This article is the first installment of a short series to keep insurance professionals informed on the causes, effects and outcomes of a severe power interruption that has occurred in the Northeastern United States and large regions of Eastern Canada. As technical experts to claim professionals, we have assembled information that we believe will help you in making educated coverage and valuation decisions.

Background:

The New England states form a large power usage and generation network called EI (Eastern Interconnect) that is interconnected with Ontario and Quebec, Canada. The connection points into Canada occur via New York State and Detroit on Niagara Mohawk corridors that are transborder.

Throughout the year, Quebec stands as a net supplier of power to the Eastern Interconnect grid due to its large hydroelectric generating capacity that exceeds its net demands.

This interconnectedness makes the Atlantic Northeast run electrically and provides many significant advantages such as stability, continuity of service and economy, over running several smaller independent networks.

While there are numerous power companies in the Easten Interconnect super region, there exists a handful of Master Control Centers that are command locations that are also interconnected. In this way, the daily, tactical operation of the grid plays out.

Under most conditions, problems are worked around and bypassed to maintain the highest quality, appropriate generating capacity and continuity of service. Larger disturbances that last longer can affect larger portions of the grid, but can also often be worked around with careful direct intervention at the Master Control Center level senior management decision-making.

As we have all witnessed, though, there are conditions that present long-term faults that will lead to a "crash". In these rare cases, strong interconnectedness is the system's Achilles Heel.

What Happened on August 14th?

Earlier in the day, the grid had been the subject of several problems, with alarm conditions (called contingencies) occurring throughout the Eastern Interconnection. Current information indicates problems were brewing as early as 11 AM Eastern.

At around 2 PM Eastern, the first real signs of trouble were occurring in the western end of the Eastern Interconnect. While not clear at this point, problems involving voltage swings and power supply were showing. At approximately 3 PM a portion of an Ohio generating facility went off line.

Essentially, though, the beginning of the cascade began around 4 PM Eastern Time, when three (3) large transmission corridors (operating at 345,000 volts) tripped off the grid when automatic protection detected fault conditions.

This fault created a long-term fault that required a massive load swing on the grid. The result was generating capacity trying to work around the problem and massive load shedding (i.e. shutting off power to consumers). Under many conditions, such an event can be worked around effectively, but a temporary generation quality problem will exist. If the fault clears and the system settles down, normal stability will resume.

What appears to have happened here is a loss of stability when voltage dropped and loads on generation increased substantially. Ultimately, this led to a cascade of generators being automatically dumped off the grid as they became unstable. Once enough capacity was removed from the grid, the absolute failure became inevitable. It is better to shut off power than damage generation stations and have them down for months for repairs. This kind of automatic lock out is normal, engineered and prevents permanent catastrophic failures.

The media originally reported (4) different theories as to the cause of the event:

1. A fire at a generating station outside of New York City, which may have produced a drop in capacity and produced a demand problem.
   
   
2. A three-phase fault on the Canadian side of the border at Niagara Falls causing the loss of several thousand megawatts of capacity.
   
   
3. A three-phase fault on the corridor running through New York State from Buffalo to New York City (resulting in the same scenario as 2).
   
   
4. A three-phase fault on a high-tension corridor running in Northeastern Ohio (same scenario as 2 and 3).

Of these, only item 4) predated the event that resulted in the blackout conditions.

The Outcome:

We have followed and analyzed the numerous sources of information and news outlets over the first 24 hours following the loss and applied educated analysis and experience with power systems to provide what follows.

As we best understand the extent of failure, large portions of Ontario, New England (Connecticut, Rhode Island), New York (including 100% of New York City), New Jersey, Eastern Ohio and Southern Michigan were affected.

Power started to return to many emergency services and to many consumers in rural and suburban areas and some outlying urban areas within a half day after the loss. We witnessed the majority of power supply return within 24 hours. However, even 48 hours after the event, there were some Ontario consumers in Toronto and Ottawa without power.

Unfortunately, since a large portion of our base capacity is carried by Nuclear and Thermal (i.e. coal fired) plants in Eastern Interconnect region, bringing such stations back online is not as simple as throwing a switch. Every generator must be carefully warmed, turned over, brought up to speed, synchronized with generators already supplying power and then switched into the system. In the case of nuclear station, this can take 2-3 days.

As well, various areas present load conditions that will vary over a 24-hour period. The Master controllers are sensitive to this as they bring a grid back up. This is why major cities will come on last and blackouts will occur. The load MUST be carefully balanced and brought back on in a sequence that minimizes disturbances.

What can adjusters expect?

The usual fare will predominate:

• Refrigerated and frozen goods consequential damages
• Off Premises Power (OPP) Time element coverage triggers
• Pain and suffering claims from loss of air conditioning
• Lost rent and income from building tenants in commercial and rental properties.
• Flooding in low lying areas due to loss of sump or ejector pump function

We would also expect equipment damage during a return to full service:

• Electronic equipment failures due to severe transient conditions (artificially generated currents) as power switches into and out of the grid.
• Motors and compressors - voltage sag and current transients from equipment not properly shut down prior to leaving for the day on Thursday.
• Specious lightning claims - look for where the damage is and is not.
• Lost income - what did a business plan to do following the loss.
• Lost computer data and rework/re-entry claims

In many instances, we see a failure to mitigate immediately following a loss event that can trigger Lost Income and Wages that were fully preventable.

LWG Consulting is ready to assist you with any technical equipment claims activity resulting from this event. We are well represented in the Northeastern part of North America and have technical consultant either in or very close to the states and provinces where the outages occurred. In an environment where officials will be spending weeks if not months poring over logs and actions that led up to the blackout, LWG will be available as "Your Trusted Advisor" to supply you the information, facts, and advice necessary to help you get the job done.