View recent news coverage highlighting interviews and quotes from LPPC.
Utility Dive: Public Power Leaders See Lasting Effects from 2020 Disruptions with New Approaches to Resilience, Equity
September 11, 2020
By Emma Penrod
The aftermath of COVID-19 and social unrest in 2020 could make 2021 a year of unprecedented change and innovation in the power sector, the heads of three large public power companies said during a Wednesday panel organized by the Large Public Power Council and Women's Council on Energy and the Environment.
Some of the major themes this year, including resilience, sustainability and social justice, will continue to dominate energy industry efforts in 2021, executives said. At the same time, COVID-19 has highlighted the need for flexibility, and multiple executives say teleworking is likely here to stay.
“What I've seen previously are mostly changes driven by regulatory policy,” said Jolene Thompson, president and CEO of Ohio-based American Municipal Power. “Today what we're seeing is more driven by what consumers want and what technology has become available."
The panel tapped the heads of Tacoma Power and Austin Energy, along with American Municipal Power, to discuss how the events of 2020 will shape the industry in 2021 and beyond. While they said their overall goals of sustainability, resilience and equity have not changed, they noted that 2020 may change the way they approach them, including by making innovation a priority.
“In my view, the technology changes are more revolutionary than the past 30 years of changes," Thompson said.
While COVID-19 forced Thompson and her fellow panelists to move to a remote workforce, she and the others agreed that remote work is likely here to stay.
“We pushed everyone out of an office over two weeks,” Jackie Flowers, director of Tacoma Public Utilities, said. While it took time for everyone to adjust, “we found real potential for us to incorporate it into our workplace culture. Our employees love it.”
Jackie Sargent, general manager of Austin Energy, said the shift to remote work has improved the company's customer relations because the flexibility has improved employee morale.
Thompson concurred that remote work is likely here to stay. "I don't think the new normal is going to look like the old normal," she said.
While COVID-19 has slowed certain projects, the executives said investments in sustainability and innovative new technologies will continue.
Flowers said Tacoma Utilities's plan to achieve its zero-emissions goal by 2045 remains on track, as are plans to make investments in electric vehicles and emerging solutions such as hydrogen fuel.
All three executives expressed particular enthusiasm for energy storage, but they also saw a need for additional innovation to accelerate its adoption.
“As we see energy storage evolve, we're going to see a need for distribution system operators, similar to what we have on the transmission side today,” Sargent said. “There will be a need for some kind of collaboration between those to ensure we maintain the overall reliability of the system.”
They said the civil unrest of 2020 has also spurred them to consider the role of their own organizations in supporting systemic racism, and to consider creative solutions. Flowers said Tacoma Public Utilities has used data to build an “equity index," which revealed that disadvantaged communities have suffered from a lack of infrastructure investment.
“In some cases that has led to cutting corners, in particular for water,” Flowers said. “We're using that data to inform us whether or not we may have impacts to customers in terms of their service lines not being up to snuff.”
Tacoma Public Utilities is developing a program that would make loans and grants available to residents impacted by these funding disparities, she said.
“We would like to be able to tie that to any discriminatory acts that occurred historically, but the state constitution only allows income-based standards,” she said.
Morning Consult: Worldwide Denial-of-Service Cyberattacks on Utilities Up Five-Fold This Summer, Data Shows
August 27, 2020
By Lisa Martine Jenkins
As the societal disruptions of 2020 continue to pile up, cyberattackers have taken advantage of the chaos, with certain types of attacks against utilities spiking five-fold in recent months, according to data provided to Morning Consult by the analytics firm NETSCOUT. Those who work in and with the utilities themselves, however, have expressed little concern about this surge, reporting that the cyber threats have not impacted their security of service.
NETSCOUT, which maintains a Cyber Threat Horizon tracker in real time, recorded 1,780 “distributed denial-of-service” attacks against utilities worldwide between June 15 and Aug. 21, representing a 595 percent year-over-year increase. A DDoS attack uses multiple platforms in an attempt to flood a target’s system and render it unavailable, often through repeating a request or ping to such a degree that a target — in this case a utility — is overwhelmed.
The marked increase in DDoS attacks on utilities worldwide, including both electric and gas systems, have come amid the coronavirus pandemic and other sources of upheaval, as measured by the attacks’ frequency, volume and speed. And DDoS is not the only type of cyberattack on the rise: The Federal Bureau of Investigation recently warned the U.S. energy sector of a new hacking threat from the Russian hacker group known as APT28, or Fancy Bear, that has used a wide range of approaches.
Roland Dobbins, principal engineer for NETSCOUT’s security division Arbor Networks, attributed cyberattacks writ large to a number of potential motivations, including ideological, geopolitical, extortive, destructive and even nihilistic ones.
“Some people just love to cause harm, and what better way to do so than being able to shut down power for thousands or tens of thousands,” Dobbins said in an email.
While cyberattacks tend to increase annually by all measures simply as a function of the advancement of the technology and sophistication of the criminals, this year’s jump in attacks has been unprecedented. According to exclusive analysis provided to Morning Consult from Dobbins’ colleague Richard Hummel, who manages threat research for Arbor Networks, 2020 has so far seen double the attacks that 2019 did — roughly 3,100 through Aug. 21 compared with about 1,500 during the same period last year.
The attackers have also upped both the bandwidth size and the speed of their attempts. One entity in the Netherlands saw an attack of 88.4 gigabytes per second — in contrast with the 2019 maximum of 21.1 Gbps — while another in Italy faced an attack with a throughput of 11 million packets per second, up from the 2019 maximum of 5 Mpps.
Brandon Robinson, a partner at Balch & Bingham LLP in Birmingham, Ala., who focuses largely on utilities, said the sector has always been a target of cyberattacks.
“Whether one’s motivation is to do financial, economic, national security or industry harm, critical infrastructure such as the electric grid can be a natural target for such cyberattackers,” he said.
And citing the North American Electric Reliability Corp.’s 2019 report, Robinson added that the industry has consistently done a good job of defending itself “and are continuing to be vigilant in doing so as threats emerge and evolve.
Meanwhile, Sharon Chand, a principal with Deloitte & Touche LLP’s cyber practice who focuses on critical infrastructure protection, said that a year-over-year increase in these attacks is very normal, though things have “certainly taken a steeper climb over the last several months.” She sees this as likely the result of a combination of factors contributing to a “heightened sense of disruption”: the global pandemic, economic uncertainty and even more time on the hands of the attackers.
Robinson also said an increase in attacks on the power sector could be impacted by more concrete changes to the grid itself, divorced from society’s climate of uncertainty.
“The electric grid is also evolving,” he said, “as we see an evolution from larger, more centralized resources to more distributed resources, and virtualized, remote control of those resources, which call for and have led to adaptation in the way that connectivity between and control of grid resources is protected.”
However, the reaction from utilities has largely been detached. John Di Stasio, president of the Large Public Power Council, acknowledged that attacks “may have increased in 2020” but said that utilities are regularly planning for disruptions and even participating in drills to identify and mitigate risks. Edison Electric Institute, a leading trade group representing U.S. investor-owned electric companies, did not respond to a request for comment.
“Despite the increase, LPPC members were and continue to be well-prepared to deal with these threats,” Di Stasio said, in reference to the consumer-owned utilities that make up the trade association. “Cybersecurity risk will continue to evolve, requiring our defense capabilities to evolve accordingly.”
Chand points out that, especially as the grid evolves to utilize diverse energy sources, including certain types of renewables, redundancies are built into its system to provide consistent power to consumers: If it is not a windy day, for instance, a utility that typically uses wind power can rely more on its nuclear or coal assets. Analogous redundancies protect the system from cyberattacks: “As one piece of the grid may experience a challenge, the grid is built in a way to accommodate that,” she said.
However, industry-wide analysis indicates that by some measures, cyber threats are shifting faster than the industry can respond. An October 2019 survey from Siemens AG and the Ponemon Institute of utilities professionals worldwide found that operational technology, rather than informational technology, was particularly vulnerable to cyberattacks, and that 56 percent report at least one shutdown or operational data loss per year. Less than half (42 percent) rated their “cyber readiness,” or their capabilities as compared with anticipated attacks and known preparedness gaps, as high. And smaller organizations reported that they felt less confident in their cyber capabilities than their larger counterparts.
“Attackers become more motivated, attackers become more creative, they become more automated,” Chand said of the pattern of increased attacks. “And so, to a large extent, we expect to see an increase in the numbers of threats — denial-of-service attacks or others — facing all of our clients across the business every year. And I think we’re not going to see it go down anytime soon.”
Morning Consult: Utilities Coalition Letter Rallies Congress to Include Support for Public Power in Coronavirus Stimulus
July 22, 2020
By Lisa Martine Jenkins
The Large Public Power Council has delivered a letter encouraging House and Senate leaders to support consumer-owned power utilities in future COVID-19 recovery stimulus legislation.
The association — which represents 27 of the largest consumer-owned power utilities in the United States — flagged for leadership a number of infrastructure-related public power provisions that have already been passed in the House via the now-stalled Moving Forward Act (which is currently being considered in the Senate, though Majority Leader Mitch McConnell has said he won’t bring it to the floor).
“Without federal support, continued economic distress will make it difficult for public power utilities to continue providing reliable and affordable electricity to our 30 million customers and to invest in the electricity infrastructure of the future,” LPPC President John Di Stasio wrote in his letter to McConnell (R-Ky.), Senate Minority Leader Chuck Schumer (D-N.Y.), House Speaker Nancy Pelosi (D-Calif.) and House Minority Leader Kevin McCarthy (R-Calif.).
The association’s proposals include restoring advance refunding for municipal bonds, which state and local governments used to lower the cost of borrowing funds for infrastructure projects prior to changes made in 2017. And the group also recommends that lawmakers authorize the Build America Bonds program, which expired in 2010 after they assisted public power utilities to invest over $100 billion on energy infrastructure following the 2008 recession.
Because LPPC represents nonprofit utilities, its members cannot take advantage of the tax incentives available to for-profit companies investing in renewable infrastructure. They must instead partner with third parties in order to monetize those incentives, which the letter said can be “costly and result in public power not directly owning the renewable energy facility.” LPPC instead proposes including credit monetization provisions for renewable energy projects, such as credit refundability, transferability or direct payment, in stimulus funding.
Also among the requests are measures that would support electric grid modernization — in order to increase energy efficiency and lower electricity costs — as well as expand that grid to include vehicle electrification.
Some of these appeals echo another letter LPPC sent in April, which highlighted immediate assistance to low-income customers struggling to pay the bills in the thick of the pandemic as well as using federal emergency funds to cover pandemic-related costs. It also addressed the issue of Build America and municipal bonds, as well as infrastructure support. However, Di Stasio told Morning Consult that the “uneven circumstances” across the country when it comes to communities and states reopening has led LPPC to be more forward-looking.
“Now we’re starting to look at what I would call the ‘reentry activities’” in light of economic and operational fallout from the pandemic, Di Stasio said. “Some of the things that we were asking for in our letter are things that will provide us the ability to provide economic stimulus to our community.”
Di Stasio said he and the rest of LPPC have been in consistent communication with lawmakers, and he believes that the public power sector’s priorities are understood and supported on Capitol Hill, in a broadly bipartisan fashion.
He describes his outlook as “optimistic” and in fact is already considering what a more official “end” to the pandemic might look like for LPPC members. The association’s next order of business, Di Stasio said, will be opening another conversation with lawmakers: getting essential infrastructure workers such as power utilities employees a coronavirus vaccine as soon as it’s available.
“Presuming this gets done and some of our interests get satisfied, then we probably will pivot to: ‘What do things start to look like when there is a vaccine available, and how do we ensure that we can maintain the safety of our employees that operate the grid?’” he said.
July 16, 2020
By John Di Stasio
Electricity is an essential element of every life powering homes, businesses and the national economy. In an increasingly digitized world, effectively managing cybersecurity has become critical to the reliability of the grid and the protection of data. While there are many forms of utility business models, public power systems often operate as part of a larger municipality, as a political subdivision of a state and frequently are formed to serve many smaller municipalities. Given these constructs and the realities of operating a public purpose business, the challenges can be unique.
Over the past fifteen or so years, the electric utility industry began moving to a more formal and regulated approach to the reliability and security of the grid. Reliability and security have always been the cornerstone of the industry, but management of the interconnected grid was maintained system by system with regional coordination. In 2007, the national electric reliability was established as a mandatory reliability and security organization to heighten the coordination of the nation’s interconnected bulk electrical networks and ensure best practice through a set of mandatory enforceable reliability standards.
Since that time, the industry, using the mandatory standards as the foundation, has built additional layers of voluntary best practice guidance and significantly expanded the focus on cybersecurity. As public power utilities, this required adaptations in our governance and communications to ensure that we maintained the public transparency and accountability balanced with the security of critical operational information and the reporting of identified risks. Active benchmarking also began to occur, industry coordination and collaboration with government increased and maturity models provided a roadmap to assess an organization’s cybersecurity readiness.
While cybersecurity readiness has grown significantly over the past several years, built upon this platform of mandatory and voluntary actions, the risks continue to evolve requiring continued engagement, assessment and timely actions to ensure that the security gains that have been achieved do not less effective over time. The recent pandemic-related increase in remote working is an example of a changing condition that introduces a new risk given the volume of data being exchanged via remote network access. Proprietary networks have given way to the internet of things with the promise that the number of connected and interactive devices will continue to grow over time.
Public power, like all utility business models, accept that core reliability is the price of entry in our industry and fundamental to everything we do. Cybersecurity has emerged as a significant risk that must be actively managed to ensure that reliability is maintained. We will continue to evolve our capabilities as new threats emerge, build upon our technical expertise and the expertise of the broader collaboration between industry and government and adapt our governance as public entities to ensure that we are secure, nimble and transparent.
–John Di Stasio, President, Large Public Power Council (LPPC)
July 10, 2020
By Andrew Coen
Financial challenges posed by the COVID-19 pandemic have not slowed long-term capital initiatives at some of the nation’s largest public power utilities.
“Our board, despite the economic times, is not giving me any breaks in terms of what they expect us to achieve,” Long Island Power Authority CEO Tom Falcone said Thursday during a digital forum hosted by S&P Global Ratings and the Large Public Power Council. “We may defer some new things, we may slow down some spending, but we’re not cutting into the bone.”
Falcone said while LIPA is deferring $60 million of capital spending the next two years, the utility remains committed to carrying out future projects aimed at improving the utility’s resilience and clean energy infrastructure. LIPA, which services around 1.1 million customers in the New York City region, is in the midst of constructing a $176 million underground transmission line in Nassau County to meet national reliability standards that will be funded through bonds.
LIPA’s debt is rated A2 by Moody’s Investors Service and A by S&P and Fitch Ratings, with stable outlooks. The utility has the highest credit ratings in its 34-year history following three one-notch upgrades last year ahead of a $485 million electric system revenue bond sale.
Jackie Flowers, CEO and director of Tacoma Public Utilities in the state of Washington, said during Thursday's forum her the power organization is prioritizing capital goals that are “critical” to its operations. TPU, which services around 200,000 customers, is on track to install new smart meters and remains committed to tackling other long-range projects, she said.
“I don’t see it as a long-term impact,” she said of forging ahead with most future capital projects despite the near-term challenges brought on by the pandemic. “With our current projections on declining load we are working to access what projects we want to continue to move forward with this year.”
TPU is rated Aa3 by Moody’s, AA by S&P and AA-minus by Fitch. All assign stable outlooks.
Gil C. Quiniones, president and CEO of the New York Power Authority, said the utility plans to proceed with at least two-thirds of its scheduled infrastructure projects after pausing some capital plans during the onset of COVID-19 in March. NYPA, which is the nation's largest public power utility, issued $1.2 billion of long-term bonds in late April to fund future green energy initiatives and refinance existing debt.
“We wanted to make sure that we were ready to deal with whatever this pandemic emergency will be throwing at us along the way,” he said about the borrowing, which featured around $800 million of green bonds.
NYPA’s bonds are rated AA by S&P and Fitch with a stable outlook. Moody’s Investors rates the utility one notch higher at Aa1, with a negative outlook.
S&P revised its outlook for U.S. public power utilities to negative from stable in April, citing risks that COVID-19 would cut away at already depleted financial cushions facing many agencies. The outlook change occurred just three months after S&P assigned a stable outlook to the sector due to the essentiality of electric service.
“The pandemic’s widespread pronounced and sudden economic declines called into the question the resilience of some key fundamentals of public power utilities’ credit quality,” said S&P credit analyst David Bodek “The pandemic and recession raised questions whether business shutdowns and high unemployment could compromise historically inelastic demand for electricity.”
S&P Global: Public Power Utilities Say They Have 'Weathered' COVID-19 Storm; S&P Adds, 'So Far'
July 10, 2020
- LPPC points to challenges in the fall
- S&P warns of a hot summer
Public power utilities in the US have, like everyone else, faced high unemployment and the economic slowdown brought on by the coronavirus pandemic, but they have felt a “relatively small impact,” according to the chairman of the Large Public Power Council. Dan Sullivan, the chairman of the LPPC and president and CEO of Grand River Dam Authority in Oklahoma, said the main message put out during Thursday webcast hosted by the council was that the public power industry has been “resilient and has weathered the storm.”
There have been delays in some capital and O&M projects because public power utilities were reluctant to send large crews out into the pandemic, he said, “but some of this activity has been picking up.”
There could, however, be “challenges” in the autumn shoulder months when outages are typically scheduled.
Sullivan said much depends on the “dynamics of where you are and who you serve.” He said that retail and commercial customers have generally been hardest hit, while heavy industry has generally been deemed “essential.”
During the early months of the pandemic the decline in demand for power ran into the double-digits, Sullivan said. Now, he said, there is
“minimal degradation of demand—certainly in the single digits.”
He said much depends on the “dynamics of where you are and who you serve,” and what your mix is of retail and commercial customers. The Southwest Power Pool has a 3% to 5% range of demand decline, he said. “Our utility—based in Pryor, Oklahoma is much less.”
By Ralph Cavanagh and John Di Stasio
The road to recovery for the backbone of the American economy, our small businesses, will be long and arduous as the nation continues to grapple with an incalculable public health and jobs emergency. Our federal policymakers took strong actions to address the immediate needs of small businesses and their employees during the economic shutdown.
Now, with the country reopening, our federal leaders must find innovative ways to continue to support these businesses, which deliver half of the country’s GDP and employ half of our workforce, as they claw back from the human and financial devastation wrought by COVID-19.
This issue is very much on the table as Congress considers its next COVID interventions. We believe that if policymakers approach this problem as an opportunity not only to help our economy recover, but to make it stronger, more energy productive, more equitable and more sustainable, everyone — not just small businesses — will reap the benefits, including cleaner air and lower energy system costs.
One novel approach that meets these goals would be to establish a Small Business Energy Efficiency Grant program, as called for by the Alliance to Save Energy, that would provide federal grants to electric and natural gas utilities (and institutional partners) and supplement available utility incentives to encourage small businesses — especially minority businesses and underserved communities — to make zero-cost energy efficiency upgrades to their facilities.
Such an initiative will immediately and permanently lower their operating expenses, which will help keep paychecks flowing. We will need efficiency workers to implement the upgrades, putting them back to work and improving the general economy.
Fully 75% of America’s utilities already run programs that help their customers, including small businesses, to reduce energy use and lower monthly bills. These programs offer an established conduit for reaching small businesses across the nation. But even in the best of economic times and with substantial incentives, small businesses struggle to come up with their share of the capital needed to make energy efficiency upgrades.
In today’s economic environment, small businesses are unlikely to use scarce internal funding for such work, even when they realize it could reduce their monthly utility bills by 30% to 40%. By providing grants to America’s utilities to take the costs for these efficiency upgrades down to zero, Congress will ensure that the benefits are much more widely shared.
And because utility energy efficiency programs rely extensively on small businesses, such a partnership between the federal government and utilities also could help their employees get back to work quickly. Sadly, America’s energy efficiency workforce of more than 2.3 million has been hit harder than workers in any other segment of the clean energy industry, with a recent report from E2 and others finding that more than 413,000 efficiency workers lost their jobs in March and April.
A federal grant program to supplement available utility incentives would result in a high leverage of federal funding; small businesses that are better able to afford and pay their utility bills; the reinstatement and creation of energy efficiency jobs; and macro-economic and societal benefits through overall reductions in energy use and its associated environmental impacts.
Such a program represents the type of innovative but practical policy solutions that we believe can not only get our economy going again, but also make it more productive, more equitable and more sustainable for the future. We hope our federal policymakers agree and take action.
May 13, 2020
By John Di Stasio
When most of us flip on a light switch, we often don’t give it a second thought — we just expect it to work. But imagine if the power went out. In this new socially distant reality of ours, where most of us scarcely leave home, a power outage would create chaos and sever our connection to family, friends and work.
Reliable electricity is the common thread running through our new remote lifestyles, and thankfully there are utility company employees across the country working to make sure our homes, businesses and communities remain powered.
Engineers, systems operators, lineworkers, and the list goes on. Highly trained, these women and men are unsung heroes. They oversee the operation of thousands of power plants and millions of miles of transmission and distribution lines across America. They put their community’s needs above their own and keep us all connected.
Governed by local communities, public power systems are highly in tune with and responsive to the needs of their customers — it’s why we often say that that community is at the heart of public power’s mission to deliver reliable electricity.
The members of the Large Public Power Council, 27 of our nation’s largest nonprofit public power systems, are ensuring continuity of service for their collective 30 million customers while keeping workers healthy and safe, particularly those who are mission-critical and have to remain onsite.
From Seattle City Light to New York Power Authority, LPPC members were on the front lines as coronavirus first hit our country. As participants of our nation’s diverse municipal landscape, they worked with local and state governments, supported their communities, and kept the power on for millions across America.
Our members acted quickly to alleviate the financial burden experienced by families, businesses, and communities as a result of the pandemic. They suspended disconnects voluntarily, reconnected those already disconnected and are now offering a wide variety of options to help their customers through this time of hardship — including the waiving of late fees, expansion of assistance programs, and introduction of flexible payment plans.
However, with over 33 million Americans already filing for unemployment benefits since the pandemic took hold, we know that further financial assistance is needed to ensure families can power, heat, and cool their homes as the economic fallout from the pandemic persists.
LPPC members urge Congress to act and provide federal support for customers paying their bills. One example, the Low Income Home Energy Assistance Program, is a time-tested financial lifeline that helps hard-working Americans keep their lights on during challenging times.
The National Energy Assistance Directors’ Association recommends that Congress provide an additional $4.3 billion for LIHEAP in the next coronavirus relief package. The National Energy and Utility Affordability Coalition believes that these funds will allow states to serve approximately 11 million households, including newly laid-off workers, low-income families who were already struggling financially before this crisis and households with elderly members or pre-existing medical conditions who are sheltering in place with inadequate cooling measures at home. Just like the passage of direct relief for small business benefited the customers of public power, so too will the passage of this much-needed LIHEAP funding.
In contrast, any federally mandated disconnect or credit and collections policies will place public power systems and, in turn, our customers under further financial strain. While the motivations behind such policies are well intended, there are serious ramifications.
These one-size-fits-all policies limit flexibility and undermine public power’s ability to continue helping those in need. Instead, Congress ought to provide tangible support to struggling Americans through programs such as LIHEAP, offering certainty for both business and consumer.
As the pandemic progresses and the financial implications are brought to bear, the utility industry will experience difficulty reconciling a loss of load and an increase in financially distressed customers in need of aid. While public power, along with our dedicated utility workers, will continue to put their communities first and keep the nation’s lights on, we hope to see Congress act soon and provide federal support for those Americans struggling to pay their bills.
A 35-year veteran of the utility industry and the former general manager and CEO of Sacramento Municipal Utility District, John Di Stasio is the president of the Large Public Power Council, where he advocates for America’s largest public power systems in Washington, D.C.
S&P Global: Municipal Utilities Call For Return Of Financial Tools To Get Through Pandemic
May 5, 2020
By Bridget Reed Morawski
Groups that represent public power providers are not waiting for nonpayment data to advocate for various financial tools — such as advance refunding on municipal bonds — they say would unlock much-needed liquidity throughout the COVID-19 crisis.
The extent of service nonpayments likely will not be known until early May, following the end of the first full billing cycle since the pandemic began and most states instituted stay-at-home orders, said Desmarie Waterhouse, vice president of government relations and counsel at the American Public Power Association, or APPA, in a recent interview.
While acknowledging that she had not yet seen information from "a statistically significant number of [APPA] members," Waterhouse said she "would be surprised if, once we see the better data, it won't confirm what [the public power sector is] thinking, which is there is definitely an increase in nonpayments."
Anecdotally, Waterhouse said officials at two utilities in the South separately have told her their bill nonpayment rates are 450% and 150% above normal.
Moody's recently affirmed a stable outlook for the U.S. public power sector, noting that those utilities should be "relatively resilient" despite the coronavirus-instigated economic downturn. However, it did note that those power providers likely will face pressures on liquidity and coverage ratios in 2020 and 2021.
As non-profit entities, public power providers do not hold on to a lot of cash. Certain requirements tied to their bond covenants or factors related to their fuel supply risk are used to define what is tucked away for a financial cushion, according to John Di Stasio, president of the Large Public Power Council, or LPPC.
So few public power organizations have large rainy day funds beyond that. And right now, according to Di Stasio, utilities are making "extraordinary expenditures" and incurring increased operational costs to sequester employees and follow shelter-in-place mandates in the face of reduced loads and revenues.
"Then you add in non-payment of bills … there are certain pressures on the finances, but this is going to be a question of, how long will we be in the circumstances that we are in currently?" Di Stasio said.
How public power providers say they could build extra liquidity
One way for the federal government to help public power providers build liquidity right now would be to reinstate advance refunding on municipal bonds, both Di Stasio and Waterhouse said. Advance refunding essentially is the act of paying off older bonds with newer bonds that have better financial terms, such as lower borrowing costs. The Tax Cuts and Jobs Act of 2017 disallowed tax-exempt advance refunding on municipal bonds.
"As we raise our capital in the municipal markets, the loss of advance refunding basically limits our ability to refinance our outstanding debt when times are favorable to do that," Di Stasio said. "That is generating a significant amount of cash for our members as they watch the market and refinance when it makes sense."
APPA and LPPC representatives also said their organizations' members would like to see the end of mandatory sequestration of Build America Bonds.
The Build America Bonds program was created by the U.S. Department of the Treasury in the wake of the 2008 financial crisis to provide a deeper federal subsidy to state and local governments than traditional municipal bonds. The Treasury made direct payments to the state or local government issuer equaling 35% of the interest payment on the bonds.
But municipal utilities have not been able to issue those bonds since the program expired at the end of 2010, and the federal government since has mandated sequestration of already issued-bond subsidies. Public utilities that issued the bonds with the understanding that a subsidy would be provided have been left holding the bag, LPPC and APPA argue.
The APPA also wants to see the small issuer exception — a legal carve out that the organization says allows banks to deduct the carrying cost for tax-exempt bonds — raised from $10 million to $30 million. Waterhouse said that would help "smaller utilities … that may not need to go out and issue bonds for projects, so they can go maybe to a local bank to get funding."
Creative tools to carry on
In the meantime, public utilities are looking to trim the fat wherever possible or practicable. Most are promoting energy efficiency and energy savings programs to minimize final bills, and Di Stasio said that all of LPPC's member companies have "active programs" in place.
"If we can help our customers and consumers invest in energy efficiency, that's going to also lower their bill and enhance their ability to ultimately pay their bill," said Di Stasio. "That's another big way to help Main Street and to help economic recovery."
But in Texas, public power provider City Public Service of San Antonio, or CPS Energy, is unlocking liquidity by suspending an employee performance incentive program for certain workers, including executives. That program was set to pay out roughly $13 million in May, according to a company news release. Most hiring outside of critical roles at the multi-utility also will be frozen for now.
CPS Energy President and CEO Paula Gold-Williams acknowledged the "increased challenges" stemming from the health crisis that led to the suspension of future program payments and said, "suspending the incentive of almost $13 million is a prudent action in this extraordinary time."
April 12, 2020
By Dan Sullivan
During the difficult time we are currently facing, our societal “norms” are challenged. In a recent interview, a pundit expressed his belief the changes we are making today may become the “new norm” of the future. Working from home and changing our social patterns will likely become the new way we interact once this crisis has diminished.
Another change likely to emerge is who society typically labels a “hero.”
My definition of a hero is an ordinary person willing to do something extraordinary to have a positive impact on others. We have always thought of our first responders and military personnel as heroes because they charge toward the threat rather than retreat.
In the crisis today, the hero label certainly extends to the thousands of health care workers waging this war in our hospitals. Each one knowingly is subjected to harm and, yet, returns day after day to face the challenge.
Today, as we sit in our homes in some form of social isolation, we must consider another unsung hero during this crisis — utility workers.
Each time we turn on a water tap or flip a light switch, we automatically expect it to work. Now, possibly more than ever in our nation’s history, a simple resource we take for granted every day is a vital lifeline, whether it’s running water to wash hands or ensuring citizens remain connected to work and critical news or, most importantly, ensuring the power supply for hospitals and clinics is not disrupted.
As we move into our season of severe weather, planning and preparing for all scenarios means we also must be ready with a healthy team of workers to respond. The majority of typical workforces are able to remain in the safety of their homes, but a portion of our employees must report to work, in person, to maintain our utility services. At the time of this writing, plans are being finalized to retain many critical positions sequestered at his or her work stations for days at a time.
A great deal of personal sacrifice from electricians and line workers is required. These heroes will spend days and weeks away from their own families to protect our critical infrastructure and ensure essential, life-saving resources are available.
These are uncharted waters and require extraordinary steps to keep the lights on. The capable men and women being called upon to take extraordinary steps are prepared and ready to do so. Each and every worker recognizes the value of the service they provide to citizens in our communities.
Today, when you flip the electric switch or turn on the water tap, please keep these families in your thoughts and prayers as they encounter the stress of being away from loved ones during these difficult times. In the future, when you see a utility worker, take the time to say thank you and share your appreciation of these unsung heroes.
Dan Sullivan is president and CEO of the Grand River Dam Authority.