All Catastrophes Are Created Equal

The electricity is back on in our house. Verizon just called to confirm that our phones our working. After seven days, I finally have Internet access. The first thing I will do (after writing this blog post) is to order an iPad. Never again will a cable company hold my Internet access hostage to a broken power line.

Some of you who are reading this probably do not even know that the worst Nor'easter since 1955 swept the Long Island Sound area a week ago Saturday. This storm was not anticipated by, apparently, anyone. The forecast that afternoon called for rain. After a couple of hours it was indeed a bit windy and rainy. My husband looked out the window and said, maybe we can build a fire tonight. Then he went out to run some errands.

The next few hours featured fallen trees, downed power lines, an exploded transformer, my husband trapped in his car behind a huge mass of trees and tangled power lines a quarter of a mile from our house, a woman who died after being hit by a fallen tree, a group of parks department personnel stuck in their trucks inside a matrix of fallen evergreens, and a policeman entombed for ten hours in a car draped with power lines because the city fathers could not get a live person from CL&P on the phone .... for eight hours.

We are very grateful. My husband was taken in by some neighbors who are now new friends and got home safely by 7 a.m. the next day. Our house is fine, we are safe, and while we lost 14 trees and our deer fence, that is no big deal compared to destruction we saw around town the next couple of days. One thing we did not see was many CL&P trucks. That's not unusual; nearly everybody in our area has backup generators; over time we have learned not to rely overmuch on our local electric company. After the last big storm, in winter 2006, it took four days to get the power back on. The Verizon trucks were out right away, but CL&P trucks were hard to spot. At the time, CL&P responded to accusations that it had cut service and was ignoring its customers with a lot of boilerplate about how it was doing its best.

This time, four days after the storm, more than half the town still had no electricity.  CL&P's projections that 99% of the town would have power by Thursday night, repeated faithfully by the emergency management department, sounded more and more ridiculous.  The company's union told the newspaper that they were not being allowed to work longer hours to repair the power lines because CL&P didn't want to pay the overtime. The town held a press conference, then a meeting. The power on our street finally came back on Friday night after I had left to fly to California for a speech. A headline in this morning's paper (eight days after the storm): "CL&P getting closer to restoring service" to its remaining customers.

None of this was entirely a surprise. I had a casual conversation with the head of a major midwestern utility after the power outage in 2006. After deregulation, he said, CL&P was one of the companies that had cut service to avoid rate increases, maximize profits (and enrich the management). Eventually, the deferred maintenance can no longer be deferred, and it shows up in customers' electric bills. But in the meanwhile, it's easier for management to pay itself a lot of money because customers aren't complaining to the state utility commissioner about rising electric rates. Or so the theory goes.

In the aftermath of the storm, Governor Jodi Rell has launched an investigation into CL&P. I would not be surprised if it turned a weather event into a financial scandal.

In its tiny way, the Nor'easter of 2010 bears all the hallmarks of our recent financial catastrophe. Before the event, the signs were there. It's 100% predictable that every fifty years or so, a huge Nor'easter will strike the Long Island Sound area like a buzz saw. But when one hasn't happened for awhile, it's easy to dismiss the small probability that it will happen on any particular day. Kind of like assuming that house prices can never fall by using only data from the past 20 years. 

You also have a business that is "too big to fail," one that is semi-regulated in the worst possible way, meaning that oversight takes place, but the regulators are actually hostages. The too big to fail status means the utility gets the upside, and the public pays any downside. This is a recipe for moral hazard. 

Sure enough, the people who were responsible for maintaining the utility infrastructure explained away shortfalls in service. Some people thought there was a problem anyway, but nothing happened. After the event, everybody is looking back with hindsight and starting to realize the problem was there all along. The search for the culprits has begun.

We need to go back to a system that makes sense. When a business functions as a public utility, it should be fully regulated (meaning the public gets the profits). When the public doesn't get the profits, the business should not be afforded the protected status of a utility. (There are other ways around this than going back to a regulated nonprofit monopoly. Why not put CL&P's contract out to bid every year. Maybe Mid-American could run CL&P. It's a highly efficient company and I suspect would provide better service at a lower cost.) That solves CL&P's problem. Unfortunately, it doesn't take care of the banks....

Excellent blog entry and

Excellent blog entry and follow-ons.

good news

we have a volunteer a utility industry expert has stepped forward to help decode industry statistics if that is helpful. thank you blog readers!

The Storm

Holy cow, Alice. I had no idea the area was still putting itself back together after that storm. I'd heard about the deaths, and power outages, and the ferocity of the storm, but after a couple days I lost track of the aftermath. I'm originally from Fairfield County. No wonder I haven't heard much in the last week from old friends and neighbors. They are still in recovery mode!

Thank heavens you and your husband are okay. The experience must have been very stressful, the loss of the Internet being the least of it.

With your credentials as an analyst and writer, you certainly have a toe-in to participate in the public forum about CL&P, should you wish. You'd make a great contribution if you did.

It's so nice to see you back on the blog. :)

losing contact with the world

Oh - you would not believe it. if there was a way to post photos on here I would do it. We have three trees floating in the river next to our house. Not far away somebody took a chain saw and cut a hole in a tree lying in the middle of the road so cars could drive through it. It was like something from Yosemite. As recently as 3 days ago a paralyzed man was trapped in his powerless house with dead equipment -- his wife was hysterical. Believe me I will use what influence I can.

One lesson from Warren Buffett. There are times when writing and speaking in public are the best way. There are times when working behind the scenes are the best way. This is one of the latter times, at least for me. I have a date with our First Selectman to talk about this. If it then becomes helpful to write something I will do so but the first preference is that the town itself and the governor be financially armed to decode the bafflegab that will be fed them by CL&P. I will volunteer and if anyone else will join me to help the state figure out whatever numbers etc. will be supplied by CL&P because they will, undoubtedly, bear some element of self-interest. If we put together any kind of collective effort, even the slightest, I'm sure it would be met with the greatest appreciation because there is such a heavy thumb probably being put on the other side of the scale.

The Internet is the most powerful tool ever created to defeat entrenched bureaucracies that are leaching undeserved money by virtue of legacy and relationships. If you have any interest in becoming a part-time decoder of the "figure out what CL&P is doing" project please email me. I can't speak for Governor Rell but she will probably be grateful and at the very least it has the potential for an awesome story that we can dine out on forever.

Meanwhile, yes it's completely eerie to lose contact with the world this way. i would happily eat sandwiches toasted over a fireplace and live by candlelight for awhile but living without the Internet - NO. we are personally working on creating several redundant backups. you need to unplug your router because it will blow when the power comes back on, among other things. Everybody should be thinking about how to live without electricity if need be, and wireless access both WiFi and 3G, will be key. We communicate, therefore we are.

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