APPA-Supported Loan Interest Payment Provision Included In Bill Approved By Committee

October 29, 2021

by APPA News
October 29, 2021

The House Committee on Transportation and Infrastructure on Oct. 27 approved legislation that includes a provision that would require the Federal Emergency Management Agency (FEMA) to reimburse local governments for interest expenses for loans related to disaster relief.

It would also provide that qualifying interest includes interest incurred in the five years preceding this bill’s enactment.

The committee approved by a vote of 63 to 2 the Resilient Assistance for Mitigation for Environmentally Resilient Infrastructure and Construction by Americans Act, or Resilient AMERICA Act (H.R. 5689).

During markup of the bill, the committee adopted as an amendment to the bill the provisions of the FEMA Loan Interest Payment Relief Act (H.R. 2669) introduced by Rep. Neal Dunn (R-FL) in April.

The interest payment provision is supported by the American Public Power Association (APPA).

In a Feb. 4, 2021, letter to Dunn and bill cosponsor Rep. Darren Sotto (D-FL), APPA President and CEO Joy Ditto noted that every year, public power utilities experience some degree of infrastructure damage due to events, such as ice storms, tornadoes, floods, hurricanes, and earthquakes.

If this damage is severe enough to be declared a disaster by the President of the United States, recovery costs are eligible for reimbursement through grants from FEMA.

“These grants can amount to millions of dollars and are critical to the ability of public power utilities to recover from disasters,” wrote Ditto. “However, years can pass between a public power utility making a claim for a public assistance grant and FEMA providing that assistance. In the meantime, the utility must often borrow funds — and pay interest on that debt — to cover the costs.” 

 The FEMA Loan Interest Payment Relief Act would require FEMA “to pay at least a portion of those interest expenses. This would reduce the cost of having to borrow to cover costs that will eventually be recovered from FEMA. It would also create a financial incentive for FEMA to resolve more quickly — and make payment on — public assistance requests,” Ditto noted.

The Resilient AMERICA Act, which now heads to the House floor, will also:

• Return unspent funds from the Hazard Mitigation Grant Program to the Disaster Relief Fund, which ensures that these expiring and unspent funds will still help our communities prepare for and respond to disasters;
• Double the funding stream dedicated to FEMA’s Pre-Disaster Mitigation (PDM) program;
• Extend eligibility for the PDM program to include private non-profits;
• Expand the reach of the post-disaster Hazard Mitigation Grant Program to prevent utility outages in the face of extreme wildfire, wind, tsunami, and ice events; and
• Fund residential resilience retrofit block grants to states, tribes, and territories to strengthen homes for maximum protection and safety.

Committee Also Approves FEMA Caseworker Accountability Act

In addition, the committee also approved by voice vote H.R.5343, the FEMA Caseworker Accountability Act.

The bill, which was introduced on Sept. 22, 2021 by Rep. Tom Rice (R-SC), would direct FEMA to report to Congress on case management personnel turnover.

Specifically, FEMA must report on the turnover rate for FEMA case management personnel, the average and median length of employment for such personnel, the steps that FEMA is taking or plans to take to lower the turnover rate, and other specified points.

During Wednesday’s markup, the committee adopted an amendment by Rep. Scott Perry (R-PA) to instead require the Government Accountability Office to complete the report, rather than FEMA.

Kansas Municipal Utilities Completes Another Successful Distribution Overhead Workshop

October 26, 2021

by APPA News
October 26, 2021

Kansas Municipal Utilities (KMU) earlier this month completed another successful Electric Distribution Overhead Workshop, which offers training sessions on overhead installation, construction, maintenance requirements and techniques and provides attendees with the opportunity to practice these job tasks in a simulated energized environment.

Brian Meek, KMU’s Director of Training and Safety, noted that the 36-acre KMU training field contains an example of almost every situation encountered in the real world.

Trainees work in crews that are assembled from multiple different utilities. “The multi-utility crew composition forces trainees to hone their communication skills and adapt to the different work practices that are performed by different municipalities,” he said. The workshop is designed to offer training for all experience levels of lineworkers, from apprentice to crew leader. The workshop is taught primarily by journey lineman from across Kansas.

This year’s workshop kicked off with a simulated mutual aid event, Meek noted. Prior to trainee arrival, the field was prepped to simulate a tornado touchdown. Poles were cut down or pushed over, crossarms were broken, lines were cut, and insulators were damaged.

When the trainees arrived, they were given a class on mutual aid response followed by a briefing of the potential damage in the field. After the briefing, the trainees formed their work crews with their instructors and had to access and repair the damage within 3 hours. This exercise also required multi-crew coordination to ensure that everyone could accomplish their tasks safely.

Throughout the workshop, apprentices in the KMU Lineworker apprenticeship program complete required program skill evaluations and participate in hurt man rescue exercises, Meek said.

Meanwhile, Meek detailed how the 2021 KMU Electric Distribution Overhead Workshop that wrapped up on October 1 was a success.

“During our workshops we ensure that safety is the top priority,” he said. “The number one success for the workshop is that no one was injured during their training,” Meek noted.

“Building on that success, a large number of apprentices were able to perform activities that they have never completed before. By completing these tasks in a real-world situation but with the absence of the electrical hazard, the trainees can make mistakes without deadly consequences.”

This practice time improves their skills to ensure the work can be completed safely when they return to their municipalities, Meek said.

“Lastly, networking is one of the most commonly overlooked benefits of the workshop. Trainees leave the facility with the contact information for other lineman in neighboring utilities. The relationships they build during the workshop spill over into their regular work lives. When they have questions or need help, they call their classmates for help. Most workshop attendees say that the networks they build during the classes provide invaluable benefits.” 

Meek noted that this year marked the 10th year for the workshop. “When the workshop began there was no training center and no poles, just an open field. As time went on and the amount of poles and simulated circuits grew, we were able to get more complex in our offerings,” he said.

“Two years ago, we modified the workshop significantly. In the first eight years, trainees would spend a set amount of time at a ‘training station’ learning one aspect. They would then rotate stations after a set amount of time. The workshop was modified to create work crews and allow the crews to work an actual job from start to finish during the week.”

This format incorporates all of the aspects that were taught in the stations, but in a more real-world and comprehensive setting, Meek noted. “Last year we added the mutual aid component discussed earlier. All of these evolutions have occurred based on the input of the trainees and the instructors. I believe this is why the workshop continues to grow. This year we had a record number of participants (59) and were at capacity for the number of instructors we had.”

The Electric Distribution Overhead Workshop takes place at KMU’s Training Center in McPherson, Kansas.

“We have a large number of training events at our facility each year,” Meek noted. “In addition to the Overhead Workshop we offer an Underground Electric Distribution Workshop, Transformer Connections Workshop, Power Plant Operator Workshop, Watt-Hour Metering School, Substation Workshop, T&D Switching Workshop, multiple Leadership Seminars, a CDL workshop, multiple Utility Locate Certification Workshops, Gas Pipeline Operator Workshop, multiple Mobile Crane Certification Workshops, and a variety of water and wastewater classes.”

In 2022, “we will be expanding our workshop offerings to include heavy equipment workshops,” he said.

In addition to the workshops, “we also host our lineworker apprenticeship training program. This program has grown to over 70 apprentices.”

Colin Hansen, who is currently Executive Director of Kansas Municipal Utilities (KMU), is the chair of the American Public Power Association’s Board of Directors.

It was recently announced that Hansen will be joining Kansas Power Pool (KPP) effective Feb. 1, 2022 as KPP’s new CEO and General Manager. 

CPS Energy, Austin Energy Send Crews To Help With Power Restoration

September 15, 2021

by APPA News
September 15, 2021

Texas public power utilities CPS Energy and Austin Energy are sending lineworkers to Houston, Texas, to help with power restoration efforts in the wake of power outages caused by Hurricane Nicholas.

On Sept. 15, Austin Energy said that it has sent lineworkers and support personnel to Houston to help with restoration efforts. Twenty-three Austin Energy team members departed Austin on the morning of Sept. 23 with bucket trucks and other equipment to help bring power back for affected communities. The team is prepared to provide help for at least a week in Houston and the surrounding area, Austin Energy said, noting that it received the request for mutual aid from investor-owned CenterPoint Energy. Click here for a video of Austin Energy crews departing for Houston.

Austin Energy noted that safety is always its top priority and deploying aid during a pandemic requires extra care and consideration. “To ensure the safety of our employees, our crews will only work with other Austin Energy staff, staying with their same team members and following established COVID-19 safety protocols. Additional safety measures are also taken into consideration when setting up lodging for the crews,” the utility said.

Meanwhile, CPS Energy crews and support staff left San Antonio on the morning of Sept. 15 to assist with power restoration efforts for those in the Houston area affected by what was Hurricane Nicholas, which has since been downgraded again to a tropical storm.

In response to a request from CenterPoint Energy, CPS Energy is sending more than 30 employees to include overhead linemen, pole crews, fleet personnel, safety teams, and management to help with widespread power outages resulting from the hurricane. CPS Energy also released several contract crews to free them up to help with assistance too. CenterPoint expects the crews to be needed for up to five days.

With wind speeds reaching 45 mph, Nicholas left hundreds of thousands of Houston area residents without power. On Sept. 15, CenterPoint Energy reported that it had restored service to more than 380,000 electric customers, down from a peak outage count of 460,000 at 8 a.m. CT on Sept. 14 and that it was down to less than 80,000 customers without power.

CPS Energy crews were traveling to CenterPoint Energy’s staging area at the Sam Houston Raceway Park, where they will receive their power restoration assignments.

Keys Energy Services Sends Transformers To Houma, Louisiana, To Help With Post-Ida Restoration

September 15, 2021

by Paul Ciampoli
APPA News Director
September 15, 2021

Florida public power utility Keys Energy Services (KEYS) is sending 60 power transformers to Houma, Louisiana, to assist Terrebonne Parish Consolidated Government Utilities with post-Hurricane Ida power restoration.

On Tuesday, September 14, KEYS crews loaded the power transformers onto a semi-trailer truck that will deliver the equipment to Houma, La.

“At KEYS we are well aware of the challenges utilities face in restoring power after a major weather event,” said KEYS’ General Manager and CEO Lynne Tejeda.

“While boots on the ground do the physical work of restoring power, equipment shortages can adversely impact their progress. KEYS was not called on to assist with post-Hurricane Ida restoration efforts, but the shipment of these transformers will assist restoration efforts and help to light the path to recovery for our fellow citizens in Gulf Coast,” she said.

“Florida public power, and particularly Keys Energy, has been impacted time and time again from hurricanes,” said Amy Zubaly, Executive Director of the Florida Municipal Electric Association.

“We understand the importance of not just relying on mutual aid crews for help with restoration but the need for materials and supplies beyond what we normally have on hand. We’re proud to be able to help another public power in need however we can,” she said. 

Public Power Crews Continue Restoration Work as Ida Shifts to Tropical Depression

August 31, 2021

by Paul Ciampoli
APPA News Director
August 31, 2021

In the wake of Hurricane Ida, which made landfall in Louisiana over the weekend as a Category 4 hurricane, public power utility crews continued to assist with power restoration efforts in the Southeast as Ida shifted to a Tropical Depression.

The Department of Energy (DOE) in an update said that as of 7:00 a.m. EDT on August 31, there were approximately 1.1 million customer outages due to Ida, with approximately 1 million outages in Louisiana.

DOE said that as of 5:00 a.m. EDT on Aug. 31, Tropical Depression Ida was 185 miles southwest of Nashville, Tennessee, moving northeast at 12 MPH, with maximum sustained winds of 30 MPH.

“Considerable heavy rain and flooding threats will continue to spread from the Tennessee and Ohio Valleys into the central and southern Appalachians and Mid Atlantic through Wednesday,” DOE said.

DOE noted that utilities are conducting damage assessments and restoration efforts as conditions permit. Damage assessments are expected to take three days and estimated restoration times will be established once damage assessments are complete, the federal agency said.

Utilities in the impacted area pre-staged crews, equipment, and materials and mutual assistance networks have been activated to support restoration efforts as needed. A large number of public power utilities from several states sent crews to Louisiana prior to the arrival of Ida.

Many of those crews were set to assist Louisiana public power Lafayette Utilities System (LUS) in its recovery efforts. For example, mutual aid crews from the City of Tallahassee, Fla., deployed Saturday to arrive in Lafayette Sunday morning before the storm to assist LUS. With LUS receiving little to no impacts from Ida, the City of Tallahassee was redeployed to the City of Houma, La.

LUS on Aug. 31 reported that a team from LUS is in Houma doing damage assessment as well as line and tree trimming crews from Tallahassee, North Carolina’s Greeneville Utilities Commission, the City of Statesville, N.C., the City of High Point, N.C., the City of Wilson, N.C., Oklahoma’s Grand River Dam Authority, Nebraska’s Lincoln Electric System, the Town Tarboro, N.C., and North Carolina’s Wake Forest Power that pre-staged in Lafayette for Ida.

 

Crews from Thomasville, Ga., were deployed to St. Martinsville, La., initially, released Aug. 31 and then asked to assist Houma.

Brandon Wylie with Electric Cities of Georgia (ECG) has been assisting in Morgan City, while ECG Training and Safety Specialist Calvin Vallee has been helping out in St. Martinsville. On Sept. 1, they both will be traveling to Houma. Wylie is Director of Safety and Training at ECG.

Crews from the Georgia public power communities of Griffin and Calhoun were deployed to Morgan City, La.

ECG is a non-profit organization providing strategic and technical services to 52 public power communities with utility operations. Calhoun and Griffin are members of ECG.

Meanwhile, Nebraska’s Omaha Public Power District on Aug. 31 said it was sending 15 employees to Baton Rouge, La., to help with power restoration in the aftermath of Ida.

OPPD’s team – including four, three-person line crews, two transportation mechanics, and one field supervisor – left Monday at noon and are expected to arrive in Baton Rouge this evening. They will work with investor-owned Entergy Louisiana.

“Our linemen are happy for the opportunity to provide mutual aid support,” said OPPD Papillion Center Manager Eli Schiessler, who is overseeing the effort. “It’s particularly gratifying to be able to help another community, given the level of support we have received from other utilities this year in our service territory.”

Meanwhile, a 16-man contingent of line technicians and supervisory staff from Nebraska Public Power District (NPPD) will be hitting the road on Tuesday, journeying to Baton Rouge to provide mutual aid and restore power.

The contingent from NPPD will be utilizing a variety of equipment used in restoration efforts, with a commitment for two weeks to assist in restoring power for Entergy.

NPPD crews were expected to arrive Thursday to begin assistance.

Meanwhile, the City of New Smyrna Beach, Fla., and Fort Pierce Utilities Authority sent mutual aid crews to assist utilities personnel in the City of Plaquemine, Louisiana. The Florida public power utility teams were set to deploy on Sunday to arrive in Plaquemine Monday to begin restoring power once the storm passes. Plaquemine said that as of 6 pm, Aug. 30, power had been restored to almost all of the city’s utility customers.

Crews from the following Florida public power utilities were released and are on their way back to Florida: JEA, Lakeland, Orlando, Kissimmee.

Meanwhile, a caravan of Missouri-based public power utility crews headed to Mississippi to help Southwestern Electric Cooperative to get the power back on.

The effort involves 32 lineworkers from seven Missouri Public Utility Alliance (MPUA) towns — crews from Missouri cities of Carthage, Higginsville, Independence, Lebanon, Nixa, Palmyra, and Poplar Bluff.

Public Power Mutual Aid Crews Deploy In Advance Of Hurricane Ida

August 30, 2021

by Paul Ciampoli
APPA News Director
August 30, 2021

Public power utility crews from nine states deployed to Louisiana in the days leading up to the arrival of Hurricane Ida, which made landfall in Louisiana on Sunday, August 29 as a category 4 hurricane resulting in widespread power outages in the state.

According to Poweroutage.us, Louisiana had just over one million customers without power as of the morning of Monday, Aug. 30. Ida knocked out power to New Orleans. The city reported on Aug. 29 that all eight transmission lines that deliver power into the New Orleans area were currently out of service. When this occurred, it caused a load imbalance in the area and resulted in generation in the area coming offline. The city is served by investor-owned utility Entergy.

Public power utilities deployed 65 crews and 300 personnel to Louisiana from the following states:

• Missouri
• Florida
• North Carolina
• South Carolina
• Tennessee
• Oklahoma
• Georgia
• Nebraska
• Kentucky

Public Power Crews Deployed Prior To Ida’s Arrival

On Friday, Aug. 27, utility electric line crews from Missouri public power communities started preparations to leave for Louisiana. Organized by the Missouri Public Utility Alliance (MPUA), lineworker crews from Missouri cities were traveling to Alexandria, La., to be ready for power restoration after the storm passes. Preparedness coordinators for the City of Alexandria issued a call on Thursday to MPUA for mutual aid assistance, and the crews departed for Louisiana the morning of Saturday, August 28.

The combined response of 32 lineworkers involves crews from the seven Missouri cities of Carthage, Higginsville, Independence, Lebanon, Nixa, Palmyra, and Poplar Bluff.

The workers will stage in Alexandria, La., equipped with eight bucket trucks, four digger/derrick trucks, and 11 other utility vehicles and machines, ready to restore power to Alexandria’s municipal utility after the storm passes.

Mutual aid crews from Missouri public power utilities assisted Alexandria and other area utilities twice in storm recoveries last year, repairing damage caused by Hurricane Laura (August 2020) and Hurricane Delta (October 2020).

Missouri’s utility mutual aid response is coordinated through MPUA’s mutual aid network. Assisting cities are reimbursed by the municipal utilities receiving assistance.

MPUA’s mutual aid network is part of a national public power mutual aid network coordinated by the American Public Power Association (APPA).

Meanwhile, a crew from Oklahoma’s Grand River Dam Authority (GRDA) headed to Lafayette, La., to help repair any damage Ida may cause to that city’s electric system.

The GRDA crew of 20 volunteers, including powerline maintenance and vegetation management personnel, mechanics and law enforcement, left Pryor at 6 a.m. Saturday morning to make the nearly 600-mile drive to the Lafayette area. The crew planned to be staged on Sunday and ready to move in for any possible repair work as soon as Ida passes through the area.

The trip is a familiar one, as GRDA also provided aid to Lafayette Utilities Systems (LUS) in October 2020, after Hurricane Delta made landfall, GRDA noted.

Along with Hurricane Delta and now Ida, GRDA has also helped restore power and provide water rescue assistance following Hurricanes Rita, Irma, Matthew, and Harvey. Over the years, GRDA personnel have responded to Florida, North Carolina, Louisiana, and Texas to offer that aid.

GRDA is lending a hand in Louisiana as part of the nationwide APPA mutual aid effort.

South Carolina’s Santee Cooper also sent crews to help LUS. Santee Cooper, the state-owned public power utility, sent two crews to Louisiana.

From neighboring North Carolina, the following public power communities sent crews to help LUS: Greeneville, Wilson, Statesville, High Point, Tarboro and Wake Forest.

Florida Public Power Utilities Deploy

On Aug. 27, the Florida Municipal Electric Association (FMEA) said that it had assembled public power crews from across the state to aid with power restoration efforts in Louisiana following Ida.

FMEA, the mutual aid coordinator for Florida’s 33 public power utilities, said that nearly 85 personnel from seven Florida public power utilities would arrive in Louisiana through Monday to assist affected communities.

Mutual aid crews from the City of Tallahassee deployed Saturday to arrive in Lafayette, Louisiana, Sunday morning before the storm to assist LUS.

Additional mutual assistance line crews and other field personnel from JEA in Jacksonville, Orlando Utilities Commission (OUC), Kissimmee Utility Authority and Lakeland Electric were set to arrive in Lafayette on Monday to restore power.

Meanwhile, the City of New Smyrna Beach, Fla., and Fort Pierce Utilities Authority are sending mutual aid crews to assist utilities personnel in the City of Plaquemine, Louisiana. The Florida public power utility teams were set to deploy on Sunday to arrive in Plaquemine Monday to begin restoring power once the storm passes.

“Yesterday was Florida Lineworker Appreciation Day and we couldn’t be more thankful for the public power lineworkers and crew members who leave behind the comforts of home and their own families to help restore power in other communities that are impacted by such major natural disasters,” said Amy Zubaly, FMEA Executive Director. “Florida has many times been the recipient of mutual aid assistance when we have faced down hurricanes and other severe storms. It is always a great honor to return the favor.”

Lincoln Electric System

Nebraska-based Lincoln Electric System (LES) deployed staff and vehicles to help utilities in Louisiana with anticipated power restoration efforts due to Hurricane Ida.

Three crews comprised of 14 LES employees were sent to Lafayette, La. LES crews deployed as the sun rose on Saturday morning, Aug. 28, and were expected to arrive in Lafayette Sunday.

Georgia Public Power Utilities Also Send Crews

Crews from the following public power communities in Georgia have also been deployed to various communities in Louisiana to assist with Ida restoration efforts:

• LaGrange
• Acworth
• Griffin
• Calhoun
• East Point
• Covington
• Thomasville
• Cairo
• ECG

Crews From Kentucky, Tennessee Deployed To Help LUS

Crews from Kentucky public power utility Paducah Power System and the City of Paris, Tenn., and Greeneville, Tenn., also deployed to assist LUS with recovery efforts.

LUS Helps Customers Prepare For Ida

Prior to Ida’s arrival, LUS took a number of steps to help its customers prepare.

For example, the utility leveraged social media to provide customers with telephone numbers to call should they experience power outages or experience any water/wastewater issues or to report downed power lines.

LUS also provided a link to its hurricane handbook, which provides information for customers to refer to before, during, and after a storm.

LUS also utilized its social media channels to say thanks to all of the public crews that arrived in advance of Ida to assist with restoration efforts.

APPA Resources

Along with its role as a mutual aid coordinator during events such as Ida, APPA also provides a number of disaster planning and response resources including a Restoration Best Practices Guidebook and All-Hazards Guidebook.

Additional details is available here.

Special Series: Potential Alternatives To Managing Insurance Risks – Part Three

August 25, 2021

by Tonya DeRivi
APPA News
August 25, 2021

Historically we have seen the insurance market cycle from either being competitive with few utilities seeing coverage problems, or “tight” as we explained earlier and see now. The American Public Power Association concludes our three-part insurance risk series by exploring ways in which public power utilities have sought, or could seek, alternatives to the increasingly limited availability and expense associated with traditional individualized commercial insurance options.  

One model that has been successfully used is “pooling” insurance coverage across multiple entities. This is common practice across state and local governmental entities – but it necessarily covers a broader spectrum of services, from police and fire to libraries and public utilities, and therefore may not offer industry-specific coverage that high-risk enterprises may need. Fortunately, this model can also be tailored to a specific industry – provided there is the capital available and know-how to do so.

Nearly four decades ago, some public power utilities in the Tennessee Valley found themselves in an untenable position: some had no options to buy liability insurance – at any price, according to Anthony Salvatore, an area senior vice president with Gallagher.

The Tennessee Valley Public Power Association (TVPPA) – a regional organization representing public power utilities within the Tennessee Valley Authority’s (TVA) multi-state service area – set out to fix that problem. They formed Distributors Insurance Company (DIC) in 1983 with a small amount of start-up cash and a $1 million letter of credit backed by TVA. Its goal was to make coverage available to all TVPPA members, tailor coverage to exposures unique to public power utilities, and to do so at competitive pricing. In the beginning, DIC had three member accounts with approximately $200,000 in total premium. Their portfolio has grown astronomically since: DIC now has 80 accounts with approximately $40 million in assets and $26 million in surplus. They spend a large amount on safety and loss control efforts, mission-critical endeavors specifically designed to help participating members.

Today’s insurance market issues – especially given what is happening in California – are not easily solved. “California is an incredibly difficult state for insurance companies; it’s not easy to do business in, it’s expensive, and there are problems there that the insurance industry simply cannot fix. These are issues that the state needs to address,” Salvatore said. “The wildfire situation has spooked the entire insurance industry to the point where liability and property insurance capacity has almost entirely dried up. We’ve even seen some of this reactivity from the Western states spread to our area here in the Southeast” he noted. “The market overall is very tight and has been tightening for many years. Then the pandemic pushed everyone over the edge.”

Indeed, one California-based public power utility saw their general liability rate increase 111% with their 2021 policy renewal, further indicative of how wildfire exposure is driving liability coverage and pricing. The insurance carrier has already said they will not offer a renewal in 2022. This utility also saw its total premiums for all lines of coverage nearly double over the last three years, with increasingly restrictive coverages. One of their insurance carriers has already said they may not offer a property insurance renewal in 2022.

What, then, could public power utilities do in this hardening insurance market?

We spoke with Washington, D.C.-based Arnold & Porter lawyers Charles Landgraf and Paul Howard to explore options. Together they have nearly 60 years of pertinent energy and insurance policy experience. 

The “pooling” model described above has worked for decades. Forming a model like DIC or the Public Utility Mutual Insurance Company (now a risk retention group) or Aegis (which provides liability and property coverage to mainly investor-owned utilities in the energy industry) would first require conducting a feasibility study, according to Landgraf.

Actuaries would conduct an actuarial study to explore allocations, lawyers would be needed to identify and work through issues, it would have to identify who could serve in the captive manager function – whether for one state, multiple states in a region, or nationally – and then work with brokers and deliver the necessary capital. The more narrowly it is applied, the easier the issues are to work through. Landgraf also noted that while a study exploring only one state’s regulatory law and liability systems would be easier, that also reduces the spread of risk and therefore limits the competitive pricing advantages of the pooling model.

Howard added that the federal Risk Retention Act is relevant because it allows a group captive manager to go national; an entity could be formed in one state to sell insurance to local public power utilities, for example, and then sell or “front” to public power utilities in other states without the added burden of becoming licensed in each state. This offers a nice tool as a multi-state solution – but is limited only to liability lines of business.

They estimated that such a study may cost anywhere from the low six-figures, for a limited regional approach, or high six-figures for a national feasibility study.

Landgraf and Howard suggested there may be intermediate steps public power utilities could take too.

“If this became an acute enough problem for state governments in the West, for example, you could in theory work to develop a multi-state compact,” Howard said. Community-owned utilities may carry a much more sympathetic message to relevant state leaders – namely, their governors and insurance commissioners – seeking regulatory relief through a mini risk retention policy model. Politically like-minded state leaders could work together to reach a mutual agreement allowing public power utilities to pool their capacity for self-insurance and to leverage access to global reinsurance. Landgraf explained that having the backing of state leaders through an interstate agreement to simplify and streamline regulations could, for example, allow a single entity to be domiciled and licensed in one state and serve the other states too.

“This may be something the Pacific Rim states could explore” given their like-minded politics and prior efforts by state leaders to work through climate change policies together, Landgraf said. Similarly, other like-minded states in a region could explore such interstate agreements to help their public power utilities navigate this increasingly difficult insurance market.

Landgraf noted that the insurance industry itself may be inclined to explore such efforts. “They are acutely aware of the different regional impacts climate change is having,” he said. The situation may be acute enough now that a mutual effort to work through region-specific solutions is primed. There is credibility on all sides: the insurance companies would want to help public power utilities create an insurance solution they could support, provided that the states work through existing regulatory problems, like multi-state licensing rules and to simplify regulatory hurdles; state leaders have seen first-hand the resulting damages of a changing climate and that more needs to be done to incentivize preventive measures within their own and nearby states; and publicly-owned utilities need affordable insurance solutions.

Another challenge with seeking multi-state relief is political. One must also consider that agreement across states in this arena involves elected governors and elected or appointed insurance commissioners, Howard added.    

The American Public Power Association is the voice of not-for-profit, community-owned utilities that power 2,000 towns and cities nationwide.  We celebrate our members that strengthen their communities by providing superior service, engaging citizens, and instilling pride in community-owned power.

Special Series: How Utilities Are Addressing Rising Risks And Insurance Premiums – Part Two

August 24, 2021

by Peter Maloney
and Tonya DeRivi
APPA News
August 24, 2021

Per member requests, the American Public Power Association presents this in-depth Public Power Current newsletter series on managing insurance risks. Thank you to the utility systems and industry experts for their contributions about what is happening in the insurance market that is affecting policy coverage and prices (Part 1); types of “best practices” utilities can utilize to minimize their exposure (Part 2); and what potential alternatives may be available to help in a challenging insurance market (Part 3). 

Yesterday we detailed how risks to utility operations are rising and, with them, the cost of insurance.

Several utilities are grappling with this problem, particularly in areas that have recently suffered through disasters.

“Insurance rates have gone up and it’s not just wildfires; everything seems to be elevated,” Russell Mills, director of risk management and treasurer at California’s Sacramento Municipal Utility District (SMUD), said.

Historically, SMUD has not made any wildfire claims, but the utility does have some assets in wildfire areas and, more broadly, operates in a region where wildfires are prevalent, and that proximity can affect perceptions of the risks SMUD faces.

In April 2019, Moody’s Investors Service revised its ratings outlook on SMUD’s outstanding revenue bonds to negative from stable to reflect the more challenging operating environment in California resulting from the impact of wildfires. Moody’s revised its rating on SMUD in May 2020, returning the public power utility’s outlook to stable.

The risks were addressed, but the lesson was clear. The risk environment is changing, and it is best to stay ahead of the problem. In returning the outlook to stable, Moody’s cited SMUD’s “comprehensive actions to shield itself from wildfire risk.”

Mills at SMUD said he is seeing premium increases “across the board.” To address that challenge, he said SMUD tries to differentiate its risk profile from that of other utilities when it makes its annual presentation to underwriters and brokers when it comes time to renew its insurance coverages.

In those meetings, SMUD is able to highlight the steps it has taken with its Upper American River project, a series of 11 dams and eight power houses in a high wildfire risk area on the slopes of the Sierra Nevada Mountains. There, SMUD has focused on vegetation management efforts, undergrounding wires, and hardening assets.

When it returned the utility to a stable outlook, Moody’s cited SMUD’s actions and the utility’s “multi-pronged approach” that included “a sizeable insurance policy and strengthening liquidity.”

Increasing insurance coverage is not the only tool in SMUD’s kit, though. The utility takes proactive steps by conducting probable maximum loss (PML) studies to better understand its risk exposures. SMUD also has been hardening its balance sheet as a precaution against possible disasters.

In 2015-16, SMUD had about $100 million in excess liability wildfire insurance coverage. Over a span of three years, the utility raised its coverage to $300 million and then trimmed it back down to about $250 million.

SMUD also bolstered its commercial paper program by 30 percent to $400 million, raised its operating cash on hand by one month, and is paying down debt to have the capacity to issue bonds if the need arises.

“All three work together – insurance, ratings, and reserves,” Mills said. “It shows our intent and wherewithal.” It also sends a message to the underwriter that the brunt of any liability is not solely on them, he said.

Overall, Mills recommends utilities prepare themselves against natural disasters by taking on mitigation projects, such as grid hardening or undergrounding, that can provide a utility with data they can present to underwriters. For cyber security threats, he recommends utilities take similar steps, such as following the North American Electric Reliability Corp.’s Critical Infrastructure Protection (CIP) standards and conducting in-house training programs and be prepared to show that the procedures are being followed.

So far, Mills said, no insurance company has turned them down or refused to renew a policy. SMUD also has been able to negotiate cuts in proposed premium increases for fire coverage on the order of 10 percentage points.

“At the end of the day, insurance is a means of transferring risk,” Mills said. “You have to own the risk, show that ‘we are part of this.’”

The Northern California Power Agency (NCPA) has worked with their new property insurer to identify further ways the joint action agency could prevent losses and manage their insurance risk exposure, according to Monty Hanks, chief financial officer and assistant general manager of administrative services.

“As many utilities across the nation have experienced, NCPA was faced with a continuation of a hardening property insurance market. Last year was the most challenging one due to some underwriters quoting our program at the last minute,” he said, which left NCPA with little time or negotiating room for better terms or lower premiums. “Despite this, we made a commitment to our members to hit the ‘reset’ button in our approach to procuring property insurance for our facilities,” Hanks said.

NCPA contacted new property insurance market players with expertise in the power generation sector – including FM Global, which insures more than a third of the Fortune 1000 companies. Hanks said that NCPA had traditionally marketed their program about three months prior to the policy’s expiration, but FM Global had never quoted it. “I never understood why – they are a huge player.”

Hanks learned that three months was not enough time for FM Global to perform their own due diligence. 

He found that the company’s engineering-first philosophy and approach, which helps clients become more resilient against natural disasters, matched NCPA’s core principles. 

“We engaged FM Global in early 2021 to build a plan, and that started with scheduling loss control visits,” he explained. “We learned very quickly that they were not like other property insurance companies. They were guided by the belief that most losses can be prevented, and they will dig deep to understand your business needs to help you reduce your risk,” Hanks said. Indeed, the company has its own research campus where they have studied floods, wind, fire, hail, explosions, etc. that provides them with the data spec sheets to help validate and support their engineering recommendations.

Because NCPA’s members are dependent upon power plants running to provide stable, cost-effective resources, their resiliency is critical.     

“One of FM Global’s recommendations was to improve our wildland fire vegetation management around our geothermal plant,” Hanks said. The plant is in a relatively high fire risk area, and although NCPA had always taken a proactive approach to vegetation management, “their studies indicated that we should do more, and recommended we create a clearance zone around the plant that maintains forested areas 330 feet away from plant buildings, especially the cooling towers.” Hanks said.

NCPA agreed and implemented the recommendation. “Now, NCPA feels like we have found a partner in the property insurance business. Working with FM Global to evaluate risk and complete recommended improvements will help us increase the resiliency of our plants against natural disasters – the work that we’ve done as a result will ultimately help us better manage our risks and control operational and maintenance costs,” Hanks said. 

Midwest Flooding

In the middle of the country, Nebraska’s Omaha Public Power District (OPPD) is facing similar challenges, though from a different type of natural disaster. In Nebraska, flooding is more of a concern than wildfires, but the effects can be just as devastating.

OPPD filed a claim as a result of the severe flooding that hit Nebraska in 2019. Researchers at the University of Iowa have linked such flood events to warmer weather, particularly higher temperatures in the Gulf of Mexico, a phenomena they say triggers “The Midwest Water Hose.”

For many utilities, rising flood waters have also meant rising premiums. For OPPD, that challenge is made even more difficult because they have coal-fired assets in their generation portfolio.

 Insurance coverage for new coal projects is already difficult to find in Europe, but it is a trend that is becoming more widespread and could become prevalent in America in the coming years, Daniel Laskowsky, director of risk management at OPPD, said.

In 2019, Chubb, a major insurer in the U.S., said it would no longer underwrite the construction and operation of new coal-fired plants or companies that generate more than 30 percent of their revenues from coal generation or mining. By one count, 19 major insurance companies now refuse or restrict their coverage of new coal projects.

“We are doing all we can” in the face of rising threats from natural disasters and increasing premiums, Laskowsky said. The insurance environment is “very challenging.” In the renewal process, OPPD has seen “some very large increases, double digit increases,” he said.

The district’s approach to rising insurance rates includes having a solid understanding of the utility’s risk tolerance, using market competition to his favor, and working with underwriters and brokers as partners where he can.

“Understanding your organization’s risk tolerance” is critical, Laskowsky said. “Internally you need to know how much risk you can take.” The usual way to do that is to look at historical risks. The challenge is predicting the future. That is something OPPD is trying to better understand. “It is not a perfect science,” Laskowsky said.

Laskowsky also recommends shopping around to compare insurance coverages and rates. “Competition is good,” he said. “It may not be something you do every year because you don’t want to burn the market,” he said, but if you can find a lower rate, “you have to be willing to fight for it” and “you have to be willing to commit” when that time comes in the negotiating process.

Laskowsky also says OPPD tries to form strong partnerships with its insurance underwriters and brokers. A utility should lean on its insurance brokers and use them as a resource because they have a broader view of the market and know what the rest of the industry is doing, he said. “We know them, and it helps when it comes to negotiations.”

In addition, Laskowsky said the district works with insurance underwriters that are structured as mutual companies that cater to the public power and energy sector. There is more of a partnership approach to doing business and, if a utility participates in the governance process as a member of the organization, “you can have some say in the insurance company’s processes,” he said.

Those are all considerations that public power utilities should consider when shopping for insurance or when they are engaged in coverage renewal process, Weber said. Insurance still remains the top method of risk transference, he said, and most public power utilities buy insurance for at least one line of coverage, but every utility differs in terms of size, location, assets and services offered.

Weber advised that insurance programs should be structured differently to provide proper coverage for a given utility’s risk exposures. A utility with generation assets is much different than a transmission and distribution utility, he said. “It’s not a one size fits all approach.”

Weber also noted that there are a handful of insurers that specialize in the public power space for American Public Power Association members. “Therefore, each insurance carrier has a pretty good idea of the exposures and landscape of the public power sector.” He recommended that members “should make sure their trading partners are financially stable and know what coverages they are getting from their insurance provider.”

Utilities can “differentiate themselves in the market by providing thorough underwriting data and starting the renewal process well in advance,” Weber said. “Underwriters are requiring more data than ever before, and it is important for each utility to be ready to answer and have prepared the underwriting data that might be requested.”

“We recommend also getting to know your underwriter and building the relationship,” Weber said. “At the end of the day, it is a relationship business.”

In Part 3, tomorrow, we will explore ways in which public power utilities have sought, or could seek, alternatives to traditional individualized commercial insurance options.

Nebraska Public Power Utilities Make Progress In Restoring Power In Wake Of Storms

July 12, 2021

by Paul Ciampoli
APPA News Director
July 12, 2021

Public power utilities in Nebraska continued to make progress over the weekend in restoring power to customers in the wake of outages caused by severe storms that hit the state.

A storm that hit on the night of Friday, July 9, damaged transmission structures as well as local distribution structures in several communities and crews from across the state were called to help restore power as quickly and safely as possible, Nebraska Public Power District (NPDD) reported.

Over the weekend, crews continued restoration work in the hard-hit areas of Plattsmouth and Kearney, Neb., NPPD said. Broken poles and downed trees entangled in power lines continued to be a challenge, especially in Plattsmouth. Power has been restored in the Kearney area.

NPPD said that progress continued to be made in restoring power to the Plattsmouth area with approximately 300 customers still without power. Crews continued to work into the evening hours to restore as many customers as possible, but not all power will be restored, it said. Linemen were back working early Monday morning.

Meanwhile, Omaha Public Power District (OPPD) and mutual aid crews made good progress Sunday on outages caused by historic, hurricane-force winds that ripped through the service area in the early morning hours Saturday. At its peak, the storm left 188,000 customers without power, OPPD said.

OPPD made significant progress on Saturday, its first restoration day — restoring more than 75,000 customers’ power — more than all outages that were restored following the 2017 Father’s Day tornado.

Because of the magnitude of this event, more than 500 people from OPPD, mutual aid partners and tree-trimming contractors continue to work in the field to make these repairs and re-energize lines, OPPD said on July 11.

The work began in the early morning hours Saturday and will continue 24 hours a day until all customers have power.

Soon after the storm, OPPD’s mutual aid partners reached out to offer help and assistance. “The outpouring was overwhelming and showed how committed the public power industry is to helping each other,” the utility noted.

The weekend storm is the largest in OPPD history, topping storms in 2017, 2008 and 1997. 

“The widespread nature of the severe weather damage has made this storm unique,” said Javier Fernandez, OPPD President and CEO, in a statement. “Rather than isolated outage areas, we have seen broad swaths of extensive tree damage, which can impact power lines and cause outages.”

The complex work involves first removing tree limbs tangled in lines, then making needed repairs to poles and equipment. In some locations, tops of power poles were snapped off or entire poles were flattened to the ground, OPPD said.

Public power utilities prepare for arrival of Tropical Storm Elsa

July 6, 2021

by Paul Ciampoli
APPA News Director
July 6, 2021

Florida public power utilities have completed preparations for and are closely monitoring Tropical Storm Elsa, which is expected to make landfall along Florida’s Nature Coast early on the morning of Wednesday, July 7.

“In preparation for the storm, the Florida Municipal Electric Association has activated its mutual aid network,” said Amy Zubaly, Executive Director, Florida Municipal Electric Association, in a July 6 statement.

She noted that electric crews and resources from fellow public power utilities both within the state and from nearby states, including Georgia and Alabama, were on standby and ready to assist with power restoration efforts if needed. She said that as with any emergency, public power is committed to restoring power as safely and quickly as possible for customers.

“Our preparation efforts begin well before the start of hurricane season, and our mutual aid coordination efforts will continue right up until and immediately following landfall. We thank all the lineworkers and power restoration crews that are part of our mutual aid network for being at the ready to help impacted Florida communities,” she said.

Several public power utilities in the state noted that they are keeping a close watch on the tropical storm.

For example, Keys Energy Services (KEYS) said in a message posted on its website that it is prepared to restore service as quickly as possible if electrical facilities are damaged by Tropical Storm/Hurricane Elsa. 

It said that crews will be in the field working until sustained winds exceed 35 miles per hour. At that time, all crews will be called in from the field. If power outages occur at this time, KEYS will not attempt to restore power until after the storm has passed. Additionally, KEYS will not intentionally shut power off in advance of a tropical weather event, it said. Essential utility employees will be on standby to begin the restoration process once it is safe to do so, it said.

KEYS noted that it has a number of agreements in place so that, if needed, emergency supplies and additional crews from other utilities will quickly mobilize to assist in the restoration effort. “KEYS has established priorities for storm restoration that are intended to emphasize health, safety, and essential community services and to restore service in a manner that will affect the greatest number of customers first. The time required to restore power will largely be due to the extent of damage to our system. Restoration crews will work as quickly as possible to restore power,” the utility said.

KEYS is the public power utility for the Lower Florida Keys. Headquartered in Key West, Florida, KEYS provides electricity from Key West to the Seven-Mile Bridge and serves more than 28,000 customers.

The Weather Channel on July 6 noted that a hurricane watch had been issued for a part of Florida’s immediate west-central and Big Bend coast including much of the Tampa Bay metro area.

“Although Elsa is not officially forecast to reach hurricane strength, there is some possibility of that happening right before landfall on Wednesday, but that would not significantly change the expected impacts,” it said.

Santee Cooper

Meanwhile, South Carolina’s Santee Cooper on July 2 noted that its personnel were making preparations for the anticipated effects that Elsa may have on Santee Cooper’s service territory.

As of 2 p.m. on July 2, Santee Cooper, the state-owned public power utility in South Carolina, went to OpCon 4 alert status. This means there is a possible threat to Santee Cooper’s electric system, but effects may be limited or uncertain.

At OpCon 4, the utility is primarily:

• Checking and fueling vehicles, including line trucks
• Making sure communications equipment is in proper working order
• Taking inventory and procuring supplies as needed, such as utility poles, electric transformers and associated equipment

In a July 6 email, Nicole Aiello, Manager of Public Relations at Santee Cooper, noted that in addition to these precautions, Santee Cooper has made work plans for transmission and distribution crews, Energy Control Center and Distribution Control Center team members, and customer service representatives in its Customer Care Center.

She said extra crews will be on standby to assist with restoration efforts, as needed.

“We also reached out to APPA mutual aid crews and contract crews, including tree crews, and they are on standby should we need them. We have three helicopters also on standby. We will continue to closely monitor the storm and are prepared to restore power outages as quickly as crews can safely get to them,” she said.