VM Funding - Barriers

June 13, 2011
In the last couple of issues of VM Insights I’ve laid out the process for determining the funding needs of a VM program and I believe, provided a compelling argument for doing so.

In the last couple of issues of VM Insights, I’ve laid out the process for determining the funding needs of a VM program and I believe, provided a compelling argument for doing so. (Don’t agree? You are welcome to use the comment box at the bottom to adjust my thinking.)

How many utilities are currently using this approach? How many have used it to justify VM funding requirements to their regulators? A good number have used a tree and brush inventory and growth rates to explain funding needs. However, in many cases the resulting VM programs have become victims of their own success. As tree-related outages drop dramatically it becomes exceedingly difficult to justify continued spending to regulators or oversight bodies. If management has not already withdrawn their support for what they perceive to be an ongoing high level of expenditures, the support is typically withdrawn once the regulator points out that the motivation, a high incidence of tree-related outages, no longer exists. Recognizing that VM workload can be represented by a logistic curve and the derivative, the concept of the need to remove as a minimum the AVI, is the antidote because it makes apparent the financial risk associated with underfunding.

Part of the barrier to ongoing proper funding of VM has been the failure of vegetation managers to effectively communicate the need both within and outside the organization.

However, there are some points of resistance to having actual tree and brush conditions drive the funding. One is senior utility management. VM is typically within the top three O & M expenditures for distribution systems. At most utilities, VM work is contracted out. Consequently, VM represents a large pool of money that offers the flexibility of re-distribution in hard financial times, without having to reduce utility staff. By separating VM out from O & M funds to obtain regulatory approval for specific, dedicated funding, management loses flexibility. Of course, maintaining budgetary flexibility by not making VM a separate regulatory issue ignores the risk that tree-related outages may increase, drawing public, political and regulator attention. However, the thinking during tough financial times appears to be we’ll deal with that issue when it arises.

Another barrier to proper VM funding is the regulatory process. The regulator’s role is to protect the consumer. That means regulators will naturally be resistant to any request for increased VM funding. Their resistance is bolstered by consumer advocates and other interveners, none of whom want to see electric rates increase. To justify funding the utility needs to specify the benefit associated with increased funding or the risks that are likely to be realized in the absence of that funding. This may temporarily set the VM program on the proper foundation. However, the regulatory process is biased against long-term proper funding because to sustain the proper level of funding the utility would need to prove harm or negative events that would have occurred but for the proper funding.

Yes, you read that right. Yes it defies logic. It’s simply a perverse consequence of the adversarial regulatory process. I’m not saying I know a better way; just recognizing what is an inherent trait in the process.

Some years ago while working with the legal department of a regulatory commission I was asked the question whether there was a specific amount that needed to be spent annually on VM and could that amount be determined. If you’ve followed this series on VM funding, you know my answer was yes to both. I was asked if there was a downside to quantifying the VM resource requirements. My answer was yes, that it would compel both utility management and regulators to act on the facts before them and facts alone. I’ll paraphrase the attorney’s direct and I believe honest retort - the commissioners are political appointees and any action that results in a loss of flexibility is not likely to gain traction with them.

Is it then surprising that we have VM issues such as repetitive and extensive tree-caused storm damage and blackouts, when the most influential players both inside and outside utilities prefer to maintain flexibility, based on convenient fantasies, rather than obtain and act on the inconvenient and constraining facts?

To close this series on proper VM funding, I can’t say it any better than Bob Bell did in his article The Great American Blackout: “We have the knowledge. The question is: Do we have the will and desire to implement that knowledge?”

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