Remarks on Reliability Metrics, Planning and Tracking

Good morning. My name is Blossom Peretz, and I am the Ratepayer Advocate for the State of New Jersey. My office, the Division of the Ratepayer Advocate, represents and protects the interests of all utility customers in the State of New Jersey, including the interests of residential, small business, and industrial customers. This is an unorthodox mix of constituents for a traditional utility consumer advocate, but it reflects the fact that no consumer group is isolated from the economic well-being of the entire community. This is particularly true in the developing competitive electric industry, where consumer interest in lower energy costs for all classes of consumers is a driving force towards deregulation.

But access to cheaper power should not be at the expense of safe, adequate and reliable service either in the regulated or competitive paradigm -- for as we all know, electric service is a lifeline service. This leads me to the reason for today’s workshop -- to comment on the July 1999 power outages experienced in the service territories of several of New Jersey’s electric distribution utilities.

I’d like to commend the DOE for undertaking this investigation. While the July 1999 New Jersey outages were largely the result of distribution system failures, an area that is traditionally under state jurisdiction, a federal initiative that emphasizes reliability as a key element in the nationwide restructuring of the electric power industry is important.

First, some background. The heat-related outages of last Summer are the third major weather-related power outages in New Jersey over the last three years. In the Summer of 1997, the New Jersey Board of Public Utilities ("BPU") began an investigation of outages in several parts of GPU Energy’s service territory. That investigation culminated in a December 1997 BPU Order which recommended numerous changes to GPU’s practices, including more frequent tree-trimming, several distribution system maintenance programs, better customer service center performance during outages, and better communications with municipal and emergency service personnel during outages.

Then, in 1998, the BPU launched a second investigation into weather-related power outages, this time expanding the matter to include all four investor-owned electric utilities. This investigation resulted in a second BPU Report and Order, in December 1998, which added additional maintenance and reporting requirements, and was applicable to all NJ investor-owned electric utilities.

Despite these BPU directives, there were significant failures of the distribution systems in different areas of the State in early July of last year. Therefore, it is apparent that more affirmative, prescriptive standards are necessary to ensure that the electric delivery system is sufficient to meet the demand.

The Ratepayer Advocate is fully committed to New Jersey ratepayers to ensure that proper consumer protection controls are in place to maintain service quality levels during and beyond the transition to competition. My office received a number of letters and telephone calls of concern from customers concerning outages. The July outages were the fourth time since 1997 that GPU Energy’s customers have experienced outages lasting for three or more days and, understandably, customers feel that not enough has been done to alleviate the power outage problems. Some residents are also worried that the problems will only get worse as competition unfolds in New Jersey.

While it is not clear that competition may worsen reliability, it is clear that competition will not remedy existing utility service problems. While consumers will shop for a supplier for services based not only on price, but also on service quality and reliability, most outages are the result of the failure of the utility’s transmission and distribution system, which will continue to be regulated. Therefore, we need regulatory backstops to ensure safe and reliable service. We must be watchful that with unbundling and deregulation, utilities do not attempt to increase profits on the unregulated side of the business by sacrificing service quality performance on the regulated side of the business. Of course, the July outages were not due to lack of generation capacity, but to failure of the utilities’ distribution systems -- the portion of a utility’s business that is still fully regulated.

The topics for today’s workshop are Reliability Metrics, Planning and Tracking. I agree that better utility planning is an essential step to reducing future outages. However, New Jersey currently has no objective standards for service reliability, performance, or system maintenance.

For the last several years, the Ratepayer Advocate has recommended that the NJ BPU implement electric service quality and reliability standards. However, with the emphasis on implementing retail competition and customer choice, the development of service performance and reliability standards was delayed.

Just last week, the NJ BPU initiated a working group to develop service reliability regulations. My office is an active participant in that process, which will hopefully lead to objective standards that reduce the frequency and duration of service interruptions.

I  will now comment on some of the minimum components of a service quality and reliability plan. The plan should mandate and thereafter track categories like: (1) service reliability (e.g., frequency and duration of outages; accuracy of meter readings); (2) service quality -- e.g., customer service office performance (e.g., response time to customer complaints, emergency telephone response times, adequacy of notification to municipal and emergency response personnel, emergency field response times, percentage of appointments kept); and (3) compliance with other regulatory performance measurements. The plan should set a baseline from which to measure changes in these categories so that penalties may be invoked when the utility fails to meet baseline service levels.

Additionally, the regulations should establish both statewide rules and individual utility service quality plans. Statewide rules will establish the uniform, objective standards, while specific utility plans will allow the Board to target the unique circumstances and service issues for individual utilities.

The Board should establish specific criteria for a utility’s response to significant outage or service quality events. Utility-specific Emergency Response Plans and system maintenance and inspection cycle requirements should be documented in enforceable rules that can be evaluated during the subsequent significant outage or service quality event.

It is particularly crucial that utilities have a comprehensive communications plan and system in place for emergency situations. One of the chief complaints of customers and public officials stemming from the July outages was that they were not kept informed about the status of the outages and restoration efforts. This plan should be included in the Emergency Response Plan, and thereby be subject to monitoring, enforcement, and penalties for non-compliance.

The mere documentation of inadequate service quality or service deterioration without an enforcement mechanism will not be enough of an incentive for utilities to maintain service quality. Therefore, these standards should contain service quality standards with specific, objective customer service and reliability indexes that monitor key attributes of service quality and establish financial penalties for noncompliance. The penalties should be structured in a way that benefits ratepayers, such as a one-time credit on customer bills or in the form of customer rebates or reduced rates. Such a performance-based plan ties customer service and reliability directly to the utility company’s bottom line.

In closing, I’d like to thank the Power Outage Study Team for receiving input on these important issues. While many of the distribution reliability issues are currently under the jursidiction of the State PUCs, a strong federal leadership role in ensuring that service reliability remains a key issue in the nationwide electric restructuring debate is important in ensuring that purely economic policy does not lead to a reduction in the reliability of such an important, life-line service as electricity.