What are some approaches to regulation adopted in recent decades by national governments, and the implications for management making international investment decisions?
XMLLingua Franca of Energy Commerce
A case study from Maryland on electric restructuring.
The restructuring of the old utility-owned energy industry is changing how we do business. But there's a catch. We have to overcome systems and business processes built around a vertically integrated industry. With the fragmentation of the vertically integrated utility has come market participants with widely differing information technology systems, broken down along business type, size, volume, geography, jurisdictional and technological lines.
To collaborate fully, players in a new market need a-a common language and understanding that allows separate systems and businesses to communicate and exchange information around shared business processes.
Without such universally accepted standards and language, utilities and energy companies-power producers, transmission and transportation companies, distributors and retailers-are forced to manage widely varying forms of data exchange. The costs of this variety of forms of data exchange is seen in greater inefficiency, increased risk of service failure and higher transaction costs.
Yet, it need not be so. Instead, eXtensible Markup Language (XML) is emerging as the standard for collaboration between disparate systems. This acceptance comes because XML is technologically suitable for the most advanced collaboration medium in business today-the Internet. Moreover, XML has won near-unanimous acceptance by the software community.
An Event-Driven Economy
We inexorably are moving towards an event-driven energy economy, where customer demand for energy is fulfilled by coordinated efforts among many participants.
For example, energy companies must collaborate in the information flow related to the procurement and billing of energy delivered ultimately to customers. At the same time, they must collaborate in the physical and financial flow of energy across networks managed by market operators and local distribution companies. The physical delivery of electricity and related financial flows, for example, requires coordination and collaboration by:
- The customer who draws power by a metered service.
- The distribution company that supplies power via a local network while managing the constraints of the local network.
- The transmission grid organization that transmits power from the generation plant to the distribution company network while managing the constraints of the grid.
- The generator providing power in response to real-time dispatch instructions by the transmission grid organization.
- The market operator who organizes power markets, covering the spectrum of real-time to futures, to provide price signals to market participants for the supply and demand of power.
- The retailer who provides price signals to the customer in the form of a supply contract.
This requirement creates an expanding Web of relationships among market participants. Yet, barriers between energy companies still exist-stemming from differences embedded in the methods and systems employed by independent energy companies to manage their operations. These differences can create discontinuities, or greatly increase the up-front cost and ongoing operating costs related to the control and flow of information between the collaborating entities.
Why Not EDI?
When discussing what will be the language of commerce within energy, I am often asked, "Why XML? Why not EDI or another format?" There are reasons why XML has gained the attention of the business community as the preferred language of commerce between companies. The strengths of XML make