Private electricity companies in other parts of the world have a much better track record than Toronto Hydro when it comes to handling severe weather.
A Toronto Star investigation reveals that an “aging management system” at Toronto Hydro is to blame for the massive blackout that struck Canada’s largest city in the wake of the recent ice storm. That claim – among complaints from politicians and other officials about the utility’s poor response to the December 22 ice storm – has led Toronto Hydro to put together an “independent panel” to look at what it could have done better.
But look no further than private electricity operators in the UK and Australia for a lesson in how to manage a utility and its customers during a major weather event.
As I reported previously in the Financial Post, in the UK – where the power system was privatized in 1990 and companies must compete with one another to keep the loyalty of their customers and where government regulation of the private companies is strict – power companies must offer compensation when they fail to provide adequate service. The compensation not only applies when the lights go out over extended periods of time, but can also be applied for a variety of other infractions – ranging from repeated, short power failures to missing appointments.
Those penalties and the need to keep customers happy had a positive effect on the companies. Once the companies moved from public to private ownership, they invested and upgraded their systems and reduced the amount of time customers were left without power – benefiting both shareholders and users who could depend on a more reliable power system.
The recent storms in the UK provided an interesting opportunity for the companies. Because of the severity of the storm and that it occurred during the Christmas holidays, UK companies provided their customers with greater compensation than required of them by law.
UK Power Networks – one of the “Big Six” power companies in the UK – tripled its required payment to £75 ($131 in Canadian funds) for customers lacking power for 48 to 60 hours, including Christmas Day. Customers then received an additional £54 ($95) for each subsequent additional 12-hour period without power. In all, customers received as much as £432 ($756) to take the chill off the Christmas that the blackouts brought.
The company also brought in engineers from across the country and offered its most vulnerable customers Christmas dinners as well as hotel accommodation – all at the expense of shareholders.
Other UK companies responded differently in their voluntary offerings. Scottish and Southern Energy – another major power company in the UK – offered £75 to any of its customers that were without power at any point, no matter for how long, on Christmas Day.
The Australian state of Victoria, home to Melbourne – the second largest city in the country with a population of more than 4 million people – also privatized its power utilities in the late 1990s and has since lowered the amount of time the average consumer loses power each year by one third. In 2008, when the state experienced a once-in-three decade storm that left more than 660,000 homes without power due to downed lines from fallen trees, the utility was able to turn the lights back on for 90% of those customers within 24 hours.
Knowing that severe weather was on the way – and they would have to compensate all of their customers if the lights went out – the state’s major utilities began mobilizing staff and resources before the storm hit. Part of the mobilization included gathering as many vegetation management contractors as they could, knowing they would be needed in order to fix downed power lines.
The utilities were also able to rely on their employees to handle multiple tasks, as they had implemented a policy to train their staff in emergency duties that were above and beyond their normal responsibilities – including taking calls, patrolling lines, inspecting damage and calling customers. The utilities call this a culture of “whole business” and it means that they can quickly expand the pool of staff needed to handle front line duties during emergency situations.
The companies’ also invested in updated call centres and fault reporting systems that vastly increased the amount and quality of information available to them. A number of the utilities installed technology that would automatically update customers on the status of their power, either directly through a company website or telephone – keeping customers firmly in the loop on when they can return home.
Many of the customers who suffered a blackout received a call making sure the power had been restored and, if not, when they could expect the lights to come back on. Tens of thousands of customers were contacted in the aftermath of the storm.
Toronto Hydro’s response to the ice storm was well short of expectations. Thousands of customers were left without power during the festive season, while information from the utility was in short supply. Meanwhile, customers in the UK were receiving help from the power companies in form of hotel accommodation and hot meals. And in Australia, the power utilities have taken the necessary steps to ensure that most customers don’t have to leave their homes during major storms.
Brady Yauch is an economist and Executive Director of the Consumer Policy Institute (CPI). You can reach Brady by email at: bradyyauch (at) consumerpolicyinstitute.org or at (416) 964-9223 ext 236.