Over the course of August and September 2017, the United States was hit with major storm systems which had a huge impact on regional power grids. Hurricane Harvey inflicted severe damage along the Texas Coast, Hurricane Irma barreled through Florida, and Hurricane Maria devastated Puerto Rico. The latter of these storms left Puerto Rico in the dark for over 55 days, representing the largest power outage in the United States in over a decade and contributing to the over 50 deaths . These are not the first major storms affecting these regions, but according to David Katz of CFO Magazine, “there was something different about this year. Maybe it was the awareness that the Gulf of Mexico’s waters were ‘freakishly warm’ this summer, as the Chicago Tribune reported in March, and that such warming could indeed intensify storms originating in those waters” . As companies responsible for the power grid think about the effects of climate change, such as intensifying storms, leaders need to focus on how to maintain service in the event of catastrophes. One company currently dealing with a storm’s aftermath is CenterPoint Energy (“CenterPoint”).
CenterPoint, headquartered in Houston, Texas, owns and operates electric transmission and distribution facilities, natural gas distribution facilities, and supplies natural gas to commercial and industrial customers . In the aftermath of Hurricane Harvey, 950,000 customers experienced power outages due to flooding as a result of 16 of 200 substations (transform voltage from high to low) being flooded. The company was faced with analyzing it’s response to the storm and how it could improve its ability to supply power to customers. When reflecting on the effects of the storm, CFO, William Rogers, also realized that the effects could have been worse had digital meters not been installed in 2009, enabling CenterPoint to quickly pinpoint where outages were occurring and quickly reroute power to those areas through alternative substations .
As the company looks forward, one opportunity to mitigate the risk, as stated by SVP, Kenneth Mercado, is raising facilities aboveground. Currently, most substations are located belowground and experience electrical shorts when flooding occurs leading to power outages. By raising the facilities aboveground you are protected from flooding; however, this also exposes the facilities to the potential adverse effects of hurricane force winds. As such, CenterPoint needs to be very thoughtful about restructuring infrastructure . Another factor when evaluating moving substations is the cost. For example, following Superstorm Sandy in New Jersey, The Public Service Electric and Gas Company (PSE&G) launched a 5-year $1.2 billion project to elevate 18 substations that flooded. Additionally, Jersey Central Power and Light (JCP&L), invested $1.5 billion to upgrade 20 substations through installing flood barriers, elevating equipment, and installing real-time monitoring devices . CenterPoint had 16 failed substations, and both PSE&G and JCP&L highlight the cost of renovating a similar number of substations.
CenterPoint needs to examine where the current power grid and substations are located and optimize for different natural disasters resulting from climate change. When power outages occur, CenterPoint looks to reroute power from other substations. To ensure this can take place effectively, back up plans should include a source of power from a substation at a different elevation (i.e. if the primary power for an area is from an underground substations, then an aboveground substation should be the backup plan). Implementing changes to the power grid will be costly and take place over a longer time horizon, but the question remains how to determine the optimal layout. One option to determine the optimal layout of the power grid, and how to mitigate other weather-related fallout, is a predictive model that is being developed by Texas A&M Regent Professor, Dr. Mladen Kezunovic. According to Dr. Kezunovic, Big data such as “utility company’s operational records, weather forecasts, altitude and vegetation around the power systems can be used to customize the applications of the model” . If the model can be customized to determine which areas are most susceptible to outages based on different natural disasters, then CenterPoint will have a blueprint detailing where to invest resources. Currently, CenterPoint is partnering with Texas A&M and providing data to prove the model’s validity for vegetation trimming. Given that the data is already being provided, the aforementioned customization should be a near-term reality .
In the last three years, Houston has seen two 500-year floods and one 1,000-year flood (as classified by FEMA), and CenterPoint needs to have a better understanding of how superstorms will continue to impact the region. More work needs to be done around understanding the cost associated with upgrading the power grid. Additionally, is upgrading the power grid more than just a supply chain issue, but a humanitarian issue? And if it is a humanitarian issue, should the government help pay for the upgrades?
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 Lu, Denise and Alcantara, Chris. “Most of Puerto Rico Has Been in the Dark For.” The Washington Post, November 15, 2017, https://www.washingtonpost.com/graphics/2017/national/puerto-rico-hurricane-recovery/?utm_term=.fdc0a69951b7, accessed November 2017.
 Katz, David M. “The Weight of Water.” CFO Magazine, November 6, 2017, http://ww2.cfo.com/risk-management/2017/11/the-weight-of-water-flooding/, accessed November 2017.
 CenterPoint Energy. February 28, 2017 Form 10-K. [http://investors.centerpointenergy.com/secfiling.cfm?filingID=1130310-17-6&CIK=1130310], accessed November 2017.
 O’Neill, James M. “Superstorm Sandy: 5 years later, New Jersey is Still Storm Proofing.” NorthJersey.com, October 25, 2017, http://www.northjersey.com/story/news/new-jersey/2017/10/25/superstorm-sandy-5-years-later-new-jersey-still-storm-proofing/713669001/, accessed November 2017.
 “Researchers develop model to predict and prevent power outages using big data.” EurekAlert! The Global source for Science News. July 26, 2017, https://www.eurekalert.org/pub_releases/2017-07/tau-rdm072617.php, accessed November 2017.