There is no doubt that wearing gloves is clumsy and makes the electrical worker’s job more difficult. It is not surprising, then, that D.L. Steiner, Inc. is often asked whether or not workers are required to wear their gloves when working on a de-energized panelboard, control panel, or PLC cabinet. The answer to this question has three parts.

Part One: an Observation to Clarify the Situation

What is being considered here is a cabinet in which the local switch has been turned to the off position in order to isolate the internal components from the feed voltage supply. This is not the same as a cabinet or panel that has been completely isolated from its power source. When a cabinet has been removed from all voltage and appropriately locked out and tested for the absense of voltage, no shock or arc-flash hazard remains. In the case of a cabinet where a local switch has merely been turned off, however, a line-side voltage is still present, even though the internal components are de-energized, having been isolated from the voltage by an integrated isolating switch. So in such a case if the internal components are free from dangerous voltage, are gloves still needed?

Part Two: Questions to Guide Action

Gloves needed inside the Restricted Approach Boundary

This question is answered with a question – two questions actually. The first involves shock protection: What is the Restricted Approach Boundary? Simply put, this is the distance (which varies with voltage) where qualified workers must restrict their approach to energized electrical conductors over 50 Volts, unless using proper personal protective equipment (PPE) and voltage-rated tools (see NFPA 70E, section 130.2[C] for an explanation). Answering this question goes a long way in determining “Are gloves still needed?”

Consider the Restricted Approach Boundary to be a protective bubble that extends around energized components. The line voltage determines the size of this protective bubble. If workers are working on components sufficiently removed from the exposed energized conductors so that hands will not be placed within the Restricted Approach Boundary, there is no requirement to wear insulating gloves. Conversely, if electrical workers’ hands will “penetrate” or are likely to penetrate the protective bubble, they definitely face a shock hazard and should be wearing insulating gloves of an appropriate voltage rating.

The simplest situation for determining to glove or not to glove is when 120/240 Volts feeds the equipment. In this case, the Restricted Approach Boundary is “avoid contact” (see NFPA 70E, Table 130.2[C] for a complete listing of boundary dimensions with their corresponding voltages). If electrical workers are careful to avoid contact with energized components, they can work on adjacent de-energized components without wearing insulating gloves.

If the feed voltage is 480 Volts, the Restricted Approach Boundary grows to one foot. Workers can work on de-energized components that are more than one foot from the energized conductor without wearing protective gloves. But if their hands will or are likely to encroach the boundary, insulating gloves of the appropriate rating must be worn.

Is that all there is to it? Not quite. So far this discussion has only considered gloves as a protection from the hazard of electrical shock. But they are also intended to protect from a second electrical hazard, namely, arc-flash. Since we know there is a Restricted Approach Boundary for electrical shock; there is also an Arc Flash Protection Boundary. This naturally leads to the next key question: What is the Arc-Flash Protection Boundary? Whenever workers enter this boundary, they have placed themselves within an area that, should an arc-flash incident occur, could result in severe and damaging burns. These burns most frequently afflict the hands, because these body parts are typically closest to the potential arc source and therefore must vulnerable to arc burns.

By definition, the Arc Flash Protection Boundary is “the distance from a prospective arc source within which a person could receive a second degree burn if and arc flash were to occur.” (NFPA 70E Art. 100). Consequently, any worker who crosses this boundary is at risk of third degree burns and death.  The NFPA 70E requires that workers wear appropriate PPE (including gloves) as a thermal barrier. Thermal hand protection may be in the form of leather gloves, arc-rated gloves, or rubber insulated gloves with leather protectors depending on the particular circumstances involved (see NFPA 70E, Table 130.7[C][10] for PPE requirements in the vicinity of arch flash hazards).

PPE must be worn within the Arc Flash Protection Boundary

This question is not easy to answer, as it is not directly related to voltage levels or any single factor, but instead involves a combination of electrical conditions. The clearest indication of this boundary occurs when an arc-flash hazard analysis has been performed on the electrical equipment in question. In such a situation, each electrical device will have an electrical hazard label identifying the Arc-Flash Protection Boundary for that device. On some pieces of equipment with very low levels of arc-flash potential energy, workers may find the Arc-Flash Protection Boundary to be small enough to permit them to work on portions of the de-energized cabinet without wearing gloves. Typically, however, the Arc-Flash Protection Boundary will be large enough that gloves are required while working on de-energized components within the cabinet.

When an arc-flash hazard analysis has not been performed, NFPA 70E stipulates a default boundary of four feet in some situations when the voltage to a device is between 50 and 600 Volts (see NFPA 70E 130.3[A][1] for the conditions that create these situations). Obviously working in a cabinet or bucket in the presence of a live feed a four-foot boundary will require workers to wear gloves to protect their hands, even when working on de-energized electrical components within that equipment.

Knowing both the Restricted Approach Boundary and the Arc-Flash Protection Boundary helps workers properly protect their hands from the dangers of shock and arc-flash. In most cases, workers will discover that this protection involves wearing either leather gloves or rubber insulating gloves with leather protectors.

Part Three: An Option to Consider

Anyone who has ever worn voltage-rated gloves, with their bulky leather protectors, realizes just how clumsy such attire can be. When a delicate touch is needed, workers are tempted to forego protective gloves and risk injury from shock or arc-flash by doing the work barehanded. This leads us to yet anotherquestion: Is there no other solution? Yes, there is!

It’s a fundamental fact: when workers’ hands, or other body parts, will be placed within a Restricted Approach Boundary or an Arc-Flash Protection Boundary, they need protection. The most typical protection is to wear gloves; however, an acceptable alternative is to place guards on the conductors so that workers cannot make accidental contact with energized components. With such guards in positions, the equipment is now touch-safe, and the need to wear protective gloves is removed. Much of the newer electrical equipment, in fact, is being manufactured with touch-safe guards already in place, making them easier to maintain and repair when these services are required.

Workers should not gamble their safety by failing to use front-line protection from the hazards of electrical shock and arc-flash. Following the guidelines presented above will help electrical workers accurately determine when glove use is essential to protect against serious hand injury.

When the 2009 edition of NFPA 70E was released, electrical safety auditing became part of the electrical industry’s best practices. Certainly, it will be one criterion OSHA will use to judge whether an employer is doing what it needs to provide a workplace that is “free from recognized hazards that are causing or are likely to cause death or serious physical harm to his employees;” [OSHA General Duty Clause]

NFPA 70E Article 100.7 (H) says: “An electrical safety program shall be audited to help ensure that the principles and procedures of the electrical safety program are being followed. The frequency of audit shall be determined by the employer, based on the complexity of the procedures and the type of work being covered. Where the audit determines that the principles and procedures of the electrical safety program are not being followed, appropriate revisions shall be made.”

Let’s take a look at some of the implications that arise from this new standard raises for American industry.—implications that must be addressed if a company wants to remain OSHA compliant..

Auditing is mandatory. The little word shall is crucial. The clearest conclusion we can draw from this paragraph is that the NFPA did not intend auditing as an optional exercise. No employer can afford to ignore a regular audit of their electrical safety program. (You do have a documented electrical safety program, don’t you?)

Audit frequency is flexible. With the exception of the need for annual auditing of the lockout/tagout procedure [(NFPA 70E article 120.3 (C) (3)] a company is free to set what it considers to be an appropriate frequency for its electrical safety audit. The frequency of audit is determined by “the complexity of the procedures and the type of work covered.” This seems to beg for a progressive auditing plan. Electrical procedures would be prioritized and scheduled for auditing according to the established priority. Lockout/tagout would be audited yearly, other procedures audited every other year or some other appropriate interval. Still other procedural audits might be triggered by programmed events, such as plant shutdown or the release of new safety standards.

The NFPA 70E itself is revised on a 3-5 year schedule. The release of a new revision of the NFPA 70E standard should automatically trigger an audit of the electrical safety program. Each company should ask itself, “Are our previously compliant procedures now out of phase with the new standard?” Remember that safety standards have no grandfather clause. Just because a procedure was compliant under the 2004 (or earlier) edition of NFPA 70E does not mean that it will remain acceptable under the newer 2009 edition. The changes to NFPA70E must be reflected in corresponding changes to an employer’s electrical safety policy.

As an example of how changes in NFPA 70E can influence your safety policy, the 2009 edition now requires electricians to wear an arc-rated faceshield when working within the flash protection boundary of HRC category 1 equipment. Companies that did  their arc flash analysis under the 2004 edition and have included a PPE list on their equipment labels would now find their category 1 labels to be inaccurate and in need of revision. A proper audit would have picked up this discrepancy and promoted compliance with the new standard.

Auditing is focused on behavior. It is important to remember that the electrical safety audit is not intended to investigate the employer’s policy on paper, but to examine whether the electricians and technicians who are doing the work are actually using the policy in practice. It is important that company auditing of its electrical safety policy investigate the controls by which the policy is monitored and enforced.

Auditing profits from independent eyes. Although the bulk of auditing can and should be accomplished in-house, there is a very real need for employers to have an independent auditor periodically examine its electrical safety program. Familiarity may breed contempt, but familiarity also breeds myopia. It is easy to overlook significant gaps in the electrical safety program by being so close to the project. Fresh unbiased eyes will see what may otherwise be overlooked. In addition, it is difficult for a person involved with the day-to-day management of operations to keep abreast of the latest in electrical safety standards and best practices. Periodically bringing in a safety professional to look over your electrical safety policy is simply an effective way to help ensure that a company remains both safe and compliant to the electrical safety standards..

Auditing is not comfortable, nor easy. Yet it is an essential part of an effective electrical safety program. After all, safety is the goal and auditing helps us do the best job we can of providing an electrically safe work place.

An unsuspecting electrician opens an electrical panel only to discover that he has let loose a lethally dangerous explosion—light flashes so bright that it permanently damages eyes, heat that is 4 times the surface of the sun incinerates clothing and flesh, molten shrapnel bores upon him with bullet-like speed, and a blast wave that throws him like a rag doll with a pressure wave of hundreds or thousands of pounds per square inch.

Approximately 2000 workers will be admitted to hospital burn units this year due to thermal burns from arc flash or arc blast accidents. These accidents will result in nearly one fatality every day. Although electrical injuries are relatively rare (1 in 494 lost time accidents are electrical in nature) they nevertheless result in a disproportionate number of fatalities as 1 in 20 industrial fatalities are as a result of electrical accidents.

Most of those killed or injured workers were unaware of and unprepared for the level of hazard they were facing. Because of the immensity of the risk, responsible employers recognize the need to facilitate electrical safety through performing arc flash hazard analysis on their electrical equipment.

It costs a bunch. I just don’t see that it is worth the cost and bother.

It has been estimated that an arc flash accident may cost the employer as much as a million dollars or more. Lost production, equipment repair or replacement, lawsuits, skyrocketing insurance premiums and OSHA fines can add up in a hurry. Arc flash hazard analysis is a form of risk management whose relatively small investment provides protection against the potentially huge costs of an arc flash accident.

My equipment is all installed according to the NEC. Doesn’t that guarantee that it is safe?

The NEC is intended to provide equipment installations that are safe from electrical hazards to workers in their normal working configuration. However, electricians and maintenance technicians by definition work on electrical equipment under abnormal circumstances—when they are broken, damaged, or in need of maintenance. These are the times that electrical arc flash accidents are most likely to occur. That is why OSHA asked the National Fire Protection Association (NFPA) to produce a standard providing for the safety of the worker exposed to electrical hazards. It is this standard, the NFPA 70E, that requires an arc flash hazard analysis before workers unknowingly expose themselves to potentially lethal hazards.

Hey, there’s no law that says I’ve got to do an arc flash study, is there?

It is true that OSHA regulations do not specifically require an arc flash hazard analysis. It is also true that the NFPA 70E is a consensus standard, not a law. However, OSHA can and does impose fines on companies that ignore the standards of the NFPA 70E. OSHA regulations require employers to provide workplaces that are “free from recognized hazards that are likely to cause death or serious physical harm to employees.”¹ More specifically OSHA requires that “Safety-related work practices shall be employed to prevent electric shock or other injuries [emphasis added] resulting from either direct or indirect electrical contacts. . . .”² OSHA tells employers WHAT to do, that is provide electrical safety, and the NFPA 70E is the handbook telling us HOW to accomplish it. Here is what the NFPA 70E has to say about arc flash hazard analysis: “An arc flash hazard analysis shall determine the Arc Flash Protection Boundary and the personal protective equipment that people within the Arc Flash Protection Boundary shall use.”³

The NFPA also calls for equipment labels that identify the level of hazard the electrical worker may be expected to encounter: “Equipment shall be field marked with a label containing the available incident energy or required level of PPE”⁴ An effective arc flash hazard analysis identifies these necessary pieces of information for electrical worker safety. It’s not an option, it’s the law!

¹29 CFR §1903.1

²29 CFR §1910.333

³NFPA 70E-2009 Article 110.8(B)(1)(b)

⁴NFPA 70E-2009 Article 110.3(C)

Consider the variable of frequency of maintenance. If a plant were to do no preventive or scheduled maintenance, all maintenance costs would be lumped into corrective maintenance when the equipment finally fails. During equipment downtime, fixes would be initiated, but soon the breakdowns would multiply as differing systems reached the limits of their reliability at unpredictable intervals. Costs would quickly ramp up as the expense of corrective maintenance adds to the cost of lost product. The point of prohibitive expense would soon be reached.

Obviously increasing the frequency of scheduled and preventive maintenance would bring down costs by reducing lost product with only a slight increase in the costs incurred through regular maintenance. But even regular maintenance can become prohibitive if pushed beyond a certain point. If the frequency of maintenance were increased excessively eventually the cost of wasted manpower and parts replacement of still serviceable parts would eventually induce costs that are wasteful and excessive.

Somewhere between these extremes exist the “maintenance sweet spot.” D.L. Steiner, Inc. has produced an electronic tool to assist electrical maintenance personnel in discovering this sweet spot and maximizing the reliability of electrical equipment and the efficiency of maintenance activities—ReBEEMS: Reliability Based Electrical Equipment Management  System.

1. ReBEEMS is ONLINE! Once signed into the system, ReBEEMS and its maintenance tools are available from any web-enabled computer. No more thrashing through poorly organized file systems, ReBEEMS supplies instant access to an industrial-strength maintenance database.

2. ReBEEMS means INSTANT DOCUMENTATION! What are you looking for? Single-line drawings? Equipment manuals? Maintenance procedures? Test sheet results? Maintenance schedules? All can be organized electronically for you in PDF or other convenient-to-access formats.

3. ReBEEMS promotes SAFETY! The information needed to supply safe operation of your electrical equipment is easily provided through ReBEEMS database. Arc flash hazard records, shock protection boundaries, and PPE categories can be accessed and printed quickly and easily as checklists or labels.

4. ReBEEMS means RELIABILITY! ReBEEMS is based upon NFPA 70B maintenance intervals to improve reliability and predictability in your maintenance program.

Give D.L. Steiner, Inc. a call today to inquire how the ReBEEMS program may assist productivity, safety and reliability at your facility.

Why should we do an arc flash hazard analysis?

Please describe the arc flash hazard analysis process?

If we do an arc flash hazard analysis, what is our part in the process?

What IS arc flash and arc blast??

For many years the hazard of electrical shock has been well understood. The National Electric Code and OSHA regulations provided consumers and workers protection from shock hazard. Increasingly, it became recognized that a large percentage of electrical injuries were burns not technically related to electrical shock-that is contact with a live electrical conductor. As this phenomenon was investigated, it became clear that there was another electrical hazard to considered.

Arc flash occurs when there is an arcing fault between two energized conductors or between and energized conductors and ground. The arc begins when there is breakdown in the insulation of the conducting elements. I may be precipitated by a short-circuit or degradation of the insulation separating the conductors. The arc can grow massively depending upon the amount of current available in the circuit and the amount of time it takes for a fuse or breaker to clear the fault. As the arc begins it produces a cloud around it of electrically conductive plasma, which allows even more current to flow into the arc. In a fraction of a second, the arc can produce prodigious amounts of light and heat enough to directly burn skin and set afire clothing.

Arc blast is the extreme form of arc flash as the heat builds it causes explosive expansion of the superheated air and vaporizing metals in the vicinity of the arc. It is estimated that an arc flash/arc blast can produce heat as high as 35,000° and a blast pressure wave equivalent to several sticks of dynamite propelling molten shrapnel at 700 mph.

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Why should we do an arc flash hazard analysis study???

There are three associated answers. First, safety is simply the right thing to do. A responsible company will want to protect its workers from a recognized hazard. The second reason is economical considerations.  Failing to remedy dangerous conditions is like a ticking time bomb or a risky gamble. Should an arc flash event occur it is likely that there will be hefty associated costs paid in downtime, equipment repair, not to mention medical care for injured employees. Thirdly, a proactive approach to remedying arc flash hazards insures that your company remains in compliance with OSHA regulations and the NFPA 70E.

Specifically, section 130.3 of the NFPA 70E-2009 says,

An arc flash hazard analysis shall determine the Arc Flash Protection Boundary and the personal protective equipment that people within the Arch Flash Protection Boundary shall use.

The arc flash hazard analysis shall be updated when a major modification or renovation takes place. It shall be reviewed periodically, not to exceed five years, to account for changes in the electrical distribution system that could affect the results of the arc flash hazard analysis.

The arc flash hazard analysis shall take into consideration the design of the overcurrent protective device and its opening time, including its condition of maintenance.

If an arc flash hazard analysis has never been done upon your company’s electrical equipment, one needs to be accomplished ASAP to remain in compliance with government regulations.

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Please describe the arc flash hazard analysis process???

Arc flash hazard analysis is by nature a very technical and somewhat lengthy process. It is possible that a company may have the wherewithal to conduct the arc flash study, but usually the company contracts with an electrical engineering firm with experience in the field to conduct the study. The arc flash hazard analysis study should be viewed as a cooperative partnership between the client company and the contracted engineers to facilitate the study and to reap the greatest possible gains.

In general there are seven phases in the analysis:

Phase 1: Data Collection

Accurate data is absolutely necessary to produce useful results. In order to perform the study engineering technicians will need to collect detailed nameplate information during visit to your facility.  They will also need access to all of the breakers, fuses, panels and control panels. They will collect the data utilizing NFPA 70E standards for PPE while opening the cabinets to obtain the information. Any assistance the client company can provide in the areas of any available drawings, nameplate data, manuals or other information related to the electrical equipment will streamline this process.

It is possible that the data collection phase can be accomplished by the client company’s employees, however the potential for missing or inaccurate data may markedly slow the progress of the study.

Data Collection Note:

  Along with the data collection process, the engineering technicians will conduct a safety survey and report to you any safety and compliance issues they may note.

Phase 2: Single-Line Diagram (SLD) and Computer Model

The engineering technicians will assess the electrical hazards by building an accurate single-line-diagram of the facility and converting them intotheir digitial equivalents. This single line model is used to calculate the short-circuit currents.

The completed Single Line Diagram is required for a qualified professional engineer to calculate the fault currents at these points. The complete single-line diagrams will become part of the final report submitted to client and should be updated regularly by the company

Phase 3: Short-Circuit (SC) Study

Determining the short-circuit current for each bus and branch is one of the most important aspects of designing and maintaining your power distribution system and is a key component in the process of calculating arc flash potential.  Short-circuits must be anticipated and their effects considered when selecting electrical equipment.  Inadequate devices represent possible failure with damage, injury, and repair expense.  The data obtained from fault calculations determines the sizing of switchgear and all related protective equipment.  The results of this phase of the study will be based on applicable ANSI/IEEE standards.

1.      Maximum RMS symmetrical three-phase bus short-circuit current available at each substation and each motor control center.  The results will represent the highest short-circuit currents to which feeder/load equipment might be subjected under the reported system conditions.  Estimates for contributions from large induction motors will be included in the calculations.

2.      Comprehensive list of the input data and the calculated results.

3.      A one-line diagram (specific to the computer model) will identify all bus locations with the maximum available bus short-circuit current.  The maximum branch short-circuit current will be shown for each protective device.

4.      Evaluation of the adequacy of the short-circuit ratings of the protective devices will be provided in tabular form.  Any inadequacies will be called to your attention, and recommendations will be made for improvement.

Phase 4: Protective Device Coordination (PDC) Study

The time it takes for a given protective device to trip during a fault is a major contributor to the magnitude of the potential arc flash. Consequently, examination of the protective devices is necessary to identify how they are used to isolate equipment faults.  The tripping characteristics (the time-current characteristics curves — TCC) for breakers and fuses are studied to see if they are properly set according to three limits.  First, they are set below a maximum level to protect the downstream equipment.  Second, they are set above a minimum level to prevent nuisance tripping during startup and normal operation.  Third, they are set below the upstream device.  Devices set within these constraints are said to be “selective”, or well-coordinated.

The purpose for performing the Coordination Study is to examine the timing of protective devices to insure that such devices are properly coordinated in the event of a fault in the system. This is accomplished by comparing the Time Current Curves (TCC) of the related protective devices based upon the manufacturer’s published data and the device settings. In the event any miscoordination is discovered, the study will provide recommendations for better coordination of the protective device.

Phase 5: Arc-Flash Hazard (AFH) Analysis

This analysis builds upon the existing short-circuit analysis, and protective device coordination.

A key point contained in this IEEE 1584 standard pertaining to the calculation of arc-flash worst case values is that small reductions in arcing fault current can produce substantially different protection device trip times and thus higher arc-flash levels.  Therefore, the standard recommends that low tolerance of 15% for arcing fault current calculations be used.  Thus, the arc-flash should be calculated at the low (85%) and high (100%) tolerance values utilizing the highest arc-flash result for determining proper NFPA 70E arc-flash protection.

A key point to remember is that optimal arc-flash protection could still lead to a second-degree skin burn, which is considered curable and therefore tolerable.

Arc blast hazards exist when the energy released from and arc flash exceeds 40 cal/cm2 at ordinary working distance. In the case of arc-blast, there are few personal protection options.  This hazard consists of the molten metal debris and shrapnel, and of the exploding metal vapors.  If the available energy from an arcing-fault is too large for arc-flash protective clothing, then the only other measures are distance and barriers.  As with arc-flash, the energy can be reduced in large part by limiting the available arcing-current, or by reducing the arcing-time with faster breakers and fuses. 

Phase 6:  Electrical Preventive/Predictive Maintenance Program

According to NFPA 70E-2009 section 210.5 FPN “Failure to properly maintain protective devices can have an adverse effect on the arc flash hazard analysis incident energy valuses.” As a part of the system study and arc flash evaluation the engineering technicians will provide a written electrical preventive/predictive maintenance program for all electrical devices and equipment contained in the scope of the system study and arc flash.  The written EPPM program provided is based on: NFPA 70E, Chapter 2 Safety Related Maintenance Requirements”, NFPA 70B “Recommended Practice for Electrical Equipment Maintenance” and NETA.

Implementing and maintaining an electrical preventive/predictive maintenance program will provide two benefits.  First, EPPM will provide for increased reliability of the plant electrical system and secondly it will meet the requirements of the NFPA 70E arc flash program.

All arc flash calculations are based on the arc clearing time and short circuit current in order to determine incident energy.  With this information protection boundaries are determined.  The clearing time is derived from the protective device coordination study, mentioned in this proposal., which is based on manufacturer time current curves.  If maintenance and testing is not performed it could result in extended clearing times, unintentional time delays, open or shunted current transformers, open coils, or dirty contacts.  This can affect the calculated arc flash boundaries and the PPE requirements.

Phase 7:  Label Creation and Installation

Clearly marking the danger level of each device is an essential stage in Arc Flash awareness. High Quality UV resistant labels providing clear warning of the Arc Flash Hazard and identifying the Personal Protective Equipment required will be produced and affixed to each device incorporated into the study.  In most situation two varieties of-colored labels will be provided. In the case of devices that are in one of the four categories of arc flash hazards, orange and black warning labels will identify the hazards. For equipment that present arc blast hazards which may only be worked upon in the denergized state, red and white DANGER labels will be provided.

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If we do an arc flash hazard analysis, what is our part in the process???

The most important thing you can do at the outset is provide accurate equipment data to the arc flash team; specifically an up-to-date single line drawing will materially speed up the arc flash hazard analysis.

Should you gather all the data yourselves? Some companies do conduct their own data collection in order to cut costs. Certainly, it is possible to gather your own data, but it is not always an ideal solution. The engineering firm’s data collection team is experienced in knowing exactly what kind of data is needed. It is imperative that the data be as accurate as possible before the actual analysis.  Should you opt to collect the data yourselves, the engineering firm will supply you with documentation specifiying the needed data standards and forms to record the data.

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By DANIEL L. STEINER, P.E., D. L. STEINER. INC., LIMA OH; AND
WILLIAM WHITEHEAD, SENIOR APPLICATION ENGINEER SIEMENS ENERGY & AUTOMATION NORCROSS, GA

Recent advances in both microprocessor- based monitoring and control devices and computer networking have expanded the range of power monitoring equipment available and improved functional capabilities of these devices. The result is a significant new potential for increasing power system reliability while simultaneously decreasing system operating costs. These advances along with deregulation are causing a growing number of plants to develop comprehensive new energy management strategies that help them maximize valuable energy resources. . .

The state of Ohio electric energy production and distribution is one of both great challenge and also considerable opportunity.

Electrical Marketplace Confusion

It is obvious that Ohio electric power is in a state of flux. In 1999 Senate Bill 3 was signed into law. This law sought to establish in Ohio a competitive marketplace for electrical energy sales. In the transition period, it provided for a five-year market development period lasting from Jan. 1, 2001 to Dec. 31, 2005. During that time, rates were frozen in order to allow a competitive wholesale market to take shape.

The competitive market did not develop as expected. As the end of the market development period neared, the Public Utilities Commission of Ohio (PUCO) became concerned about the limited number of competitive electric suppliers and the low degree of market activity. They feared that this response was an indication that an immediate shift to market-based rates in 2006 would not be in the best interest of customers.

They set out to minimize the effects of rate “sticker shock” upon the unsuspecting electrical customers by gradually transitioning customers to market-based rates. The PUCO required Ohio’s electric utilities to develop rate stabilization plans (RSPs). These plans were intended to eliminate market uncertainty and provide customers with stable, predictable rates. For the most part, the Rate Stabilization Plans were initiated Jan. 1, 2006 for a three year period and are due to come to an end on Dec. 31, 2008 (The RSP of Dayton Power & Light ends in 2010).

Throughout this period, the shift toward competitive marketplace for electricity supply has struggled. There appears to be a marked lack of enthusiasm on the part of the electric utilities to embrace the competitive concept. AEP Ohio commented in a 7/6/2006 news release, “We believe that a move to competitively bid market-based rates would be detrimental to our customers.” Indeed, on the PUCO’s own website there is a very telling notice, “No Competitive Retail Electric Service providers are currently enrolling customers in Ohio.”

Even as the shift to competitive market based electricity sales has caused uncertainty ANOTHER Senate Bill has compounded the problem. On May 1, 2008 S.B. 221 was signed into law. The impact of S.B 221 is in several areas. First, it is in many ways a backing away from a strict market-based electrical sales. It establishes a kind of hybrid system with both regulated rates and market-based rates.

Secondly, S.B. 221 is intended to provide PUCO with the power to stabilize rates after the official Rate Stabilization Program draws to conclusion in December 31, 2008.

Thirdly, it establishes a powerful impetus for utility usage of renewable energy resources. S.B. 221 requires that by 2025 25% of electricity sold by electric distribution utilities and electric services companies be from “alternative energy sources”. Alternate energy sources include renewable energy resources and advanced energy sources. Renewable resources are electrical energy generated through wind, solar, and hydroelectric power. Advanced energy sources are sources of recovered energy such as usage of waste heat for electric generation, improvements to real and reactive power, and peak demand reductions.

Utility Goals for 2025

These goals will be gradually phased in beginning in 2009 continuing through 2025. The utility company’s progress will be monitored by the PUCO and financial penalties will be assessed if it is determined that a utility has not made sufficient progress. Funds from these penalties will be deposited in the “advanced energy fund” to provide financing for alternative energy projects.

Alternative Energy Resource Opportunities

Electrical rates can be expected to rise in a predictable manner. Ohio utilities AEP Ohio, Duke Energy and FirstEnergy have filed Electric Security Plans. These plans, when accepted by PUCO, establish their rates for the next three years. AEP Ohio, for example, forecast an approximate 15% raise in rates per year over three years.

Although the rates will be predictable over the next three years, S.B. 221 puts considerable pressure upon the utilities to find adequate sources of Renewable and Advanced Energy Sources. Some of those sources may be found from the utility customers themselves. Opportunities exist for customers to capitalize on these opportunities. As the pressure on the utilities increases as the years close on 2025 we can expect the opportunities in the area of renewable resources to multiply. The following advanced energy resources will be worth monitoring.

Distributed Generation. – Net metering is a scheme of distributed generation where a customer has their own small renewable generating equipment to provide a part of their own electrical needs. The generating equipment is hooked to the system and metered in such a way that the customer pays the net cost of the difference between total electrical consumption and the customer supplied power. During times of low electrical consumption the excess power is fed back into the grid and at that point the customer essentially “sells” power back to the utility. Before S.B. 221 the tariffs set by the utility for net metering schemes were limited to 1% of customer’s peak electrical usage. That cap has been eliminated by the new law.

Cogeneration is an energy thermodynamic efficiency scheme where a heat engine or power station simultaneously provides both heat and electrical power. A boiler that produces heating may be tapped so that the excess heat provides power for small electrical generating equipment.

Power Factor Correction provides increased power efficiency by correcting an imbalance between the real and reactive power.

Peak Demand Reduction programs must be implemented by distribution utilities beginning in 2009.

The significance of these Alternative Energy Resources may not be immediately apparent. Any improvement in the area of alternate energy resources on the part of a utility customer reflect back upon the utility. The utility may be able to use these improvements as part of the utility improvement programs.

Government Incentives

Currently incentives by the utilities themselves to invest in these Alternate Energy Resources are largely non-existent. This should change as the implementation of S.B. 221 rolls forward. As pressure on the utilities to meet their established quotas of alternative energy resources grows, we can also expect incentives by the utilities to expand as well. In the mean time, companies should consider investigating governmental incentives for involvement in alternate and renewable energy resources. Proactive preparation in these areas should position forward-looking companies for the increasingly “green” industrial environment.

State of Ohio Incentives: Companies who are interested in investing in alternate or renewable energy technologies should look to the Advanced Energy Fund for assistance. Currently the Ohio Department of Development (www.odod.state.oh.us) has three programs to assist in development of alternative energy projects.

The Distributed Energy Resources Notice of Funding Available seeks applications for grants to cover a portion of costs of projects in the area of distributed energy resources such as: industrial heat recovery, biomass or landfill methane for electric generation.

The Manufacturing Facilities’ Energy Efficiency Notice of Funding Available seeks applications for grants to cover a portion of projects in the area of improving manufacturing efficiency in areas of lighting, HVAC, geothermal, motor efficiency, power factor correction and cogeneration.

The Renewable Energy Program Notice of Funding Available seeks applications for grants to cover a portion of projects in the area of implementing renewable energy projects in the area of solar electric, wind electric, and solar thermal systems for commercial, industrial, institutional and governmental entities.

The Advance Energy Job Stimulus Fund T his bond-funded program creates an Advanced Energy Job Stimulus Fund that is administered through a public process managed by the Ohio Air Quality Development Authority (OAQDA). The Fund will award grants and loans to a portfolio of advanced energy projects that serve to attract new investment to Ohio, build upon Ohio’s manufacturing strength, advance energy technology development toward commercialization and prepare Ohio’s workforce for the future.

The fund will consist of $150 million advanced energy money (over three years) seeking to increase the development, production and use of advanced energy technologies in the state, and is divided in the following manner:

• $66 million for clean coal technology projects administered through OAQDA’s Ohio Coal Development Office (OCDO) (reviewed by the Technical Advisory Committee and approved by OAQDA); and
• $84 million for non-coal-related projects in three $28 million annual appropriations administered by OAQDA (reviewed by the Development Finance Advisory Council, approved by the OAQDA and brought before Controlling Board for final approval).

As a general guideline, grants may range from approximately $50,000 to $250,000 based on the size and scope of the entire project and the jobs, investment and other. Projects presenting outstanding value propositions for Ohio may be considered for significantly higher awards.

• Additionally, five percent of the fund may be set aside for small grant awards (generally in the range of $50,000) to support disruptive technologies with significant potential for success, even if they are in earlier stages of development.

Loans may range from approximately $1 million to $2 million. For highly qualified applicants, loans could be structured a number of ways including below market rates, subordinate collateralized positions with participating financial institutions and/or varying principal payments for a specified period of time.

Tax Exemption. Ohio has other incentives such as certain tax exemptions. The State of Ohio exempts certain property from real and personal property taxation, sales tax and use tax. The exemption applies to property used in renewable energy conversion, thermal efficiency, waste heat recovery, and the conversion of solid waste to energy. See http://www.odod.state.oh.us/taxreform.htm.

Federal Incentives: The Federal government offers substantial incentives for projects involved in alternate or renewable energy.

Federal Loan Guarantee Program. The Federal government offers loan guarantees for large projects that employ advanced technologies that avoid, reduce or sequester emissions of air pollutants or greenhouse gases in the area of coal-based power generation, industrial gasification, and advanced coal gasification facilities. See http://www.lgprogram.energy.gov/press/092208.pdf.

Tax Incentive Assistance Project. On October 2, 2008 President Bush signed into law legislation that extended the Energy Efficiency Tax Incentives that had expired in 2007. Tax incentives exist that support a variety of alternative energy resource development projects. See http://www.energystar.gov/index.cfm?c=products.pr_tax_credits.

It may be too soon to jump onto the alternative or renewable energy resource bandwagon. The regulations from S.B. 221 have barely had time to implemented. The time is coming, however, and it may be very soon that action will be required. In the meantime the prudent businessperson will carefully investigate his/her opportunities and be prepared to join the wave before it washes over us.

Update 1/12/2009: The PUCO has failed at this point to approve AEP Ohio’s Electrical Security Plan (ESP). Consequently, the anticipated rate hikes have not taken effect and the 2008 rates will continue into 2009 probably through February.