The Cost of Extreme Weather for Utilities in TX, NY, & CA

According to NOAA, the U.S. has experienced 291 weather and climate disasters that cost $1 billion or more since 1980 - for a total price tag of $1.9 trillion.

With 22 billion-dollar disasters in a single year - including drought, wildfires, tropical cyclones, tornadoes, and winter storms - 2020 set a new record.

These extreme weather events pose significant risk to utility generation, transmission, and distribution.

And as utilities struggle to keep the lights on during these disasters, state regulators are imposing penalties and passing increasingly strict regulation.

Extreme weather clearly creates considerable business, financial, legal, reputational, and regulatory risk for utilities.

However, the unique challenges in California, Texas, and New York - when viewed as a microcosm of the different weather and regulatory environments throughout the U.S. - suggest that utilities aren’t powerless as temperatures rise and regulation mounts.

To mitigate extreme weather risks and avoid penalties, utilities must invest in innovative technologies that ensure accurate information, clear communication, and streamlined field operations.

a venn diagram of weather in texas, california, and new york

At a Glance: Extreme Weather in TX, CA, and NY

Texas, California, and New York provide insight into the risks posed by extreme weather, how state regulators are responding, and where utility providers can innovate in order to safeguard the grid and avoid penalties.

A comparison of Texas, California, and New York

Texas: Deregulation and Winter Storms Challenge Reliable Generation

a texas license plate buried in the snow

Extreme weather has prompted rapid evolution in Texas’s regulatory environment. Utilities are facing new requirements and potential penalties, meaning they need practical solutions to ensure compliance and avoid fines.

In February, 2021, Winter Storm Uri crippled Texas’s grid: depriving millions of water, electricity, and heat. Over two-thirds of Texans lost power for almost two days. Approximately half lost running water for 52 hours on average - with 390,000 still without clean water access at the beginning of March.

There are at least 210 known fatalities, though some estimate the number could be as high as 700.

During the storm, demand for electricity increased dramatically - up to 69GW from a high of 48GW in the days prior. Meanwhile, low temperatures shut down 44GW of generation capacity, which led the Electric Reliability Council of Texas (ERCOT) to order outages.

According to ERCOT’s President, the grid came close to catastrophic failure.

When the dust settles, we’ll have a clearer understanding of Texas’s grid failure, but it’s valuable to consider where commentators have placed blame so far.

3 reasons why the Texas grid failed

a neighborhood in texas covered in snow

1. Inadequate winterization for energy and natural gas assets

In 2011, Texas experienced a winter storm and power outages remarkably similar to those in 2021.

A 2011 report by FERC and NERC identified cold weather and frozen equipment as “the most common cause of the outages.” ERCOT’s recent analysis observes the majority of 2021 generation losses were also “weather related.”

Both natural gas and electric had inadequate, or poorly implemented, winterization procedures in 2011. Generators had failed to winterize equipment, despite recommendations from previous severe winter weather events, so it could operate in low temperatures.

Without NERC standards obligating generators to winterize, they were “reactive as opposed to [...] proactive in their approach to winterization and preparedness.”

This decade-old report - which could have been issued in response to the 2021 storm - begs the question: If regulators understood winterization was a significant vulnerability in 2011, why hadn’t energy and natural gas addressed this risk?

One might critique energy and natural gas companies for their inaction, but Texas’s deregulation shouldn’t go without consideration.

After all, ERCOT avoids FERC oversight, meaning FERC could only issue recommendations - not mandates - in its 2011 report. Only the Texas state legislature can create actionable requirements.

a snow plow clearing a street

2. The state legislature and the PUCT failed to pass sufficient regulation

Past attempts at weatherization legislation in Texas have lacked teeth.

Following the 2011 report, ERCOT issued voluntary best practices for winterization, and a new rule required ERCOT to share reports to the Public Utility Commission (PUCT) concerning utilities’ winterization plans.

The state legislature did pass a bill requiring utilities to submit plans for winter preparedness, but a weatherization requirement - with $100,000 per day fines attached - was dropped from the bill.

Notably, penalties are also minimal in the state’s public utilities code. Civil and administrative penalties can’t exceed $5,000 and $25,000, respectively, for each violation per day. In contrast, penalties in California and New York can reach $100,000 per day or per violation period.

An advisory commission’s recommendations to increase Texas penalties to $100,000 per day was ignored by the legislature in 2013.

In the end, frustration with the state legislature’s inaction on the FERC/NERC report taps into a broader critique of Texas’s market, grid, and priorities.

a frozen fire hydrant

3. Texas’s deregulated market doesn’t protect consumers, create adequate reserve margins, or incentivize emergency preparedness

ERCOT and the PUCT embrace a free market approach.

In fact, the PUCT’s mission statement is to “protect customers, foster competition, and promote high-quality and reliable infrastructure.”

However, Winter Storm Uri and the legislature’s inaction on winterization have highlighted the tensions in this mission, revealing that competition and deregulation often conflict with consumer protections and reliability.

In other words, competitive utilities don’t pursue a proactive stance when it comes to extreme weather preparedness.

High demand raises wholesale prices, so generators aren’t incentivized to support ERCOT in raising reserve margins or building further capacity.

Ultimately, the cost of a winter storm is borne by consumers and Texas’s Retail Electric Providers (REP).

Following the February storm, the wholesale price of electricity in Houston rocketed from $22 per megawatt-hour to around $9,000, and three REPs have declared bankruptcy so far.

Though ERCOT and the PUCT’s leadership experienced turnover, critics maintain that these entities were beholden to private interests, not consumers.

Critics observed ERCOT’s board only has one seat for a residential consumer representative, while five of its 16 members lived out of state. Moreover, ERCOT and the PUCT lack any publicly elected seats, and Texas politicians - like Gov. Abbott - receive significant campaign contributions from oil and gas companies.

While Texas’s winter storm has provoked significant debate, one thing is sure - the fundamental assumptions undergirding Texas’s deregulated market and independent grid are under renewed scrutiny. Utility inaction is no longer viable.

Regulation heats up in response to extreme cold

As ERCOT moves forward on a 60-point plan, the state legislature is finally implementing new regulations to prepare for future storms.

While the state legislature hasn’t changed the fundamentals of Texas’s grid and wholesale market, two new bills are significant.

Senate Bill 2 and Senate Bill 3:

  • Compel winterization
  • Create a council to improve coordination between ERCOT, the PUCT, and the Railroad Commission, which oversees natural gas facilities
  • Ensure operators prioritize critical natural gas facilities during outages
  • Change ERCOT’s board, so it’s appointed by state legislators

Unlike past attempts, these winterization requirements aren’t toothless. Senate Bill 3 carries a penalty of up to $1,000,000 per day if an organization isn’t adequately prepared for a weather emergency.

Utilities are sure to face increased regulation and scrutiny in Texas moving forward as extreme weather events become more common.

an aerial view of neighborhood covered in snow

Complying with new winterization requirements

Winterizing Texan wells and generators will cost billions of dollars, so electric generators and natural gas producers have a significant undertaking ahead.

As utilities winterize their assets and ensure reliable generation, they need innovative solutions to...

  • Manage the work that’s mandated in new winterization requirements
  • Track assets and ensure effective maintenance
  • Collect the data and maintain the necessary documentation for compliance

In a stricter regulatory environment, the cost of neglecting these areas is too high.

Utilities can optimize operations through new technologies, like smart field devices, field operations software, map visualizations, and geospatial workflows

Though utilities can’t prevent a winter storm from striking, they can certainly prepare by leveraging every solution at their disposal.

Recommended Reading

California: Wildfire Season Damages Powers Lines, Threatening Safety

a transmission line threatened by a wildfire

While Texas’s winter storm paralyzed generators, California’s high temperatures and severe droughts consistently impact the entire energy supply chain: generation, transmission, and distribution.

Californian utilities must also grapple with a unique problem - their power lines can spark wildfires.

2020 was the fifth-warmest year and worst wildfire season on record in the U.S. These wildfires were some of the largest, most destructive, and deadliest in the state’s history.

Rigorous vegetation management is key to preventing these fires - requiring careful oversight of the state’s 25,526 miles of transmission lines and 239,557 miles of distribution lines.

Failures in vegetation management directly threaten customers and violate state and federal regulation - inviting scrutiny and enormous fines.

Californian utilities’ struggle with wildfires underscores the regulatory, legal, financial, business, and reputational risks involved in managing extreme weather.

In the face of unprecedented challenges, incomplete vegetation management efforts led to lost lives, bankruptcy, and billions of dollars in fines and settlements.

a firefighter fighting a wildfire

California’s power lines spark major wildfires

Power lines and equipment have sparked some of the most devastating wildfires in California history. One recent and particularly destructive example being the Camp Fire, in which 85 people were killed and over 18,000 structures were destroyed.

Violating state vegetation management requirements risks millions of dollars in fines, massive settlements, Chapter 11 bankruptcy, and even charges of involuntary manslaughter.

Significantly, the risk of wildfires - coupled with challenges in vegetation management - has driven an extreme measure to protect consumers: simply shutting off the power.

In fact, an Oregon utility’s decision against shutting off power is the subject of class action lawsuits, which contend a power shutoff could have saved a town from destruction.

But sacrificing reliability for the sake of safety invites its own risks.

a neighborhood shrouded in smoke from a wildfire

Public Safety Power Shutoffs: Insufficient communication

When wildfire risk is high, utilities in California may implement a Public Safety Power Shutoff (PSPS) to avoid sparking a fire. However, they must follow the CPUC’s requirements when doing so.

A utility must provide advanced notification, supply clear and accurate information to customers, offer resources, and coordinate with local jurisdictions regarding critical facilities.

However, the CPUC found major utilities didn’t comply with PSPS guidelines during 2019 outages.

Among the issues identified by regulators...

  • Poor consideration of public safety risks
  • Inadequate community outreach, support, and education
  • Website failure
  • Inaccurate outage maps
  • Secure portals that couldn’t be accessed by public safety partners
  • Insufficient staffing at call centers
  • Not providing advanced notice to customers, including Medical Baseline customers

In addition to a $106 million penalty for one utility, these utilities can’t collect revenue from customers during future PSPS events until they’ve fixed their processes.

Specifically, they’re required to improve their training and compliance, share best practices, and report back to the CPUC on their progress. That said, the goal should be avoiding PSPS events altogether in order to protect vulnerable customers and avoid regulatory action.

Utilities are considering dramatic investments to mitigate wildfire - like burying thousands of miles of power lines - but a crucial measure is bolstering vegetation management efforts.

a transmission line surrounded by vegetation

How utilities can bolster vegetation management

Customer and employee health and safety in California hinges on a utility’s ability to manage thousands of miles of power lines.

Major challenges in VM include:

1. Coordinating workers in the field

2. Tracking diverse assets spread across a large region

3. Collecting accurate data

4. Ensuring clear communication and oversight.

Smart field devices, field operations software, and geospatial workflows could help optimize communication and management, like in Texas, but securing hundreds of thousands of miles of power lines is a unique challenge: Californian utilities need to improve data collection.

Californian utilities should leverage remote inspection technologies - like LiDAR, satellite, and drones - to assess wildfire risk and identify hazardous vegetation.

Implementing tools that streamline VM would improve inspection times, reduce costs, and potentially save lives.

Whether in California or Texas, utilities face unprecedented risks to the energy supply chain from extreme weather - and the financial, reputational, and human costs of neglecting these risks are prohibitive.

The same is true for utilities in New York.

Recommended Reading:

New York: Ineffective Storm Response Paralyzes Distribution

a hurricane seen from satellite

Tropical Storm Isaias struck New York on August 4, 2020, with 70-85 mph winds measured on Long Island and damage stretching through Eastern New York State. In total, 1.5 million customers experienced power outages, with peak outages of approximately 1 million customers.

After delays and poor communication, utilities restored power to all customers eight days later on August 12.

Immediately following the storm, Governor Cuomo ordered an investigation into New York’s major utilities. The Public Service Commission (PSC) published an interim investigation report on November 19, and detailed over 30 violations for each utility’s storm response - a potential penalty of $137.3 million in total.

As tropical storms grow more severe, utilities like those in New York must overhaul their storm response to avoid sky-high fines and ensure customers’ access to electricity.

flooding

Storm response penalties in New York

New York authorities don’t shy away from regulation or steep penalties.

Unlike Texas’s ERCOT, New York’s Independent System Operator (NYISO) boasts the “strictest reliability standards in the nation.”

And the PSC can penalize a utility up to $100,000 per utility code violation, charge a potential $250,000 if death or personal injury is involved, or fine $500,000 if a utility doesn’t comply with reliability requirements.

Following the Isaias investigation...

  • NYSEG admitted to three violations and accepted a $1.5 million penalty
  • PSEG Long Island (PSEG LI) will pay $30 million
  • Central Hudson has settled 32 violations for $1.5 million
  • Con Ed and O&R were fined a total of $82.05 million (for their response to Isaias and three other incidents)

State regulations instruct electric utilities on the development, submission, and implementation of emergency response plans. The penalties above stem from ineffective plan implementation.

a lightning storm

Emergency response plan violations during Tropical Storm Isaias

Emergency response plans cover a wide range of duties.

With a storm on the horizon, utilities must analyze weather forecasts, accurately assess the severity of a storm, pre-stage adequate equipment and line workers, coordinate with contractors, and - potentially - request additional staffing from neighboring utilities.

Once a storm has hit, providers must assess the damage, dispatch and manage field crews, and communicate with customers - especially those who rely on medical devices. They must also coordinate with municipal leaders and emergency responders to ensure safe and efficient clearing of roads and power restoration.

Managing all of these pieces during an evolving emergency is an enormous challenge, both logistically and technologically. That said, effective emergency response plans should have three priorities: accurate information, sufficient resources, and clear communication.

The PSC’s investigation highlighted seven major issues as utilities struggled to meet these priorities in their storm response:

  1. Inadequate damage assessment
  2. Ineffective assignment of resources and restoration crews
  3. A non-functional outage management system
  4. Inaccurate estimated restoration times or misleading reports
  5. Poor communication and coordination with customers, municipal governments, and state agencies
  6. Inappropriately classifying the storm, impacting pre-storm crewing assessments
  7. Issues with their websites

A report by a Westchester County group observed similar problems in NYSEG and Con Ed’s storm response.

The potential for problems is huge and weakness in a single area can have devastating consequences and significant penalties. Poor communication with customers, particularly those with life support equipment, is at the basis of NYSEG’s three $500,000 violations.

dark storm clouds

A history of dysfunction in storm response

Haphazard storm response isn’t unique to New York or Tropical Storm Isaias.

For instance, Connecticut’s Public Utilities Regulatory Authority (PURA) fined one of their utilities $30 million for its storm response during Isaias.

Like the PSC report in New York, a PURA investigation found they failed in procuring adequate resources, managing their municipal liaison program, coordinating with emergency response, organizing its field crews, and communicating with customers.

Significantly, New York utilities have struggled with other storms in the recent past as well. A Westchester County official noted Con Ed’s performance during Isaias was “a repeat of March 2018.”

During 2018, New York experienced five major storms, including winter storms Riley and Quinn - each of which knocked out power for at least 100,000 people.

Among the 43 violations in utilities’ emergency response plans were insufficient staffing, poor crew management, and ineffective customer communication. And Con Ed and O&R were fined $10.75 million for violating their emergency response plans in 2018.

New York residents and officials haven’t missed the parallels between 2018 and 2020.

Because of utilities’ continued failures, Cuomo, the state legislature, and the PSC have signaled even stricter penalties in the future along with potential revocation of operating licenses.

“With Tropical Storm Isaias in August, we once again experienced an unacceptable response from utility companies. As a result, we are doing everything we can to make sure New Yorkers are compensated.” -Governor Cuomo, January press release

Recommended Reading:

Conclusion: Avoiding Penalties and Safeguarding the Grid through Innovation

Whether in California or New York, the threat posed by extreme weather isn’t merely reputational or financial - it’s existential.

Fundamentally, utility providers face challenges in managing work, data, and documentation.

They need accurate information, clear communication, and streamlined field operations.

Utilities in New York can utilize the same solutions that are useful in California and Texas to improve incident and outage monitoring, coordinate work crews, and ensure proper FEMA documentation and regulatory compliance:

As utilities face more severe penalties, scrutiny, and extreme weather across the country, utility professionals can’t settle for the status quo.

In preparing for, mitigating, and responding to extreme weather, utility providers must invest additional resources in technological innovation to save lives and secure the future of their business.

Streamlined collaboration in Emergency Response & Vegetation Management

Winter storms, wildfires, and tropical hurricanes are complex, and there's no single innovation that will solve every problem.

That said, improving collaboration between the field and office is critical across the board - whether that's in preventing wildfires through vegetation management or expediting power restoration following a storm.

Here, Mobile GIS is a powerful tool. Real-time maps, intuitive data collection, and a robust project record help streamline field operations and compliance.

Discover how Unearth's Mobile GIS, OnePlace, can support your teams and start your own free trial of OnePlace for Vegetation Management or Emergency Response.

Unearth's emergency response mobile GIS
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