Keystone Research Center welcomes legislative report on utility reliability

HARRISBURG, Pa., June 12, 2002 — The Keystone Research Center recently welcomed a new legislative report on electric utility industry reliability, “Assessing the Reliability of Pennsylvania’s Electric Transmission and Distribution Systems.”

KRC urged the legislature to use the report as a springboard to a more comprehensive assessment of the impact of deregulation in all utility industries (including gas) on reliability.

Legislators requested the new report, by the Legislative Budget and Finance Committee (LBFC), following the release on May 30, 2001 of a Keystone Research Center study, “Pennsylvania Utilities: How Are Consumers, Workers, and Corporations Faring in the Deregulated Electricity, Gas, and Telephone Industries?” (on line at http://www.keystoneresearch.org).

The KRC report documented Pennsylvania utility industry trends that point to the possibility of reliability problems down the road.

* Reinvestment of only $0.8 billion out of $16 billion in profits in utility infrastructure from 1994 to 1998;
* Increasing consumer complaints to the PUC;
* Longer electric utility outages; and
* A 15 percent decline in utility workforces.

Based on the LBFC briefing, but without having read the full LBFC report, KRC Executive Director Stephen Herzenberg credited the LBFC with contributing to a more open and fact-based discussion of reliability. Dr. Herzenberg added, however, that the LBFC report does not appear to look at the underlying challenges that deregulation may pose for reliability. “We still need to look at whether the economic incentives in a deregulated environment translate into underinvestment in infrastructure or cutting labor costs to a level that jeopardizes maintenance and service.”

At the LBFC hearing releasing the report, Representative David Levdansky suggested that we cannot expect the market to take responsibility for reliability. “Particularly in a deregulated environment,” concluded Dr. Herzenberg, “we may need stronger non-market mechanisms to safeguard reliability. That means an aggressive PUC, representing the long-term interest of consumers. But since regulatory approaches are vulnerable to capture by the industry, we also need to give an expanded role on reliability monitoring to workers. Workers see first hand when companies are making short-sighted cuts that threaten service. The state should search for innovative ways to access that insider knowledge in ways that serve consumers.”

To look more deeply at reliability issues, Dr. Herzenberg also said Pennsylvania could follow Massachusetts and require an independent audit of whether each utility has enough workers to maintain service and reliability.

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