Information Technology: It's Not Just Business Anymore

Fortnightly Magazine - March 15 1996

Computer systems must move beyond insular needs (billing and work orders)

to marketing opportunities. But few regulators really understand.

Everywhere we see the march of technology, especially computer and information technology. Pagers hang on nearly every belt or bag, PDAs have replaced notebooks and portfolios, computers sit on more home desks, and every major magazine and almost every daily paper has sections dedicated to news about the Internet.

Virtually every office desk holds a computer, offices are connected by networks, and networks connect offices around the globe. Our auto repair specialists must have computers for the complicated components in our cars. Card catalogs have been replaced by CD-ROM systems. Even the grocery store scans purchases, debits customers' bank accounts, and automates inventory, stock ordering, and accounts.

To the casual observer, the computer and information revolution has missed the electric power industry. Outside our homes and businesses, a mechanical meter, just like the ones that have been there for decades, turns quietly, registering incomprehensible information that must be physically read and translated into a bill that reliably arrives every month.

What we see as individual customers, however, disguises a revolution. The electric utility industry, too, is caught in the technological whirlwind, as are the other utility sectors, from natural gas to telecommunications. Utility managers are now offered a host of new information technologies that will allow more efficient operations, better data collection and retrieval, and better decisions.

The range of options, the nature of the technologies, and the decisions about when and how to acquire them for maximum benefits are complex. These complex decisions are difficult enough in times of monopoly service provision, but exponentially more complex when competition lies on the near horizon, where functional or actual unbundling, delamination, and disaggregation of the traditional utility business is now openly discussed across the country. The reliable certainty of the franchise service territory and the allowed rate of return are at serious risk of being replaced with a mere chance to compete.

Unfortunately, information technology is one aspect of the electric utility business few, if any, regulators really understand. No computer has a 40-year expected life. Information technology systems mean increased efficiency, but often have high front-end costs and short depreciation lives. And information technologies are not just tools for doing today's business better, they are tools for competing.

Utilities historically have used information technologies for a number of internal purposes. Customer information systems ensure that the "reliability" of billing parallels the "reliability" of the service delivery system. Automated mapping/ facilities management systems manage a utility's physical facilities to ensure engineering efficiency and cost containment. However, information technologies were seldom used by executives or regulators to support decisionmaking (em to help marketing staffs target market segments for special promotional campaigns, to help management evaluate the potential threat of a competitor, or to help regulators evaluate alternative transmission siting corridors or graphically view the facilities and interconnection issues related to a proposed merger.

Today, utilities use related types of spatial information technologies to improve work order management, outage recovery, resource planning and optimization, power flow modeling at the distribution and transmission level, and power system control. But these systems were developed to meet the discrete and insular needs of each aspect of a utility's operation, and rarely integrated into the decision-support systems utility executive teams will need to position the utility for a competitive future.

The surviving utilities in the new competitive regime will not only need to provide different services and products, but to conduct business differently. Utilities face the challenge of developing a better understanding of their customers' individual wants and needs. To meet that challenge they will need to comprehensively integrate disparate information sets, add business geographic applications software and data sets, and incorporate creative subjective judgment from the executive team. The wider understanding utilities gain from integrated information technology will help them segment market opportunities (em to determine which segments to pursue and to price their services and products appropriately.

Regulators have protected utility executives from such challenges. Regulators have a conscience; the market does not. The competitive marketplace will require a more flexible regulatory approach. Regulators will oversee broad market directions, act in a consumer protection role, and focus on antitrust issues. The era of full-blown prudence reviews and oversight that can stifle competitive markets from working efficiently is over.

Regulators can use information technologies to help evaluate siting and interconnection requests, to help identify and analyze "stranded" assets claimed by jurisdictional utilities, to help analyze a utility's response to a service interruption, to enhance performance-based regulation initiatives by benchmarking utilities against minimum service standards and then monitoring and reviewing the utility's actual performance.

The transition to this type of environment at regulatory commissions is already underway. Texas makes dockets, rules, and other information available to the public on the worldwide web. New York runs a pilot program that uses geographic systems technology to handle siting/distribution and transmission certification issues. And regional quality of service oversight committees, such as the 14-state regulatory committee that monitors U S WEST, may find considerable benefit in using information technology to monitor service standards and coordinate regulatory initiatives.

Technology is reshaping the utilities industry in ways that were unimaginable only a few years ago. If I were still a regulator, I would aggressively deploy information technology to avoid becoming what some jokingly refer to as a "stranded regulator" in the competitive future. Without information technology, utility executives as well as regulators could become "stranded." Think about it! t

Karl Rábago is deputy assistant secretary for utility technologies at the U.S. Department of Energy. He served on the Texas Public Utility Commission from 1992 to 1994.

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