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Wired or Mired? Electronic Information for the Gas Industry

Fortnightly Magazine - February 1 1996

with only a few keystrokes.

Build Infrastructure. Organizations are spending billions on electronic networks that link computers, databases, and other information technologies together. Vast information infrastructures knit together whole companies, often linking them to the computers and networks of suppliers and customers as well. Seamless integration via electronic pathways forms the essential infrastructure of the Third Wave economy.

As the electric industry follows the gas industry into the competitive realm, it will make greater use of electronic information technologies. Regional power pools are organized around sophisticated EBBs, as are the developing regional transmission groups (RTGs). Power pools and RTGs could be expanded to integrate with gas company EBBs. The not-too-distant future could see both gas and electric power traded and transported through unified networks. Intelligent software currently under development will change the paradigm for information retrieval from "navigating and searching" to "bringing."4 Software "intelligent agents" or "infobots" could be set loose in the network to ferret out the optimal matchup of supply reliability and price to match a particular customer's needs.

Accelerate Operations. Economies of speed are replacing economies of scale. Timing has become critical in scheduling all inputs in the manufacturing process, including energy. Indeed, the future role of natural gas in electric power generation will depend on the industry's ability to provide minute-by-minute dispatch.

What is to Be Done?

To move the gas industry toward the goal of creating seamless electronic commerce in energy, the FERC should play a three-part role: facilitator (of debate), ratifier (of industry consensus), and, if all else fails, enforcer.

The strategic value of information standards will be realized only if pipelines up their commitment to setting standards. While the regulatory process likely will not keep pace with rapid changes in information technology, the industry's voluntary standard-setting process can be kept moving by FERC-imposed mandatory milestones for particular transaction standards. GISB should continue to encourage and help adopt voluntary standards. It remains to be seen, however, if GISB will emerge as effective arbitrator of factional disputes. If GISB cannot perform this role, the FERC will, by necessity, stand ready to fill the void.

Also, since pipelines have invested heavily in their proprietary EBBs, the FERC should not mandate uniform EBBs to promote seamless commerce across multiple pipelines. Instead, the FERC should recognize the diversity of proprietary EBBs, but require the industry to combine them in an interconnected network. Such a network could be accomplished using existing technology in

conjunction with customized software.

Arguments that the market should determine such a venture are not persuasive. The microcomputer business, one of America's greatest economic successes, was started by "visionary nerds" before a market existed for the product. Moreover, judging by industry sentiment that the proprietary pipeline EBB systems are an impediment, there should be ample support for developing an "energy internet." Given the amount of public good that would result from such a system, it may be feasible to convince Congress to provide tax-related incentives to stimulate private-sector investment.

Finally, fostering an interconnected network for the gas industry would be consistent with the FERC's goal of creating RINs