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News Analysis

Fortnightly Magazine - February 15 2000

its Centricity outage management software is the only system capable of providing a second-by-second, real-time audit trail of what happened when, and what actions the company took.

"[Being able to reproduce] the time continuum is the single most-important factor ¼ to say 'Yes, we were in control,'" says Ken Geisler, chief executive officer of CES. "What it comes down to is, [for purposes of] justifying to the regulator, or determining safety conditions, you need to produce what happened."

Having such an audit trail might prove essential in the aftermath of an outage, whether for legal purposes, or even compensatory purposes, such as in the case of Northern Ireland Electricity, when the company struggled to match customers with appropriate compensation and reimbursements.

Technology such as the Centricity system also can specify categories of customers hit by an outage (e.g., healthcare facilities vs. grocery stores), giving the company instant information it needs to make decisions on where to attack the outage and when - a potentially invaluable tool when considering liability issues. "You can prioritize," as Geisler says.

Who's to Blame?

From a liability perspective, the PG&E outage, which stemmed from human error, would be considered a "failure to supply" - a fairly clear-cut case in which the utility accepted responsibility for the outage. (That outage, incidentally, spurred the California Public Utilities Commission to establish protocols for it and the state independent system operator to coordinate outage investigations. Opening comments on the draft protocols were due Jan. 21, and reply comments were due Feb. 1. See Investigation 98-12-013, Jan. 5, 2000 (Calif.P.U.C.).)

Consider one key question: Is a heat wave an act of God, or is the resulting outage a "failure to supply" for which the utility is responsible? With reports of failing grid reliability creeping into the mainstream press, summer reliability promises to garner ever-increasing attention. (Note "Electric-Power Grids' Reliability Erodes," Wall Street Journal, Jan. 13, 2000, p. A2.) Apparently, accountability is an issue that has not been resolved completely - even from the perspective of liability insurers.

"Is heat a weather condition? I think that's an open question," Swiss Re's Anderson says.

The Irish don't face many heat waves, but NIE's McCracken has an opinion, based on his experience: "The first time, you can say, well, it was an unexpected event. But [the second time is] a lot less defensible than it was the first time around."

Competition: Re-Writing the Law?

"In a regulated environment, utilities were protected ¼ unless they were grossly negligent," Anderson observes. But that may be changing.

Anderson stops short of drawing a direct link between deregulation and recent settlements in outage-related cases. Yet he does acknowledge the possibility. "I think settlement is a complex issue. It comes down to reputational risk."

Meanwhile, Richard Gary, co-leader of the energy and telecommunications team at the law firm of Hunton & Williams, sees a possible connection between competition and settlements. "[Settling] might be a trend in the sense that electric companies are becoming more competitive. You may just [settle] as a business decision. It wouldn't surprise me."

Increasingly, the drive