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For Immediate Release: November 18, 2013
Contact: Rob Thormeyer, 202-898-9382, rthormeyer@naruc.org

NARUC Launches Dialogue on Valuing 'Resilience' Investments with New Paper

WASHINGTON—State economic utility regulators need a better and more commonly understood definition of the term “resilience” as more and more utilities seek approval to charge their consumers for investments designed to improve the grid’s ability to withstand major storms and other disruptions.

In a paper, the National Association of Regulatory Utility Commissioners’ Department of Grants and Research provides a working definition of the term in an attempt to initiate a dialogue about how it should be valued by utilities, consumers, and regulators. The paper was funded by the U.S. Department of Energy.

This discussion is important because many utilities are asking their consumers to pay for resilience investments. They hope these investments will bolster their infrastructure against storms and other natural and man-made disasters. Though a handful of States have already taken action, this document is an attempt to supplement the States’ leading role in improving the resiliency of the nation’s power grid.

“This paper launches a critical discussion about how regulators should treat resilience investments,” said NARUC President Philip Jones of Washington. “Our job as regulators is to manage risks and ensure that consumers pay fair, just, and reasonable rates for safe and reliable utility services. Hardening the system against massive storms and other disruptions may require new regulatory tools that better evaluate these risks, along with a broader understanding about how we use and value utility services. This paper will have relevance in all regions across the country, not just those that endured the devastation of Hurricane Sandy, Tropical Storm Irene, or the Derecho.”

The word “resilience” is commonly used but not necessarily commonly defined. It is distinct from the term “reliability,” which already has standards and metrics (such as SAIDI and SAIFI measurements). Resilience can be used to describe populations or cities, but until this paper there has been no effort to launch a discussion as to what it means in a regulatory construct.

NARUC’s Resilience in Regulated Utilities is an attempt to fill that gap. The paper offers a working definition of resilience to mean, “The robustness and recovery characteristics of utility infrastructure and operations that avoid and minimize interruptions of service during an extraordinary and hazardous event.”

The paper is meant to serve as a conversation-starter for policymakers working within the regulated utility sectors. Its intent is to lay the foundation for establishing common definitions and a methodology for utility commissioners and others to consider when exploring the regulatory issues surrounding investments in utility resilience. Further work is needed to develop the evaluative frameworks that allow for strong regulatory review of resilience investments that, in the long run, may deliver more reliable and affordable service for ratepayers.

The paper suggests that a risk-based approach to resilience may be necessary. Utilizing this approach will ensure that the elements of the grid that are most vulnerable will be addressed first, thus minimizing costs to consumers. A resilience investment may be particularly valuable in the face of high-impact disasters and threats that utility systems have not faced before, like national-scale natural disasters or man-made cyber and physical attacks.

“Regulators want to be as smart as possible in evaluating utility proposals in resilience,” the paper says. “If these investments bring large enough benefits, they may be worth seeking out proactively. All of this may require new tools, new partnerships and the generation of new understandings about how we use and value utility services. It’s a conversation that’s already taking place across the commissions and we hope this paper will help State commissions become even better participants in it.”
 

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NARUC is a non-profit organization founded in 1889 whose members include the governmental agencies that are engaged in the regulation of utilities and carriers in the fifty States, the District of Columbia, Puerto Rico and the Virgin Islands. NARUC's member agencies regulate telecommunications, energy, and water utilities. NARUC represents the interests of State public utility commissions before the three branches of the Federal government.

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