Goal is to reduce outages after hurricanes
The Florida Legislature this year is looking at an idea that many of us in disaster management and insurance have been frustrated hasn’t gotten much traction over the years: move more utility lines underground to help prevent electricity outages during hurricanes and other disasters. Bills to do just that are now ready to go before the full House and Senate.
The question has come up every few years, after hurricanes have struck, and the answer has been that it’s very expensive to take down overhead electric lines in existing neighborhoods and bury them underground. The question has always come down to how much of the cost utilities and customers each should contribute.
Utilities currently pay for those storm-hardening projects from money they collect from their base rate. Base rates cover a lot of different costs of utility operations, are shared by all customers, and are set on a multi-year basis by the Florida Public Service Commission (PSC).
HB 797 by Rep. Randy Fine (R-Palm Bay) and SB 796 by Senator Joe Gruters (R-Sarasota) would create a new process for utilities to pass along the costs of these projects to their customers. It would create a separate process before the PSC, outside of the base rate process, similar to the one utilities go through annually to pass along specific fuel expenses to customers. The utilities would also be able to earn a rate of return or profit on the projects.
Opponents include the AARP and large businesses that are big electric users, who argue the proposal would unfairly shift too much of the cost onto customers. They want the costs included in the base rate. Supporters say more underground power lines would go a long way to help prevent lengthy electric outages after hurricanes.
This debate is much the same as the insurance industry’s discussion of how much consumers should pay after heavy losses from catastrophes. You will often hear “pay now or pay later,” meaning it may be more cost effective if everyone pays a little bit before the storm to harden structures than the enormous costs after the storm. Watching the utility company debate is a window into the insurance industry and its recommendations to pay now versus paying later!
Both the House and the Senate bills have passed all of their committees and are ready for consideration by their full chambers.
LMA Newsletter of 4-22-19
