U.S. power costing more as grid deteriorates

Posted: March 07, 2013

America's power grid is like an old car. It gets the job done, but the repair bills go up every year, and experts say only a major overhaul will reverse its decline.

An Associated Press analysis of utility spending and reliability nationwide found that electric customers are spending 43 percent more than they did in 2002 to build and maintain local electric infrastructure. Since then, power outages have remained infrequent, but when the lights go out, it takes longer to get them back on.

Neither the spending nor the reliability trends is dramatic on its own. But experts say the combination is revealing: It suggests that extra money from electric customers isn't being spent wisely, or that utilities are not investing nearly enough to upgrade fragile equipment increasingly threatened by major storms.

"The electric system is the critical linchpin of our society, and we are operating the overall system closer to the edge," said Massoud Amin, a grid-security expert and professor of electrical and computer engineering at the University of Minnesota.

The diminishing returns on investment reflect several factors: The grid is getting old, making it more expensive to maintain service at current levels of reliability; day-to-day weather and major storms have become more extreme, meaning wires, poles and transformers have to be replaced more frequently; and when utilities replace aging or broken equipment, they are not always upgrading to modern technologies common in other nations.

When utilities spend on equipment, regulators allow the companies to pass those expenses on to customers. In recent years, that portion of customer bills, the cost of delivering power, has been rising and pushing bills higher, though the cost of the power itself has fallen sharply.

With the help of Ventyx, a software and data-services firm that works with electric utilities, and the utility consulting firm PA Consulting Group, the AP compared reliability statistics with the spending of 210 utilities across 24 categories of local distribution equipment.

In 2011, the most recent year for which annual data are available, the average U.S. electric customer was without power for 112 minutes, according to PA Consulting, a 15 percent increase since 2002 and the highest level in 10 years. The number of outages decreased slightly, from an average of 1.2 per year to an average of 1.1, but that statistic has shown no improvement since 2004.

Over the same period, annual spending per customer on local distribution equipment and maintenance rose about twice as fast as the rate of inflation, from $163 to $232, according to Ventyx. That does not include spending on power plants or major transmission lines.

The number of outages and the longer amount of time needed to restore power does not take into account major blackouts such as Hurricane Sandy caused. Those types of outages are not included in reliability statistics because they are so dramatic and irregular that they would make it impossible to draw a clear picture of the grid's performance from year to year. But outages caused by extreme weather are occurring with greater frequency - a rising threat that cannot be ignored, experts say.

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