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Utilities struggling to balance crisis response, costs

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Armed with storm preparation and restoration recommendations issued by the state Board of Public Utilities in August, New Jersey's four electric utilities felt confident they would pass the next Hurricane Irene with flying colors — until October, when Hurricane Sandy raised the bar.

And just as during the aftermath of Irene and a rare snowstorm on the eve of Halloween last year, the harshest criticisms in the post-Sandy public uproar have centered on the utilities' communication practices.

"We went from no calls with mayors in Irene to a call a day with every one of the mayors during Sandy, and I personally met with 100 mayors. Just looking at those two examples of interaction with municipal officials, that's a tremendous improvement from where we were — but it's still not good enough," said Ralph LaRossa, president of Public Service Electric & Gas.

That wasn't enough for the BPU, either, which earlier this month said the state's four utilities were stronger in responding to Sandy than to Irene, though President Robert M. Hanna gave all four companies failing grades on communication with local officials and customers.

Jersey Central Power & Light, a subsidiary of Ohio-based FirstEnergy Corp., has particularly taken a beating in the court of public opinion, as it was singled out in news coverage and public hearings as a particularly poor communicator when millions of its customers lost power during the storm. The company did not respond to interview requests for this story.

LaRossa said the utilities might have received better scores if studies to outline the costs and benefits of replacing working meters with smart meters — which the companies commissioned in the years before Irene — had materialized in BPU policy ahead of Sandy.

"We'll never get to the customer level (of contact) without us having a two-way communication with that customer," LaRossa said. "The signals were clear it wasn't something folks wanted … but absent better technology and better information, I struggle with how we're going to make things that much better for the next storm."

Hanna rejected that at a Senate committee hearing Dec. 5, saying the utilities "already have plenty of ways to (communicate to the public) in this day and age, so that is not the problem. The problem is the utilities are not generating information in a way that will be useful to the public."

And the benefits of smart meters — like those of hardening infrastructure against future storms — don't outweigh the estimated $1 billion in costs for PSE&G and JCP&L, said Stefanie Brand, director of the state Division of Rate Counsel, especially since that cost would trickle down to ratepayers.

"We need to be realistic about the fact that a storm like Sandy is going to have a lot of power outages," she said. "If we have to triple rates to reduce the damage a little bit, or to test out a new way for utilities to communicate with customers, then that may not be worth it."

At the hearing, Hanna said the BPU will be "doing a cost-benefit analysis for major expenditures" on proposed infrastructure improvements with the Edward J. Bloustein School of Planning and Public Policy at Rutgers University, though an agency spokesman said "it's more about researching different ways of responding to storms based on what has already been done in the industry, like raising substations and selective undergrounding" of utility cables.

BPU Commissioner Jeanne Fox said the agency is working with utilities and regulators in states like Florida — which "hasn't had a Sandy, but has been hit with multiple hurricanes in the past three years" — to learn the effectiveness of various storm response improvements and better methods to implement them in New Jersey.

"Anything we do is going to be costly, and we need to make sure the costs really balance the risk of another event happening before we go forward with regulations or standards," Fox said.

Despite the current lack of updated storm response recommendations from the BPU, LaRossa said PSE&G is "getting close to rolling out a process improvement where we'll be able to communicate with the folks that give us their cell phone numbers their outage information in real time." But LaRossa said the company is waiting on clear signals from regulators before it invests in more significant disaster-related communication improvements, like smart meters.

"In the past, we got clear signals that solar was needed, so we went ahead and did those (rate) filings. Then it was the same thing with energy efficiency, so we did that over the last few years," LaRossa said. "To me, the day that we see consumers reaching out to the Rate Council and saying it's a good idea — that's when it happens. But there's no way a utility would make the investment when the state Rate Council says it doesn't make sense."

E-mail to: katiee@njbiz.com

On Twitter: @katieeditor

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