November 4, 2011
MASSACHUSETTS LAW ON RESTORING UTILITY SERVICE AFTER STORMS
By: Kevin McCarthy, Principal Analyst
You asked for a description of a recent Massachusetts law on the restoration of utility service.
In 2009, the Massachusetts Department of Public Utilities (DPU) investigated the extent to which Unitil (operating as Fitchburg Gas and Electric) properly prepared for and responded to a major ice storm in the winter of 2008. DPU found that Unitil had failed to restore service to customers in an efficient, effective, and timely manner and this constituted a failure to meet the company's public service obligation to provide safe and reliable service. While DPU concluded that Unitil's performance might warrant monetary penalties, it concluded that it did not have authority to fine the company.
In 2009, the Massachusetts legislature adopted an act that (1) required DPU to adopt rules and regulations to establish standards for emergency preparation and restoration of service for electric and gas companies and (2) establishes penalties for violation of these standards. It required each electric and gas company to file an annual emergency response plan with DPU for its review and approval. The plans must be designed for the reasonably prompt restoration of service after a storm or other emergency. The act authorizes the courts to appoint a receiver to take over operations of a small electric or gas company during an emergency if the court determines that the company (1) has materially violated DPU standards for responding to emergencies or (2) based on other compelling evidence will not be able to comply with such standards without a receivership. The act also expanded the powers of the DPU chairman regarding electric, gas, and water utilities during emergencies.
LEGISLATION (2009 mass. acts ch. 133)
DPU Standards and Penalties
The act required DPU to adopt rules and regulations, described below, to establish standards of acceptable performance for emergency preparation and restoration of service for electric and gas companies doing business in the state. The act allows DPU to open a full investigation on its own initiative and requires it to do so on the petition of the attorney general or city council or board of selectmen in an affected city or town, to determine whether the company violated the standards. The petition must be filed with DPU within 90 days after the violation has been remedied. DPU must impose a penalty of up to $250,000 for each violation and for each day that the company violates the standards, subject to a maximum penalty of $20 million for any related series of violations.
The act requires each company to file a report with DPU by March 1 annually comparing its performance during the previous calendar year to DPU's service quality standards and any applicable national standards DPU has adopted. DPU may impose a penalty against any company that fails to meet the service quality standards in an amount up to 2.5% of the company's transmission and distribution service revenues for the previous calendar year.
Emergency Response Plan
The act requires each electric, transmission, and natural gas company in the state to file an emergency response plan with DPU by May 15 annually for its review and approval. The plan must be designed for the reasonably prompt restoration of service after an emergency event, i.e., an event where widespread outages have occurred in the company's service area due to storms or other causes beyond its control. DPU may fine a company that fails to file its plan $500 for each day during which such failure continues. The fines must be returned to ratepayers through reduced distribution rates.
The plan must identify (1) management staff responsible for company operations during an emergency and (2) additional supplies and equipment needed during an emergency and how the company will obtain them. The plan must also include
1. a system for communicating with customers during an emergency that extends beyond normal business hours and business conditions;
2. provisions for contacting customers who had documented their need for essential electricity for medical needs;
3. designation of staff to communicate with local officials and relevant regulatory agencies;
4. provisions on how the company will assure the safety of its employees and contractors; and
5. procedures for deploying company and mutual aid crews to work assignment areas.
The filing must also include a copy of all written mutual assistance agreements among utilities. DPU must treat the plan as a protected document under the Freedom of Information Act.
After reviewing the plan, DPU may request that the company amend it. DPU may open an investigation of the company's plan. If, after hearings, DPU finds a material deficiency in the plan, it may order the company to make modifications that are reasonably necessary to remedy the deficiency.
DPU may also open an investigation to review the performance of any company in restoring service during an emergency. If, after evidentiary hearings or other investigatory proceedings, it finds that the company's failure to implement its plan materially lengthened the time needed to restore service, DPU may deny the recovery of all or part of the service restoration costs through distribution rates, commensurate with the degree and impact of the service outage.
The act allows the attorney general, on his own initiative or on petition by DPU or the city council or board of selectmen in an affected municipality, to apply to the Superior Court to appoint a receiver to oversee the operation of an investor-owned electric distribution, transmission, or natural gas distribution company with fewer than 100,000 customers in the state. The act's provisions do not apply to a company that serves fewer than 100,000 customers if it has a larger affiliate in the state and the affiliates perform emergency restoration work jointly.
The court may appoint a receiver to operate the company if it finds that an emergency exists and that (1) the company has materially violated standards for responding to emergencies or (2) there is other compelling evidence that it will not be able to comply with such standards without a receivership. The receiver can be any person on a list established for the purpose by the DPU chairman and the secretary of energy and environmental affairs after they consult with representatives of the utilities. The court must set reasonable compensation for the receiver, consistent with DPU regulations. The company must pay this compensation from its revenues.
The receiver must safeguard the health, safety, and welfare of the company's customers. The receiver may not take any actions or assume any responsibilities inconsistent with this purpose. The receiver has access to all company assets and records and may manage the assets in a way that will restore or maintain an acceptable level of service. The receiver may hire, direct, or manage any employee, discharge any non-union employee, order an internal management audit, expend existing company utility revenues for labor and materials, and make additional expenditures essential to providing an acceptable level of service. The expenditures must be funded in accordance with generally accepted utility practices. The company may petition the court to determine the reasonableness of any expenditure by the receiver. The company is responsible for any costs incurred by DPU or the receiver under these provisions.
No one may bring an action against the receiver without first securing the court's permission. The receiver is considered the beneficiary of any insurance policies held by the company relating to the liability of the company's directors or officers.
DPU may promulgate rules and regulations to implement these provisions.
The act allows the governor, upon declaring a state of emergency, to authorize the DPU chairman to take steps the chairman considers necessary to assure public safety and welfare through the priority restoration or continuing availability of electric, gas, and water utility services. The chairman has immediate access to all utility documents, information, and personnel needed to respond to the state of emergency and the information he obtains is exempt from the state's Freedom of Information Act to the extent needed to protect public safety.
Under this authority, the chairman may issue operational and management directives and order expenditures or other measures by any investor-owned utility that he considers necessary to respond to the state of emergency. These can include expenditures for personnel, equipment, and other assets or property of another utility that assumes responsibility for the restoration of service if, in the chairman's judgment, the affected utility is unable to restore service. The chairman may temporarily suspend any DPU rule or regulation and implement any emergency rule, procedure, or protocol needed to respond to the emergency. The chairman's orders expire in 30 business days unless the DPU commission extends the expiration date before then.
DPU may recognize any expenses authorized by the chairman as proper business expenses of the affected utility or alternative utility, subject to investigation and recovery through rates. The affected utility must reimburse the alternative utility for all its costs incurred within 90 days of the receipt of invoices for the cost of service.
Failure of any investor-owned utility to carry out an order by the chairman is subject to investigation and a penalty of up to $1 million per violation. The penalty must be returned to ratepayers through distribution rates. A utility aggrieved by an order or directive issued by the chairman may request a hearing within 90 days from the date the state of emergency ends.
REGULATIONS (220 Mass. code regs. 1900)
In April 2010, DPU adopted final regulations to implement the act. The regulations require each electric and gas company to ensure that it is adequately and sufficiently prepared to restore service to its customers in a safe and reasonably prompt manner in an emergency. DPU may grant an exemption from any provision of the regulations for good cause shown if this is not contrary to statute. Some of the regulations' provisions also apply to restoration of service in non-emergency situations.
Emergency Response Plan
Each company must submit to DPU an emergency response plan designed for the safe and reasonably prompt restoration of service associated with an emergency. In addition to the provisions required by the act, the regulations require that electric company plans include a process to (1) immediately update the company's Life Support Customer list when a customer notifies it of a medical need for electric service; (2) communicate with such customers before, during, and after an emergency; and (3) provide information to public safety officials regarding the status of electric service to the homes of such customers.
The plan must also set forth the content, format, and timeline for the company's annual reports.
A company's plan goes into effect when filed with DPU, pending review and approval, and remains in effect until a new plan is filed or DPU directs otherwise. If a company updates or changes its plan between annual filings, it must submit them to DPU as soon as possible. These changes go into effect when filed with DPU, pending review and approval.
In addition, electric companies must at least:
1. implement all applicable components of their emergency response plan related to planning and preparation for emergency events;
2. at least annually, meet with state and local officials to ensure (a) effective and efficient flow of information and (b) substantial and frequent coordination between the company and local public safety officials, including coordination with local officials with respect to vegetation management;
3. conduct training and drills or exercises at least annually to ensure that (a) their personnel perform effectively and efficiently during emergency events, and (b) the company can restore service to its customers in a safe and reasonably prompt manner; and
4. maintain updated lists of local elected and appointed officials, state and local public safety officials, life support customers, and all internal personnel and external entities involved in the company's restoration efforts.
Each electric company must submit a report with supporting documents to DPU on its preparation for emergency events that details each meeting, training, drill, or exercise held pursuant to the regulations. During an emergency, each electric and gas company must provide periodic reports to DPU, appropriate regional Massachusetts Emergency Management Agency representatives, and municipal emergency managers, or their respective designees, that contain detailed information related to emergency conditions and restoration performance for each affected city and town.
Gas companies must at least prepare and follow written procedures consistent with those required by federal and state law. Each gas company must include these written procedures in their respective manuals for conducting operations and maintenance activities and for emergency response, and, where appropriate, in their manuals of written procedures to minimize hazards resulting from gas pipeline emergencies.
Each electric and gas company must restore service to its customers in a safe and reasonably prompt manner during all service interruptions and outages. During an emergency, this must at least include implementing all applicable components of the company's plan related to restoration of service. Following an emergency, each company must submit a detailed report with supporting documentation to DPU on its restoration performance, including lessons learned.
DPU Investigation and Penalties
DPU may open an investigation into a company's performance regarding emergency preparation or restoration of service. It must open a full investigation upon petition of the attorney general or by the city council or board of selectmen in an affected city or town to determine whether a company violated DPU's standards. Petitions for an investigation must be filed with DPU not later than 90 days after the violation has been remedied.
If after investigation DPU finds a violation of the standards, it must impose a fine of up to $250,000 for each violation for each day that the violation of the standards persists. The maximum penalty may not exceed $20 million for any related series of violations. In determining the amount of the penalty, DPU must consider, among other factors, the:
1. gravity of the violation;
2. appropriateness of the penalty to the size of the company;
3. good faith of the company in attempting to achieve compliance; and
4. degree of control that the company had over the circumstances that led to the violation.
If after investigation DPU finds that the length of a service interruption or outage was materially longer than it would have been had the company followed its plan, DPU may deny the recovery of all or part of the service restoration costs through distribution rates, commensurate with the degree and impact of the service interruptions or outages.