Power Outages Test IT's Mettle

A year ago, IT managers at the nation's utility companies were preparing for the changes that deregulation was going to bring to their industry. Today, however, their main concern is making sure that the power keeps flowing.

Pete Roberts, IT director for program management at KeySpan Corporate Services, a public utility holding company that serves Long Island, keeps a close eye on weather reports. "On 90-plus degree days, we test the mettle of the grid," he says.

There's no room on the island to build additional power plants. When the weather gets hot, so do the overhead wires that carry electricity. That can be a problem; when wires get hot, they carry less electricity--just when the demand for power grows. "You're talking about a lot of wealthy people with big air conditioners," Roberts says.

Key to coping with peak summer demand is the careful scheduling that takes place each year between September and June. "A power plant is worked on--and out of service--every day during that time," Roberts says. "We execute plans like our lives depend on them, because if a project slips, it could go past June 1." The Mineola, N.Y., company maintains 12 power plants on Long Island. In extreme heat or during outages, KeySpan will turn on gas-powered turbines and boost energy output.

Electric utilities outside of beleaguered California also go to great lengths to make sure the power stays on. The power problems in California seem to have slowed the pace of deregulation because legislators and regulators in other states want to avoid similar situations.

But regardless of the rules under which they work, successful utilities collaborate with business partners and suppliers to ensure that they have enough capacity to handle the load during peak times. Some companies use E-business marketplaces to obtain and deliver gas and electricity in the most efficient and profitable way. Utilities also work with customers to even out demand and prices.

Most power companies aren't worried about a repeat of California. "Nobody could have predicted all the things that went wrong there," Meta Group analyst Rick Nicholson says. But the power problems of California have put IT managers at utilities in the hot seat. Customers, politicians, and regulators nationwide are questioning utility officials and seeking reassurance that they'll avoid blackouts and power shortages.

Many are looking to IT for some of the answers, because it plays a pivotal role throughout a utility's infrastructure. For IT managers, a top priority is to make sure that computer and network problems don't cause power problems, which means that unexpected downtime isn't an option.

They do everything big in Texas, and Brian Landrum, VP of E-business at Reliant Resources Inc. in Houston, says the state has one of the largest reserve capacities in the country. Texas permits out-of-state utilities to sell power in the state and is preparing to deregulate retail sales of energy in January. "Texas doesn't have that 'not in my backyard' policy of California," he says. "We're fortunate that the state has a more balanced approach to power generation, with fewer regulatory restrictions."

Reliant and other Texas utilities won't have to shoulder the whole load of building more capacity to meet growing demand. "New players have come in and built brand-new power plants," Landrum says. The state also has pilot programs to prepare for retail deregulation. "We're making sure there aren't any supply issues," he says. "We'll balance the load of electricity throughout the state."

Reliant and other Texas electric utilities are part of the Electric Reliability Council of Texas (Ercot), a nonprofit group that manages the state's electrical grid and also handles changes when a utility customer wants to switch from one service provider to another. To make sure deregulation works smoothly, every participant--power generators, wholesalers, retailers, distributors, and trading companies--must make sure that their IT infrastructures interoperate and communicate with Ercot's.

However, energy companies charge that Ercot's systems aren't working well in the trial phase. While more than 103,000 customers have asked to switch electricity providers since the testing started June 1, only 2,668 have been switched and just 567 of those have had their first meter reading in a three-month period. Ercot officials call the complaints "basic startup problems" and say they won't delay deregulation.

As utilities deregulate, IT plays an important role in cutting the costs of energy. Entergy Corp. in New Orleans outsourced most of its computer operations to Science Applications International Corp. more than a year ago and has focused its attention on connecting to Pantellos, an online energy marketplace. "In IT, we're working to reduce cost and automate the procurement process," says Science Applications product manager Gina Brack, who held a similar position at Entergy before the decision to outsource. "Once in place, we'll be able to get materials in quicker, and we won't have to keep as much inventory on hand."

By taking proactive measures, IT can help guarantee that power is available under any conditions, normal or unusual. Carl Rizzo, CIO at natural gas utility Equitable Resources Inc. in Pittsburgh, says hot summer days don't tax his company's generating capacity. His challenge is to make sure that customers have enough heat in the winter, and IT plays a big role. "We take measures to ensure the gas supply is sufficient at all times, including controls for the ability to predict loads and the influence of temperature on them," Rizzo says.

Besides assuring delivery of power to customers, IT is involved in other projects that further strategic business goals. Reliant's IT team helps some business customers make money on energy by letting them sell back unused power to the utility. "The technology to recognize price and put the energy back into the grid is here today," Landrum says of internally written software that every customer receives.

Like other utilities, Reliant supplies customers with intelligent, automated metering equipment that lets them track energy usage. When the price of energy spikes during daytime hours, some companies will shift operations to evening hours and make money by selling power back to the utility.

Business collaboration is the lifeblood of electric distributor Tennessee Valley Authority's operation in Chattanooga, Tenn. The authority delivers power to 158 municipal distributors and 63 direct-service customers such as Alcoa Corp. and Saturn Corp. "It's more critical than ever to communicate with each other," says Diane Bunch, the TVA's senior VP of IS.

At TVAonlineconnection.com, a hosted marketplace, distributors interact with suppliers and generators. "More than ever, we all know what each other is doing," Bunch says. Tennessee Valley also works with customers who want to save on energy costs. "Some customers work around times when power is cheapest," she says. The company uses its automated telephone system to notify customers when it's necessary to cut back on power supplies during emergencies. The phone system also notifies billing systems of any change in charges due to curtailments.

As utilities deregulate, they need to work more closely with important business partners. "With supplies like consumables, such as toner or paper, we'll shop around on a marketplace," Equitable Resources' Rizzo says. "But we're picky about our wireless service provider because tight collaboration with that partner could mean success or failure."

Utilities also are finding ways to use IT to work more closely with customers. Internet collaboration starts with residential customers, says Don Tomlin, director of retail IS at electric utility Florida Power & Light. "A lot of self-service is available to customers at Fpl.com," he says. "They can examine their energy usage, think about starting and stopping service to save money, and maybe change their refrigerator model." By year's end, the Juno Beach, Fla., company will launch a similar site for business customers.

The Internet is having an impact at nearly every utility. "It's led to a tremendous increase in demand for information by customers to access accounts for metering and pricing," Entergy CIO Ray Johnson says. "It fundamentally changes our relationships with customers and partners."

Electric and gas utility Ameren Corp. in St. Louis offers a Web service called Amerenabacus that shows customers how they can get price breaks if they don't use energy during peak periods. Ameren's customers don't pay much attention to time-of-day pricing because they're paying 14% below the national average for energy, but that could change, says Chuck Bremer, VP of IT.

The Web service shows that utilities can adapt to new ways of thinking, Bremer says. "Before, we were all inbred utility people," he says. "Now we're bringing people in with different thoughts and that causes all of us to change our attitudes."

Utilities have learned some lessons during the past few years. Many have failed to make profits in the online business-to-consumer end of the business, so they focus on Inter-net-based business-to-business procurement and trading.

"E-business is still a big issue for utilities, but they realize that procurement marketplaces and trading have more immediate upside," Meta Group's Nicholson says.

Most utilities can benefit from energy marketplaces. Although smaller utilities may have a tough time competing against players such as Enron, innovation and collaboration with partners can help. "The more information they can gather and control, the better they can compete in trading," Nicholson says. "It drives cost down and volume up."