[BETA] Fortnightly

IN THE DRIVE TO MATCH INFORMATION TECHNOLOGY SYSTEMS WITH THE

demands of "deregulatory" standards, utilities are investing billions in information technology (em some launching new business lines from their experience.

Worldwide, utilities are investing $20 billion; electric utilities pony up the most: $12 billion each year, according to Newton-Evans Research Co. An average U.S. electric utility will invest $43 million this year; a gas utility will invest $9 million.

The research company defines IT as "enterprise-wide" systems, management information systems and technical information systems. The latter include applications found in utility control centers, notably those for energy management.

According to Newton-Evans, the most applications planned for rework or replacement at electric utilities are those for customer information, then financial systems, followed by systems in work order management, materials management and human resources.

One of the most significant trends, according to the data, is that utilities are teaming up with known vendors or consultants (em IBM, EDS, Andersen Consulting, Price Waterhouse (em to develop applications for themselves. They then spin off subsidiaries or start divisions to commercialize the technology. Some have been more successful than others.

"We helped Idaho Power spin off Stellar Dynamics Inc., which is turning into a very sharp leading edge little business out of Boise," says Charles W. Newton, Newton-Evans president. "Stellar has gotten multiple millions of dollars of business in its first two commercial years."

Northern Indiana Public Service Co., in its partnership with IBM, is projecting a $5 million-a-year business selling consulting and training services and utility know-how. Hydro-Quebec has spun off m3i. In June 1996, UtiliCorp United Inc. launched RiskWorks, whose nine customers include six utilities. Andersen Consulting has several alliances, including one with Florida Power Corp. that improved a line of customer service software. GE, Hewlett-Packard Co., Oracle and Microsoft are taking on utility partners.

Nearly half of the electrics surveyed by Newton-Evans say they've considered commercializing internal IT for resale to other energy companies. Most applications are for customer information systems (CIS), but that could be changing. Regulators are unbundling customer-related services, making metering and billing competitive. This could prompt reevaluation of investments in those "moneymaker" technologies.

But these changes aren't happening in a vacuum. There are external pressures from public utility commissions. The extent of California's gas and electric restructuring, for example, struck PG&E broadside, ending a $300-million CIS project with IBM-NIPSCO.

Internal pressures have surfaced. NIPSCO's IT changes have led to worker cutbacks. Its union now claims the company is compromising customer service to return more cash to shareholders and management and pump money into unregulated subsidiaries.

Other ventures have taught utilities they'd better stick with their core strengths, says J. Guerry Waters, of META Group Inc., a utility information technology strategies vice president and former chief technical officer at Southern Co. He says he knows of at least six commercializations that soured. They include a nuclear on-line records system and an executive information system. Hundreds-of-thousands to millions of dollars of investment were lost, he says.

Beyond Core Competence

Utilities are trying to mesh internal systems to come up with enterprise-wide solutions.