THE RECENT INCREASE IN MERGER ACTIVITY IN THE energy and telecommunications industries has concerned state regulators for some time. Such concern reveals how the practical or "local" aspects of...
Silicon Crisis? How Info Tech Poses Risk for Electric Restructuring
ELECTRIC POWER SYSTEMS ARE HEAVILY DEPENDENT ON computers and communications. The electric power industry is reputed to be the third largest user of computers and communications, behind government and the banking industry. When regulators and legislators make decisions regarding the electric power industry, their decisions often carry implications for the industry's computer systems. However, it is rare for these implications to attract significant consideration or influence in the deliberative process.
The result has been the introduction of technical risks into an industry that had previously been considered a paragon of stability and reliability. This discussion will address three areas in which these risks are most serious: the computer system changes required by the restructuring, the confluence of restructuring schedules with the Year 2000 problem, and the information security issues introduced by the restructuring.
Operational Computer Systems
Regulators and legislators have been busy addressing issues of deregulation, market power, stranded costs, taxation, divestiture, and market structure. When their deliberations are finished, what remains is the need for a massive computer project to implement their decisions. Viewed from an implementation perspective, the restructuring of the electric power industry is fundamentally an information technology event. To demonstrate this, one need only look at the changes that must take place on the day of the official restructuring. There are three areas in which changes could take place:
Ownership, financing, and regulation
Generation, transmission, and distribution
ontrol, information processing, and communications
In the long run, of course, important changes do take place in ownership, financing, and regulation. These changes could ultimately lead to significant impacts on the power system. For example, the new owners of generation facilities may decide eventually to change their portfolios of power plant equipment. In the short run, however, it's a different story. On or about the day of restructuring these changes are confined mostly to ceremonies in board rooms, legislative chambers, and regulatory offices. Papers are signed, toasts are exchanged, hands are shaken, and gavels are pounded, but nothing actually changes in the power system.
Similarly, no significant immediate changes appear on the horizon in the areas of generation, transmission, and distribution. Regardless of who owns them or how they are controlled, the wires and equipment that perform these functions remain exactly the same the day after restructuring as before. Not a single generator, transformer, relay, capacitor, circuit breaker, or other piece of generation, transmission, or distribution equipment needs to be installed, replaced, or have its wiring connections changed to implement the restructuring.
By contrast, however, massive and immediate changes will occur in control, information processing, and communications at the time of restructuring. Changes in these areas are monumental and must be implemented for the restructuring to be accomplished on the official date. In most cases, the defining event of the restructuring is the initial operation of one or more computer systems. For Federal Energy Regulatory Commission Orders 888 and 889, the system was the Open Access Same Time Information System (OASIS). For the California restructuring, the systems were those of the Independent System Operator (ISO) and the Power Exchange (PX). The