Utilities prepare for active hurricane season as COVID-19 complications persist

The National Oceanic and Atmospheric Administration is predicting another above-normal Atlantic hurricane season this year as U.S. utilities' response plans remain complicated by COVID-19.

Forecasters predicted 13 to 20 named storms, with six to 10 of those expected to become hurricanes. Of those hurricanes, NOAA anticipates three to five could become major hurricanes, defined as Category 3 and above. In a May 20 press briefing detailing its 2021 outlook, NOAA experts said there is a 60% chance of an above-normal season with only a 10% chance of a below-normal season.

The 2020 season saw 30 named storms, with seven each causing more than $1 billion in damages, representing the most active season in 170 years. In April, NOAA updated data used to determine its hurricane season outlook, increasing its expectations of named hurricanes during the average Atlantic season to 14, from 12.

Utilities are still keeping supplies stocked, modifying staging sites and lodging for social distancing and deploying fewer people in more vehicles, among other measures, all according to Centers for Disease Control and Prevention guidance.

Rick Riley, senior vice president of distribution operations and asset management for New Orleans-headquartered Entergy Corp., said the utility is hoping to loosen some of its COVID-19 restrictions as conditions improve across the United States.

"We're already proving we can handle a dual event," Riley said in an interview, adding that Entergy was completing system drills just last week, with pandemic protections still in place.

After storms, Entergy, like other utilities, sends scouts out to assess and log damage. Typically there are two or more crew members to a vehicle. But during the pandemic, Entergy often split those teams up into individual vehicles and other measures that put a strain on the company’s resources. Riley credited Entergy's successful responses last season to the company's years of planning for mass health crises long before the COVID-19 pandemic.

In preparation, utilities are expected to continue costly COVID-19 logistics in the face of the second hurricane season since the pandemic began. As mask mandates and other public health and safety measures evolve and more Americans are vaccinated, some major utilities are considering relaxing some, but not all, restrictions.

Utilities tout a 'smarter' system

Duke Energy Corp. and Entergy, with customers across the Southeast and Gulf Coast, continue significant grid improvements to increase resiliency and automation through smart technology.

Smart meters and so-called "self-healing" technology help utilities to identify and isolate outages and reroute power while a repair is completed.

"Self-healing technology lets us restore power and reduce impacts of an outage before we have to send a crew out," Duke Energy spokesman Jeff Brooks said in an interview. "As we move into a new era of energy delivery, this will play an increasingly important role."

During 2018's Hurricane Florence, Brooks said Duke was able to avoid more than 80,000 customer outages in the Carolinas using self-healing technology with only as much as 25% of its system equipped. In the coming years, Duke plans to outfit about 80% of its system with such technology.

During recent storm outages smart meters have enabled Entergy utilities to detect individual outages remotely instead of deploying crews to check each customer.

"We didn't anticipate how useful it could be during outages," Riley said.

Utilities also continue to work to make systems more resistant to storm damage.

The Carolinas have faced historic flood events in recent years which struck rural and remote areas hard. In response, Duke Energy and other utilities are increasingly establishing better flood barriers around essential systems, installing pumping systems to remove excess water and in some cases, relocating substations.

Since 2005's Hurricane Katrina, which drowned some substations, Entergy has been making similar improvements and coping with rising sea levels.

"We do know is our coastline is eroding," Riley said.

Entergy is raising several of its substations and considering improvements in areas only recently flood-prone. Mobile dikes and control units and entire mobile substations "we can roll in in case an area floods we didn't anticipate" are among the strategies Entergy is implementing, Riley said.

Duke Energy is creating more redundant alternative energy pathways with options to control the flow of electricity, as well as investing in "micro-grids" and battery storage to help during extreme weather events, Brooks said.

Both utilities are expanding fleets, with Duke Energy adding more all-terrain vehicles, including amphibious transports. Entergy is keeping vehicles slated for retirement and the auction block on the road to help with pandemic distancing while adding new ones.

Regulatory support

Regulators are likely to continue to be supportive of storm cost recovery.

With the economic downturn caused by the pandemic, "everyone is feeling the pressure of wanting to avoid raising rates for customers," said Lillian Federico, energy research director at Regulatory Research Associates, a group within S&P Global Market Intelligence. "But I think there's a precedence that says these are costs that have been traditionally allowed to be recovered."

Federico said only a few U.S. utilities have begun recouping deferments from the pandemic so far, including direct expenses such as employee safety costs. Other utilities may be faced with attempting to recoup pandemic costs alongside storm damage.

There is only so much "headroom" to raise rates, Federico said, which means as utilities begin recouping costs from both the pandemic and storms, they may have to pull back on other expenses like infrastructure. "We have seen utilities beefing up efforts to cut costs where they can," she added.

Securitization, where a utility issues bonds to finance upfront storm costs, is emerging as another tool utilities may have to manage hurricane damage recovery costs. At least eight states have used securitization for storm-related costs and a few more have pending legislation, or legislation on the books already to allow it, Federico added. Securitization may become more attractive because of pandemic costs. But Federico warned it could potentially become too much of a good thing in some cases.

While securitization could save ratepayers money and get utilities their cash quicker, there is the potential that the ability to recover costs more easily could "disincentivize utilities from minimizing costs associated with extraordinary events," she said.

Off-balance-sheet financing above a certain threshold could also affect how rating agencies view those companies and that type of financing.

"The pandemic was like another kind of storm," Federico added. "Now utilities have to decide how to meet the costs of both."