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News In Review

May 10, 1999

Utilities:
Industry Downplays Concerns Over Y2K

Companies say most gas and electric systems appear ready for the future

By Richard Adhikari

pie chart

The Y2K Package:
  • Y2K Under Control

  • Financial Services

  • Transportation

  • Government

  • Telecom

  • Utilities
    • Will utility companies, which have successfully delivered power to users through storms and other natural disasters, stand up to problems associated with the year 2000? Officials monitoring the issue are confident they will, though the outcome depends on the voluntary cooperation of the companies involved.

    There are reasons to expect the transition to 2000 will go smoothly. "I was skeptical when I testified before the Senate on this issue last summer, and I'm much more confident in terms of the industry's readiness now," says James Hoecker, chairman of both the Federal Energy Regulatory Commission, which supervises the Y2K readiness of the oil and gas industries, and the Oil and Gas Subgroup of the Energy Sector Working Group.

    What's changed? In a December survey of 1,000 companies providing 88% of U.S. energy for consumption, operations and embedded systems were at 78% readiness, up from 46% last September, Hoecker says. For business systems, the percentage shot up to 86% from 55%. "Everyone is becoming aware of the commercial implications of having Y2K failures," Hoecker says. "I'm hoping we're up in the high 80s or 90s the next time around."

    Similarly, the North American Electricity Reliability Council, which oversees the electric industry, reports large utilities are on track for Y2K compliance. These utilities have reported to the council that they've completed more than 75% of their testing and remediation, up from 44% in November.

    No Significant Problems
    "There shouldn't be any significant problems come the turn of the century," says the council's director of communications Eugene Gorzelnik, referring to the 200 large investor-owned utilities that provide about 75% of the electricity consumed in the United States. But that doesn't mean there's not work left to do: The council's latest quarterly report shows that 42% of all public power companies and 18% of cooperative power companies won't complete their year 2000 projects until later this year--after the self-imposed industrywide deadline of June 30.

    State utility commissioners are working on the municipal utilities and rural cooperatives that produce the remaining 25% of the nation's electricity, says Leon Jacobs, head of the Florida Public Service Commission and chairman of an ad hoc task force on Y2K readiness for the National Association of Regulatory Utility Commissioners. Y2K won't be an issue, Jacobs says, because of the discussions taking place with the utilities.

    A recent InformationWeek Research survey of 240 IT professionals in various industries shows broad confidence in utilities' ability to avoid Y2K-related disruptions. Utilities ranked among the top three sectors, earning an overall confidence rating of 8.1 on a scale of 10.

    The Y2K preparations by companies such as Con Edison, which provides electricity, natural gas, and steam to parts of New York City and Westchester County, N.Y., lend credence to those expectations. Robert Hedlund, Con Ed's director of technology services for information resources, says 98% of the 5,000 components that could be affected by Y2K in the utility's fossil-fuel plants are already compliant--which means they won't pose problems because they aren't affected by date changes. The rest are metering-type devices that may give the wrong date but won't affect operations, Hedlund says. All but three of the 330 components in Con Ed's nuclear generation plants on which Y2K could have an impact are Y2K ready, having been overhauled or replaced. He says 97% of the nearly 1,000 components in Con Ed's transmission systems are ready; all 100,000 components in its distribution systems are compliant; and gas and steam systems are fully Y2K compliant.

    About 20% of the electricity used by large utilities comes from 103 nuclear plants in 66 facilities nationwide. The nuclear energy industry is confident it will be ready for 2000. "Averaging overall facilities, we're about 70% done with remediation," says Jim Davis, director of operations at the Nuclear Energy Institute, an umbrella organization for the worldwide nuclear energy industry. He expects most U.S. plants to be compliant by July 1, and the rest by September. Safety won't be an issue because all safety systems at the plants have been tested for Y2K readiness, Davis adds. Potential problems will be related to the inability to generate power.

    Contingency Plans
    To prepare for potential problems, the oil, gas, electricity, and telecommunications industries have set up the Inter-Industry Contingency Planning Group to work on joint contingency plans. "We're trying not to be Pollyannas about this," the Federal Energy Regulatory Commission's Hoecker says. "The objective is to keep Y2K problems as local as possible and of as short a duration as possible."

    Because utilities depend heavily on voice and data communications to monitor outages and electricity flow and to handle calls about problems, they're focusing on developing tests and plans with telecom companies. The large utilities are conducting their own tests with some regional Bell operating companies, long-distance carriers, and rural telecom providers.

    Meanwhile, the North American Electricity Reliability Council is coordinating two nationwide drills this year. The first was held on April 9. It simulated a partial failure of data and voice communications. About 200 large utilities and 500 power plants nationwide used backup communications systems such as radios and cell phones to transmit and receive key operational systems data. Participants learned many lessons, such as the need to reposition some radio antennas and to correct some emergency phone numbers, says Jon Arnold, CIO of the Edison Electric Institute, a trade association for large utilities. The next drill is scheduled for September.

    Utilities are also busy making sure their business partners can work with them through 2000 and beyond. Pacific Gas and Electric Corp. in San Francisco has been working on its own Y2K issues since 1996 and is in the final stages of completion, says John Keast, VP and CIO at PG&E Corp. The company now devotes about 60% of its Y2K efforts to ensuring that its business partners are Y2K ready through testing, drills, and auditing. Those that don't make the cut can't do business with PG&E Corp. between the end of December and early January. For the others, PG&E Corp. is working out contingency plans for unexpected problems.

    Some say utilities may be expressing confidence about Y2K in a bid to fend off potential lawsuits. Leslie Buttorff, managing director of the Power and Gas Practice at Arthur D. Little, which offers Y2K consulting services to the energy industry, says potential Y2K liability claims may exceed $1 trillion. Buttorff has visited 25 utilities throughout the country and has learned that whoever's in charge of the Y2K projects usually boasts of being on top of matters. "But people in other parts of the company say, `This isn't done yet,' or `That's not done yet.' You ask yourself whether utilities are covering themselves."

    Arnold at the Edison Electric Institute shrugs off this view. "A couple of years ago, Y2K program managers were expressing concern about operating during 2000 and dealing with lawsuits," he says. "But as they test their systems, they're finding lawsuits will be a nonevent." The energy industry knows what to expect and how to deal with it, says Arnold. "There's absolutely no excuse for not being prepared and having manpower in critical locations."


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