Washington Water Power Co. will give a public accounting this week of how it handled the worst natural disaster in its history.
It’s the first time WWP will detail before customers and state regulators its response to the Nov. 19 ice storm that left thousands shivering for days in the dark.
But there’s another reason why the Washington Utilities and Transportation Commission’s public hearing on Thursday is a high-stakes event.
It comes at a time of rapid changes in an industry facing dramatic deregulation - where the customer is king and public image is everything.
Soon, WWP customers won’t have to buy their kilowatts from the Spokane utility. They’ll have several choices throughout the region - and ultimately, throughout the nation.
WWP has three to five years before full deregulation hits the Inland Northwest, said company President Les Bryan.
That makes WWP’s performance this week before the commission especially important. The company must re-establish its image as a reliable source of electricity.
“We take customer satisfaction seriously - and part of that is reliability,” Bryan said in an interview.
This week’s hearing is a fact-finding mission for state regulators. But the commission has the authority to order improvements if it feels reliable service is being compromised, said Chairman Sharon Nelson.
After this winter’s storms, which left hundreds of thousands of people without power throughout the Northwest, regulators are increasingly concerned, Nelson said.
“When the electrical system goes down, there are severe economic, environmental and human safety consequences. It’s a big, big question we’re asking: Is deregulation going to undermine the reliability of our electric network?” she said.
Before Nov. 19, the WWP system was 99.985 percent reliable, meaning outages interrupted service less than one-tenth of 1 percent of the time.
The company has not sought a rate increase since 1987, its relationships with Washington and Idaho regulators are good, and many of its innovations are considered industry models.
WWP will retrain workers using emergency response tips from the military, and study ways to communicate better with the public and the media during an extended outage.
Experiences like the ice storm “allow you to get better,” Bryan said.
He’s told WWP employees that 1997 is their “year of accountability” to work on the company’s image.
Top WWP officials, including Bryan and CEO Paul Redmond, will attend this week’s meeting to hear for themselves what customers think of the company’s response.
Aborted merger created problems
Some industry observers say it’s ironic that WWP considered one of the companies most prepared for the vast changes sweeping the industry - has had setbacks just as deregulation is beginning.
Although WWP made $231 million last year in wholesale power sales, placing itself among the leaders nationally, 1996 proved to be star-crossed.
The company’s proposed merger with Reno, Nev.-based Sierra Pacific Resources would have significantly restructured its Spokane operations. But skeptical federal regulators refused to bless the merger, and WWP abruptly canceled the deal last June.
WWP shareholders absorbed $15.8 million in planning costs for the aborted merger.
The deal also caused lingering morale problems among WWP employees. Many had accepted severance or early retirement packages contingent on the merger.
When it failed, they were stuck in limbo. But morale has improved since, said a Spokane consultant to WWP.
“By the time the merger failed, most felt its failure was a good thing because of the turmoil it had caused,” the consultant said, requesting that his name not be used.
Four months later, the ice storm hit - delivering another blow to the company’s bottom line. The utility estimates the storm did $21.8 million in damage to its distribution system. Shareholders also will eat those costs.
“WWP has pretty good relations with its customers. But they’re not perceived like Nordstrom is,” the consultant said.
How much image-building is really necessary is unclear. Jim Conway, a director with the Electricity Consumers Alliance, said homeowners given a choice have stayed with the local utility where pilot programs have opened up the market to a number of suppliers.
Storm was a ‘rarity’
In the Northwest, where rates are already low, the challenge for WWP will be satisfying its traditional retail customers while pursuing wholesale markets in California and Arizona.
“They may be one of the few companies in the country that are in a good position to move forward,” Conway said.
Bryan said WWP surveys indicate that 90 percent would stay with the company even if there were other choices.
Meanwhile, company officials have nearly completed their internal review of the November emergency.
At a press conference and before legislators in Olympia, they’ve stressed the highly unusual nature of the storm that left their power lines in shambles.
“Due to the rarity of ice storms in Eastern Washington, trees had not been pruned by Mother Nature as they have, say, in the Portland area, where the frequency of ice storms is much more significant,” said WWP’s Bruce Folsom at a recent legislative hearing.
Additional tree trimming would not have prevented major damage, Folsom said.
According to WWP surveys, 78 percent of customers said the utility did a “good or excellent” job during the storm.
“We should all be proud of this utility company and the job that they did,” Dennis Scott of Spokane County’s public works department told state regulators last month. Scott was part of the local emergency response team after the storm.
270 calls a minute when storm hit
But some WWP customers have complained, although only 3 percent of the company’s survey respondents said the utility performed poorly.
Some customers were angry about not being able to get an estimate of when their power might be restored.
WWP’s switchboard was overwhelmed. On Nov. 19, the storm’s first day, the company got 18,000 calls. Overloaded telephone lines contributed to customer frustration.
“We were taking 270 calls a minute, but there were probably another 100 calls (per minute) trying to come in at that time,” Folsom said.
WWP should “add more phone lines to respond to customer problems during an emergency. Something similar to the emergency communication system that was recently implemented by Puget Power,” Don Kreuziger of Spokane told the utility commission in a December letter. He also praised the line crews working during the emergency.
But Puget has had its problems, too. Year-end snow and flooding caused extensive outages and its brand-new phone system failed during the last storm due to computer problems. The commission has scheduled two meetings to review Puget’s performance.
WWP’s difficulty answering basic customer questions - such as when repair crews would arrive in their neighborhood - is at odds with management’s pledge of “customer service,” said Steve Blewett, an EWU journalism professor and former WWP public affairs officer.
After being out of power for six days, Blewett said he called WWP on Nov. 24. “I was reluctant as an ex-employee to call sooner,” Blewett said.
The message he got on the outage hotline had been recorded 24 hours earlier and was outdated. “That shows they really need to work on how they manage a crisis,” Blewett said.
Bryan agrees there’s room for improvement.
“We have to do a better job, and we will,” he said.
Deregulation creates pressures
That’s a concern throughout the Northwest, said Bob Sipler, senior utility analyst with the Oregon Public Utilities Commission.
As utilities position themselves to compete in a deregulated marketplace, cost-cutting to woo new customers with the cheapest electricity rates will be a constant pressure, Sipler said.
“As deregulation approaches, system maintenance and reliability is absolutely more of a worry,” Sipler said.
“Our concerns are that financial pressures will force these companies to begin to cut their budgets for safety-related programs,” he said.
WWP had 17 line crews in the Spokane and Coeur d’Alene areas when the storm hit, and called for emergency help from local contract crews and other utilities throughout the region, including Canada. Some 88 crews were working at the storm’s peak.
“I know the investor-owned utilities have downsized their crews,” said Ken Hemmelman of Bonneville Power Administration. Hemmelman is BPA regional manager for transmission field services in Spokane.
“BPA also runs smaller crews than a decade ago. The whole industry is becoming much more competitive,” he said.
WWP CEO Redmond said the utility has as many crews today as it had a decade ago.
Regulators point out, though, that even when full deregulation hits, the electricity distribution side of the utility business - the poles and wires - will remain regulated.
“We’ll still be watching,” said Sipler of the Oregon utilities commission.
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