August 18, 2006

Wall Street Journal
Aged Equipment Sends a Jolt Through Strained Power Industry

By REBECCA SMITH

Even as a hot summer strains the electric-power grid, industry officials are growing worried they have underestimated another problem: decades-old underground cables and other gear prone to fail under stress.

Repeated heavy loads or just nearby construction can sometimes fry this gear, and knock out other pieces of electrical equipment nearby. Antique equipment is often associated with recent power outages, such as a length of 59-year-old cable whose failure was a factor in a 10-day blackout that plagued the Queens section of New York last month.

Engineering experts now believe the nation is entering a period that could be marked by a dramatic increase in localized power outages unless considerably more is spent on replacing old and deteriorated lines. Replacing these old cables and equipment could add billions to utility spending.

Yesterday, Texas set a new record for electricity usage, exceeding last year's peak by 4.6%, a huge jump by industry measures. Most regions also have set records this summer and some of the hottest weather may still be ahead.

"We've been using equipment far beyond its original intended life because we've been concerned with the cost of replacement and the need to keep utility rates down," says Dean Oskvig, president and chief executive of B&V Energy, a unit of Black & Veatch, a global engineering firm based in St. Louis, Mo.

To save money, the industry often waits for a failure to occur before replacing aged power lines and equipment. This "run to fail" approach leaves equipment in place long after its expected life and raises the prospect of more outages where they have already occurred.

U.S. utilities currently spend more than $18 billion a year on their local electricity-delivery systems, but much of that is spent on stringing wire to new housing developments and customers. Black & Veatch estimates the industry needs to spend an additional $8 billion to $10 billion a year to tackle the problem of obsolete and corroded equipment.

But such pro-active replacements could add about 5% to residential electric rates. That is a hard sell with electricity prices already under pressure from rising power-generation costs.

Few utilities know the exact age of their oldest pieces of equipment, which often lie buried below city streets and are hard to get at. "Records are pretty sparse," says Chet Knapp, manager of reliability for Pepco Holdings Inc., owner of the utility that serves Washington, D.C., and parts of Maryland. It is not unusual for utilities to find equipment dating to the era of the Model T Ford.

That is what happened a couple of years ago in Philadelphia, when workers for the local utility, PECO Energy, a unit of Exelon Corp., found lengths of underground electricity cable still in service they later dated to 1899. Nearby, they found more wires put down in 1900 and 1904 that also were in good shape. Some of the old wiring equipment has been left untouched because it has a smaller diameter than newer cable. So replacing old stuff would also require installing new conduit, the protective pipe through which the cable runs. A small job would quickly become a big, messy job requiring burrowing under streets and sometimes buildings.

In addition to chronological age, "there's another aging mechanism going on and it's related to the overheating of equipment that's caused by heavy electricity use," says Ralph Masiello, senior vice president of KEMA consulting, which often works for utilities. Put simply, equipment that's repeatedly stressed will age faster -- and be more likely suddenly to give out.

The recent outage in Queens involved cable that was nearly identical to the type found by those Philadelphia utility workers. They are known as "PILC" cable -- short for "paper-insulated, lead-covered" -- and are found beneath the streets of many big U.S. cities.

Although the cable is remarkable for its durability, it wears out eventually, usually when disturbed by digging nearby or as moisture invades the sheath. Consolidated Edison Inc., which serves the New York City area, began a concerted effort in 1986 to replace all of this type of cable with wires of a newer design that employs synthetic coverings over metal wire. But the cost, about $25 million a year, is so great that ConEd doesn't expect to finish until 2024. By then, some of its replacements will be 38 years old. Currently, about 27% of its system consists of the old paper-insulated cable.

As work continues, cables fail. The failures of PILC cables were blamed for power outages in Manhattan in July 1999 that affected 200,000 people. As with the Queens blackout, the earlier failures also occurred in the middle of a heat wave, where there was exceptionally high electricity demand.

ConEd uses different diagnostic tests to try to ferret out which lines may be susceptible to collapse but some tests actually can damage lines. Others are unreliable. "There is no perfect test," says John Miksad, senior vice president of electrical operations at ConEd.

In San Francisco, a failed PILC cable was blamed for a December 2003 outage that affected 100,000 residents and darkened the popular Union Square shopping district at the height of the holiday shopping season. An investigation concluded a 40-year-old cable failed "explosively" and started a substation fire that caused $4.6 million worth of damage because it wasn't immediately detected. Pacific Gas & Electric Co., the local utility, now is replacing all similar PILC cables at its unmanned San Francisco substations and beneath about 100 miles of Oakland and San Francisco streets.

Investigators found that the older cable, when strung vertically, gradually loses its insulating properties. That happens because old PILC cable consists of copper wires wrapped in oil-impregnated insulating paper. Over time, the oil can migrate to the bottom of a suspended wire, leaving the upper stretches brittle and more thinly insulated. Insulation failure is a leading cause of PILC cable failures.

Distribution-system outages haven't received as much attention as big transmission-line failures because they generally affect fewer people at one time. In "networked" systems found in downtown areas, there's redundancy built into the system and it requires multiple line failures in order for power flows to be noticeably disrupted.

An increase in PILC cable failures could have a significant impact on reliability and costs. The cables are typically found in underground systems and are the most difficult to repair or replace.

Many utilities feel a pressing need to spend more money on their power-distribution systems. In a survey of 39 top utility executives that will be released next month, distribution-system spending ranked as the No. 1 priority, ahead of generation and environmental compliance, according to Jone-Lin Wang, senior director at energy consultants Cambridge Energy Research Associates.

It is hard to say how much PILC cable still is in use, but it's believed to be a lot. The decision about whether and when to replace cables is made on a utility-by-utility basis. Expense is always a major consideration.

Southern California Edison, a unit of Edison International, recently sought approval to replace 800 miles of aging underground cable, including some PILC type, after concluding cable failures were the leading cause of controllable outages. But consumer advocates at the California Public Utilities Commission fought the $145 million request, arguing that there was no proof that the worst cables would be replaced first, given inadequate utility records.

Instead, the utility got permission to replace only 300 miles of cable at a cost of $54 million. An administrative law judge acknowledged the reduction might mean "running cable to failure" and "poorer system reliability than what customers experience today."

Ron Litzinger, senior vice president of transmission and distribution at the utility, says the utility expects to present more compelling data for its next rate request in three years. In the meantime, it plans to spend $250 million more than is recouped in customers' bills "because we don't want to get too far behind."

Regulators are paying more attention to reliability issues. A study by the Oregon Public Utility Commission, for instance, found a gradual worsening of service quality between 2001 and 2005. Excluding storms, it found equipment failures were the leading cause of outage. In 2005, failed equipment caused from 25% to 45% of outages at the state's three biggest utilities.

The electric sector is trying to beef up its data collection and analysis. It's also installing more sensors in equipment to warn of imminent failures. "We're the last industry to aggressively embrace sensors," says Clark Gellings, vice president of innovation at EPRI, the Electric Power Research Institute in Palo Alto, Calif.

Given the remarkable durability of PILC cable, some observers think it should be used as replacement cable, too. But the lead covering is regarded as an environmental hazard and it takes more skill to join together lengths of the older-style cable than newer types.

Workers splicing PILC cable work with hot lead solder, shaping it by hand and taking care there are no voids that later could allow moisture to intrude. It takes twice as long to splice the older-style cable as the newer types. "It's really something of an art," says ConEd's Mr. Miksad. Someday, he says, "it could be a lost art."