Power Industry Weighs Impacts of Coronavirus

The post Power Industry Weighs Impacts of Coronavirus appeared first on POWER Magazine.

Utilities and power generators worldwide are altering their business practices and developing strategies for dealing with the COVID-19 pandemic. It's particularly critical for the power industry, as a reliable supply of electricity is essential to prevent even more economic disruption. The U.S. Department of Homeland Security (DHS) lists utilities among the 16 industries that the agency considers critical infrastructure sectors, including power plants, dams, and nuclear reactors, along with transmission systems.

The Edison Electric Institute (EEI), the leading utility trade group, in a recent memo to its members said as many as 40% of utility workers could be directly impacted by the coronavirus, either through personal illness, being placed in quarantine, or called away to care for other sick family members.

Several utilities, like other businesses, have established telework protocols for their office staff. Fort Collins Utilities in Colorado has told non-essential, non-critical employees to work from home, and has implemented its "continuation of services" plans to ensure operations and service deliveries continue as usual.

The Platte River Power Authority, which provides wholesale power to Fort Collins Utilities, also told its employees to work from home, and its essential on-site staff is separated into two, unconnected buildings. Employees in either building cannot enter the other building, or have in-person contact with the other building's workers.

Southern California Edison has said 8,000 of its 13,000 employees are working remotely.

"This type of situation, and its preparation, is what utilities live for," said Mike Byrnes, senior vice president of Veolia North America, and chief operating officer of energy consulting firm SourceOne, told POWER on March 18. "I worked for ConEd [Consolidated Edison in New York], and the guys really think about these things and they know how to prepare for them. They all pull together. They did it after 9/11, after the first World Trade Center bombing, after [Hurricane] Sandy. This is when the red tape goes out the window, and everyone gets done what they need to get done."

EEI has said planning for a pandemic is different from other natural disasters because the situation is not limited by geography, instead impacting a wide area-in this case, the entire U.S. and much of the world. EEI also said preparations must be done with an eye toward a long-duration event. DHS has said power utilities are an important part of the response to a pandemic.

"Veolia is an operating company," Byrnes said. "We operate [industrial and power] plants, wastewater plants, we are all about critical infrastructure. And that includes all the preparation for this type of situation."

Byrnes said Veolia's staff has been discussing plans to deal with the coronavirus for weeks. "It was, 'Do we have enough staff? What do we do if an entire plant comes down sick? Will we have to lock people in?' We are always ready. Each plant has at least two weeks of food and water in place. And we always look at how do you cover for these people if they get sick."

He continued: "We've been shifting people to prepare lists, determining who's got the license to go to this plant if we need it. It's not just Veolia, it's the entire industry. It's what our people and the people in this industry train to do. And this is the time when people value what we do."

Travel Restrictions, Infrastructure Safeguards

Many utilities have enacted travel restrictions or bans on non-essential travel for their staff, along with shifting in-person meetings to teleconferences. ISO New England, the grid operator for six states in the Northeast, last week said it "has been closely monitoring the spread" of the virus and outlined precautions it has taken, including banning all international business travel. PJM Interconnection, another regional transmission organization, suspended all business travel for its staff, both international and domestic.

California ISO President and CEO Steve Berberich in a statement last week said, "Until more is known about the origin, transmission, and treatment of the virus, the ISO is taking necessary proactive steps to protect the health and safety of our staff, our stakeholders and our customers, while safeguarding the critical infrastructure of the power grid and energy market."

David Hutchens, chief executive of UNS Energy, the parent of Tucson Electric Power, in a statement to media said, "I want you all to be assured that the health and well being of our employees and customers and community are absolutely paramount. Obviously our service is absolutely critical. Electric service in our state and across the nation has to be the focus right now because without that nothing else works. So we are taking that seriously at our companies, we are taking it serious in our industry, and across the entire continent of North America we are making sure that service remains reliable for our customers, maybe now more than it ever has been."

A report from Moody's Investors Service issued Wednesday said, "The US regulated utility sector is better positioned than many industries to withstand the economic fallout from the coronavirus (COVID-19) outbreak. In addition to benefiting from stable residential customer demand, utilities can rely on a variety of cost recovery tools provided by state regulators, which helps to maintain a resilient financial profile through crises." The report said volatility in financial markets is the "biggest risk for utilities because the sector requires external capital in order to meet sizeable liquidity deficits."

The coronavirus also provided a backdrop for the ongoing bankruptcy of Pacific Gas & Electric (PG&E). The utility on Monday got approval to move ahead with about $20 billion in financing commitments to support its emergence from Chapter 11 bankruptcy. PG&E in a March 2 motion in the case said the financing, which includes $10.825 billion in debt and $9 billion in equity, were "particularly important" due to the market volatility caused by the pandemic.

Impact of Power Demand

Utilities also are looking at the impact of lessening demand for power from commercial and industrial (C&I) enterprises, and the possible rise in consumption from the residential sector, with schools and businesses closed and people ordered to work from home.

Italy, one of the epicenters for the coronavirus outbreak, saw an 18.1% drop in power demand from Feb. 21-the day before the country instituted a nationwide lockdown-through March 16. The lockdown keeps people in their homes, with all nonessential businesses closed. As U.S. officials ponder more measures to prevent the spread of the virus, beyond the closure of schools and businesses, the potential for what's known in the energy industry as "demand destruction"-something usually reserved for areas in the wake of natural disasters-could become all too real.

Steve Cicala, an assistant professor at the University of Chicago who studies energy markets, told The Wall Street Journal on Wednesday that electricity data can be valuable to economic policy-makers, as a more immediate measure of economic activity. He said U.S. electricity demand began to fall in November 2007, a month before the official beginning of a recession that lasted through 2008 and into 2009. Twenty months after the recession began, electricity demand was off 5.3% from its peak.

Melissa Lott, a senior research scholar at the Center on Global Energy Policy at Columbia University, told the Journal: "I think [electricity demand] is a good leading indicator. As it starts to go down, that's an indicator our economy is headed to a rough place."

Some utilities along the U.S. West Coast have begun reporting drops in demand for power. Snohomish County Public Utility District outside Seattle, one of the areas hit hardest by coronavirus thus far, reported a 3% drop in electricity demand on Monday. Portland General Electric, which serves customers in Oregon, also reported declining demand.

Veolia's Byrnes said his group was unsure of the eventual impact of COVID-19 on power demand, but added: "In our side of the business we manage a lot of commodity contracts for customers, and to be conservative, we're figuring [consumption] will drop by 10%. Right now we're in the shoulder season, and everyone is going through their [maintenance] outages, and I'd be more concerned about that [impact]" on the power grid.

The impact of declining power demand is being studied closely in California, a state where much of the demand for electricity comes from the C&I sector. A recent Wood Mackenzie report noted that C&I would likely see much of the impact from COVID-19, with power demand falling as businesses close. The report said residential electricity demand is "relatively more stable under economic distress," although it's likely household demand for power will rise with entire families sheltering in their homes. An increase almost certainly will be noted if self-quarantines last into the warmer summer months.

Changes to Customer Service

COVID-19 also is impacting how utilities deal with their customers. Con Edison on Wednesday said it is temporarily shutting down its customer service walk-in centers in each of the five boroughs of New York City, as well as in Westchester County. Con Edison, like many U.S. power companies, has suspended shutoffs of services for non-payment, waiving late-payment charges for customers, and suspending the fee the utility normally charges to a customer who is not able to grant access to their property. Meter readers also will no longer enter homes to read meters; customers with indoor meters can report their usage online. Visits to look at residential energy efficiency measures also have been suspended.

Other utilities suspending service shutoffs include Xcel Energy, Southern California Edison, Duke Energy, Georgia Power, American Electric Power, Dominion, and Pepco.

"We are committed to helping every customer through difficult times, and we know there will be many challenges associated with this pandemic," Pepco Holdings President and CEO Dave Velazquez said in a statement earlier this week. "From programs that provide supplemental support, billing options that spread costs more evenly, to relief of late payment fees, we are taking important steps to support our customers and communities."

Pacific Gas and Electric (PG&E) has a moratorium on service disconnections that applies to both commercial and residential customers, and PG&E said it will remain in effect indefinitely.

"We recognize that this is a rapidly changing situation and an uncertain time for many of our customers," PG&E Vice President Laurie Giammona said in a statement.

-Darrell Proctor is associate editor at POWER (@DarrellProctor1, @POWERmagazine).

The post Power Industry Weighs Impacts of Coronavirus appeared first on POWER Magazine.