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The need for quick recovery of the transmission grid after a disaster is often beyond the capabilities of a single utility. After a blizzard, earthquakes, flood, hurricane, or tornado there are often thousands of utility poles and transformers that need to be repaired, and miles of downed wire that needs to be restrung. And, these days, utilities also face new threats from cyberattacks that can be potentially just as devastating.
Affiliates of Berkshire Hathaway Energy, as well as affiliates of American Electric Power, Duke Energy, Edison International, Eversource Energy, Great Plains Energy, and Southern Company are pursuing the development of Grid Assurance, a limited liability company, that will offer subscribers cost-effective solutions for enhancing transmission grid resiliency.
Recovery of the transmission grid can be hampered by long lead times required to build and deliver critical replacement equipment including large transformers, circuit breakers and other specialized electrical equipment. Grid Assurance will give subscribers economical access to critical equipment faster than traditionally possible.
The Federal Energy Regulatory Commission (FERC) issued a positive order March 25 to Grid Assurance that provides regulatory clarity supporting transmission-owning entities participating in and subscribing to Grid Assurance as a way to strengthen transmission grid resiliency. Grid Assurance had requested determinations on several issues from FERC in December 2015.
The eight electric utilities and energy companies first announced Grid Assurance on June 10, 2015 as a limited liability company that expects to offer subscribers cost-effective solutions for enhancing transmission grid resiliency and protecting customers from prolonged transmission outages.
FERC initially recognized the benefits of Grid Assurance in an Aug. 7, 2015 order. The Grid Assurance consortium subsequently developed a Subscription Agreement and has received clarity from FERC in a declaratory order that enables broader transmission owner participation.
In the March 25 order, the FERC confirmed:
• the prudence of subscriber decisions to contract with Grid Assurance for sparing service and the prudence of purchasing spare equipment from Grid Assurance following a qualifying event;
• the availability of single-issue ratemaking to recover costs of purchasing sparing service and spare equipment from Grid Assurance; and
• that affiliate rules are waived for Grid Assurance, subject to certain conditions including submission of an annual information report from Grid Assurance that contains audited financial statements, information about the sparing service fee formula and information about sparing sales including cost and sale price. The annual information reporting requirement will begin a year from the start of sparing operations.
Grid Assurance continues to evaluate the order and will seek additional clarification from FERC, if necessary. Grid Assurance expects to begin marketing this service to transmission owners in the second quarter with subscriber acceptance, warehouse specification and inventory identification occurring over the next 18 months.
Grid Assurance plans to own and maintain critical, long lead-time equipment at secure, strategically located warehouses and offer logistics support to facilitate the expedited movement of equipment to the affected sites following qualifying events.
Qualifying events can include physical attacks, cyberattacks, electromagnetic pulses, catastrophic events, solar storms, earthquakes and severe weather events.
Grid Assurance services are intended to complement transmission owners’ existing programs as well as established industry initiatives.
© 2016 David Mazor
Disclosure: David Mazor is a freelance writer focusing on Berkshire Hathaway. The author is long in Berkshire Hathaway, and this article is not a recommendation on whether to buy or sell the stock. The information contained in this article should not be construed as personalized or individualized investment advice. Past performance is no guarantee of future results.