Off Peak

November 1, 2000

Customers Move On

Oracle's energy director tells Congress how new-economy firms are taking reliability concerns into their own hands.

 

My name is Jeff Byron. I am the energy director at Oracle Corp. in Redwood Shores, Calif. Oracle is a software developer who sells to many of the Fortune 500 companies. I am here today as an end-use customer of electric commodity and services. ...

"I believe Oracle is representative of many of the high-tech companies of the digital-economy. ... I operate a 15-megawatt distribution system at Oracle. ... I am a one-man operation, whose responsibility is to maintain the highest level of reliability of electric supply at the lowest feasible cost. The expertise I bring to Oracle is not a core competency for the world's second-largest software company. However, in 1996 Oracle had become frustrated with the number of power outages that were being experienced, and instead of making substantial expenditures for uninterruptible power supplies (batteries) that would maintain critical functions through short power interruptions, Oracle invested in its own substation and distribution system. ...

"This investment cost Oracle approximately $6.5 million and involved taking a risk that few commercial companies have considered. Nevertheless, the investment has afforded Oracle a moderately more reliable electric supply than most commercial customers. ...

"In a word, Oracle ventured into electricity distribution for improvement in 'reliability.' Oracle is not the first end-user to take these measures, and I am certain there will be many more. Why? Because it is becoming clear that if customers need a higher level of service, they will have to take care of it themselves.

"Because of what Oracle does, create software, it has always been difficult to calculate financial losses due to a power interruption or significant voltage sag. ... In all, losses from each event can be many millions of dollars. It is worth a great deal to Oracle to minimize these interruptions and to invest in options to mitigate them. ...

"Oracle is an E20-T rate tariff customer in the service territory of Pacific Gas & Electric Co. This tariff means that our load exceeds 1 MW and electric service is taken at transmission voltage of 60,000 volts or greater. The actions I have described above were all taken under existing rate structures and had nothing to do with deregulation. These actions are worthy of mention as they indicate the level of effort that Oracle has undertaken to improve the reliability of its electric supply.

"Other digital-economy companies have taken similar actions. ... While large industrial companies have taken similar actions in the past, the reasons for doing so were generally different than they are today for digital-economy companies. ... It is the absence of electricity that is far more costly to a digital-economy company than the cost of electricity. This is a new and critical change in the value proposition for electricity. ...

"For the most part, the digital-economy customers are the missing stakeholder in the deregulation process. ... We must rely on the policy makers to understand this complex industry and