Client's 900 kVAR capacitor bank exploded last month at their Rochester manufacturing plant. RG&E is now hitting them with $25K monthly power factor penalties on their Schedule 6 service while they wait for replacement equipment. Insurance company is claiming the PF penalties aren't covered under business interruption because they're "avoidable costs." Anyone dealt with similar insurance disputes? The capacitor manufacturer says 8-week lead time for replacement due to supply chain issues.
Capacitor bank exploded - insurance fighting PF penalty coverage
Tom, had a similar situation with FPL after Hurricane Ian damaged a client's capacitor bank. The key is proving the PF penalties are a direct result of the covered loss, not a separate operational choice. Your business interruption coverage should include "extra expenses" to maintain operations, which could include temporary PF correction equipment rental. We rented portable capacitor banks for $3K/month while waiting for permanent replacement - way cheaper than the penalties.
Check if RG&E offers any hardship provisions for equipment failures. PSO here in Oklahoma will waive PF penalties for 60 days if you can prove equipment failure and show good faith effort to repair. Also document that you've ordered replacement equipment - some utilities will extend the grace period if you can prove supply chain delays beyond your control. The insurance fight is separate but winnable if you frame the penalties as consequential damages from the covered equipment failure.