1 1 BEFORE THE FLORIDA PUBLIC SERVICE COMMISSION 2 3 DOCKET NO. UNDOCKETED 4 In the Matter of 5 ELECTRIC UTILITY INFRASTRUCTURE WORKSHOP. 6 _________________________________/ 7 ELECTRONIC VERSIONS OF THIS TRANSCRIPT ARE 8 A CONVENIENCE COPY ONLY AND ARE NOT THE OFFICIAL TRANSCRIPT OF THE HEARING, 9 THE .PDF VERSION INCLUDES PREFILED TESTIMONY. 10 VOLUME 1 11 Pages 1 through 129 12 13 PROCEEDINGS: Electric Utility Infrastructure Staff Workshop 14 DATE: Monday, January 23, 2006 15 TIME: Commenced at 9:10 a.m. 16 Concluded at 5:41 p.m. 17 PLACE: Betty Easley Conference Center Room 148 18 4075 Esplanade Way Tallahassee, Florida 19 REPORTED BY: LINDA BOLES, RPR, CRR 20 Official FPSC Reporter (850) 413-6734 21 22 23 24 25 FLORIDA PUBLIC SERVICE COMMISSION 2 1 I N D E X 2 PAGE: 3 INTRODUCTION BY CHAIRMAN EDGAR 3 4 PRESENTATIONS BY: 5 SENATOR RON KLEIN 5 6 MAYOR ANNE CASTRO 13 7 COMMISSIONER CHARLES FALCONE 24 8 SCHEF WRIGHT 34 9 ROY JAZOWSKI 47 10 MARK HAMMER 51 11 MICHAEL OSTERHOUT 55 12 MARY WOLTER GLASS/DR. MARTIN SKEER 59 13 DR. KURTIS R. GURLEY 71 14 DR. ALEXANDER DOMIJAN 83 15 CHARLES E. FISHER 90 16 WILLIAM MAYER 95 17 DR. RICHARD E. BROWN 101 18 19 20 21 22 CERTIFICATE OF REPORTER 129 23 24 25 FLORIDA PUBLIC SERVICE COMMISSION 3 1 P R O C E E D I N G S 2 CHAIRMAN EDGAR: Good morning. My name is Lisa 3 Edgar. I'm the Chairwoman of the Public Service Commission 4 here in Florida. I want to thank you all for coming and for 5 joining us. 6 Just a few comments, and then we're going to jump 7 right into our agenda. As, of course, everyone in this room 8 and hopefully everyone that is participating across the state 9 with us today is well aware, we have entered a period in the 10 State of Florida of unprecedented hurricane storm activity. 11 Unfortunately, the prognosticators tell us that the data 12 indicates that instead of a period of maybe one storm at one 13 area of the state every ten years or so, that over the next few 14 years we will probably experience multiple intense storm 15 activity across our state. We know, we have seen firsthand 16 that this impacts our families, our businesses, our 17 communities, economic development across the state. And we 18 know here at the Public Service Commission, as do each of you, 19 that this changes the analysis that we need to do; that we need 20 to think differently about the costs, the benefit, the analysis 21 of what we can do, what we should do, what we are able to do to 22 better prepare our state and our families, our businesses and 23 our communities to be ready and to withstand storm events. 24 In November, my colleagues and I had the discussion 25 about this at a public meeting, and we decided to jump right FLORIDA PUBLIC SERVICE COMMISSION 4 1 into it and to try to do what we can in our role to gather 2 together experts, to pull together data, to do some analysis 3 and to put some ideas out there for further discussion and for 4 further consideration. 5 Our purpose today is to take the next step in that 6 effort, to take a hard look at our existing policies and 7 procedures, to be able to make recommendations to help us 8 minimize damage from future storms, to reduce outages and to 9 reduce the restoration time and cost associated with outages. 10 I want you to know that I take this effort very 11 seriously. I know that my colleagues here at the Commission 12 take this effort very seriously. We do believe that we are in 13 a unique position to help pull together efforts and to help 14 frame the discussion that we need to continue to have in this 15 state. 16 We need meaningful baseline assessment of our 17 electric infrastructure and of our current practices, and we 18 are really looking forward to benefitting from hearing the 19 firsthand experience of our local government officials. Our 20 goal here today is to put us in the best posture so that over 21 the next few months we can help identify both short-term 22 strategies and long-term strategies. We have a very tight time 23 frame. We will be pulling together information over these next 24 few weeks. We will be bringing together recommendations for 25 consideration by the Commission at the end of February, and we FLORIDA PUBLIC SERVICE COMMISSION 5 1 will be putting that together then to present to the 2 Legislature, the Governor and others early in March. 3 We've directed our staff to move very quickly on this. And, 4 again, I want to thank each of you for helping us as we move 5 forward in this effort. 6 We have a very full day's work ahead of us and very 7 full weeks ahead of us as well. So thank you again for your 8 participation, thank you for helping to make this a very 9 meaningful effort, and thank you for helping us move along here 10 through the day. 11 With that, I would like to move on again into our 12 agenda and to introduce to you Senator Ron Klein, who has 13 joined us here today. Senator Klein represents District 30, 14 which includes West Palm Beach, Boca Raton and Deerfield Beach. 15 Senator Klein has an abiding long-term, acute interest in these 16 issues, and I'm very pleased that he has joined us here this 17 morning. Senator Klein. 18 SENATOR KLEIN: Thank you very much, Chair, and the 19 members of the Commission and some of our local officials who 20 have come up here, Mayor Slesnick and Commissioner Falcone. 21 And all of you, I echo the Chair's gratitude for all of you 22 participating in this cause of trying to figure out ways to 23 better protect the grid in Florida and work on behalf of all of 24 our consumers. 25 I think we all recognize it's been almost exactly FLORIDA PUBLIC SERVICE COMMISSION 6 1 three weeks -- three months to the day that Hurricane Wilma hit 2 Florida. And in South Florida, those of us who live there, 3 6 million subscribers of electrical services lost their power 4 during that period of time for a certain number of days. For 5 many people in that area the loss of power was not a new 6 experience necessarily but a new expansion of some of the 7 problems that arise with a loss of power. It wasn't just a 8 question of the normal electricity going out. This time we had 9 gas stations that had gas in the ground but no ability to pump 10 it out. We had substantial amounts of senior citizens living 11 in multiple-story buildings, not necessarily high-rise, but 12 even two- and three-story buildings, that unfortunately, 13 although many of them normally can get around with wheelchairs 14 and other apparatus, were stuck because the elevators weren't 15 operating. And I think we all know many of the other 16 experiences. 17 So I think that when we went through the hurricane 18 experience last year, I was very interested, along with many 19 other members of the Legislature -- and I commend Chairman 20 Littlefield, who I know has been very active as well in this 21 issue -- in trying to get underway as of last year's storms to 22 figure out, try to bring the best and the brightest together, 23 people that understand the science of transmission of energy, 24 the infrastructure issues, the building, the financing and all 25 those things, together so that we would be able to figure out FLORIDA PUBLIC SERVICE COMMISSION 7 1 ways to work together to help build that system a little more 2 efficiently. And we did pass that bill in the Senate last year 3 to set up this task force. It did not get all the way through 4 the House, but there was some limited amount of activity last 5 year to begin to look at this. But, unfortunately, at least in 6 my view, we did not take it up very, very far. 7 This year, again, we are pursuing -- and we have 8 filed a bill creating the Florida Utilities Task Force. It's 9 not viewed to duplicate the efforts here. As a matter of fact, 10 again, I want to acknowledge the House and the Senate -- 11 President Lee and our Chairs Diaz de la Portilla and 12 Constantine have already had some activities, we've had some 13 hearings in the state to talk about hurricane responsiveness. 14 But we're going to keep this issue out there as a means of 15 making sure that we continue moving this along. 16 And, again, I guess the bottom line to this whole 17 thing is this is all a matter of establishing an understanding 18 of what shared responsibility there may be to make the grid 19 more reliable. And when I say shared, we're talking obviously 20 about utilities that provide the electricity, we're talking 21 about municipal governments and county governments and state 22 governments that have codes and ordinances that impact the 23 ability to build, operate and even things like landscaping 24 codes, we have shared responsibility with property owners, 25 homeowners and others that plan things and build things and do FLORIDA PUBLIC SERVICE COMMISSION 8 1 things that sometimes create greater risks for destruction when 2 you have a storm event. 3 But at the end of the day I think we all recognize, 4 and many of you have studied this and you're far more expert 5 than I am, but I at least know enough to know that there are 6 places around the world that have figured out ways to make 7 their systems work. I think that we need to do more if, in 8 fact, our meteorologists are telling us that we may have a 9 series or a cycle of storm events. This was a Category 2, this 10 was not a Category 5. If we have one, two, three, four over 11 the next number of years, we need to do whatever we can 12 collectively as a state and as a local group of residents and 13 businesses to make sure the system is operating a little more 14 reliably. And to that end I look forward to working with the 15 Public Service Commission and making sure that what comes out 16 of this in the timetable that was established by the Chair -- 17 and, again, I appreciate that, recognizing not all of this is 18 going to be legislation, maybe none of it is legislation or 19 maybe some of it is, but part of it is going to be an effort to 20 do short-term things that can reasonably be accomplished 21 between now and the time we have our next hurricane season. 22 And some will take a little more thorough analysis and will 23 take implementation over months and years, but we need to get 24 on with it. And I again appreciate the fact that we're here 25 today with a timetable as has been established by the Chair. FLORIDA PUBLIC SERVICE COMMISSION 9 1 The Legislature will be working in cooperation with that and, 2 to the extent necessary, will be advancing at the same time. 3 So thank you, Chair, for allowing me to be here with 4 you today. And members of the Commission, I look forward to 5 listening today and being part of finding some solutions. 6 Thanks. 7 CHAIRMAN EDGAR: Thank you, Senator Klein. I would 8 also like to take this opportunity to recognize Representative 9 Ken Littlefield. Representative Littlefield, thank you for 10 joining us today and thank you for your interest in support of 11 our efforts here. Representative Littlefield is the Chair of 12 the House Utilities and Telecommunications Committee and is 13 also a Co-chair of the Joint Committee on Public Service 14 Commission Oversight. He represents the Zephyrhills, Trinity 15 and Dade City areas. And, again, thank you for joining us. 16 Well, I think we've set out a pretty aggressive 17 agenda for the day and for the next few weeks ahead. I 18 personally am excited once again about the opportunity that we 19 have to contribute to this discussion. I believe firmly that 20 there are some things that we can do over these next few 21 months, as Senator Klein pointed out, to put this state in a 22 better position for the next storm season; short-term 23 strategies and long-term strategies, those are our goals. 24 And with that, I'll turn the agenda over to Mary Anne 25 Helton, who is the Attorney Supervisor in our Economic FLORIDA PUBLIC SERVICE COMMISSION 10 1 Regulation Section of our General Counsel's office, and she 2 will be moving us through the agenda today. Thank you. Mary 3 Anne. 4 MS. HELTON: Thank you, Madam Chairman. I'd also 5 like to welcome all of you who have traveled to Tallahassee 6 today, and I'd especially like to welcome and thank the 7 speakers who have traveled here. I know that the staff and the 8 Commission look forward to a meaningful day where we can 9 actually gather some meaningful information so that we can move 10 forward with some specific goals. 11 As Chairman Edgar mentioned, we have a busy, full 12 schedule. My hope is that we can complete all of the 13 presentations by 5:00 or 5:15 today, as is mentioned on the 14 schedule. So to that end I hope that we can move, move quickly 15 through all of the three sets of presentations that we do have. 16 For those of you who, like me, are interested, I do 17 envision that we will break for lunch. I do envision that we 18 will take a morning break and an afternoon break. I can't 19 guarantee that it will be at the times specifically mentioned 20 on the agenda, a lot of that has to do with how the day plays 21 out, but we will break to do those things. 22 I do have a couple of changes to the agenda which 23 hopefully should be on that back table there along with the 24 presentations that have been provided by the speakers. And if 25 you missed on, missed out on getting a copy there, you can get FLORIDA PUBLIC SERVICE COMMISSION 11 1 it from our Commission website at the Infrastructure Electric 2 Workshop link. 3 The changes to the agenda are: Unfortunately, 4 Mayor Don Slesnick from Coral Gables had travel difficulties 5 and he was not able to come down from the Miami area -- or come 6 up from the Miami area today. And Michael Osterhout with the 7 Composite Technology Corporation will be added to the end of 8 the morning speakers after Roy -- excuse me, I should have 9 worked on this -- Jazowski and Mark Hammer from The Homac 10 Companies. 11 We, as we said, have a busy schedule. So to 12 accommodate us being able to finish everything today, we are 13 not set up so that we can take specific questions from 14 individuals in the audience. However, if you do have a 15 question, if you would please write the question down on a note 16 card there. Kathy Lewis is holding them up. There's a box 17 there set up for your questions, drop the question in, and Tom 18 Ballinger of our staff will be taking the questions and our 19 staff will be asking them at the end of each panel. 20 Let me recognize now Connie Kummer and Bob Trapp. 21 They are chairing this meeting or workshop with me today that 22 was noticed last December. And as Chairman Edgar mentioned, it 23 was after the Commission had voted in Internal Affairs for us 24 to go forward and gather this information. Let me also 25 acknowledge the staff who are sitting over at the side of the FLORIDA PUBLIC SERVICE COMMISSION 12 1 room. All of the staff who have been working on this workshop 2 have nametags on. We've all been working very hard, and we 3 appreciate your hard work very much. If you have any specific 4 questions, please don't hesitate to ask Connie, Bob or me or 5 any of the staff members sitting over here who have a nametag 6 on. 7 We also have -- if we didn't get to you this morning 8 and you're a speaker, we have name cards -- place cards and 9 nametags for the speakers. I would ask if we weren't able to 10 talk to you this morning, if you are on the first panel, if you 11 could come sit over here. And then when it's your turn to 12 speak, if you could please come up to the podium, and then sit 13 back down over here so that you will be available to answer 14 questions at the end of your panel's presentations. And then 15 once your panel has finished, if you would move and sit 16 wherever you feel comfortable in the audience, and then we'll 17 move the second panel over. 18 And I'd also like to acknowledge before we get 19 started that our Commissioners are here. They're not sitting 20 up at the bench as they normally do. They're letting us have 21 the fun today. They are out in the audience. Thank you, 22 Commissioners Tew, Carter, Arriaga and Deason for being here. 23 We hope that we will run a good workshop and that you can get 24 some good information from it. 25 So with that, Mayor Castro, if I could turn it over FLORIDA PUBLIC SERVICE COMMISSION 13 1 to you, please. 2 MAYOR CASTRO: Good morning, everyone. First of all, 3 it's a pleasure to be here today. I want to thank the Public 4 Service Commission and certainly, most graciously, their staff 5 for working so hard on putting this on. I need to put my 6 disclaimer out front. I'm not at all an expert about 7 electricity. I know when I flip the switch up, it's supposed 8 to go on, and when I flip the switch down, it's supposed to go 9 off. But I'm here to give you some firsthand accounts. 10 And in particular most of my references will be to 11 Florida Power & Light in my presentation only because that's 12 who we deal with in South Florida. 13 To start with, I want to give you a little frame of 14 reference for the comments. If you'd put the first slide on. 15 I want to show you where Dania Beach is a little bit and give 16 you an idea of what we're made up of. We're a very small city. 17 We're located just south of the Fort Lauderdale-Hollywood 18 International Airport right next to Port Everglades. We're the 19 oldest city in Broward County. We just celebrated our 20 centennial; hence, our infrastructure is probably one of the 21 oldest ones you'll find in South Florida. We're six square 22 miles and we have about 28,000 residents. We just acquired 23 half of the city about five years ago through annexation, so 24 we've kind of double sized in the last decade. 25 For reference also, I was born and raised in Broward FLORIDA PUBLIC SERVICE COMMISSION 14 1 County. I was born in Fort Lauderdale. I was raised there 2 until I went to college and came back home, and then I settled 3 in Dania Beach and have been there the last 18 years. I'm a 4 newly elected official, being elected a year ago. This is my 5 first presentation of this type, so I'll appreciate it if 6 you'll forgive me if I create any issues or faux pas and excuse 7 me. 8 But this pattern of this last season was so 9 devastating to us that we felt it was that important for 10 somebody to come up here and talk about it. I don't want to 11 get into the mix and mingle of the technicians and the experts, 12 you know, about a lot of the issues about how wire should be, 13 what they should be, but I do want to share with you our 14 observations. Because if that helps you put their studies in a 15 frame of reference again or a frame, that's what we're going to 16 try to do. 17 Quickly before I proceed, I want to thank State 18 Senator Ron Klein. I know he's mostly from the Palm Beach 19 area, but taking point on this issue is helping all of South 20 Florida. And we're a very high-density area and we very much 21 appreciate it. And I think he'll understand too whether it's 22 one storm a season or ten storms a season, there's something 23 going on with the infrastructure. 24 As I alluded to, I was born in Broward County. I've 25 lived through many hurricanes from Donna to Andrew to whatever. FLORIDA PUBLIC SERVICE COMMISSION 15 1 And the reality is the response time in getting power turned 2 back on is taking so much longer, and I can only assume from an 3 outsider's point of view that's because the damage is greater 4 each and every time. And it's not because the winds are 5 different, but it must be because something is wrong with what 6 the winds are hitting. That's what we hope the Public Service 7 Commission, the experts and, yes, the electric company 8 utilities will get into, help figure out a plan. And I will 9 tell you my municipality in its little small way will help in 10 any way that we can to do that. 11 If we could have the next slide. The most important 12 thing also to remember about Wilma, and I can't emphasize this 13 enough, is it was a late season hurricane and it was 14 unseasonably cool the first week after the storm. So the fact 15 that people didn't have power and water the first three or four 16 days was unbearable but bearable in the fact that you had a lot 17 of senior people, a lot of elderly people and a lot of people 18 in high, tall buildings who really couldn't get down because 19 they had no power for their elevators. So without water and 20 electricity they were fairly stranded. Had the temperatures 21 been ten degrees higher, I think you would have seen a worse 22 catastrophe and I think this whole thing would have been moving 23 so much faster and there would have been a lot more 24 finger-pointing. And I'm not for that, but I think everybody 25 would have thought of this as a huge crisis as opposed to let's FLORIDA PUBLIC SERVICE COMMISSION 16 1 get this problem solved and worked out. And that's what I'm 2 concerned about in the next few hurricane seasons is what kind 3 of storm is going to come when and what is it going to create? 4 So when Senator Klein mentioned the other parts of not having 5 power, electric power for gas stations, for food, for things 6 like that, it became critical. 7 Broward County also lost their water supply for the 8 first three or four days. My city was fortunate. We got it up 9 in 24 hours by going back to our own wells. We disconnected 10 from the Broward system and put our own pumps back up. That 11 did a tremendous asset to give those people at least one of two 12 major things back: Giving them their water back even though 13 they didn't have electricity. So every bit helps. And, again, 14 the length and duration of these power outages is longer and 15 harder, so we need to look at that 16 Now getting into it, I know nothing about power 17 grids, as I said. But I want to thank Lynn Shatas and Tom 18 Gualtney (phonetic) of FPL. They're our Liaison and our 19 Director of Ops who helped bring our city back on with a lot of 20 others, and they took time to explain some things to me. 21 They start at the substations to get those up and 22 running first because literally the whole grid went down. Then 23 they said they're going to go out to the lateral lines, which I 24 gather are the big, big, big, big high-tension wire lines, and 25 then they get down into the neighborhoods and the lines and the FLORIDA PUBLIC SERVICE COMMISSION 17 1 poles. What I also understood is once they brought a lateral 2 up, usually about 80 percent or 70 percent of the people got 3 their power back on because lateral was the issue. 4 So my perspective is then start where you can get the 5 most bang for your buck. If electric companies can do 6 something to insulate and protect starting with the substation 7 and working out the laterals, if that's the priority, I think 8 what you'll do is keep more people from even going down in the 9 first place. 10 So I bring that up for that reason. I don't know 11 what happened at the substations, I don't know what happened at 12 the laterals. I don't know if lines came down, I don't know if 13 fuses got blown down, I don't know if there's a way to 14 physically structurally protect them, but that would be my 15 first suggestion or recommendation is you start there. 16 The second thing we want to look at, of course, are 17 lines, lines and poles, and that's where a lot of the 18 controversy gets in because that's what everybody keeps talking 19 about are the lines and the poles. 20 Starting with the lines, you've got to figure out 21 which are better for them. I don't know if concrete poles or 22 wood poles are better. I don't know if underground versus 23 aboveground. I understand some people's point that if you put 24 a line underground, you get flooding. Dania has one particular 25 part of our city that notoriously floods. Obviously, FLORIDA PUBLIC SERVICE COMMISSION 18 1 underground wiring wouldn't be a good thing for them because if 2 it does go out, nobody could get to it. 3 But I will tell you other cities in Broward County 4 like Weston and Davie who have underground lines had power. 5 They never lost it. So there's something to be said for the 6 underground wire issue. 7 But, again, I think you're right. From the utility's 8 perspective you need to make sure that getting to those lines 9 won't be interfered with by standing water. So that would be 10 another thing I would take a look at. 11 Trees, trees and trees. I'm a tree hugger. I love 12 trees. I love our canopy. We certainly need them in South 13 Florida; otherwise, the humidity gets even worse. But we also 14 put them in some of the darnedest places and we don't maintain 15 them and we don't keep them. And this is something soon I'll 16 talk about from our perspective as a municipality. 17 Now Florida Power & Light in our case comes through, 18 and if they see an offensive tree, they do what everybody calls 19 the V cut of the tree. If the tree is that offensive, I think 20 if they could communicate with the City that maybe that tree 21 needs to be removed, even if it's on private property, then 22 it's a code enforcement issue that we were talking about 23 earlier, that maybe we could do something about that. We could 24 get the tree out and we'll have a program to replace the tree 25 with another tree. But if we just keep V cutting them and you FLORIDA PUBLIC SERVICE COMMISSION 19 1 don't get your V cuts in the right time and the right order 2 during the season, God forbid if that tree overgrows again and 3 you lose a power line or a telephone pole. So trees are 4 another issue. 5 The poles, I've heard all kinds of discussion about 6 poles: Wood, concrete, age, no discernible patterns. I'm 7 going to tell you from my experience there is no pattern 8 either. If you have a concrete pole that's listing at 9 45 degrees, it probably has a higher probability of falling 10 down than a wood pole that's standing up straight and is solid 11 in the ground. And that's just a fact of physics, I think. 12 I'm not even sure that's an electrical concept. So poles are a 13 very individual thing from my perspective, and that's why they 14 all need to be maintained, they all need to be reviewed. And 15 we have all kinds in our city. We have wood poles that are 16 probably older than me, some with cracks, some with rotting. 17 We have concrete poles that are, you know, brand new but, as I 18 said, they're kind of listing. And sometimes the crews will 19 come through and tap them and stand them straight back up, and 20 as the truck is driving away it's starting to fall over again. 21 So all of that, I'm sure, pulls on the wires. And I don't know 22 enough about wires if it makes a difference. If the wires are, 23 you know, too tight, not tight enough, how they go from pole to 24 pole, how they connect, how do they connect to a wood pole 25 versus a concrete pole, that I'll leave to the experts. But FLORIDA PUBLIC SERVICE COMMISSION 20 1 that's something everybody should be paying attention to. 2 The poles, I understand from our FPL representatives 3 the concrete poles did have less of a failure rate in Broward 4 County than the wood poles. And that may speak to something. 5 But, again, if it's not properly placed and it's not properly, 6 you know, buried in the ground, it's still going to be a 7 problem. And it doesn't matter to me about the microbursts of 8 wind. You're going to catch a pole here and there no matter 9 what. The point is does it pull all the other poles down the 10 line with it? And maybe there's something engineering wise 11 that if one pole goes, there's a breakaway or snap-away or some 12 other thing that keeps the rest of the poles and lines standing 13 up as opposed to running down the whole street. So that's what 14 I want to talk to about poles. Poles is a matter for me of 15 probability, not of a pattern. And I don't know if studies are 16 going to bear any patterns out. 17 If we'll go to the next slide. What we have offered 18 -- we offered FPL during the crisis -- this is the time when 19 our City Manager decided he was going to withhold the City's 20 payment to FPL until such time they got all of our residents 21 back online. I myself was without power for 15 days. So 22 that's the good thing about power outages; it knows no class or 23 person or whatever, it's just out, it's out. We want to be the 24 eyes and ears for FPL. We have offered them that we will go 25 ahead and we will train or they will train our public service FLORIDA PUBLIC SERVICE COMMISSION 21 1 people, our public safety people, especially after a hurricane 2 or even on an ongoing basis during the year, as to what to look 3 for in their infrastructure. If they could teach us what to 4 look for as far as poles being bad or wires being bad or fuses 5 hanging or loose ends hanging, our folks, as they routinely do 6 this through code enforcement, through the fire department, 7 through the police department, are happy to go out there and 8 take a look. Even our citizens on patrol, they turn in half of 9 our code violators anyway. Tall trees, trees that are in the 10 lines, they can report all of that, they can create a list. 11 We can then give the list over to Florida 12 Power & Light on a monthly basis, a quarterly basis, a weekly 13 basis, a daily basis, whatever they would like, and then what 14 we would like them to do is address the issues on that list. 15 And we think in that way local communities, without putting up 16 a lot of dollars, because most of us don't have a lot of 17 dollars to put up as far as putting in our own wires and poles, 18 we can help the Power & Light Company find out what problems 19 are out there and be proactive about fixing them. 20 If you can run down the rest of it, please. And 21 we're happy to make sure that that report is available to 22 anybody, including the Public Service Commission, so they know 23 what it looks like and what the pattern looks like. And if 24 that data also helps find future problems, we're happy to offer 25 that solution. That's something we can contribute right away. FLORIDA PUBLIC SERVICE COMMISSION 22 1 If our electric companies will take the time, as I said, to 2 come out and train with us and work with us and then develop 3 the process, we're on board with this, we're ready to go. 4 And then finally -- the next slide, please. In 5 closing, I just want to tell you from our perspective there is 6 no silver bullet. I appreciate everybody taking their time and 7 the technical experts coming in. From our perspective, as I 8 said, poles are a matter of probability, not pattern. Patterns 9 are a matter of each and every storm and they're different. 10 The reality is the infrastructure needs to be addressed; 11 whether it's one hurricane or ten hurricanes, we need to really 12 address it. And what we need from Florida Power & Light in our 13 case, it's maybe not every utility, is a commitment. 14 We understand that there are stockholders for Florida 15 Power & Light, and I've talked to everybody from the most 16 liberal people in my city to the most conservative, including 17 my 87-year-old mom who said, "You know what? We're tired of 18 getting rate increases and not getting a return on them." They 19 have to invest back in our infrastructure. And we understand 20 they have an obligation to stockholders. But just like any 21 company, like the company I work for, you know, performance and 22 management performance is gauged by the value of your stock. 23 And if you're not putting your money into your infrastructure 24 and you're not protected from your losses, most companies like 25 my company, we don't get to go to a state government agency or FLORIDA PUBLIC SERVICE COMMISSION 23 1 anybody else and say, gee, we didn't do a good job this year. 2 We need you to raise our prices for us so that we can, you 3 know, dig ourself out of this hole. You can't have that. And 4 the sooner we can make it so that the stockholders of FPL 5 understand they have to assume some of the risk, and I don't 6 think their stockholders will go away because they're still a 7 good bye, then I think the faster FPL will then be able to 8 commit some of their resources. 9 The purchase recently of the other company from the 10 northeast really aggravated a lot of people. They didn't 11 understand it. You know, for them it's an $11 billion cash 12 deal going out the door when we should be putting $11 billion 13 into our infrastructure in South Florida, and it was very 14 confusing to everyone. 15 And I understand some of the reasons for doing it, 16 but we need a commitment from the utilities to come in and put 17 the money where their mouth is. Let's fix the infrastructure. 18 It has aged out. So whether it's a wood pole or concrete 19 pole -- again, I know there are poles on my street that are 20 older than me. Not that they're bad poles, they could be fine, 21 but if they're not checked, nobody knows. So we really need 22 that commitment. 23 And even my little town as small as it is, we're 24 willing to put up what we can put up, whether it's resource, as 25 I said, for helping code, public services right after a storm, FLORIDA PUBLIC SERVICE COMMISSION 24 1 year-round, we're happy to put those resources forward because 2 we can't let our citizens go through what they did after 3 Hurricane Wilma. It was a very difficult time. I can't 4 emphasize that enough. And I can't tell you again, but for the 5 cooler temperatures, it would have been a lot more devastating 6 than what you were able to read about. And with that, I thank 7 you very much for your time and your attention. Again, I thank 8 the staff and the Public Service Commission for having us speak 9 here today. Thank you. 10 MS. HELTON: Thank you very much, Mayor Castro. I 11 think that was very informative. 12 Now we'll go to Commissioner Charles Falcone. He is 13 on the Commission for the Town of Jupiter Island. 14 COMMISSIONER FALCONE: Good morning. It's a 15 privilege to address you this morning. 16 Can we have the first slide, please. I come to you 17 with a fair amount of town government experience, but a whole 18 lot more of industry experience as an engineer, an executive 19 with the utility industry, that's American Electric Power where 20 I spent 30 years, as a regulator and a consultant for briefer 21 periods in my life. I have a Ph.D. in electric power systems 22 engineering from the best school in the country. 23 There are public policy issues that you all need, the 24 Commission needs to address here, and a little history lesson. 25 I see a few gray hairs out in the audience, not many. But back FLORIDA PUBLIC SERVICE COMMISSION 25 1 in 1965, the Great Northeast Blackout, Lyndon Johnson was 2 president. It was only a couple of years after John F. Kennedy 3 was assassinated. Lyndon Johnson responded with a request to 4 the Federal Power Commission then at that time to do a massive 5 study of what went wrong, make sure it doesn't happen again. 6 The utility industry really noticed this, really began to 7 respond and generate its thoughts about a response. The 8 government continued to get active at the federal level: 9 Started to institute programs, added staff, looking deeper and 10 deeper into this. That was the mid '60s. 11 By the late '60s NERC was formed, the National 12 Electric Reliability Council. Now it's the North American 13 Electric Reliability Council. They brought in Canada. Also a 14 massive investment in electric transmission; not distribution, 15 transmission. If you look at the records, from 1965 to 1975 16 there was a huge increase across the entire country in the 17 investment and transmission. It went from single contingency 18 service to double basically. Now in the last 25 years it's 19 been much tougher to build transmission, and thankfully that 20 happened at the time. That was the last great opportunity to 21 build transmission in the United States. But it was done in 22 response to a threat. The utility industry wanted to get its 23 own act together with NERC, that is, police itself, and with 24 the building of transmission infrastructure so that the 25 government didn't do it. There were three national power grid FLORIDA PUBLIC SERVICE COMMISSION 26 1 studies conducted by the government over those years. I was 2 responsible for the third one in the mid '70s. I was Director 3 of Power Supply and Reliability at the maturing of Lyndon 4 Johnson's little seed, and it was in the Department of Energy 5 because Jimmy Carter had reorganized FPC into FERC and DOE. 6 But I learned quickly to get out of the government after I got 7 a little experience and I went into the private sector and 8 became a utility executive. I was responsible to AEP for all 9 the transmission access and also the wholesale marketing. I 10 was -- I had more monopoly power than FPL for 12 years. 11 Well, the blackout, the northeast blackout recovered 12 in 24 hours. Amazing! It was widespread but in 24 hours, more 13 or less, lights were all back on. Here in South Florida we've 14 had three blackouts in my area in the last two years. And the 15 last one after Wilma took, what, a couple of weeks for a full 16 recovery. Serious? You bet. Not as widespread but very 17 serious life, life and property threatening for Florida, for 18 Southeast Florida. 19 Now we're a little town, talk about small towns, but 20 we're geographically configured in such a way that 21 undergrounding is very feasible. We want to do it. We've been 22 wanting to do it for some years now. Our power supply is poor. 23 We love our trees. We're willing to pay for it. But we -- no 24 one wants to get ripped off; you don't, we don't. We don't 25 want to overpay. And there are other obstacles. FLORIDA PUBLIC SERVICE COMMISSION 27 1 I'm not really delighted with all my slides, so we're 2 going to pass through them. So let's take the next one. We 3 want to convert that -- the next slide -- to that. Notice the 4 word "Please." It may give you the wrong impression about the 5 attitude and style of the power company. They're polite folks. 6 They're not easy to deal with. I know. I used to be one of 7 them. I know what it's like. I used to be that. For that 8 reason I'm probably a good person to deal with it. I don't get 9 frustrated quite as fast as some other people might. 10 We want to convert this, that's a switch, to that. 11 That's what an underground switch looks like in the next one. 12 Why haven't we done it? Well, the cost -- and let me say a bit 13 about that. Five years ago they told us it was going to be 14 $17 million. When we did a so-called binding cost estimate 15 last year, $8 million dollars. That's half. Now I don't know 16 whether they were just misled when they gave us the $17 million 17 figure or whether they were trying to discourage us from going 18 forward, but it did discourage us from going forward. 19 So the next slide, if you would, I'm going to tell 20 you some news, that things are getting better. But, here, hold 21 that slide for a minute. We put it on the back burner after 22 2002 because of that high cost estimate. And we had meetings 23 with the Chairman and President of FPL and they explained to us 24 that any contribution in aid of construction would require, 25 would represent a taxable event. It would be income to FPL FLORIDA PUBLIC SERVICE COMMISSION 28 1 and, therefore, taxable, so we had to gross it up for taxes. 2 Well, that's why it was twice as much as it turns out to be. 3 It turns out with closer study of IRS law that if 4 we're not a customer, the town is not a customer, I'm a 5 customer but not the town, if the town gives them a check for 6 $8 million, it's not taxable. It's a noncustomer contribution 7 to capital and it's not taxable. And that's the big reason why 8 the cost came down. Well, it's still too high. They're 9 putting overheads into that. I don't see why they should put 10 overheads into it, especially since we're talking about hiring 11 our own contractor to do it. FPL simply is going to inspect 12 the work, do some engineering ahead to say what kind of 13 switches and so forth. But why they should put an overhead 14 figure of a couple of millions dollars into that is unclear to 15 me. 16 We got back off the back burner and onto the front 17 burner after the hurricanes of 2004. You remember those. 18 Right after those hurricanes, we said, whoa, we better get 19 going, and we did. We got moving, we wrote letters to FPL. 20 Sometimes we got an answer, never a satisfactory one, other 21 times we didn't get answers. You write them a letter, you 22 don't get an answer. 23 You know what Mel Brooks taught us? It's good to be 24 the king, you know. Monopoly power is neat. You don't have to 25 treat your customers the way competitive companies treat their FLORIDA PUBLIC SERVICE COMMISSION 29 1 customer. The customer isn't always right. We'll tell you 2 what's right. That's the attitude of people like us, you know, 3 ex-monopolists from AEP. 4 Well, then we really made a lot of headway. We even 5 asked FPL to do a binding cost estimate in late 2005. It cost 6 us $95,000. And we learned it would be about $8 million to do 7 this, but that includes their overheads. Then Wilma, and FPL 8 had an epiphany, much like the epiphany, I think -- and it's 9 only the beginning, so it's too early to say, but the whole 10 power industry got an epiphany back in 1965 after that 11 blackout. 12 What's an epiphany? Let's take a look. Webster says 13 that's what it is. It's an enlightening of what the reality 14 is. Maybe it's a wake-up call. 15 One more slide. Caused the sea change. Hey, let's 16 measure the sea change. There's Senator Klein, he's active on 17 this. Why? It's the sea change. Wilma and the earlier 18 hurricanes caused that. This conference, we wouldn't be 19 sitting here today talking about this if there weren't a sea 20 change happening. We've got towns looking at it, we've got 21 newspapers, we've got the people in an outrage, towns and 22 cities around Florida are upset about the response to the 23 hurricane, about the destruction that took place that perhaps 24 shouldn't have. 25 What's needed this time? Look, if the fix in 2000, FLORIDA PUBLIC SERVICE COMMISSION 30 1 I'm sorry, in the year 1965 after the blackout, if the fix was 2 more transmission and the industry organizing so the government 3 doesn't, what's the fix this time in South Florida? Move to 4 New Jersey? No. No. It's distribution. And the industry, 5 the utilities need to recognize that more investment and 6 distribution is needed. 7 Let's flash forward. This is fine. Quickly I'll 8 tell you that we see suddenly a new working relationship since 9 Wilma with FPL. It looks like they may lower the cost because 10 they are thinking about a cost incentive. I'll say more about 11 it in a minute. But they're agreeing that we can use the 12 right-of-way reluctantly where feasible. We're still going to 13 need some easements. It's very important to our residents who 14 own this beautiful property, they don't want to offer an 15 easement across their property if it's not absolutely 16 necessary. So we seem to have a collaborative arrangement for 17 tailoring the new distribution system to meet our existing 18 town. We'll work together on that. That's good. 19 We have a good understanding of hardening the feeders 20 that come into the town. I won't dwell on it, but it's 21 important not only to harden your town, but think about what's 22 coming in. You don't want to have -- if your system is intact 23 but your feeders aren't, you're not going to get the lights 24 back on. We've got that licked too. 25 An evaluation of waterproof switchgear. We know that FLORIDA PUBLIC SERVICE COMMISSION 31 1 underground equipment can suffer from overwash, ocean/salt 2 water, et cetera, deep water on underground switches can do 3 real damage. You know, there's waterproof hardware available. 4 It costs a little more. FPL doesn't support that technology 5 right now. They're testing it, they're looking at it. Folks, 6 it's in use all over the world. How do I know? I talked to 7 S&C. They're the suppliers of this equipment. I know where 8 these switches are installed, know what they look like, know 9 what they cost. 10 Let's move on. I want to say a few words, and I 11 don't want to take more than my time, about reliability. Is it 12 more reliable? It certainly is. But I want to tell you, you 13 can't find data -- skip forward two slides, if you will, one 14 and then one more. I've read a dozen recent reports. Every 15 one -- in the last five years. They're generally commissioned 16 by state commissions when some kind of storm event forced it to 17 happen, but the studies were all controlled by the local 18 utilities. There is very little data about reliability. No 19 data at all in the Florida reports. You can't find published 20 data comparing underground with overhead reliability in 21 Florida. It doesn't exist. Is it hard to get this data? It 22 would seem so. It's easy to get it. We're collecting it 23 ourselves. I won't spend time on it, but I can show you how 24 easy it is to collect data. We're doing it. We have every 25 outage recorded in a computer database on Jupiter Island for FLORIDA PUBLIC SERVICE COMMISSION 32 1 the last two years. It's automatically transported to that 2 database with little devices that cost a few hundred dollars in 3 each home. Four or five homes, four or five times a few 4 hundred dollars, we'll have enough installations in your whole 5 town to tell you what's going on. Now we can't so easily get 6 data for every other town. How can we? FPL could. They don't 7 want to do it. They've held it back. They don't want us to 8 meddle in the design of their system. I understand that. A 9 few years ago I didn't want anybody doing that to me either. 10 Let's move forward. I don't want to tell you why 11 they have discouraged us from -- I don't want to spend much 12 time, let's say, telling you why they have discouraged our 13 investment in underground facilities. Let's just say it wasn't 14 in their business interest until the epiphany. 15 Let's move forward. This is important. In Florida, 16 unlike most other states, four things are more favorable to 17 underground versus overhead distribution. Salt spray, most of 18 our development is along the coast. You don't see that in 19 central New Jersey. That salt spray causes momentaries. Fast 20 vegetation growth. It doesn't grow a few inches a year. It 21 grows a few feet a year right into the trees. We don't like 22 them to chop down all our trees. We love our trees. So 23 there's that tension. Much higher lightning frequency in 24 Florida than any other place in the United States and nearly 25 any place in the world. Lightning strikes overhead; doesn't do FLORIDA PUBLIC SERVICE COMMISSION 33 1 anything to underground. Underground utilities are out of 2 harm's way. And hurricanes happen here. Oh, that's, that's 3 the killer. 4 Okay. One more slide. Distribution all over the 5 country is the stepchild. It's underinvested. It suffers from 6 a lack of investment. That's not such a crisis in most places, 7 but in Florida, as it turns out, it sure is because of the 8 hurricanes. 9 Now this is good business for the utilities to have a 10 cash cow. When you go ahead -- when we underground and pay for 11 the cost of the underground utilities, FPL has to pay a 12 component of that, pay the equivalent of what a new overhead 13 line would cost. That's a capital infusion that does nothing 14 for their bottom line because they already have those 15 customers. Now for a new customer, they're delighted to have 16 the new customers build underground, and two-thirds of all new, 17 all new developments are underground served. And that's before 18 Wilma. Now after Wilma I bet you it's going to scoot up to 80 19 or 90 percent. 20 When you say people aren't willing to pay for 21 underground facilities, it's clearly not true because 22 two-thirds of new developments are choosing to pay the higher 23 price for underground facilities. 24 All right. What's needed? And here's where you, the 25 Public Service Commission, can really and need to play a role. FLORIDA PUBLIC SERVICE COMMISSION 34 1 Make sure there's going to be a customer-friendly environment 2 for underground conversion for towns and communities and 3 villages that want to do that conversion, are willing to pay it 4 on their own, give them an incentive. Make it administratively 5 easy to do. Don't, don't put obstacles in their way. 6 Why overheads? Well, if you must have overheads, and 7 I'm no expert at it, on that, if there must be, then find 8 another way to provide an economic incentive. Pay a small 9 component of it. It's very expensive inherently. Make it a 10 little cheaper. But expect that you can't -- we can't afford 11 as a state to convert the entire state to underground, that's 12 probably beyond reach, but you certainly can create an 13 encouraging environment. Make it administratively simple. 14 Answer the letters. Probably the power companies need to set 15 up a little department that handles this. They're not 16 organized to, to deal with the public in this way yet, and it 17 wouldn't be hard for them to do it. 18 Facilitate the administrative processes. That's my 19 message to you today. I thank you so much, and I'll be glad to 20 answer questions, but I know that's not on the agenda for us at 21 this time. Thank you so much. 22 MS. HELTON: Thank you, Commissioner Falcone. 23 Now we have Schef Wright, who represents the Town of 24 Palm Beach. 25 MR. WRIGHT: Good morning. Thank you, Chairman FLORIDA PUBLIC SERVICE COMMISSION 35 1 Edgar. Thank you, Public Service Commission. Thanks, Mary 2 Anne, Bob and Connie. 3 I'm sure I know the vast majority of everybody in 4 this room on a first-name basis because I've been working in 5 energy in Florida for 25 years. I worked here for seven years 6 when it was in the Fletcher Building. 7 I was born and raised in Florida. I have lived all 8 but nine years of my 56 years in this wonderful state and I 9 really love it. I lived through Donna and Betsy when I was a 10 kid in Miami, I lived through Kate here, and I lived here, to 11 my good fortune, through the near misses that we in the 12 Tallahassee area experienced when the storms struck last year 13 and this year. 14 My first exposure to the, actually my real first 15 exposure was the undergrounding issue, to the undergrounding 16 issue is when I worked on the CIAC rule back when I was on 17 staff in the mid '80s. But after that the law firm that I was 18 working with while I was in law school was engaged by the Town 19 of Golden Beach, which is in the very northeast corner of 20 Miami-Dade County in 1989 and 1990. They wanted their 21 facilities put underground. We believed that the service was 22 inadequate. The PSC, in fact, found that our service was not 23 reasonably adequate, sufficient, et cetera, but that there was 24 no willful failure and, accordingly, there was no penalty 25 imposed on FPL. FLORIDA PUBLIC SERVICE COMMISSION 36 1 But I wanted to share the following anecdote with 2 you. My first experience going to Golden Beach was I drove 3 into town from the south coming up A1A, and the first thing, 4 I'm not making this up, the first thing I saw on the right-hand 5 side about 100 feet inside the city was an FPL truck working on 6 a rusted out transformer. It's a coastal area. As 7 Commissioner Falcone said, salt spray wears these things out. 8 The poles in Golden Beach were leaning every which way. We 9 wanted underground. It didn't, it didn't happen. It didn't 10 happen following the review of undergrounding mandated by the 11 Legislature in 1989. Frankly, in my opinion, in my view of the 12 world, in my experience it should have. Something a lot more 13 than happened, which is essentially nothing, should have 14 happened at the very least after Hurricane Andrew whacked our 15 state in 1992. 16 I'm here to speak on behalf of the Town of Palm 17 Beach. We are working with Senator Jeff Atwater and others 18 sponsoring a bill that would encourage, not mandate, but 19 encourage the undergrounding of electric distribution 20 facilities in Florida. I know a lot of people in the room have 21 seen the bill and have copies of it. There are copies right 22 yonder on the staff table there. 23 How did we get here? We got here for a lot of the 24 reasons Commissioner Falcone mentioned. There's a perception, 25 and it's been Palm Beach's experience that it's somewhat FLORIDA PUBLIC SERVICE COMMISSION 37 1 difficult to get an undergrounding project done. It's 2 difficult to get information on certain costs. We wanted 3 information on the net book value which factors into the CIAC 4 and we had a really hard time getting that. 5 There are other features of the utility's tariffs 6 that, intended or not, discouraged the installation of 7 underground facilities. For example, the requirement that the 8 utility own the facilities even where a municipality might pay 9 $10 or $35 million in a CIAC with no credit ever to be given if 10 the utility, if the municipality subsequently decides to 11 establish a municipal utility system. Basically Palm Beach's 12 franchise expires, I believe, in March of 2011. If we pay $35 13 million this year for undergrounding and then we want to 14 municipalize at the expiration of the franchise, FPL has made 15 it very clear to us they will want to be paid the entire value 16 of their system, including the underground system, most of 17 which the cost we will have paid for. 18 There are questions, as Commissioner Falcone alluded 19 to, about the proper application of overhead costs. And I mean 20 in that context indirect and general costs that are allocated 21 to jobs, and the general refusal by utilities in my experience 22 to include differential O&M costs in the computation of the 23 CIAC and their refusal to include the prospect of avoided 24 hurricane restoration costs in the calculation of a CIAC. 25 Here's what the bill will do. It establishes FLORIDA PUBLIC SERVICE COMMISSION 38 1 underground as the presumptive, not fully mandatory, but the 2 presumptive standard for new service for public utilities. The 3 municipal utilities and the cooperatives are specifically 4 excluded. It recognizes that underground is clearly the 5 preferred standard of service, it is becoming the standard of 6 service by choice, it's just not yet the prescribed or 7 mandatory standard. It would be a presumptive standard. It 8 would be rebuttable by a demonstration that overhead in a 9 particular instance was not, was not the most cost-effective or 10 best method. 11 The bill would encourage the public, it would 12 actually direct the Public Service Commission to promulgate 13 rules and the utilities to behave and govern themselves in such 14 a way as to encourage the conversion of existing overhead to 15 underground to the maximum extent feasible. It has specific 16 provisions that would remove barriers and disincentives to 17 municipalities and other local governments participating in 18 underground projects. It would establish a utility obligation 19 to maintain data and submit reports on costs and on 20 reliability. Frankly, it is unfathomable that our utilities in 21 Florida, with somewhere north of one-third of all their 22 distribution facilities being underground and, correspondingly, 23 a little bit less than, less than two-thirds being overhead, 24 with all the reliability issues that are posed here, can't tell 25 us what the relative reliability of underground versus overhead FLORIDA PUBLIC SERVICE COMMISSION 39 1 is. They can't tell us what percentage of the cost of 2 restoration in 2004 and 2005 was attributable to underground 3 and overhead. The only number I've ever seen on that subject 4 was in Bernie Windham's testimony, a member of the PSC staff 5 then and now, Bernie Windham's testimony in the 6 1990/91 investigation where he said he believes the proper 7 number is probably around 97 percent of hurricane restoration 8 costs should be allocated to overhead. If that's true, it 9 should tell us something. 10 We need to know all the costs and benefits. We need 11 to know what we would call the social costs and what we 12 reformed economists like myself and currently practicing 13 economists would call the external costs, the social cost, the 14 cost of food that goes bad, the cost of medicine that goes bad, 15 the cost of productivity that is not realized, the cost of lost 16 wages and everything else. When you take these things into 17 account, the numbers are staggering. If you looked at a 18 utility, a conventional utility expected unserved energy 19 analysis with a fairly high value that the utility would place 20 on lost kilowatt hours delivered to customers, the numbers 21 become on the benefits side of the equation staggering. 22 They're very, very big numbers. 23 And I want to make one other point on this. This 24 consideration was mandated by the Legislature in 1989. It 25 didn't get much real consideration from the Commission other FLORIDA PUBLIC SERVICE COMMISSION 40 1 than Bernie's testimony, which addressed it very explicitly. 2 But this is specifically consistent with what several of the 3 panelists at the Governor's energy forum last month were 4 talking about when they said we need to develop our state's 5 energy policy. We need to develop Florida's energy policy with 6 a goal toward maximizing the greater good. That was the catch 7 phrase that was used. 8 There are also some interesting, and I haven't had a 9 chance to look at them yet, but I'm trying to round up some 10 consultants and some funding for them to take a look at, there 11 are some very interesting and potentially complex 12 cross-subsidization issues. People served by underground don't 13 have to have the trees trimmed outside their house. They have 14 to pay for everyone else's tree trimming. You know, if the 15 number on hurricane restoration costs really is something like 16 97 percent overhead, the people served by underground generally 17 speaking aren't causing those costs to be incurred. Now they 18 are to a degree served in a number of instances by upstream, 19 upcurrent overhead feeders. But in terms of what's sort of in 20 their development, there isn't any overhead there, but they're 21 paying for everybody else's overhead facilities to be restored. 22 One big issue that we have encountered -- and I also 23 represent the Town of Jupiter Island on these same issues. One 24 big issue that we have encountered is, as I mentioned, the 25 utility's unwillingness to give us credit for CIACs that we FLORIDA PUBLIC SERVICE COMMISSION 41 1 would pay if we ever were hypothetically to decide to 2 municipalize. This is a big barrier. It's one thing when a 3 town council or a town commission is sitting there before its 4 citizens and says, yeah, we're going to spend $30 million now, 5 we're going to spend $10 million now, and if we ever decide to 6 municipalize, we'll get a credit for that against what we have 7 to pay. It's a real different thing when they have to say, 8 yeah, we might spend $30 million now and then if we decide to 9 municipalize in six years, we're going to have to pay that same 10 $30 million plus whatever else the cost of the system we buy is 11 however that may be determined. The bill would change that. 12 It would give the municipalities either credit for what they 13 paid or the opportunity to buy the system for the difference 14 between what they paid and what it cost. Either way, in our 15 view of the world, it is eminently fair, it's economically fair 16 and equitable, and that's what the bill will do. 17 It gives local governments the opportunity to install 18 underground systems and own them so that if they ever decide to 19 municipalize, it's simply a matter of changing the connections 20 in the building (phonetic). It would reinstate the municipal 21 purchase option for, in utility franchises that was present in 22 Florida law until 1973 for municipalities to buy the facilities 23 of franchisees pursuant to arbitration rather than eminent 24 domain. It will direct the PSC to ensure that overhead and, 25 again, I mean indirect and general costs, overhead costs are FLORIDA PUBLIC SERVICE COMMISSION 42 1 appropriately considered and not overloaded in any proceedings 2 before the Commission where undergrounding costs are an issue. 3 By the way, where this becomes an issue is where a 4 utility wants to be paid all of its overhead costs even where, 5 as Commissioner Falcone mentioned, the municipality pays for 6 the work. We are completely on board with the general 7 provision in the utility's tariffs that we should pay for 8 review and inspection. They're certainly, they're going to be 9 maintaining the facilities, they're certainly entitled to come 10 inspect and maintain them. But they're not entitled to, in our 11 view of the world, to the whole engineering cost. Because when 12 they give us the binding cost estimate and give us our nice set 13 of plans, they say, you can build from these plans. In my 14 world that means that covers at least the engineering and all 15 that remains is the inspection and evaluation, which is 16 actually the language in the tariffs. It encourages -- the 17 bill will encourage the use of rights-of-way versus easements 18 and it will encourage, not mandate, the use of rear yard 19 easements where they presently exist, and it will also in that 20 regard allow correctly utilities to require that such easements 21 be kept free of obstructions. For example, where there's an 22 alley, there's not really much of a problem. Where there's a 23 fence and five-foot wide hedge and you want to put underground 24 underneath it, that's a problem. We recognize that, the bill 25 recognizes that. FLORIDA PUBLIC SERVICE COMMISSION 43 1 Our conclusion is this: It's time for more action 2 towards encouraging undergrounding now. We strongly believe 3 that if, after Hurricane Andrew struck Florida in 1992, the 4 Florida Legislature had enacted a bill like this or we had 5 voluntarily or with the Commission on its own initiative had 6 moved toward a California Rule 20 type situation where all new 7 distribution goes in underground with provisions for the 8 orderly, timely conversion of overhead to underground had been 9 adopted or enacted, we would be in much better shape today than 10 we would, than we are, given the way things have evolved with 11 the storms of 2004 and 2005. 12 I'll echo one thing that, actually something 13 Commissioner Falcone touched on and also something that Mayor 14 Castro touched on. We know that undergrounding is not a silver 15 bullet. There will be some instances where it is not the most 16 cost-effective alternative. The classic example is the fish 17 camp out at the end of the Three Mile Run on the Withlacoochee 18 River. You know, it ain't going to make sense to underground 19 the wire running out there. But in many places, in many 20 places -- probably, in my view of the world, probably in those 21 places at least -- well, new -- putting new in underground is 22 the way to go. And conversions, when all costs, hurricane 23 restoration costs, O&M costs, the cost to the people who are 24 without power for six to 18 days, when all costs are 25 considered, the conversion of existing overhead to underground FLORIDA PUBLIC SERVICE COMMISSION 44 1 will be justified in many, many instances. Thank you. 2 MS. HELTON: Thank you, Mr. Wright. If you all could 3 remain there, I think we have at least one question. And I 4 guess I probably should have said earlier this morning, of 5 course, if any of our bosses that are sitting in the room have 6 any questions, we would be happy to hear you. 7 MR. BALLINGER: Mary Anne, this is Tom Ballinger with 8 staff. We did get one question from the audience. It was for 9 Commissioner Falcone. I believe you mentioned the current 10 estimate is about $8 million to underground for Jupiter Island. 11 And the question is this: How does that break down into an 12 average cost per customer, if you will, on your island, and is 13 the town doing anything to help funding or the assistance in 14 funding of that cost? 15 COMMISSIONER FALCONE: Okay. I'll answer the 16 question, but first I'll say that that figure could go up a 17 little, if we choose, and we hope to put better hardware that 18 is waterproof and actually goes into vaults under the ground, 19 those are switches, might add a couple of mil. But then we're 20 hoping it might come down a little if, indeed, FPL comes 21 through with their flirtation and proposes some kind of cost 22 contribution or if it simply backs off on the overheads. So it 23 may end up around that figure. And it's $13,000 per customer, 24 per home or home site, $13,000 per site. 25 Is the town going to do anything? The town will do FLORIDA PUBLIC SERVICE COMMISSION 45 1 this, it will -- as you know, the town doesn't have deep 2 pockets. It gets its money from us, the residents, through 3 taxes. What we're going to do though is float a bond and 4 spread that cost over 15 or 20 years, probably 20, the life, at 5 least the life of the facilities. They may actually go for 25 6 or 30 years. So we'll spread it out over time. We're still 7 thinking about whether we'd put a little part of it on the 8 electric bills because there is a tariff provision that the 9 Commission has approved for that, and a little bit in taxes, 10 half and half. We haven't decided, but those are the choices 11 we're considering. 12 MR. BALLINGER: Thank you. 13 MS. HELTON: Mr. Trapp. 14 MR. TRAPP: I had a question for Mayor Castro 15 actually. 16 You had mentioned in your presentation a proposal for 17 a community action type of surveillance, if you would, between 18 the city employees communicating with Florida Power & Light and 19 sharing information on problem areas, trouble spots. Is that 20 something that is in the proposal stage or have you received 21 any type of concurrence from the company on that? 22 MAYOR CASTRO: We proposed it to them and they have 23 not acknowledged or accepted the offer yet. 24 MR. TRAPP: So it's something that's under 25 consideration by the company? FLORIDA PUBLIC SERVICE COMMISSION 46 1 MAYOR CASTRO: As far as I know, that's correct. 2 MR. TRAPP: Thank you. 3 MS. HELTON: Mr. McNulty, did you have a question? 4 MR. McNULTY: Yes. I also had a question for Mayor 5 Castro. 6 Mayor, could you tell me whether or not the City of 7 Dania Beach maintains tree ordinances of any sort? 8 MAYOR CASTRO: Actually we do maintain some tree 9 ordinances. But, again, because of some of the age of our 10 town, a lot of trees were there long before a lot of the 11 ordinances came along, so there are trees in places they don't 12 need to be. Not an electrical issue, but a good example was 13 years and years ago it was decided that black olives should be 14 placed along the swales of some of the residential areas. 15 Black olives don't do well in hurricane winds. They seem to 16 fall over and take up your sidewalk and your street with it. 17 So that's something we're also trying to correct. But, again, 18 some of our properties were platted so long ago, they're 19 40 feet by 100 foot lots on our homes, and so a lot of the 20 trees are literally decades old. And in South Florida where 21 trees are a very protected species, as they should be, we don't 22 go and just cut them all down. But FPL does come through to 23 maintain. 24 I, again, love trees, I can't say that enough, but I 25 think we have to be practical. And, again, I think if we can FLORIDA PUBLIC SERVICE COMMISSION 47 1 come up with a program that we encourage homeowners and 2 property owners to move those trees by giving them another tree 3 or FPL giving them another tree or somebody doing something, 4 kind of like the canker program or whatever works, that's what 5 we need to do. But these trees are usually quite old and have 6 been there long before probably even some of the power lines 7 went up. 8 MR. McNULTY: Thank you. 9 MS. HELTON: Okay. With that, I think that concludes 10 the presentations by local government officials. Now we'll 11 move on to the presentations by technical experts. Roy 12 Jazowski and Mark Hammer with The Homac Companies. 13 MR. JAZOWSKI: Good morning, everybody. And I thank 14 the Florida Public Commission to speak here today. I wanted 15 to -- Mike, if you could bring up the presentation. Okay. If 16 you could move the slide forward to the next one. 17 Since Homac is a Florida-based manufacturing company 18 and since we are a major connector, supplier of connectors for 19 the overhead market and also the underground distribution, we 20 were approached by EPRI in the Year 2005 to help develop a 21 connector that would break away during storm conditions. We 22 feel that our, our infrastructure, both underground and 23 overhead, is, is, is way too -- is not pliable, it doesn't 24 move. So we are looking at trying to control the break 25 situation, that if a tree does come down, we can actually FLORIDA PUBLIC SERVICE COMMISSION 48 1 supply and we can break the device free from the energy line. 2 Next slide. The goal of the project was to first 3 mitigate any damage to the power line structures and systems. 4 Second is we wanted to restore the power quickly, we wanted a 5 device that we could actually plug right back in again. And, 6 third, we also wanted to eliminate any damage to the service 7 customers, service entrance power line system. 8 Next slide. Additional goals of the project is that 9 we wanted to improve the SAIFI and the SAIDI. Just a little 10 brief overview. For SAIFI, that is looking at the average 11 interruption frequency, and also for the SAIDI, the average 12 interruption duration. That was the goal for this project. 13 Additional other goals -- next slide, Mike -- was to 14 improve safety to the public and the repair crews by insuring 15 that when the lines are de-energized, when the lines are hit by 16 an object, a tree or a branch, that they would come down to the 17 ground safely and they would not be energized on the ground. 18 And then last but not least we wanted to restore the power 19 quickly with no cost or repair charges to both the utility and 20 the customer. 21 Next slide. This is a typical picture of the service 22 entrance of our customers, our end, our end-users. In this 23 instance you can see the service entrance connections. 24 Normally in a severe storm these service entrances will be 25 damaged, they will bend over, they'll break, and they could be FLORIDA PUBLIC SERVICE COMMISSION 49 1 in the area of costly repair of $500 to $250 -- $2,500. 2 Next slide. The picture here is actually the Storm 3 Safe device in place up on an overhead device. It is designed 4 to break away. There is a fuse link that's connected to the 5 pole. In this picture here there's actually two service 6 entrances feeding two power -- two houses coming off the 7 secondary or the transformer. 8 I have the device here, and when a tree or object 9 actually hits the service entrance, it literally pulls away and 10 it disconnects. Now this is not a 50-cent device. This is an 11 area that we are going to have to overcome. Are the utilities 12 going to be willing to pay for extra monies for a device like 13 this? 14 Next slide. Benefits, of course, are faster 15 restoration time; improved SAIFI and SAIDI; O&M costs, no 16 damage to terminal poles; customer satisfaction where both 17 customer satisfaction is at the homeowners where we mitigate 18 any transients that go into the line where we actually destroy 19 computers, TVs, radios; the safety to the public so that lines 20 are de-energized; and end result are the crews. 21 This is a -- we wanted to get some field experience 22 of this device. And in conjunction with TVA and also with -- 23 this was -- we had a beta site at Tullahoma out in Tennessee 24 and we actually installed three devices on the system. And 25 believe it or not, within three to four months we actually did FLORIDA PUBLIC SERVICE COMMISSION 50 1 have a storm and a tree did come down on the device. The 2 bottom picture there is the tree that did come down. In this 3 instance, the crew was able to come right back in again, cut 4 down a tree, get the line up and basically just plug the line 5 back in again. 6 The fuse link, there is a mechanical fuse link that 7 is attached to this device. The fuse link can be set at 8 500 pounds, 800 pounds, 1,000 pounds. It depends on wind 9 loading and, of course, if there's any ice storm conditions if 10 we're looking at other areas of the country. 11 Next slide. This is also another test we did. This 12 was with Kansas City. Unfortunately, we do have a video that 13 goes along with this but we could not get the video going. I'm 14 going to sort of simulate this to you. Under this condition 15 the pole is actually released by the truck, the bucket truck. 16 And you can see there's two, there's two service entrances with 17 the device up on the power pole. The pole comes down, it 18 cleanly breaks the two service devices, there are no damages to 19 the pole and there is no damage to the service entrance 20 connector. 21 Last slide. The project results, it can be applied 22 in any overhead service drop condition. It's adaptable to, to 23 any existing new services or existing services. We can supply 24 a three drop service or a single drop service, and we can 25 basically just put the fuse link back in and plug the device FLORIDA PUBLIC SERVICE COMMISSION 51 1 back in and energize. This device will be available in the 2 third quarter, so we are working very hard to try and bring 3 some solution to the power companies. 4 To Mark Hammer. Thank you. 5 MR. HAMMER: Thank you, Roy. Good morning. Just a 6 little bit about Homac. We're a Florida-based manufacturer. 7 We started in 1963 and actually moved to the State of Florida 8 in Ormond Beach in 1972. So just like everyone here, we have a 9 vested interest in doing our part to come up with ways or 10 solutions that we can mitigate some of these storm issues and 11 problems. 12 We are, in fact, the leading producer of electrical 13 connectors. We've got about 425 employees and three 14 manufacturing locations; two in Ormond Beach and one out in 15 California. 16 Next, please. We were recognized recently also as 17 "Manufacturer of the Year" in Volusia County by the Volusia 18 Manufacturers Association. This is our main campus in Ormond 19 Beach. 20 Next, please. And a few miles down the road, another 21 several facilities that we also have in Ormond Beach, Florida. 22 Next please. Our, our niche, if you will, is service 23 to the distribution sector of the electric utility industry. 24 And I think Commissioner Falcone mentioned from his perspective 25 that that's been somewhat the stepchild in our infrastructure. FLORIDA PUBLIC SERVICE COMMISSION 52 1 I concur with that. But anyway, that's the area that we, we 2 service in the electrical industry. 3 Our customers, obviously, are the utilities 4 themselves: IOUs, RECs, as well as municipal utilities. And, 5 in fact, we service customers across the United States as well 6 as 40-plus countries across the world. 7 A little bit about our history. In the early '60s, 8 that's when the transition began from overhead distribution to 9 underground installations. And as a matter of fact, that time 10 period coincides with really the birth of our company. Our 11 founder in 1964, in fact, invented, patented and developed the 12 first connector designed specifically for what's called URD, 13 underground residential distribution, that device on the bottom 14 there. 15 Next, Mike. We also pioneered the use of EPDM rubber 16 in our industry for insulating and waterproofing these 17 underground joints. Now, again, these are, these are part of 18 our heritage as a company. These basically contribute to 19 sealed underground connections that give the whole system 20 integrity. Obviously, the cable itself is underground cable, 21 but it also has to be sealed when a connection is made whether 22 it's a splice or a tap. And through the use of EPDM rubber 23 technology, what we call our Flood-Seal technology -- years and 24 years ago we, in fact, provided an economical, cost-effective 25 solution for sealing these submersible cable joints. FLORIDA PUBLIC SERVICE COMMISSION 53 1 Next, please. This is an underground cable connector 2 device. As a matter of fact, we sell quite a few of these 3 locally to Florida Power & Light across the state. But this 4 would be an example of our connectors and sealing capability 5 utilizing the interference-fit rubber's stretch and memory 6 characteristics. Now that's important because when this 7 formulation of rubber that we use in our products to seal our 8 connectors is stretched, it does have a memory. It basically 9 bounces back. We have these installed underground across the 10 state, across the country that have been in place for decades. 11 URD cable itself is basically designed to last 30 years. Our 12 connectors have to last at least as long as the cable itself. 13 Today, Homac has grown to become the leader in design 14 and manufacture of electric power delivery connector solutions. 15 And, in fact, we're the largest manufacturer of secondary 16 underground distribution connectors. We are the experts in 17 making these type of connections for underground. We're also a 18 recognized leader in overhead, as you saw with Roy's portion of 19 the presentation, as well as substation connectors. 20 A little bit about our products. Next, please. Some 21 of our family of products. This is specifically for a 22 substation. 23 Next, please. And as a few of the gentlemen before 24 us mentioned, I've got to also, from our perspective, convey 25 that underground distribution, even though we presented a FLORIDA PUBLIC SERVICE COMMISSION 54 1 potential solution that Roy just walked through on the overhead 2 side, underground distribution without question is the way to 3 go. Some facts, obviously improving reliability is -- should 4 be our main concern as far as why go underground. Obviously 5 the underground electric system does, in fact, mitigate 6 outages, it improves the aesthetics. And post-9/11, obviously 7 security concerns are going to help drive additional growth for 8 underground. Today underground cable placement is growing 9 eight times the rate of overhead, but that's only because of 10 new installations. It's not because of conversions. 11 We had some statistics shared about the State of 12 Florida or Florida Power & Light specifically, but across the 13 country underground is growing eight times the rate of 14 overhead. But, once again, not because a lot of utilities are 15 converting their systems, it's to accommodate new 16 installations. So right now across the country less than 17 15 percent of distribution cable is, in fact, underground. 18 There's a tremendous opportunity to improve our reliability 19 across this nation. So we, in fact, support any initiative 20 that focuses on improving our electric power delivery 21 infrastructure, our system reliability and certainly customer 22 and lineman safety. Thank you. 23 MS. HELTON: Thank you, Mr. Hammer and Mr. Jazowski. 24 Next we have Michael Osterhout, who is with the 25 Composite Technology Corporation. We've given him about five FLORIDA PUBLIC SERVICE COMMISSION 55 1 minutes to conclude this section. 2 MR. OSTERHOUT: Thank you very much. Yes. I'm 3 Michael Osterhout from Composite Technology Corporation. Our 4 company is a manufacturer of a new conductor product. I'm 5 going to talk about those issues aboveground. The distribution 6 site underground is, is certainly something that needs to be 7 prioritized. But in those instances where it cannot be 8 prioritized, our company is working with General Cable 9 Corporation and a number of utilities around the country, as 10 well as with Florida Power & Light currently. I think we have 11 some dialogue going with them at this point to see what we can 12 do to reinforce and strengthen and harden the bare overhead 13 transmission conductor that comes from the substation into the 14 feeders and is all around your state. 15 The composite technology is a bit different in that 16 the core of this particular conductor manufactured by General 17 Cable is not steel. It's made out of a variety of composite 18 components. The composite components tend to be a lot stronger 19 than steel, about 25 to 30 percent, and yet lighter weight than 20 steel. 21 Consequently, that combination, like the Defense 22 Department's submarines and aircraft and NASA, allows for a 23 great deal of environmental robustness and flexibility. What 24 we find is that we have usually 30 percent to 40 percent 25 greater strength capability in the overhead conductors that can FLORIDA PUBLIC SERVICE COMMISSION 56 1 withstand winds in excess of 200 miles an hour. These are 2 engineered products, so we also are working on a side -- the 3 line side and the pole side as well. The pole side, working to 4 engineer some structures out of a variety of composite 5 materials that can likewise withstand those high winds and 6 water. 7 One of the characteristics of this particular 8 conductor is that it has -- with General Cable's help, it's 9 called aluminum conductor, aluminum conductor composite core, 10 ACCC/TW, trapezoidal wire. Its mechanical performance is 11 exceptional, but its electrical performance is even better. 12 The composite material doesn't have the same temperature 13 constraints that steel does, so you're going to increase the 14 current over a particular line which increases the temperature. 15 As temperature increases in your traditional steel, you have a 16 tendency for the steel to expand and the conductor to sag. 17 Composites are made so that they can withstand 18 greater temperatures. Typically you might run 100°C for your 19 current conventional conductor before it begins to sag beyond 20 that limit where it hits the trees or where it becomes 21 unusable. With a composite core within your standard 22 conductor, same weight, same outside diameter, you can go up to 23 about 200°, 220° with no sag. These are the kinds of things 24 that are happening. Because that will allow you to take a 25 conductor that is now made of this particular material, you can FLORIDA PUBLIC SERVICE COMMISSION 57 1 reconductor existing structures and double your impacity. So 2 you don't have to build new structures, you don't have to worry 3 about that. 4 If you have priority areas, the islands, the outer 5 portion, the shorelines, utilizing a combination of composite 6 structures with the conductor that we currently have can give 7 you not only future growth, but something we think is extremely 8 reliable, sustainable. The composite also, it reduces the 9 electromagnetic field at the core, reduces the heat, you have 10 no hysteresis, there's not the reaction of dissimilar metals 11 that you have with steel and aluminum when you run it at a 12 higher temperature, and salt water corrosion is mitigated 13 substantially. 14 We're working with -- before the hurricane in New 15 Orleans we were working with ENERGY to do a project across Lake 16 Pontchartrain because they had consistently corrosive 17 conditions on the different spans of conductors. With the 18 composite core you eliminate a lot of that corrosion as well. 19 So there are some issues coming out here that -- we've been in 20 business since 2002. Actually the conductor has been operable 21 since 2004. We have about nine installations now. 22 Commissioner Falcone's old alma mater, AEP, has just concluded 23 a pretty substantial installation of this down in South Texas. 24 PacifiCorp also has concluded that it's a very beneficial 25 product for them in the Pacific Northwest out of Salt Lake FLORIDA PUBLIC SERVICE COMMISSION 58 1 City, and we have a number of other projects underway. 2 My message today is more informational and to make 3 you aware that there are new technologies that are addressing 4 many of the issues of strength, durability, sustainability and 5 reliability. 6 We do have -- the conductor sizes are about ten 7 different sizes, so we address low voltage, not the 8 distribution size cable at this point. You can use it, but the 9 lowest is about what they call a 336 linet (phonetic) size. If 10 any of you from the utility industry, transmission areas are 11 here and understand what I'm talking about, but that would be 12 the smaller-sized conductor. Conventionally we are in the 13 transmission side where you have the bare overhead. That still 14 is an issue because those things have a tendency to blow down 15 and the poles have a tendency to fall down during traumatic 16 events which you have experienced and apparently may experience 17 again more frequently than you desire here in Florida. 18 So our goal, by the way, is to not only work with 19 what we have, but because we're an engineered product, is to 20 work with the utilities and municipalities and the co-ops in 21 designing specific products, whether it's structures or 22 conductor, that may withstand those issues that you're dealing 23 with and can do so very effectively and cost-effectively as 24 well. 25 I'm going to have to say, because I have five minutes FLORIDA PUBLIC SERVICE COMMISSION 59 1 -- 2 MS. HELTON: Which I have to say is just about up. 3 MR. OSTERHOUT: -- which my time is about up, is 4 please leave me business cards if you have any interest in what 5 we're doing. We will put, I think, something on the website, 6 you've invited to do that, so you can have a look at all the 7 technical aspects of what I'm talking about. I do have some 8 cards and samples of the type of conductor here if anyone is 9 interested who would like to pursue more questions and 10 discussion on this. Thank you very much for the opportunity to 11 present a solution potential. 12 MS. HELTON: Thank you, Mr. Osterhout. Let's take a 13 break now until 10:45. And if I could ask during the break if 14 the next set of speakers could come and set up here so that we 15 can move quickly through the next stage. Thank you. 16 (Recess taken.) 17 MS. HELTON: Let's go ahead and start our next 18 section, or actually I guess continue the next section with 19 presentations from technical experts. We have with us Mary 20 Glass and Dr. Martin Skeer, who are with New Stratagem 21 Consulting, and they are going to be next. 22 MS. GLASS: Thank you very much. We're very pleased 23 to be invited to participate in this workshop. I think it's 24 going to be something that's useful not only to Florida, but I 25 think the data you're gathering will be of benefit to people FLORIDA PUBLIC SERVICE COMMISSION 60 1 across the country. So I applaud your efforts. 2 MS. HELTON: Thank you. 3 MS. GLASS: New Stratagem Consulting does management 4 consulting to electric utilities, both public and 5 investor-owned, across the country. As part of our work we've 6 looked at joint use pole loading in a number of aspects for our 7 customers, and we've also pursued our own independent research 8 on this topic because we feel it's a very critical one that has 9 not necessarily been fully explored. 10 We have been looking at this from a different 11 perspective than the engineers. We are looking at this from a 12 policy, safety and risk approach, trying to come up with what 13 are remediation techniques and other mitigation measures that 14 can be taken to avoid the problem of overloading due to joint 15 use. 16 And let me just step back. For those of you who 17 aren't in the utility community, joint use simply refers to any 18 multiple use of a pole by different parties. That could 19 include the utility, but it also could include 20 telecommunications, it could include streetlights, traffic 21 lights, a number of other uses that utility poles ultimately 22 end up getting tapped for because of the ubiquitousness of the 23 facilities. 24 And what we've done is try to pull together the parts 25 of this research in a very simple way for you all today, the FLORIDA PUBLIC SERVICE COMMISSION 61 1 parts that we think are most applicable to the problems that 2 you're facing with regard to hurricane loadings. 3 And so we're looking again primarily at existing 4 poles, not new infrastructure. In most cases when a utility 5 puts in new infrastructure, full engineering design goes in. 6 For some of the facilities that are already there and have been 7 there for 50 years, no real formal design has been done. And 8 that makes good sense because safety factors were quite large 9 50 years ago. 10 But looking at one of your concerns, the number of 11 poles that broke as a result of the hurricanes, I think you 12 have to step back and look at all of the root causes of 13 structural failures of poles, not just the hurricane winds, 14 because frequently what you'll see is several different factors 15 come together to actually cause a pole to fall down. So if you 16 focus only on one of the factors, you may be missing another 17 opportunity to harden your system in a simple, less expensive 18 way. So obviously there are aging and maintenance factors, 19 there are extreme weather factors such as hurricanes, there are 20 accidental factors, and that could include tree limbs falling, 21 natural, other natural factors, but also cars hitting poles and 22 things like that, so human-made factors. And finally 23 overloading factors, and this has really become a major issue 24 because of the number of communications attachments that have 25 gone on poles over the last, especially the last 20 years and FLORIDA PUBLIC SERVICE COMMISSION 62 1 particularly the last ten years. As the communications 2 industry is expanding and we're demanding much greater service, 3 and as the FCC has been promoting competition in 4 communications, you're just seeing an incredible proliferation 5 of these facilities on utility poles. So we understand that 6 that's going to interact. 7 Can we have the next slide? We've done some study 8 and we'd just like to share some of our views from this large 9 mass of study in talking to literally dozens of joint use 10 managers across the country. 11 First of all, we believe that about 5 percent of 12 current poles are overloaded. Obviously this is more likely -- 13 and it may be higher in urban areas than in rural areas, but we 14 think that's a conservative number. And then another 15 10 percent of the poles are approaching overloading or are in a 16 situation where in really extreme weather conditions they could 17 come down as well. Urban areas and areas where you see a 18 confluence of communications facilities, what you call backbone 19 areas where you have very large conductors going down attached 20 to the poles, those are the cases in which you're most likely 21 to see the overloading. And this is going to continue. I 22 think this is one of the most critical factors. Yes, we're 23 finding it in existing poles, but with, again, the push for 24 more wireless, more fiber, overbuilds on systems, these poles 25 are just continuing to get more and more loaded up, and it's FLORIDA PUBLIC SERVICE COMMISSION 63 1 something that we have an opportunity to deal with before the 2 problem gets worse. 3 Looking -- next slide. Looking at the evolution of 4 this, I think everyone in the room is pretty familiar with the 5 fact that, you know, this has been building for a long time. 6 The utilities know it and they've been concerned about it and 7 watching it. And really it's some of the FCC policies that 8 have caused this to get worse. They have set policies that are 9 not tough enough on unauthorized attachments. We estimate that 10 10 to 20 percent of the communications attachments in any 11 typical territory are unauthorized, meaning they've been 12 unreported, which makes it much more difficult for the 13 utilities to track what the loading situation is on their 14 poles. In addition, the FCC allows, specifically allows 15 overbuilding, overlashing of cable. So if a cable company 16 wants to come in and do a whole new overbuild, they do not need 17 to inform the utility before they do it, they do not need to do 18 any kind of loading studies. And in many cases the additional 19 conductors that they're attaching are quite large and the 20 cumulative load on the pole is significant. 21 And, finally, because the FCC was pushing after the 22 Telecom Act of 1996 for all the building and the new 23 competitive facilities to get out there quickly, they put very 24 short time frames on how long the utilities had to review what 25 was going up and a lot of things got pushed through without, I FLORIDA PUBLIC SERVICE COMMISSION 64 1 know for some utilities, the time they would have liked to have 2 had to review the loading situation before it went up. 3 This FCC situation is now showing the potential of 4 getting worse again. There are two petitions in front of the 5 FCC right now, one of which would attempt to lower the rates 6 paid to utilities for attachments. And the other is looking 7 for free, unfettered, unmonitored access to conduits and 8 vaults, underground facilities, which obviously is going to 9 make it more difficult for the utilities to control and be 10 responsible for those assets that they're operating. 11 Next slide. Now for us I want just to define this 12 carefully. We're talking about pole overloading in a very 13 specific sense when we do our studies and the analyses we've 14 done. Again, we're not construction designers. We're looking 15 at this from the point of view of what are the established 16 safety factors and engineering design thresholds that have been 17 set either by the utility itself or by the regulatory agency in 18 their state? And so what we're doing is comparing the 19 performance of poles against whatever the applicable standard 20 is there. We're not assuming that there's some magical number 21 that's right for everybody. 22 And what we found is that in order to simplify our 23 model, make it work better, we looked at the predominant 24 stresses which are the horizontal stresses or the bending 25 stresses primarily from the wires, the conductors and the guys FLORIDA PUBLIC SERVICE COMMISSION 65 1 that are used to hold up the poles. 2 You will find -- next slide. You will find that 3 there are many companies out there that do have much more 4 detailed models for doing pole design. Ours does not do that. 5 As I say, we only consider conductors and guys. We are only 6 looking at it from the standpoint of safety: Are we exceeding 7 standards? And we are looking at it from the standpoint of, 8 okay, depending on what we find, the nature of the overloading, 9 what's causing it, where is it occurring, what are the best 10 mitigation tactics and remediation steps that can be taken to 11 solve the problem? And we run our model in two conditions. 12 One we call the measured condition where we look at a pole just 13 as it's standing in the field on a regular day, no unusual 14 storm conditions, and measure what's happening on that pole. 15 Is it being overstressed? Does it have lots of capacity on it? 16 Then we go and look at the design standards for that particular 17 utility for that particular area if there were a major storm, 18 what they call a designed storm, and see how that same pole 19 would fare under those conditions. And from that try to pull 20 out what kinds of characteristics we can use to design 21 remediation programs. 22 So let me give you a couple of fairly quick examples. 23 The first is, what I think as kind of a typical urban pole, 24 it's got a lot of electrical conductors, it's got a lot of 25 telephone, at least two telephone conductors on there, you've FLORIDA PUBLIC SERVICE COMMISSION 66 1 got cable down at the bottom, you've got a streetlight attached 2 to it and a bunch of other smaller ancillary facilities. There 3 is also some pole-to-pole guying on this pole. 4 Let's go to the next slide. Okay. Now let me just 5 take a minute to explain this so you can understand what you're 6 seeing. The horizontal axis is the height of the pole going up 7 to the right. So it's as if we laid the pole on its side. And 8 we took measurements every three inches along the height -- did 9 calculations every three inches along the pole. 10 The vertical axis is the pounds per square inch being 11 exerted, bending force on that pole. The blue line at the top 12 is the maximum design standard for that pole under that 13 utility's criteria, and the yellow line is a calculation of 14 what the stresses are on the wood at the various heights of the 15 pole. Now the little hash marks at the bottom are actually the 16 location of the various conductors. So it's interesting to see 17 that the peak forces are where the lowest conductors, the 18 communications and the telephone conductors are located on that 19 pole, and it obviously drops off to about zero at the top of 20 the pole. Well, that calculation is done assuming that the 21 pole is new. That's the way it's usually done. 22 But we went ahead and added some aging factors and 23 two basic factors: One, rotting at the bottom of the pole, 24 which is where you'll usually see the most significant rotting; 25 and then just plain aging of the fibers of the wood so that FLORIDA PUBLIC SERVICE COMMISSION 67 1 they can carry less stress. And when you do that calculation 2 and also look at a lower threshold, you can see that blue line 3 has come down because we're ass