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Amid Safety Concerns, Utilities Transition To New Business Models

California’s Public Utilities Commission earlier this month levied a record $1.6 billion fine against Pacific Gas & Electric Co., the state’s largest utility, in connection with a 2010 gas explosion that killed eight people.

While the California case is part of a long-running controversy over possible corruption in the traditionally cozy relationship between the state regulator and the utility, the accident and the fine again raise the question of how well sprawling utilities like PG&E can maintain safety standards.

PUC president Michael Picker, installed in December to take a tougher line with the utilities, questioned how committed PG&E was to a safety culture and whether it could be focused enough on supervising the massive web of gas lines given its diverse responsibilities. Related: These Major Players Could Make Or Break The EV Market

The fine for an explosion that leveled parts of San Francisco suburb San Bruno comes as utilities transition to a new way of doing business with smart metering, distributed energy and other off-grid options for consumers.

While the San Bruno explosion has been blamed on poor maintenance and supervision, an explosion last month in Manhattan’s East Village, which killed two people and caused three buildings to collapse, seemed due to illegal tampering with gas lines and siphoning of gas.

New York utility Con Edison – which like PG&E operates a sprawling empire of gas and electricity services – maintained it had followed safety protocols in spotting the original tampering and shutting it down. Con Ed inspectors, in fact, were in the building the very day of the explosion and rejected new work for gas service. The possibility is that siphoning may have occurred in a different location than the original tampering.

Con Ed reacted by beefing up its communications with consumers regarding gas safety in general (“Smell gas, act fast”) and by publicizing its hot line for anonymous tips regarding possible theft of gas service. It also entered into talks with the city about ways of notifying building authorities of illegal tampering so that sanctions could be imposed on offending plumbers. Related: How The Majors Are Playing The Oil Price Slump

PG&E ranks sixth among U.S. utilities in terms of revenue and Con Ed, twelfth, according to Fortune.

For Con Ed, as for other utilities around the nation, the continuing emphasis on safety in distribution comes as the companies adapt to a new relationship with the customer through the two-way possibilities of smart metering and the interplay of energy options through distributed system platforms.

Con Ed officials have likened the new operational paradigm to air traffic controllers of the grid as the state’s Reforming the Energy Vision program requires them to create a digital marketplace for distributed energy resources, as specified in the New York Public Service Commission’s order from Feb. 26.

Con Ed will spend $1.5 billion over eight years to develop its advanced metering infrastructure, installing some 3.4 million meters. Related: Solar Could Be UK's Biggest Loser This Year

While New York’s REV plan normally prohibits utilities from owning distributed energy resources themselves, an exception is allowed when necessary to provide energy resources to poor or underserved neighborhoods.

Just how this can play out is evident in the $300 million Con Edison Brooklyn Queens Management project. In addition to energy conservation and efficiency measures, the project is likely to include new solar, energy storage and micro grid developments that will enable Con Ed to defer $1 billion in upgrading traditional capacity. Moreover, it will improve resiliency as neighborhoods are able to go off the grid and lower electricity bills for consumers.

Whether this evolution will make it easier for utilities to manage their responsibilities remains to be seen, but for the moment it is the large, diverse utilities that have the resources to deploy in this new energy market.

By Darrell Delamaide of Oilprice.com

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