• Ensure adequate reliability and emergency
planning by regulated utilities
• Manage interdependencies
• Optimize planning through utilities facility
siting process
• Approve cost recovery for infrastructure
investments.
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Issues
• Measuring infrastructure reliability
• Prioritizing spending
• Maintaining affordability yet justifying costs
• Benefits of enhanced system redundancy
• Improving the safety of operations
• Establishing performance goals for utility
Threats to the System and
Emergency Preparedness
From Response/Recovery to Utility System Reliability/Resiliency:
•Continuity of Operations Plans•System Redundancy•No choke points•Diversity
Plan not only for predictable events, but low probably/high consequence events.
How to integrate these modes of thinking into operations?
Paradigm Shift
The Five Phases of an Emergency
Phase III Assess and
decide action
Phase I Planning
Phase IV Take actions and respond
to feedback
Phase V
Review lessons learned
Phase II Monitor and
alert
Who is involved and who leads at each stage?
What specific actions are taken at each stage?
RECAP
• Know your network: identify critical infrastructure and key assets
• Assess risk, vulnerabilities, criticality & nature of threat
• Identify Protective Measures
• Build partnerships with public/private sectors, federal, state, local and adjacent governments
Utility Emergency Preparedness
&Utility Assurance
Guidelines
What is Utility Assurance?
All Hazards Approach:
• People – Sabotage, Terrorism, Civil Disturbance, Public Health Emergencies
• Nature – Flooding, Hurricanes, Tornados, Earthquakes, Ice Storms and others
• Technological failures – Cybersecurity, Failure of Other Infrastructure
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Effects of A “Dry” Hurricane
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PlanningTraining/Exercises
Coordination
AssessmentScope and Duration
MitigationRisk & Vulnerability
Assessment
Security• Physical• Insider• Cyber
Reliability• Redundancy• No choke points• Diversity
2. Preparedness for Emergency Response
1. Protecting Critical Infrastructure
Ten Actions to Assure Emergency Preparedness
1. Ensure you & your staff are prepared & trained to deal with the emergency situation
2. Know your utility infrastructure and profile
3. Know key government & industry contacts
4. Maintain current file of legal authorities
5. Remember infrastructure locations & keep them current
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Ten Actions to Assure Emergency Preparedness (cont.)
6. Be familiar with response measures
7. Work with the private (or public) sector
8. Review & update plans regularly
9. Develop standard operating procedures for access or credentialing
10.Prepare a media plan
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Emergency Response Plan
“WHAT’S IN YOUR PLAN?”19
Communicating Interdependencies
In an emergency,–what you know is only as
important as
–who you tell.
Communicating with the Public
• Be prepared – know who will to talk to the press
• Provide a clear and consistent message
• Facts (always) versus speculation (never)
• Provide authoritative, accurate and timely information
• Provide background information that helps them understand the nature of the problem
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Responsibilities In An Emergency
Public Utilities Commission• monitor for outages & emergencies• e.g.: equipment failure, utility response issues
(access to affected areas, etc.)• make recommendations to the Governor
• *facilitate governmental response coordination
Utilities• institute “Emergency Procedures”• know priority customers• coordinate with other utilities• restoration, reports 22
Cyber Security
• What are we trying to protect?
• What are the threats?
• What are the challenges of instituting cyber security?
• Where are the vulnerabilities?
Summary Observations: Regulatory Roles & Responsibilities For Critical
Infrastructure Protection
• Participate in emergency planning
• Ask utilities key questions about their infrastructure
• Protect sensitive information
• Designate an information point-of-contact
• Keep updated emergency contact lists
• Recognize interdependencies
• Coordinate and communicate regionally & internationally
Interdependencies
What are interdependencies?• The functional reliance of an essential
service (e.g., networked utility service) on another network/system
• Disruption/outage in one area/sector has implications beyond that area/sector, and vice versa
What interdependencies exist among your utility systems?
How can a domino effect be avoided?
What are some types of interdependencies?
• Types:– Physical– Cyber– Geographical– Institutional
• Infrastructure integrity – interdependency is intimately related to security and reliability
Regional and International Coordination
Why is coordination important?
• Utility services are typically provided by network industries (scale economies & large service territories)
• Utility regions may be international
• Regional and international governance issues
• Lack of coordination and communication undermine reliability and security
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Cost Recovery
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Cost Recovery and Prudence of Investment Decisions
Utilities need to exercise due diligence to protect the investments of their shareholders and assure a reliable supply to customers.
Who has a specific role in domestic security and critical infrastructure protection?
Who has a role in the recovery of the costs of utility investments?
Cost Recovery
• Who pays?– Stockholder
– Customer
– Federal, State, Local Government
• How do we pay?– Lower return
– Higher rates
– Securities (bonds)
– Increased tax liability
– Increased efficiency
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How are costs recovered?
• Regulatory Agencies implement protocols to determine whether a utility may recover money
• Most cost recovery is done through rate cases
• Cost recovery is implemented through rate adjustments
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Reliability Standards:
Some Related Approaches
Distribution Quality:
(1) What is to be measured?
(2) What are the indicators?
• MEASUREMENT = the reliability of
each distribution system
• INDICATORS = Service reliability
indices to be matched against
performance targets.
“Reliability” is defined by
1. Adequacy The ability of a utility system to supply the aggregate
demand and customer requirements at all times
2. Security The ability of the utility system to withstand sudden
disturbances such as unanticipated loss of system elements or power supply disruptions
EXAMPLE MEASURES
• Number of service interruptions
• Duration of service interruptions
• Call center response
• Cost thresholds
In the USA, certain measurements are used to determine how well a utility
system is performing
1.CAIDI (customer interruptions)
2.CAIFI (the frequency of customer interruptions)
3.SAIDI (system interruptions) and
4.SAIFI (the frequency of system interruptions)
The measurement of how well a system is performing provides an indicator of “reliability.”
CAIDI
• CAIDI (measurement) - The customer average interruption duration index, represents the average interruption duration or average time to restore service per interrupted customer.
• CAIDI (percentage indicator) is expressed by:
Sum of customer interruption durations ÷ number of interruptions
CAIFI
• CAIFI (measurement) is the customer average interruption frequency index, represents the average number of customers interrupted
• CAIFI (percentage indicator) is expressed by:
Sum of customer interruptions ÷ number of customers who had at least 1 interruption
SAIDI
• SAIDI (measurement) is the system average interruption duration index, represents the average time each customer is interrupted.
• SAIDI (percentage indicator) is expressed by:
Sum of customer interruption durations ÷ number of customers
SAIFI
• SAIFI (measurement) is the system average interruption frequency index, represents the average number of interruptions per customer.
• SAIFI (percentage indicator) is expressed by:
Sum of customer interruptions ÷ number of customers
How To Use Measurements and Indicators
• Performance targets are determined for each utility as a basis for service reliability indicator
• Performance targets (next succeeding calendar year) revised as system performance patterns become more recognizable
• Performance targets should reflect historical system performance, system design, service area geography, and other relevant factors
Recognition of system performance aids in targeting maintenance and system
improvements
• Annual performance levels for each service reliability indicator during a major weather event such as a storm should be recorded and reported for future use
• Performance data during a “major storm”, or other uncontrollable interruption of service can be used by the operator to develop an emergency plan
Recognition of system performance aids in targeting maintenance and system
improvements
• If the annual performance level is worse than the target for any indicator, the operator can develop an action plan to improve performance to a level that meets or exceeds the target level for each missed reliability indicator
KEY INGREDIENTS
• Performance targets must be achievable
• Utilities AND Stakeholders set goals
• Utility has discretion in how to get there
• Observable and verifiable
• The measures actually reflect utility performance and efforts
IMPLEMENTATION ISSUES
Start too high=>no room for improvement or only at extremely high costs
Start too low=>easy improvements, high reward with little or no effort
Look for needed improvements
Role of Standards
• Standards important because:– Pipeline assets fail at different rates
– Some newer generation pipes fail sooner than earlier vintage pipes
– Spending money to reduce average age of infrastructure not necessarily most cost-effective measure to address
Role of Standards - continued
• Standards important because :– Quantify types of breaking mains and #
customers served– Can result in economic waste and failure
to substantially improve service to address
– According to AWWA, many late 1800s cast iron pipes still functioning well
Achieving Optimal Infrastructure Performance
• Is difficult • Optimization process• Understand water infrastructure failure
causes• Define acceptable level of rate of failure• Evaluating costs of reducing threat risk• Refine through continuous improvement
process• Begin then develop and refine as you
proceed
Achieving Optimal Infrastructure Performance - continued
• Set reliability goals which quantity
– Risk of failure
– Value of reliability
• Example: critical care facilities usually have backup power, but don’t have backup water supply facilities
• Lesson: you need different reliability standards for different customers
APPLICABILITY TO WATER UTILITIES
US water systems
– Some reliability goals or standards for water supply sources
– But not for entire water systems
Issues • Main breaks
– Main break history (frequency, repair costs)– Outage impact history: Duration; Customer impact (#,
type, need for extraordinary flushing, disinfection, complaints)
• Material integrity– Undesirable material– Known corrosion (internal, external)– Known problems by batch, vintage or manufacturer
Issues • Pipe age/useful life
– Approaching/exceeding expected useful life– Range of expected useful life– Material – cast iron, cement, steel, ductile iron– Installation
• Location• Conditions• Date/age
– Pressure or other factors known to affect useful life
Issues
• Critical system impact– Transmission or other large-diameter main– Potential failure impact on customers (#, type,
nature & magnitude of failure impact)• Impact on priority customers (schools,
critical care facilities, significant commercial/industrial/military)
– Valve operation/location issues
Issues
• Water quality issues– Customer complaints– More frequent flushing needs– Utilizing bleeders for quality control– Pipe material contributing to water quality
problems
• Leakage– Losses due to system integrity– Losses due to theft of service
Issues
• Hydraulic capacity– Does not meet system hydraulic needs– Customer complaints or operational issues related to
flow and/or pressure– Hydrants on mains less than desired diameter– Fire flow adequacy
Issues
• Scheduled work coordination– State or locality other government project– Required government agency relocations– Potential for restoration/paving savingd due to third
party work
• Other (specified by utility provider)– Unique customer or community considerations– Other mitigating or unanticipated factors or conditions
New Orleans, September 2005
Hope for the best, plan for the worst, and you should
always find yourself prepared.
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Muchas Gracias!
Thomas PearceSenior Utility Specialist, Public Utilities Commission of Ohio
Chair, NARUC Staff Subcommittee on Critical Infrastructure
+1 614 4661846