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Power Shut-Down Was the Right Financial Move: Con Edison


The decision that has put so many in the dark will save time and money in the long run.

MINYANVILLE ORIGINAL Sights of downed power lines, flooding, and wind damage caused by Hurricane Sandy are not only emotionally difficult, but they also remind us that there's a financial cost to the destruction. Eqecat Inc., a provider of catastrophic risk models, has estimated that the total cost of Hurricane Sandy will range from $10 billion to $20 billion. The recovery efforts of utility companies along the East Coast make up a large part of these costs. Earlier this week, the Christian Science Monitor reported that 2011's Hurricane Irene was responsible for utility company rate increases in Vermont, New Hampshire, and New Jersey. Central Vermont Public Service Corporation (NYSE:CV) customers will pay a monthly surcharge of $2.23 over four years, while Atlantic City Electric will raise rates by 1.9% to recover costs caused by Irene, the news organization reported.

When Con Edison (NYSE:ED) made the decision to shut off power Monday night, its difficult decision was also smart financially because it was cost effective. Though disruptive for customers, this preemptive measure prevented critical damage to underground electrical equipment. Con Edison spokesman Allan Drury said, "The decision to shut down power in Lower Manhattan and Brooklyn protects equipment from flooding." If left on, the underground power lines would have faced much more damage when making contact with saltwater, resulting in far more difficult and expensive repairs, though estimates related to Hurricane Sandy were not yet available. Con Edison's extensive underground electrical system was put into place to avoid the wind and tree damage that can easily disturb above ground power lines.

From his office in New Jersey, FirstEnergy Corporation's (NYSE:FE) spokesman Christopher Eck said via email that when it comes to recovery efforts, the financial aspect is secondary. "When a storm of this magnitude hits, it is our job to restore service to our customers as quickly and as safely as possible. Restoration efforts like this are usually very expensive, and there is little any utility can do about that."

So what is the process that utility companies follow from beginning to end and where does cost come into play? Bryan Hay of Pennsylvania's PPL Corporation (NYSE:PPL) spoke via email about the protocol this utility follows, making it clear that the lives and safely of the public are the company's first priorities. "PPL's recovery efforts began around-the-clock operations started at midnight Sunday in the utility's central and regional emergency command centers, as well as in the Customer Contact Center." Hays continued, "When the restoration is complete, we will -- as we always do after major storms -- thoroughly review all of our actions and make a full report to the PUC (Public Utility Commission)."

Another substantial cost of the recovery will include the price of aid from numerous utilities that travel from different parts of the country to lend a hand. When discussing the large amount of work that still needs to be done in the region, Drury of Con Edison said that in the coming days the utility will be getting more and more assistance from utility companies based in the South and West such as Southern California Edison (NYSEAMEX:SCE-E). Eck of First Energy said they have assistance from crews from "as far away as Florida and Iowa, and some crews from Canada, as well." Eck continued, "We have a total of 1,600 line workers and 1,200 forestry workers, most of whom are here from out-of-state." Hay of PPL said that its sister company from Kentucky is one of the many utilities coming in to help with repairs.

However helpful the additional aid is, the work is not voluntary. Drury said that utility workers providing assistance are paid by their own utility, putting in time as they would ordinarily, and are reimbursed by Con Edison.

Whatever the cost, it's good to know that there are people in place whose jobs prioritize public safety over cost. They are there to make life more comfortable -- and if it comes to it, they might even save a life.
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