Power Move

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U T I L I T I E S
Power Move To The Future
Large utilities invest in client-server technology in face of heightened competition

By Marianne Kolbasuk McGee
Issue date: Sept 18, 1995

tilities have always been thought of as providers of essential services. San Francisca ns take for granted that Pacific Gas & Electric will supply the power to light their offices, while New Yorkers expect Consolidated Edison to keep their air conditioners humming.

But that's not the case anymore. Ongoing federal deregulation is making it possible for a power company in one region to compete for customers in another. In a few years, customers might have two or more utilities vying for their business. The nation's largest utilities are gearing up for the competition by investing in information technology to provide better services and explore new business opportunities.

"Right now, a utility may have 100% of the potential customers in its geographic region, but with the new level of competition, you can only lose existing customers," says Brad Holcomb, a partner with Andersen Consulting's utility practice. "However, there are many ways to keep those customers while going after new ones," he adds.

Utilities such as ConEd, PG&E, and Entergy of New Orleans are implementing IT s olutions that will enable them to offer not only competitive energy rates and service, but also improved customer support and more innovative services. Client-server platforms are the infrastructure that supports utilities' improved billing and customer service systems and that link consumers to services that help the companies gauge and control power consumption.

On One Platform
"The trend is clearly toward having all critical business applications run on client-server platforms," notes John Danielson, chief information officer at PG&E in San Francisco. "Utilities are asset-heavy, so the issue is: How do you make the business infrastructure flexible and information-rich and reduce costs? The answer is tied to client-server."

Danielson says a "very significant" portion of PG&E's annual $200 million IT budget is spent on client-server products and services. By using client-server to support processes such as accounting and customer billing, PG&E has increased productivity whil e cutting its work force from 27,000 over the last few years to 20,000--even as its customer base has risen sharply, Danielson says.

At Entergy, moving 80% of its computing to client-server architectures featuring Unix-based systems from Hewlett-Packard and Sun Microsystems "has improved productivity for most operations," says Dennis Walsh, CIO of the New Orleans utility.

Improvements in customer service may be the biggest benefit of new IT, utility analysts say. "Right now, to most people, a kilowatt is still a kilowatt," says Brad Holcomb, a partner at Andersen Consulting in Chicago. Price competition among utilities may one day rule the market, but for now, Holcomb says, satisfaction with current services is building consumer loyalty. That's why utilities are spending big bucks on IT to improve customer service.

ConEd, which serves 3 million customers in New York, and neighboring General Public Utilities Corp., which serves 1.9 million customers in New Jersey and Pennsylvania, both have projec ts under way aimed at maximizing customer satisfaction over the long haul.

ConEd has loaded more than 100,000 paper-based engineering maps for its power plants into electronic video "intelligent maps" that can be accessed by the utility's field engineers, says Jim O'Brien, ConEd VP of information resources. Previously, engineering maps had to be distributed manually during an outage or other problem.

General Public in Parsippany, N.J., has begun equipping field personnel with PCs that display engineering and other maps so that outages can be remedied more quickly, says Claude Mignon, VP of IS at General Public.

General Public's use of PCs in the field is just a small part of the company's aggressive move to a client-server architecture over the past six years. Since it moved many of its core applications, such as billing, from mainframes to client-server platforms, the utility's IS and telecom organization has been reduced to 380 from 584 in 1989. "Not only has productivity improved, so has custo mer service," Mignon says. General Public's client-server billing system, which was built using object technology, allows the utility to tailor customers' billing and energy services.

GPU Services Corp., General Public's IS arm, has an annual IT and telecom budget of $70 million, and Mignon says, "We've got more development on client-server than anything else. Ultimately, client-server allows us the flexibility for improved customer services."

General Public and other utilities also are improving their customer information services by partnering with telecom companies that help consumers control their energy costs--and more.

These services are a precursor to more aggressive programs and IT solutions that will increase utilities' ability to "wheel" their energy--or compete on price--to both businesses and consumers.

Utilities have begun selective wheeling to industrial customers to provide the most cost-effective power--and are set to provide similar retail wheeling to consumers, says Glenn Ja mes, a partner with Deloitte & Touche, a consulting firm in New York. "Any utility worth its salt is looking into this," says James.

Among the utilities setting the stage for retail wheeling are PG&E, Southern California Edison, and Entergy. To do this, advances in telecom technology--and further deregulation--are vital. "We believe our telecommunications network is an enormous asset to provide information on pricing, use of energy, and consumption," says Entergy's Walsh.

In an 18-month-old pilot program in Arkansas, Entergy is providing TV set-top devices to hundreds of customers to let them access information about their energy consumption on their TV screens. Similar interactive pilots are also under way at PG&E, which has teamed with Microsoft and cable carrier TCI in a test with 1,000 California customers. The pilot is expected to be completed next year, when the utility will consider expanding its customer base.

Pundits say these solutions set the stage for utilities to compete f or each other's customers by providing cost-saving information to consumers. Andersen Consulting estimates communication-enabled services could bring the largest utilities in a full-retail wheeling marketplace up to $700 million in added revenue.

Ongoing deregulation and competition will have most utilities looking for ways to hold on to the customers they already have while trying to attract new ones. But it's a game not everyone will win. Those utilities delaying IT investments that can help prepare them for competition later will be the losers, says Duane Davis, VP of sales and marketing at EDS in Plano, Texas.

Leslie Buttroff, global practice leader at EDS, cites a number of key business trends that are shaping competition among utilities. "One trend is for some to offer telecommunications and entertainment services in addition to their core power businesses," Buttroff says. Utilities preparing to make such moves will need to begin setting up their telecom infrastructures now.

Another trend is for utilities to build alliances with partners, such as telephone companies, that have more experience in providing the new services. PG&E is planning to offer "non-traditional" services through its alliance with TCI and Microsoft. The company is also setting its telecom foundation for future non-energy-related services. Danielson declined to describe those plans.

Other utilities are choosing to scale back their services or focus only on their traditional products--energy. In all cases, energy pricing will be important. "When the time comes that the No. 1 issue with consumers is price, the utilities that don't offer the lowest won't be around," Buttroff predicts.

This assertion goes back to the basic principle that the best-positioned utilities must implement flexible IT infrastructures that can bend to their changing business needs and market competition. IT plans that include deploying new client-server architectures or improving customer access to market information are vital for survival in a n increasingly competitive business.

For PG&E's Danielson, the strategy seems obvious. "We'll use whatever technology makes the most sense in meeting our objectives."

(To view the Utilities chart in PDF format click here)

Photo for InformationWeek By Cindy Charles

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