Narragansett Electric Co. has always said the reliability of electric service in Rhode Island wouldn’t be hurt by job cuts and cost cutting related to its pending acquisition of Blackstone Valley Electric Co. and Newport Electric Corp. A set of performance standards that would go into effect after the merger is completed, which could be as soon as May 1, aims to hold the state’s largest electric utility to its promise.
Narragansett Electric agreed to the reliability standards in late January as part of a settlement with state regulators and industrial electricity users, who had both opposed parts of the company’s merger plan.
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Narragansett Electric has estimated its acquisition of Blackstone Valley Electric and Newport Electric eventually could save the combined entity about $11 million a year compared to the cost of operating the companies separately. Some of those savings would come from consolidating customer service and maintenance operations and from job cuts.
The utility’s parent company, National Grid USA, has said it plans to eliminate more than 300 positions in Massachusetts and Rhode Island following its purchase of Eastern Utilities Associates, which owns Blackstone Valley Electric and Newport Electric.
Securities and Exchange Commission approval of the $640-million deal was expected at any time as of last week.
The utility hasn’t had any major problems with service reliability, said Steven Scialabba, the Department of Public Utilities and Carrier’s chief accountant. Rather, he said, the new reliability standards are designed to head off any potential problems arising from the merger.
Narragansett Electric’s General Counsel Ronald Gerwatowski described the standards, which provide for fines up to $2.4 million per year, as a stick without a carrot
“Obviously we already have an interest in keeping good service for customers even without this, but I think, in the context of the merger, the parties that were negotiating the settlement wanted to make sure that there were other added incentives because they knew we were also going to trying to save money,” Gerwatowski said. “They wanted to make sure we had financial consequences if we sacrificed the quality of service to create savings.”
The utility will be graded in four areas: frequency of power outages, duration of outages, customer satisfaction and how fast customer calls are answered.
Narragansett Electric last year reported an average of 1.34 power outages per customer in its coastal service area, which roughly approximates southern Rhode Island. The reliability standards allow the annual average to go as high as 1.44 outages per coastal customer before the company begins to get penalized. An average of more than 1.65 outages per coastal customer would draw a $500,000 penalty.
The standards are less forgiving in the utility’s capital service area, which roughly approximates northern Rhode Island. Narragansett Electric would be penalized if it reported an annual average of more than 1.28 service interruptions per customer there. The size of the fine would depend on how far over the limit the figure was allowed to climb.
The company reported a ratio of less than one outage per customer served in the area in each of the last three years.
These ratios are common measures of service reliability, but it’s misleading to compare one utility to another based on average interruptions per customer, said Eugene Gorzelnik, a spokesman for the North American Electric Reliability Council in Princeton, N.J.
“It’s difficult to compare across utilities because you have to take into account whether it’s urban or suburban or rural, the nature of the area and so on,” Gorzelnik said.
His group, a private organization set up by utilities in the wake of a massive blackout in 1965, sets reliability standards for power transmission and distribution systems.
The state’s new standards would make allowances for extraordinary circumstances, such as a major winter storm or a hurricane.
“That’s obviously out of our control,” Gerwatowski said. “They wouldn’t count it against us as a penalty. People expect us to restore their service as soon as possible, and we’ve been very good at that, but it wouldn’t be fair to penalize us just because a hurricane came in.”
Last year, Narragansett Electric’s power outages lasted an average of an hour and forty minutes per customer in southern Rhode Island. The duration was less than an hour per customer in the northern part of the state.
The reliability standards impose penalties if outages, on average over the course of a year, last more than 82 minutes in southern Rhode Island or 70 minutes in the northern part of the state per customer.
And Narragansett Electric is required to pick up calls to its customer service department within 20 seconds no less than 72 percent of the time on average during the year. The company reported getting to the phone quickly nearly 77 percent of the time last year.
The evaluation isn’t over once the utility’s customer service staff picks up a call, though. The standards require Narragansett Electric to satisfy at least 78 percent of the customers on the other end of the line. The percent of satisfied customers will be based on independent surveys conducted by an outside agency.
Similar surveys found that more than 82 percent of customers contacting the utility in 1999 were satisfied.
