EPB Chattanooga Uses Smart Grid to Future-Proof Its Business Model

A municipal utility in the South may not be where you’d expect to find an exemplary smart grid implementation, but that’s just fine with EPB Chattanooga. Its leaders are raking in the kudos—including POWER’s 2013 Smart Grid Award—and their community is attracting new businesses in response to a fiber-optic-based system that has helped raise the profile of their city and bolster the sustainability of their utility.

Some utilities look at the process of installing smart grid technologies as a matter of necessary, partial or piecemeal upgrades. They may install smart meters in at least a portion of their service area to cut down on truck rolls, for example. Given the pushback on smart grid technologies that some utilities have faced from small but vocal minorities, and the difficulty others have had with regulators, undertaking smart grid projects can be fraught with controversy and delays. For others, including EPB (formerly Electric Power Board) Chattanooga (EPB), a smart grid project can be the lifeline to a sustainable future.

EPB, which does business under the brands EPB Electric Power and EPB Fiber Optics, was chosen as this year’s POWER Smart Grid Award winner for two main reasons. First, its technology choices, timing, and implementation have returned noteworthy benefits to the utility, its customers, and the community as a whole. Second, and more unusual, its smart grid work has enabled the utility to enter new business sectors that broaden and deepen its customer base, thereby giving it access to new revenue streams.

EPB has served the city of Chattanooga, Tennessee, since 1935 and is one of the largest municipal distribution companies in the country, serving 170,000 customers in a 600-square-mile area. As a community-owned utility, it aims to serve the community while providing reliable, low-cost services. Thanks to its smart grid, EPB has been able to deliver on that promise in unusual ways. Most notably, since September 2010, when EPB became the first company in the U.S. to offer 1-gigabit-per-second Internet speed, the high-speed communications it offers have been a distinctive selling point for city business leaders and developers. Of course, the fiber-optic cable enabling this new service was installed first and foremost to communicate with smart meters, smart switches, and all other smart grid devices.

Low-cost electricity is made possible in part by being a customer of Tennessee Valley Authority (TVA), whose portfolio is roughly 32% coal, 34% nuclear, 9% hydro, and 11% gas, with the balance coming mostly from natural gas combined cycle merchant plants. EPB also has 12 MW of customer-owned renewable generation on its distribution system, which includes a solar farm at an automobile manufacturing plant, one at the Chattanooga Metropolitan Airport, and 68 individual customers with varying levels of solar generation. But the smart grid has also kept costs low, as you’ll see.

Planning for an Integrated Grid

In April this year, President and CEO Harold DePriest was honored as the Chattanooga Area Chamber of Commerce’s manager of the year. Helping the midsize Southern city beat Google in the race to offer gigabit Internet speed to an entire city (Google has now rolled out such service in parts of Kansas City, Kan.), and the competitive advantage that gave to businesses had to have been a compelling argument for the choice.

Competition, it turns out, is something DePriest embraces. He first set his sights on a fiber-optic-based smart grid as a competitive advantage in a potentially deregulated electricity market (though that threat has not yet materialized).

Readers of this magazine will be interested to learn that DePriest is an engineer, so of course he was aware of what fiber-optic cable could do. However, installing the fiber isn’t always easy, as Xcel Energy learned with its SmartGrid City project in Boulder, Colo., and when DePriest started thinking about using a smart grid as a competitive advantage in the 1990s, the communications technology wasn’t yet where it needed to be. So he tapped an EPB employee and former cartographer, Larry Hinds, to figure out when the time was right. And then they waited. For seven years.

When the technology, workforce, and price point were all aligned, EPB made the business case, to customers and its board, to build a smart grid and offer communications services to homes and businesses. Practically speaking, it was really doing two things simultaneously—building the smart grid and starting a new business—explained Danna Bailey, vice president of corporate communications. “We had to get approvals for the new business that were not necessary for making the operational improvements that we call smart grid. In our customers’ minds, smart grid was somewhat of a sidebar to what they were perceiving as an immediate win: super-fast Internet and a better option for TV and phone service. In my opinion, it wasn’t until we started seeing real benefits in reliability that customers started realizing, ‘Oh yeah, they built that smart grid too.’ ”

Given the difficulties Xcel encountered in Boulder deploying its smart grid in general and fiber-optic cable in particular, I had to ask how EPB managed to be successful. David Wade responded, “We engaged our community early. We spent months speaking with neighborhood associations, civic groups, business leaders, and general community members about our plans. We asked them to let us know—and to let our Board and City Council know—if they wanted us to move forward with this plan, or if they didn’t want us to. Overwhelmingly, our community responded with support for this initiative. Without that support, the deployment would have likely been much more challenging.

“We were able to show customers immediate benefits to the system being in place—both in terms of offering an advanced alternative to traditional cable and phone-based communications products and also in terms of showing immediate reduction in outage duration.

“From a corporate culture standpoint, while we had been implementing smaller-scale improvements for years, it was important that the majority of our people were aligned philosophically before we began the massive project. Incredible successes happen when everyone is working on projects that complement one another—some small in scale and some massive in scale.”

As for the timing of smart grid component rollouts, EPB built its smart grid to realize the benefits of the whole, rather than individual parts (see table). “This philosophy is relevant in terms of the nonlinear nature of our buildout (many initiatives were happening simultaneously) and also in terms of payback,” Wade explained. “When we look at payback, we don’t think of it in terms of individual component payback, but in terms of the whole system.”

Key smart grid components. Because all of the components are integrated, finishing touches and additional integrations are ongoing. The completion dates here are representative of major milestones met for each feature. Source: EPB

All of the components work together, and integrations and new tools continue to be in development. Some examples include the “Smart Grid Management System.” It was operational in terms of capturing usage and voltage reads in October 2012. “However, in upcoming releases (the next one is scheduled for October 2013),” Wade noted, “more functionality will be added, including outage reporting, full integration with polyphase meters, the ability to identify usage anomalies for customers, theft detection, integration with demand response and distributed resources functions enabled by the Open Access Technology International (OATI) webDistribute platform, remote connect/disconnect functionality, and more.”

The Financing Path

Initially, EPB planned to deploy its smart grid over a 10-year time frame, reaching 80% of the most densely populated area first and gradually expanding to cover the more rural areas of the system. With that plan in mind, EPB, as an agency of the City of Chattanooga, issued $169 million in municipal bonds in 2008 and began construction. Additionally, it sought and gained approval from TVA, the regulator, and the Tennessee State Comptroller for approval and review of the fiber-optic business plan.

In 2009, EPB applied for, and was awarded, a $111 million matching grant through the U.S. Department of Energy as part of the American Reinvestment and Recovery Act. That grant, while not changing the strategy, did expedite it.

Impressive Results

As a municipal utility, EPB measures the value of its smart grid in terms of what it provides for the community along three main metrics: reduction in outage duration and other direct benefits to electric power customers, improvements in utility operational efficiency, and availability of next-generation communications services.

Reduction in Outage Duration. A University of California, Berkeley study indicates that power outages account for roughly $80 billion annually in total losses to communities across the U.S. Based on that calculation, EPB estimates that community losses in its service area are roughly $105 million annually. But it is seeing outage reductions of 50% and higher thanks to its smart grid work, which means the community avoids $50 million or more each year in lost productivity, lost product, and lost sales.

The system continues to outperform the utility’s 40% improvement goal. Here are some recent results of direct customer impacts of storm events:

  • July 5, 2012: 55% improvement, 42,000 fewer customers affected
  • Jan. 14, 2013: 100% improvement, 11,258 fewer customers affected
  • Jan. 17, 2013: 70% improvement, 8,056 fewer customers affected

The story of the Jan. 14 event—when, at 6:51 p.m., a tree fell on a high-voltage 46 kV power line just outside of the Pine Ridge Substation—is becoming legendary. Here’s the timeline:

  • The fallen tree causes a fault serving three 12 kV distribution substations and knocks out power to 11,258 homes and businesses.
  • A mere 28 seconds later, the automation system restores service to 10,000 homes and businesses.
  • Another 15 seconds later, automation restores power to another 800 homes and businesses.
  • Three minutes later, a dispatcher remotely opens and closes switches, restoring power to 289 more homes and businesses.
  • Two minutes and 43 seconds later, a dispatcher remotely operates the final switches to restore power to the remaining customers.

Within 6 minutes, more than 11,000 homes and businesses were restored—an effort that would have taken about 4 hours before Chattanooga’s smart grid.

As Figure 1 shows, EPB avoided over 50 million customer outage minutes from July 2012 through March 2013.

 

1. Outage mitigation. The direct savings in customer outage minutes since EPB began integrating smart grid technologies on its distribution system are dramatic. Data for 2013 are through March 31. Source: EPB

 

But Figure 1 only represents direct savings. Consider a traditional multi-day outage restoration scenario for a significant storm, which generally has three ordered tiers of work:

  1. Identifying areas of damage.
  2. Switching around damage.
  3. Making repairs to damage.

In a traditional multi-day storm restoration scenario, utilities may spend the first 20 hours on Tiers 1 and 2—sending crews to manually look for damage and to manually open/close switches to energize customers around the damage. These are the steps that have been largely replaced with automated switching. Next, crews begin work on the areas with damage. “We refer to direct savings in customer minutes of interruption (CMI) as the minutes saved specifically and directly by the quick identification of damage and automated switching. Just as important and significant are indirect CMI savings: the minutes gained because the crews can go straight to Tier 3 work,” explained Manager of Smart Grid Development Jim Glass.

Improvements in Operational Efficiency. “Even at this early stage of implementation, we’re seeing efficiencies in operations that amount to roughly $10.5 million per year,” said Assistant Vice President of Electric System Ryan Keel. “Examples include meter-related trip costs, demand reduction, asset management, and reduction in storm restoration cost.”

When the average person thinks about the smart grid, the first thing that comes to mind is a meter that enables bidirectional communication. That capability has helped EBP provide improved customer service. For example, it is common for customers to report an outage that a field crew later finds to be a tripped breaker box. Intelligence at the meter can allow EPB staff to troubleshoot that call remotely instead of sending out a lineman in a truck to repair a perceived problem. “Now that our software can see what’s happening at the meter, we know that roughly 10% of our outage calls are not outages at all and can be resolved with the customer quickly and remotely,” said Keel.

But network intelligence is where EPB has realized even greater gains. Reliability has been significantly enhanced by its 1,170 S & C Electric Co. IntelliRupter PulseClosers (pictured in the photo at the top of this story), which have enabled dramatic outage duration reductions, which in turn led to EPB winning Greentech Media’s best-in-class award for distribution automation two years in a row.

“Where we used to have intelligence on each end of a multi-mile feeder, we now have intelligence (smart switches) every 3,300 feet,” Glass noted. “The time saved by only having to search 3,300 feet for damage (versus up to 36 miles) represents very real, though indirect, savings in CMI.”

Next-Generation Communications Services. Though the smart grid communications backbone, which EPB Electric Power owns, was installed first to shorten power outages for customers and improve operational efficiencies for the utility, that fiber-optic asset can also be used as a revenue stream and is “leased” by the EPB Fiber Optics brand to offer next-generation communications services for a monthly subscription.

The company currently has almost 50,000 homes and businesses connected to an Internet speed of at least 50 Mbps—that’s 10 times the national average, according to Bailey, and the largest concentration of existing connections that fast anywhere in the country. Customers do not have to put down a deposit and do not have to commit in advance in order for the service to come to their neighborhood because it is available throughout the service territory. Most customers are connected at the beginning speed of 50 Mbps (available a la carte for $57.99/month); other residential and business customers subscribe at 100 Mbps, 250 Mbps, and 1 Gbps speeds.

Net Benefits. The fiber network that enables fast Internet plus high-quality TV and phone service has paid $57 million to the electric utility so far in allocations and access fees. That is the equivalent of a 4% rate increase for EPB Electric Power customers (both business and residential) that did not have to happen, Bailey noted. Every residential customer in EPB’s service territory, regardless of whether they subscribe to EPB Fiber Optics services, has realized savings of roughly $330 in their electric rates since 2009.

“Based on a conservative estimate, the EPB Fiber Optics brand will pay the EPB Electric Power brand an average of $24.1 million per year going forward,” Bailey said. Reductions in outage duration, improved operational efficiencies, and revenue from the sale of communications services result in an average annual payback to the electric utility and the Chattanooga area community of $84.6 million.

What’s more, EPB has had companies say they relocated to Chattanooga in part because of its smart grid efforts and reliability. Clearly, EPB’s smart grid has been a boon for customers, the community, and the utility.

Forging New Customer Relationships with a New Business Model

The smart grid deployment and new fiber-optic communications offerings have affected customer relationships in several ways, “from the obvious to things we didn’t even consider while we were planning the project,” Wade noted. EPB has not only had to learn how to build and operate an entirely new system but also learn how to be “a sales and marketing organization in addition to our traditional role as a technology and service organization,” he said.

Another big shift that EPB planned for was transitioning from a business in which all of the work takes place outside of the customer’s home or business “to an environment where we would be spending several hours inside customers’ homes and businesses to set up their communications services. We were vigilant in training our installation teams on customer service, behavior inside a customer’s premise, attire, cleaning up after themselves, etc. It was well worth the effort, as we now hear more customer praise about our installer teams than anyone else in the company.”

The ability to provide new information and more of it was expected, but the benefits of that information sometimes are unexpected.

Keel shared the example of a call from “an angry industrial customer whose equipment had tripped, shutting down production. In the past, we would have had to install monitoring equipment to watch for another anomaly before we could determine the problem. Today, our 1,200 smart switches capture waveforms. We were able to pull the waveform data and show this industrial customer that their equipment was reacting to a dip in voltage for one cycle that resulted from a fault on a 161 kV loop several miles and voltage levels away from the site. Appreciative of the quickly available data, the customer reconfigured the equipment to a less-sensitive setting, reducing the probability of another similar incident.”

In 2012, EPB began offering online energy monitoring options for large industrial customers, and in 2013 it began offering online viewing of interval meter data to residential and business customers, an updated demand response program for commercial/industrial customers and time-of-use rates. As EPB partners with Bell Labs, it is looking for even more ways to leverage its data for customer advantage, including:

  • Improving voltage delivery to customers.
  • Being able to inform customers that their usage is outside of normal (for example, if a heat pump fails), thereby saving the community from costs associated with unnecessary usage. (EPB estimates it will be able to help customers save 20 million to 30 million kWh annually.)
  • Providing customers with a predictive look at future usage, so that they can plan to do something about it (if they choose), versus looking at historical usage that is too late to change.
  • Aiming to improve on the current average 50% reduction in outage duration by using data to eliminate the other 50%, such as with predictive analysis on pending failures.

Congratulations to everyone at EPB Chattanooga for demonstrating that it is possible to engineer a smart grid program that delivers both technology and economic benefits to customers, communities, and utilities.

Gail Reitenbach, PhD is POWER’s managing editor.