Consider: You’re in college and you need to get at least a C- to pass a class you are taking pass/fail. Right now your average grade in the course is an F. Say you do well enough on your final exam to raise that average to a D. Is that progress? Technically, yes. A D is better than an F. But in the scope of things, the end result is the same: you are still failing.
We see a similar situation going on right now with Michigan investor-owned utilities and their plans to invest in the distribution grid and increase electric reliability for customers, a goal that customers are demanding be met after the appalling length and number of outages this past summer. DTE, Consumers Energy and Indiana Michigan Power have all filed these distribution plans, as required by the Michigan Public Service Commission.
The plans either lack clear targets for increasing reliability, or set targets so modest that they represent only marginal improvements that would still keep the length and number of outages experienced by Michigan customers much worse than national averages. The utilities seem to be aiming to make the reliability problem in Michigan somewhat less bad. But just as the college student who goes from an F to a D is still getting bad grades, going from substandard reliability to somewhat better but still substandard reliability is not true progress.
Last week CUB answered Michigan regulators’ request for comments on utility distribution plans regarding how they measure up to the scale of the reliability problem, whether the utilities are using the right metrics to track reliability, what kind of financial incentives and penalties should be applied to the utilities, how the plans account for affordability and inequity and more.
CUB’s comments responding to this request hit on all of these issues. We won’t summarize everything in this blog post, but we will go over some highlights.
Our comments on the utility’s metrics bring us back to the analogy at the start of this post. We wrote:
... goals for achievements on metrics should focus on improvements relative to similarly-situated utilities, not merely on improvements relative to the current baseline for Michigan utilities. That is because the baseline is, for the most part, subpar compared to the reliability experienced by customers in most of the rest of the country. An outcome of these plans could be that utility service becomes marginally more reliable than it is today, while still being well below average compared to utilities in other states. Marginal improvements from a low bar should not be the goal of this proceeding. [emphasis added]
...For example, in Consumers Energy’s plan, the utility targets reducing CAIDI (without major event days) from the baseline of 196 minutes to 179 minutes by 2025. But even if that goal was achieved, Consumers Energy would still be well above the national median in 2018 of 107 minutes and the regional average of 120 minutes. Similarly, the utility’s target of 170 minutes 2 for SAIDI by 2025 is above the national median of 118 and the regional average of 119.5.
Somebody could say the analogy breaks down if you consider that there is no “final exam” equivalent when it comes to the grid. We need a reliable electric distribution grid for the foreseeable future, and so any improvement in reliability is a good thing because it can be a platform for further gains down the road.
The problem is that when it comes to something as complex as the electric grid, “down the road” can be a very long time. The utilities are planning big capital and O&M projects for the grid that they say will improve their abilities to avoid and cope with power outages. These include projects like installing new fault indication sensors, building technology that allows grid operators to remotely control substations and ramping up programs to clear trees around power lines.
These are multi-year projects, and it may take even more time after completion to see an appreciable difference in reliability as these measures take effect. So for the next few years at least, the utilities are in effect facing their final exam. The decisions made now will be with Michigan utility customers for years. For the customer dealing with frequent power losses right now, telling them that reliability will eventually get up to par in a few years is little comfort.
Other problems with the utility distribution plans we address in the comments include:
- To make utilities accountable for failures to reduce outages, there need to be more specific penalties tied to utility performance on reliability. The distribution plans are for the most part vague about performance-based measures. Consumers Energy and DTE sketched out an idea in which the utilities would get a financial incentive if they improved reliability performance relative to past performance (or a penalty if they slipped compared to the past), but that approach would reward the utilities even if their performance was still subpar compared to the rest of the country. CUB’s comments instead pointed to the idea in our 2020 paper that customers should receive bill credits for each hour their power is out, and that the utilities should only be able to recover the costs of these credits through rates if their reliability performance is on par with utilities in other states.
- While it is good the utilities want to invest in more equipment to detect problems as they occur so they can be resolved as quickly as possible, there are no investments planned in predictive technology that uses machine learning and algorithms to determine in advance what parts of the grid are likely to fail next, allowing the utility to avoid an outage occurring in the first place. Read more about this approach in our recent blog post about Consumers Energy.
- Low-income areas tend to suffer from worse electric reliability than more affluent areas. To reduce that gap, utilities need to invest more in upgrading aging equipment in lower-income areas. We think the distribution plans need to take a more systematic approach to addressing this problem.
A next step in the MPSC’s inquest into power outages is a Technical Conference on Emergency Preparedness, Distribution Reliability, and Storm Response on Oct. 22 at the MPSC office in Lansing. CUB Executive Director Amy Bandyk will be presenting at this conference on the impacts of the recent outages and how Michigan utilities compare to utilities in the rest of the nation on reliability performance.