Electric Lines Underground

A typical set of objections from last week's email Big Investment Decision is as follows:

After {hurricane} Ike there was a big push to go underground electric in Houston. It has pretty much died off due to one big problem - maintenance. Underground electrical is more reliable than above ground although a little more expensive, until it comes to resolving failures then reliability numbers fall off the chart because it takes so long to find and resolve underground electrical problems and it is so disruptive. The other problem that has an impact on reliability is visibility. Underground is truly out of sight, out of mind. Not many people mess with wires overhead because they know where they are. Underground is another matter. Every guy with a shovel or backhoe and every minor flood becomes a reliability risk that overhead wires don't have. Except for very high value applications, overhead electrical is still the way to go although not as aesthetically pleasing.

The reason underground lines are not better designed, built, and maintained is that current regulations www.puc.state.tx.us/rules/subrules/electric/25.192/25.192.doc base payments on all approved costs plus a profit margin:

Transmission cost of service. The transmission cost of service for each TSP shall be based on the expenses in Federal Energy Regulatory Commission (FERC) expense accounts 560-573 (or accounts with similar contents or amounts functionalized to the transmission function) plus the depreciation, federal income tax, and other associated taxes, and the commission-allowed rate of return based on FERC plant accounts 350-359 (or accounts with similar contents or amounts functionalized to the transmission function), less accumulated depreciation and accumulated deferred federal income taxes, as applicable.

Since there is no competition, there is no incentive to minimize costs, and in fact there is an incentive to keep costs high since payments are based on "Transmission cost of service." The definitions of the accounts 350-359 and 560-573 are listed immediately below and at http://www.ferc.gov/legal/acct-matts/usofa.asp. However, I have not been able to find the reimbursement marginal rates for each of these categories (i.e. the mark-up on each cost).

3. Transmission Plant
350 Land and land rights. 351 [Reserved] 352 Structures and improvements. 353 Station equipment. 354 Towers and fixtures. 355 Poles and fixtures. 356 Overhead conductors and devices. 357 Underground conduit. 358 Underground conductors and devices. 359 Roads and trails. 359.1 Asset retirement costs for transmission plant.

560 Operation supervision and engineering. 561.1 Load dispatch—Reliability. 561.2 Load dispatch—Monitor and operate transmission system. 561.3 Load dispatch—Transmission service and scheduling. 561.4 Scheduling, system control and dispatch services. 561.5 Reliability planning and standards development. 561.6 Transmission service studies. 561.7 Generation interconnection studies. 561.8 Reliability planning and standards development services. 562 Station expenses (Major only). 563 Overhead line expense (Major only). 564 Underground line expenses (Major only). 565 Transmission of electricity by others (Major only). 566 Miscellaneous transmission expenses (Major only). 567 Rents. 567.1 Operation supplies and expenses (Nonmajor only).

Maintenance 568 Maintenance supervision and engineering (Major only). 569 Maintenance of structures (Major only). 569.1 Maintenance of computer hardware. 569.2 Maintenance of computer software. 569.3 Maintenance of communication equipment. 569.4 Maintenance of miscellaneous regional transmission plant. 570 Maintenance of station equipment (Major only). 571 Maintenance of overhead lines (Major only). 572 Maintenance of underground lines (Major only). 573 Maintenance of miscellaneous transmission plant (Major only).

It appears that the only solution is to provide customers alternatives like generating electricity from sunlight and/or natural gas at their residences. Then all parties in this will have incentives to keep costs low. These alternatives are coming, but regulators need to assure easy integration into the current grid, and planning needs to be accelerated for these coming technologies.
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