Will "Undergrounding" Solve the Outage Problem?

June's storm-caused outages in the mid-Atlantic states produced calls for "undergrounding" of distribution lines.  Undergrounding is a possible, partial solution to outages, particularly where residents wish to retain their tree canopies.  But debates on undergrounding should probe at least two questions:

What is undergrounding’s benefit-cost ratio?  Undergrounding costs more than overgrounding, in terms of both capital investment and maintenance costs.  (Try visual checking when the wire is ten feet under).  Utility regulators have little experience asking and answering the key question:  "How much are you willing to pay to reduce a (once-in-5-years) outage by (2) days?"  Not only can one insert an unlimited number of numbers between the parentheses; the answers will vary depending on whether one operates an emergency room, a computer storage farm or a backyard swimming pool.  The question quickly becomes unwieldy.  Yet we have answered it, implicitly, via our historic tolerance for whatever level of investment and outages has existed.  The point is that one cannot answer the undergrounding question rationally—and respectfully of the public fisc—without doing the math.

Does undergrounding have anything to do with performance?  If a utility's performance continually dissatisfies the public, undergrounding is not the answer.  Undergrounding does not improve poor performance; it only reduces (at some cost) the effects of that poor performance.  Financial penalties have their limits, too:  We cannot bring a company to its knees (even if poor performance justifies the penalty), and then expect it to perform well.  In the context of monopoly service, what options remain?

One answer is replacing the utility.  That's what consumers do, when dissatisfied with their doctors, grocers, mayors, etc.  Since the 2005 repeal of the Public Utility Holding Company Act of 1935 (a statute that largely confined utility companies to one local area), it is possible for multiple companies from other regions to compete for the right to be the local monopoly.  Think about it:  If the local utility knew that, every 15 or 20 years, it was at risk of being replaced by its regulators, its performance would improve rapidly.

The interest in undergrounding is understandable.  But it has two problems:  It fails to confront the mind-numbing problem of benefit-cost analysis; and it diverts attention from a possible root cause—poor performance by a utility that we assume is irreplaceable.  It is worth the effort to re-examine that assumption.

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