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6/22/2016

HowToProtectYourOrganizationFromElectricalPowerOutages
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HowToProtectYourOrganizationFrom
ElectricalPowerOutages
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MarkMacGougan,HartfordSteamBoiler

Therearewaystoreduceequipmentexposuresduetoelectricutilityserviceoutages.
Thearticlethatfollowsthissummaryisabasicdiscussionoftheissue,coveringhow
electricaldistributionworksandsomeofthecontractualandphysicalanswersto
dealingwiththeproblem.Topicsinclude:

ServiceInterruptionInsurance
KnownvariouslyasUtilityServices,ServiceInterruptionorUtilityInterruptioncoverage.
Thiscoverageisgenerallyonlyavailableforlossesthatresultfromsuddenphysical
damagetoutilityequipment.LookforthiscoverageunderbothyourCommercial
PropertycoverageandunderyourEquipmentBreakdowncoverage.

ElectricalPurchaseContracts
Therearemanywaystopurchaseelectricity.Youcanpurchasepowerfromyourlocal
utility,orfromotherutilities,orfromelectricalbrokersorwholesalers.Rateplansareas
variedasthewirelesstelephoneplansandincludemanyofthesamefactors,suchas
peakversusoffpeakusage

EnergyAssetOutsourcingContracts
EnergyAssetOutsourcingContractsAcompanysellsoffvariousenergyassets
(suchasheatingandcoolingequipmentandbackupelectricalgenerators)toathird
partythatspecializesinmanagingsuchequipment.Thecompanyagreestobuy
heating,coolingandelectricityfromthethirdpartycompanyoveralongtermat
specifiedrates.

MaintainingReliability
Herearefivetypesofphysicalanswerstotheproblemofelectricaloutageexposure:
Additionalutilityline
Uninterruptiblepowersupply(UPS)
Emergencygenerator
Distributedpowerequipment/cogeneration
Electricalequipmentmaintenance
ThefulltextarticlecontainsmoreinformationandlinkstootherLocomotivearticlesthat
exploretheseandrelatedissuesinmoredepth.
AbouttheAuthor
MarkMacGouganisassistantvicepresidentfornewproductdevelopmentatHartford
SteamBoiler.

Thefullarticle

HowToProtectYourOrganizationFrom
ElectricalPowerOutages
Introduction
Thisarticleisabasicdiscussionoftheissueofbusinessexposuretoelectricutility
serviceoutages.Itsurveysarangeofapproachestoreducethoseexposuresorease
theirimpact.Theseincludecontractualanswers,suchasserviceinterruption

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insurance,andphysicalanswers,suchasinstalledbackuppowersupplyequipment.
Thefollowinginformationservesasanintroductionmoreindepthinformationcanbe
foundinpreviousLocomotivearticleswhicharelistedattheendofthisdiscussion.
HowElectricalDistributionWorks
MostelectricalpowerusedinNorthAmericaisgeneratedatlarge,investorowned
powerplants.Thesearegenerallycoalfired,oilfired,naturalgasfired,nuclearor
hydroelectric,buttherearesomealternateenergyutilityplantsaswell.
Thevoltageofelectricalpowerissteppedupordownusingtransformers.Typically,
powerissteppedupnearthegeneratingplanttohighvoltageforlongdistance
transmission.Atsubstations,powerissteppeddowntoamediumvoltageforshorter
distancedistribution.Formostconsumersofelectricity,whetherindustrial,commercial
orresidential,thepowerisconvertedtoitsfinal,usablevoltagebyatransformeronor
veryneartotheconsumer'slocation.
Takentogether,theentiresystemofgeneratingplantsanddistributionnetworkis
knownastheGrid.TheGridinterconnectstheelectricalsuppliesformostofthe
country,althoughitissplitintoanEasternGrid,aWesternGridandtheTexasGrid.
TheCloserTheLine,TheGreaterTheRisk
Asawhole,theGridisveryreliableandresilient.TheGridcancontinuetooperate
despitethefailureofspecificindividualcomponents,evenverylargegeneratingplants
orsubstations.ThemostsignificantdisturbancetotheGridinlivingmemorywasthe
EastCoastblackoutof1965,when30millionpeoplelostpowerforaslongas13
hours.
Thereliabilityoftheelectricalsystembecomeslowerasyougetclosertotheindividual
officeorplant,withthegreatestvulnerabilityappearinginthesocalled"lastmile"upto
theactualphysicalconnectiontotheuser.Thereislittleornoredundancyinthe
connectionbetweenautilitycustomerandthenearestsubstation,sothefailureofa
transformerorpowerlinewillcauseanoutageinthatservicearea.Stormscan
sometimesdisablenumerouspowerlinesatthesametime,taxingrepaircapacityand
extendingtheoutagetimeinaffectedareas.
ServiceInterruptionInsurance
Firstpartylossarisingfromelectricalpoweroutageisaddressedunderaninsurance
coverageknownvariouslyasUtilityServices,ServiceInterruptionorUtilityInterruption
coverage.Thiscoverageisgenerallyonlyavailableforlossesthatresultfromsudden
physicaldamagetoutilityequipment.Lossesthatresultfromothercauses,suchas
operatorerrororsystemundercapacity,arenotcoveredbymostinsurance.
YoushouldlookforthiscoverageunderbothyourCommercialPropertycoverageand
underyourEquipmentBreakdowncoverage.Ineachofthesecategories,youshould
lookforcoverageforthreedifferenttypesoflossscenarios:DirectDamage,Spoilage
andBusinessIncome/ExtraExpense.Apoweroutagecancauseeachofthesetypes
ofloss.Contactyourcompany'sriskmanageroraninsuranceprofessionalformore
information.
ElectricalPurchaseContracts
Insuranceisnottheonlycontractualanswertoelectricaloutageexposure.Twoother
areastoconsiderareelectricalpurchasecontractsandenergyassetoutsourcing
contracts.
Intoday'sworld,therearemanywaystopurchaseelectricity.Youcanpurchasepower
fromyourlocalutility,orfromotherutilities,orfromelectricalbrokersorwholesalers.
Rateplansareasvariedasthewirelesstelephoneplansandincludemanyofthe
samefactors,suchaspeakversusoffpeakusage,guaranteedusagelevelsversus
variableusage,andlengthofcontractcommitment.Manyutilitiesprovidearate
reductionforcustomerswillingtobeidentifiedasInterruptible,meaningthatpowercan
beshutoffwithlittleornonoticeifneededinordertosupplyothercustomers.Some
contractsincludepenaltiesifpeakdemandthresholdsareexceeded.
Youneedtounderstandyourelectricalpurchasecontractinordertoanalyzethe
potentialbenefitsofinstallingequipmenttominimizeyouroutageexposure.Any
changeinyourphysicalplantrelativetoyourelectricaldemandorsupplyshould
includeareviewofyourelectricalpurchaseterms.
EnergyAssetOutsources
Anotherkindofcontractthathasbeenusedtoaddresselectricalexposuresisan
energyassetoutsourcingcontract.Inthisarrangement,acompanysellsoffvarious
energyassets(suchasheatingandcoolingequipmentandbackupelectrical
generators)toathirdpartythatspecializesinmanagingsuchequipment.Aspartofthe
arrangement,thecompanyagreestobuyheating,coolingandelectricityfromthethird
partycompanyoveralongtermatspecifiedrates.Thethirdpartyisresponsiblefor
systemreliabilityandoutagescantriggerpenaltiesunderthecontract.
Thesetypesofcontractsareworthconsideringbyanyorganizationthatdoesnothave

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theinternalresourcestomanageenergyassetseffectively.However,theyshouldbe
viewedwithacarefulriskmanagementeye.Somecompanieshavefoundthatthey
havesimplytradedonekindofriskforanother.Upuntilrecently,oneofthelargest
companiesofferingthesecontractswasEnronEnergyServices.
MaintainingReliability
Herearefivetypesofphysicalanswerstotheproblemofelectricaloutageexposure:
Additionalutilityline
Uninterruptiblepowersupply(UPS)
Emergencygenerator
Distributedpowerequipment/cogeneration
Electricalequipmentmaintenance
AdditionalUtilityLine
Foralargeplantorfacility,asecondincomingpowerlinecanprovideadramatic
increaseinreliability.Thesecondpowerlineshouldbeasfarfromthefirstlineas
possibletominimizethechanceofbothlinesbeingaffectedbythesamephysicalloss.
Additionalpowerlinesneedtobenegotiatedwiththesupplyingutilityandwillrequire
additionaldistributionequipmentwithintheplantorfacility.Thecostofasecondpower
linecanbesubstantialandwilldependontheamountofequipmenttheutilityandthe
userneedtoinstall.Asecondpowerlinewillnotprovideprotectionagainstawidearea
utilityoutage.
UninterruptiblePowerSupply(UPS)
AnUninterruptiblePowerSupply(UPS)isbecomingastandardpartofcomputer
systeminfrastructurerequirements.Ifdatacenterslosepowerunexpectedly,the
resultantcrashcancauseexpensivelossesofdataandfunctionality.UPSsystemsare
generallydesignedtoshieldcomputerinstallationsfromshorttermdipsandspikesin
thepowersupply.Intheeventofanextendedoutage,aUPSsystemisintendedto
provideforanorderlyshuttingdownofthecomputercenter,includingsavingdata.
UPSsystemsarenotgenerallydesignedtomaintainpowerduringextendedpower
outages.UPSsystemsserveseveralimportantfunctions,andshouldcontinuetobe
usedevenifotherphysicalsolutionstooutageexposuresareimplemented.UPS
systemsshouldbeconsideredforallmissioncriticalequipmentandnotjustmajordata
centers.
EmergencyGenerator
Emergencyelectricgeneratorsprovideameanstomaintainsomeportionofthe
electricpowerloadforanindefinitetimeduringautilityoutage.Onsitegeneratorsare
requiredatcertainfacilitiessuchashospitalswherelivesdependonelectricalpower.
Manyotherfacilitiesandanincreasingnumberofhomeownersareinvestinginbackup
generatorsasaphysicalformofprotectionagainstpoweroutages.
Mostbackupgeneratorsarepoweredbyinternalcombustionengines,andfueledby
gasoline,dieselfuelornaturalgas.Unitscanbesettopowerupautomaticallyinthe
eventofanoutageormayrequiremanualstarting.Unitsaretypicallysizedtosupport
ascaleddownelectricalloadthatiswellbelowthenormal100percentelectrical
demand.Backupgeneratorunitsshouldbestartedupandmaintainedonaregular
scheduletominimizethechanceoffailurewhenneeded.
DistributedPowerEquipment/Cogeneration
Distributedpowerandcogenerationunitsarealsoonsitegeneratingsystems.The
differencebetweentheseunitsandanemergencyorbackuppowergeneratoristhat
theyareintendedtoberunregularly,notjustduringutilityoutages.Theymaybe
operatedcontinuouslyortheymaybeoperatedduringhoursofpeakdemandorpeak
electricalcost,tominimizeelectricalcost.
Gasolineanddieselenginesareunlikelytobeusedforthisservicebecauseoffuel
storagelimitations,butnaturalgasfueledenginesmaybeused.Also,naturalgas
fueledturbinesarewidelyusedfortheseapplications.Gasturbinescomeinan
increasinglywiderangeofsizes,fromutilitygradepowerproducerstoremarkably
compactmicroturbines.Anemergingtechnologyinthisareaisfuelcells,whichare
justbeginningtobecommercializedfordistributedpowerapplications.
Thetermcogenerationgenerallyreferstocaseswheretheheatfromanyofthese
unitsisusedtoprovideheatingorhotwatertothefacility.Wherefeasible,this
approachimprovestheeconomicsofinstallingthepowergeneratingequipment.
ElectricalEquipmentMaintenance
Allofthephysicalanswersnotedaboveinvolveaddingnewequipmentandchanging
theelectricalconfigurationofalocationtoprovidebackupcapacityofonekindor
another.Anequallyimportant,andmuchlessexpensive,physicalansweristomake
suretheexistingelectricaldistributionequipmentisproperlymaintained.Preventable
failureofonsiteelectricaldistributionequipmentcananddoescausemanypower
outages.Oiltestingofelectricaltransformersandinfraredscanningofelectricalpanels
andwiringareproventechniquesforavoidingelectricaloutagesbyfindingproblems
beforetheequipmentactuallyfails.

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ForMoreInformation
ForFurtherInformation:TheserelatedarticlescanbeviewedinTheLocomotive
library:
PreparingforanElectricalPowerOutage"
"LossMitigationActionPlans"
"GuidelinesForProvidingSurgeProtection"
"KeepingtheLightsOn:AnActionPlanforAmerica'sAgingUtilityTransformers"
"AnAnalysisofTransformerFailures"(Part1andPart2)
"ElectricalPreventiveMaintenance"
"ProtectingElectronicEquipmentfromLightningandVoltageSurges"
"TransformerOilTesting"
"IncreasingTransformerReliabilityUsingInsulatingOilAnalysis"
"ShortCircuitandProtectionCoordinationStudies"
"InfraredThermography:TakingtheHeatoffFaultyConnections"
[Inafutureissue:CostBenefitAnalysis.Itisdifficultformanyorganizationsto
analyzethecostsandbenefitsofbackupelectricalsupplyequipment.Ifyoucan
quantifyyourfinancialexposuretooutages,youcancomparethosenumberstothe
annualizedcosts.Wewillprovideasamplecalculation.]
AbouttheAuthor
MarkMacGouganisassistantvicepresidentfornewproductdevelopmentatHartford
SteamBoiler.
Disclaimerstatement:
Allrecommendationsaregeneralguidelinesandarenotintendedtobeexhaustiveor
complete,noraretheydesignedtoreplaceinformationorinstructionsfromthe
manufacturerofyourequipment.Contactyourequipmentservicerepresentativeor
manufacturerwithspecificquestions.
backtotop

2016TheHartfordSteamBoilerInspectionandInsuranceCompany.Allrightsreserved.

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