The 2017 Atlantic hurricane season officially began July 1. By then, three named systems had already become storms, foreshadowing what became one of the most active and destructive storm seasons ever. Subsequently, five named storms and one tropical depression formed by July 31, but the associated damage by then was minimal, attracting little notice. However, by season’s end:

• A total of 17 named storms formed, making it the fifth most active and seventh most powerful season of all time since record keeping began in 1851
• August began a stretch of 10 consecutive hurricanes, an unprecedented occurrence
• This was the costliest hurricane season of all time at an estimated $320 billion in damages primarily due to three major hurricanes—Harvey, Irma, and Maria

The cumulative impact was sobering with notable implications for utilities for 2018.

Source: The Weather Channel

Timeline of 2017 Atlantic Hurricanes/Storms

Source: The Weather Channel

Seven of the 2017 Atlantic Ocean Hurricane/Storms directly impacted the United States. More than 750 Americans were killed and hundreds of billions of dollars in cumulative damage sustained. For the United States, hurricanes Maria, Irma, and Harvey were the most devastating in terms of storm strength, loss of human life, and estimated costs.

2017 Atlantic Ocean Hurricane/Storms Impacting the United States

Key Takeaways

• After more than a decade (2005-2016) of benign Atlantic storm activity and no U.S. landfall hurricanes, 2017 may represent the start of a new more active cycle. The average Atlantic hurricane season during 1981-2010 consisted of 12 tropical storms and six hurricanes, including two major hurricanes
• In Florida:
  • The Florida PSC required the state’s utility companies to update their storm plans and invest in “storm-hardened” infrastructure for more than a decade in the wake of a series of hurricanes and tropical storms that battered the state in 2004-05
    • FPL, a subsidiary of NextEra Energy which serves 10 million customers in Florida, says it has spent $3 billion since 2006 to fortify its electric grid, including burying main lines and installing nearly five million smart meters and other devices
    • Duke Energy, which serves about 1.8 million customers in Florida, says it has invested $2.4 billion since 2006 to improve its system in the state, including replacing more than 800,000 wood power poles
  • Within three days of Hurricane Irma’s September 10 landfall, FPL had restored power to 2.3 million customers, 40% of those affected across Florida. On September 19, the company announced that it had restored service to nearly all of its 4.4 million customers (or 99.9%). Further, it shared that its system upgrades allowed FPL to automatically reroute power and address about 1.5 million outages
• In Texas:
  • Though Harvey was one of the worst storms to affect the United States in recent years, the damage to the grids and transmission lines were not equally extensive
  • None of the major utilities in Texas, following Harvey, suffered any significant damage in their generation fleet or power generating system, thanks to advanced infrastructural development

Implications

• System upgrade investments can shorten the timeframe to restoring power, providing vital relief to customers and an operational effectiveness perception to utilities while minimizing losses in revenue
• Utilities announcing weeks or longer to restore power saw their stock prices decline in the aftermath of hurricane activity, while those announcing seven to ten days were rewarded by Wall Street with share price increases. For example, FPL shares increased 0.6% following Irma’s havoc
• Despite the devastation of the 2017 storm season, the overall utility sector is not expected to suffer much in the long term. This is due to the sector’s significant investments toward improving the grid system and transmission and distribution lines in recent years, particularly moving many overhead transmission lines to underground
• System hardening in preparation for storms can increase rate base and earnings

More information

• USA Today: Improvements Help Utilities Respond Faster to Storms
• CNN: 2017 Hurricane Season Facts
• The Weather Channel: 2017 Hurricane Review

Additional Contributing Author: Tony Gonzalez

This report is part of the VIU Minute series. To view all featured Minutes, please click here.