{"id":10923,"date":"2016-11-04T15:56:09","date_gmt":"2016-11-04T19:56:09","guid":{"rendered":"https:\/\/digital.hbs.edu\/platform-rctom\/submission\/an-explosion-redefines-a-worst-case-scenario\/"},"modified":"2016-11-04T15:56:09","modified_gmt":"2016-11-04T19:56:09","slug":"an-explosion-redefines-a-worst-case-scenario","status":"publish","type":"hck-submission","link":"https:\/\/d3.harvard.edu\/platform-rctom\/submission\/an-explosion-redefines-a-worst-case-scenario\/","title":{"rendered":"An Explosion Redefines a Worst-Case Scenario"},"content":{"rendered":"

On Monday, October 29, 2012, an explosion rocked the 13th<\/sup> Street Power Facility near the East River, cutting off power to much of lower Manhattan.\u00a0 Water levels had risen fourteen feet as Hurricane Sandy (\u201cSandy\u201d) battered the East Coast in what was to become one of the worst\u00a0Atlantic hurricanes on record.\u00a0 The storm tide waters generated by Sandy had not been seen since at least 1700,[1]<\/a> and the power station\u2019s flood walls, which were built to withstand twelve feet of floodwater, were useless.[2]<\/a>\u00a0\u00a0 Power would not be restored for days, as people in Manhattan operated without access to elevators, heating and in many cases, water, during a particularly cold Autumn.[3]<\/a>[4]<\/a><\/p>\n

\"sandy-1\"\u00a0 \u00a0 \u00a0\u00a0\"sandy-3\"\u00a0 \u00a0 \u00a0\"sandy-2\"<\/p>\n

Con Edison (\u201cConEd\u201d or \u201cthe Company\u201d), a subsidiary of Consolidated Edison, Inc. (NYSE:ED), is the utility company accountable for the 13th<\/sup> Street Power Facility and is also responsible for providing electricity, gas and steam to most of New York City and Westchester County, NY.\u00a0 It would take ConEd a week to restore power to 87% of their customers who lost it, and a total of two weeks to restore power to all of their customers.[5]<\/a>[6]<\/a>\u00a0 The infrastructure weaknesses that led to the power outages were a consequence of poor weather forecasting and institutional shortcomings at ConEd. \u00a0As climate change persists, weather events are expected to become increasingly extreme and unpredictable.\u00a0 In fact, the four largest storm-related power outages in ConEd\u2019s history have all happened since March 2010.[7]<\/a>\u00a0 Many of ConEd\u2019s structures are built to withstand worst-case scenarios, but unfortunately, the bar for the worst case has moved quickly as climate change accelerates.\u00a0 ConEd\u2019s lack of foresight led to the flooding of the power facility, as the flood walls had been built using projections from outdated storm models.[8]<\/a><\/p>\n

Further investigation uncovered other institutional flaws\u00a0that led to these failures.\u00a0 At the time, ConEd had a policy to \u201crun it until it fails\u201d which led to systems featuring\u00a0old components and deteriorating physical infrastructure.\u00a0 Exacerbating issues further, ConEd failed to staff sufficient manpower to conduct needed preemptive maintenance work due to a lockout of certain staff in the summer of 2012. \u00a0These problems were and still are emblematic of the issues faced by many utility companies throughout the United States.\u00a0 Unfortunately, poorly managed post-Sandy repair efforts will most likely lead to future problems for the ConEd.\u00a0 In the urgency of restoring service, ConEd resorted to temporary repair arrangements that were not properly documented and therefore will be near impossible\u00a0to revisit.\u00a0 Also, the use of out of state aid workers accelerated repairs, but sacrificed quality.\u00a0 Many of the volunteers were improperly trained and not well versed in New York’s complex electrical systems.[9]<\/a><\/p>\n

Although Sandy was an extreme weather event, it showcased how ConEd had failed to stay ahead of the possible consequences of climate change.\u00a0 If ConEd is to avoid catastrophic failures going forward, it must rectify the systematic internal failures that Sandy exposed.\u00a0 In February 2014, sixteen months after Sandy, ConEd committed to incorporate plans to protect its power system from the effects of climate change as part of a new multi-year $1 billion investment plan.\u00a0 These \u201cstorm hardening\u201d funds were to be deployed to areas where ConEd was especially vulnerable.\u00a0 For example, Manhattan customers would receive investments in flood prevention, while mainland customers would receive protection from falling trees.\u00a0 The Company revised its flood protections standard by adopting the most current FEMA hundred-year flood level estimates plus a safety cushion of three feet.\u00a0 ConEd furthermore committed to undertake a study on how climate change would affect its electricity, natural gas and steam systems in the coming decades, and how to prepare for these changes going forward.[10]<\/a><\/p>\n

ConEd financed these projects\u00a0without concurrent price increases to its customers, and this drives to the heart of the challenge related to motivating preemptive catastrophe investment within\u00a0infrastructure companies.[11]<\/a>\u00a0 Customer pricing for infrastructure companies is often restricted by government policy, therefore managing costs becomes the main avenue through which these companies can increase profitability.\u00a0 Tightly managing costs most often leads to a reduction in quality.\u00a0 Moreover, any capital investments are hard to value since they do not explicitly increase cash flows after completion.\u00a0 By design then, it is the responsibility of the state and local governments to either mandate investments or provide incentives to invest through tax breaks or looser price ceilings.\u00a0 The steps ConEd is taking to better understand its risks in the current climate environment are adequate, but still reactionary rather than proactive.\u00a0 Loosening the Company\u2019s margin constraints should hopefully push ConEd to plan not just for its immediate future, but to look forward to the next hundred or two hundred years as it anticipates the arrival of Sandy v2.0. (779 words)<\/p>\n

[1]<\/a> P.M. Orton, T.M. Hall, S.A. Talke, A.F. Blumberg, N. Georgas, & S. Vinogradov, January 25, 2016, \u201cA Validated Tropical-Extratropical Flood Hazard Assessment for New York Harbor,\u201d Journal of Geophysical Research: Oceans,<\/em> http:\/\/onlinelibrary.wiley.com\/doi\/10.1002\/2016JC011679\/epdf<\/a>, p. 1-4, accessed November 2016.<\/p>\n

[2]<\/a> Stephen Gandel, November 12, 2012, \u201cHow Con Ed turned New York City\u2019s lights back on\u201d Fortune, http:\/\/fortune.com\/2012\/11\/12\/how-con-ed-turned-new-york-citys-lights-back-on\/, accessed November 2016.<\/p>\n

[3]<\/a> Con Edison Newsroom, October 30, 2012, http:\/\/www.coned.com\/newsroom\/news\/pr20121030_2.asp, accessed November 2016.<\/p>\n

[4]<\/a> City of New York, \u201cSandy and Its Impacts,\u201d http:\/\/www.nyc.gov\/html\/sirr\/downloads\/pdf\/final_report\/Ch_1_SandyImpacts_FINAL_singles.pdf, accessed November 2016.<\/p>\n

[5]<\/a> Con Edison Newsroom, November 5, 2012, http:\/\/www.coned.com\/newsroom\/news\/pr20121105_4.asp, accessed November 2016.<\/p>\n

[6]<\/a> Con Edison Newsroom, November 12, 2012, http:\/\/www.coned.com\/newsroom\/news\/pr20121112.asp, accessed November 2016.<\/p>\n

[7]<\/a> Bobby Magill, \u201cNew York \u2013 Con Ed Settlement Sets Stage for Climate Change Reform by Power Utilities,\u201d Pace Academy, March 1, 2014, https:\/\/earthdesk.blogs.pace.edu\/2014\/03\/01\/new-york-con-ed-settlement-sets-stage-for-climate-change-reform-by-power-utilities\/, accessed November 2016.<\/p>\n

[8]<\/a> Con Edison Newsroom, 2014, http:\/\/www.conedison.com\/ehs\/2014-sustainability-report\/, accessed November 2016.<\/p>\n

[9]<\/a> Utility Workers Union of America & UWUA Local 1-2, February 2013, \u201cThe Impact of Hurricane Sandy on Consolidated Edison of New York: Assessment of Restoration Efforts and Recommendations for the Future,\u201d http:\/\/uwua1-2.org\/wp-content\/uploads\/2013\/02\/CLICK-HERE-to-read-the-Position-Paper-of-the-Local-1-2-on-Hurricane-Sandy.pdf, accessed November 2016.<\/p>\n

[10]<\/a> Ethan I Strell, \u201cPublic Service Commission Approves Con Ed Rate Case and Climate Change Adaption Settlement,\u201d Columbia University, February 21, 2014, http:\/\/blogs.law.columbia.edu\/climatechange\/2014\/02\/21\/public-service-commission-approves-con-ed-rate-case-and-climate-change-adaptation-settlement\/, accessed November 2016.<\/p>\n

[11]<\/a> David Funkhouser, \u201cCon Ed Agrees to Climate Change Plan,\u201d Columbia University, February 24, 2014, http:\/\/blogs.ei.columbia.edu\/2014\/02\/24\/con-ed-agrees-to-climate-change-plan\/, accessed November 2016.<\/p>\n

[Images]\u00a0City of New York, \u201cSandy and Its Impacts,\u201d http:\/\/www.nyc.gov\/html\/sirr\/downloads\/pdf\/final_report\/Ch_1_SandyImpacts_FINAL_singles.pdf<\/a>, accessed November 2016.<\/p>\n","protected":false},"excerpt":{"rendered":"

Con Edison’s 13th Street Power Facility erupts in light as water floods the station. Half of Manhattan goes dark and Hurricane Sandy rages on.<\/p>\n","protected":false},"author":1860,"featured_media":10924,"comment_status":"open","ping_status":"closed","template":"","categories":[1664,1661,1665,1439,1614,1409,1662,1663,1240],"class_list":["post-10923","hck-submission","type-hck-submission","status-publish","has-post-thumbnail","hentry","category-catastrophe","category-con-edison","category-explosion","category-flood","category-hurricane-sandy","category-infrastructure","category-new-york-city","category-power-outage","category-utilities"],"connected_submission_link":"https:\/\/d3.harvard.edu\/platform-rctom\/assignment\/climate-change-challenge-2016\/","yoast_head":"\nAn Explosion Redefines a Worst-Case Scenario - Technology and Operations Management<\/title>\n<meta name=\"robots\" content=\"index, follow, max-snippet:-1, max-image-preview:large, max-video-preview:-1\" \/>\n<link rel=\"canonical\" href=\"https:\/\/d3.harvard.edu\/platform-rctom\/submission\/an-explosion-redefines-a-worst-case-scenario\/\" \/>\n<meta property=\"og:locale\" content=\"en_US\" \/>\n<meta property=\"og:type\" content=\"article\" \/>\n<meta property=\"og:title\" content=\"An Explosion Redefines a Worst-Case Scenario - Technology and Operations Management\" \/>\n<meta property=\"og:description\" content=\"Con Edison's 13th Street Power Facility erupts in light as water floods the station. 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