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  1. Home
  2. / Investing
  3. / Energy

Storm Whacks Mid-Atlantic Utilities

Companies must fix systemwide damage first, frustrating customers.
By GLENN WILLIAMS
Jul 02, 2012 | 04:52 PM EDT
Stocks quotes in this article: D, POM, EXC

Last Friday, the Mid-Atlantic region was hit by a devastating storm. It wasn't a hurricane or tornado; it was a weather front passing through the area. Only this front had an unusual punch: It wiped out utility infrastructure, leaving millions of customers without power, cable, Internet, and in many cases cellular service, for days.

It's been estimated it could take over a week to restore services for the millions of customers in Dominion Resources (D), Pepco Holding (POM), Exelon (EXC) service areas. The destruction to the utilities' infrastructure was unusually widespread.

To make matters worse, this storm arrived when temperatures exceeded 100 degrees. Without air conditioning and other vital services, many customers lose patience and wonder why it takes so long for utilities to restore power. The reason is that the company must fix systemwide problems first.

To understand the repair process, consider municipal water systems, whose method of delivery is analogous to that of electric utilities. Municipal water is typically stored in regional reservoirs, then extracted and transported over long distances by very large pipes to serve tens of thousands of consumers. As the large pipes approach a metropolitan area, they split into a series of smaller pipes, which in turn split into even smaller pipes, until the water reaches the ultimate consumer.

If a storm damages a water system between the reservoir and the consumer, the utility usually considers the upstream water supply as the first priority, since without it, all downstream consumers would remain without water. So the larger pipes get fixed first. Repairs then migrate from larger to smaller pipes, until each consumer's service is restored.

Electric utilities take a similar approach to repairs, with regard to transmission capacity rather than pipe size. Since high-voltage power lines affect the most consumers, they are usually the first to be repaired when the electric distribution system is damaged.

Of course, there are exceptions. Utilities will prioritize returning services to hospitals, public safety facilities and critical infrastructure. Then they'll restore service to regions based on where the greatest good for the greatest number of consumers can be achieved as soon as possible.

While utilities tend to take a top-down approach toward restoring services, this can be bewildering to consumers, who see the issue from the bottom up.

If you're wondering why you seem to be last to have your power restored, look at the utility pole near your property. If you see one or two skinny wires delivering power to several consumers, you are probably low on the utility's restoration list. If you see three skinny wires tied to the pole's cross beam, or three fat wires mounted on porcelain insulators, your chances are better. If those insulators have several shells (indicating higher voltage), you're probably high on the utility's restoration list.

If you are at the low end of the utility's distribution system, don't take it personally. And don't even think about connecting a standby generator without involving a licensed electrician. Generators may seem simple, but your home's wiring isn't. Casually connecting a generator to your home's circuits can wipe out electronics and destroy small appliances the first time a large motor or air conditioner cycles.

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At the time of publication, Glenn Williams had no position in any of the stocks mentioned.

TAGS: Investing | U.S. Equity | Energy | Utilities

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