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As a leading power plant maintenance and 

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comes from our focus on your success - not our bottom line. In fact, in 2004 we were ranked 

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We’re growing our relationships - and we’re making it known across the country. 

CORPORATE - EAST MID-AMERICA SOUTH WEST COAST 

Lancaster, Pennsylvania Troy, Michigan Atlanta, Georgia Orange, California 

717.481.5600 248.643.6132 770.432.7230 714.565.7775 

www.dznps.com 

www.energycentral.com ENERGYBIZ MAGAZINE 3

4 ENERGYBIZ MAGAZINE July/August 2005 

FOR UNDERSTANDING THE 

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BUILT FOR POWER, 

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coordinated combustion control, high-speed steam & gas turbine control to automated dispatch, and scrubber control 

to emissions optimization. With our focus on power, you also get fully integrated sequence of events capability, 

embedded bus technology, and a host of mission-critical reliability features. Behind Ovation stands a dedicated team 

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EMERSON. CONSIDER IT SOLVED TM .

32Illustration by: Jürgen Mantzke 

14 

39 

Volume 2 Issue 4 July/August 2005 

Departments 

7 OUR TAKE – A Defining Moment 

8 LETTERS 

10 ENERGY BUSINESS – What the New Mergers Will Mean 

12 n The View from Europe 

13 n New Lift in Customer Information Systems 

14 CFO INSIGHT — Sempra’s Schmale, Drivers to Success 

16 LEGAL EAGLE – AEP’s Michael Morris, Mauled by PUHCA 

18 n When States Raid Public Utility Funds 

39 Guide/Sourcebook — ASSET MANAGEMENT 

63 TECHNOLOGY FRONTIER — XCEL UP CLOSE 

68 METRICS – Industrial Rates, Texas Generation, 

Customer Satisfaction, Hiring 

Features 

DAWN OF A NEW NUCLEAR ERA 

20 

AN INTERVIEW WITH Nils Diaz, the chairman of the 

federal Nuclear Regulatory Commission. Find out why 

we may need as many as 100 new nuclear plants in the 

next 20 years. 

JIM REINSCH ON the promising future of nuclear 

power. 

70 INTRODUCING – Donald E. Felsinger on Sempra’s Vision 

74 FINAL TAKE – The Best of Generation 

26 

DAN KEUTER EXPLAINS what is driving Entergy 29 

to buy up nuclear plants. 

GETTING SMART ABOUT DISASTER 

30 

WHAT UTILITIES HAVE accomplished in securing 

their assets from terrorists and natural disaster. Story 

from the utility trenches. 

ESCOS ADAPT TO NEW REALITIES 

34 

ENERGY SERVICE COMPANIES — what services 

are they providing to energy users. Read about recent 

and future trends. 


Reliable people means customer service 

you can count on. That’s Progress Energy. 

©2005 Progress Energy Carolinas, Inc. and Progress Energy Florida, Inc. 


We’re dedicated to 

making your power as 

reliable as possible. 

RELIABLE POWER. 

AND PEOPLE DEDICATED TO KEEPING IT THAT WAY. 

Reliability means improving how we deliver 

your power. Quickly restoring power after 

storms. Striving to make our customer 

service the best it can be. And evaluating 

and preparing for the energy needs of 

future generations. The relentless pursuit 

of excellence. It’s what we’re all about. 

progress-energy.com

Photo By: C Laura Maxwell Shultz 

Our Take 

VISIT US AT WWW.ENERGYBIZMAG.COM — FOR ARTICLES, TO WRITE A LETTER TO THE EDITOR, AND BACK ISSUES 

A Defining Moment 

THERE IS GROWING sentiment that the power 

industry is at a major turning point. Change is upon 

us, and it is accelerating. 

Washington insiders expect the first important 

new piece of national energy legislation in more 

than a dozen years to clear Congress and be signed 

into law by the president before the summer is out. 

Rep. Joe Barton, chairman of the House Energy 

and Commerce Committee, recently told industry 

leaders, “This is a bill long overdue.” 

In large part, that is because we soon 

may face a potential power shortage of 

immense proportion. Investment will be 

required in generation and transmission. 

Speaking several weeks ago the Edison 

Electric Institute’s annual convention in 

Las Vegas, Barton said that if the 

national economy continues at its 

current growth rate of 3 percent 

a year, we will need to build one 

new 300 megawatt power plant 

a week to satisfy energy demand. 

Similar estimates surfaced 

early in President Bush’s first 

term, and they were sketched 

out in the national energy plan 

put together by Vice President 

Cheney after meetings with 

industry leaders. Now, however, 

the numbers seem to have fresh 

urgency. 

Gerald Anderson, president 

of DTE Energy, told industry 

leaders at the EEI convention that 

his company, like many across the 

industry, faces some big decisions 

on investments — and fast. “These 

decisions are going to come in less 

years than you can count on one 

hand,” he said. 

These decisions also will be made 

when the nuclear option is getting a 

fresh look. Even some environmentalists 

concerned about global warming 

are newly sympathetic to nuclear 

power. “The ground is beginning to shift 

on this issue,” Anderson said. 

Meanwhile, the nation’s top regulator of nuclear 

plant safety is readying his agency for a possible surge 

in new construction. Nils Diaz, the chairman of the 

U.S. Nuclear Regulatory Commission, tells EnergyBiz 

in an interview published in this issue on page 20, that 

100 new nuclear power plants will be needed in the 

next two decades if nuclear power is to continue to 

provide one-fifth of the nation’s electricity. 

Renewable power is growing in appeal, and wind 

turbines are marching across the landscape. 

Mergers continue, as utilities ready themselves for 

a new emerging business reality. 

All this adds up to a flexion point for the industry. 

In coming months, we will take a closer look at the 

new energy legislation, should it become law as many 

now expect. We will look at the implications of the 

many provisions of the new law – and focus on 

the opportunities and hurdles they present to 

the energy industry. 

But for now, it is time to take a deep 

breath and appreciate the grandeur 

of this sunrise moment. A century-old 

power industry is about to head off 

in new directions. New technologies 

will be embraced. New business 

visions will coalesce and crown new 

marketplace victors. Who knows, one 

of two companies may emerge as the 

Microsoft of the power sector. 

Appreciating the defining moment 

before us does not mean we can sit 

back as idle spectators. Some leaders 

at the EEI gathering warned that the 

industry shows a worrisome tendency 

to talk just to itself in a language only it 

understands. As Barton put it, energy 

represents 20 to 25 percent of our $10 

trillion economy. What should the power 

industry of tomorrow look like? 

“Our industry has a big stake in shaping this 

discussion,” Anderson said. “These decisions 

are big ones, with 50-year implications.” 



Letters 

TO CONTRIBUTE TO the Letters column, please e-mail 

your submission to energybiz.editor@energycentral.com. 

Provide your name, address and daytime phone number. 

Letters may be edited for style and space. 

THANKS TO WANDA Reder and 

Richard Green in your May/June issue 

for their in-depth look at one of the most 

daunting human resources challenges 

facing American utilities – the aging 

workforce. According to the Bureau of 

Labor Statistics (BLS), the number of 

power industry jobs available by 2007 

will exceed supply. By 2012, it projects 

a shortage of some 10,000. While 

the power sector is certainly not the 

only area of American business about 

to be severely affected by wholesale 

retirement of the baby-boom generation, 

it has some unique problems. 

For example, late last year E3 

Consulting learned that the University 

of Colorado (CU) and Colorado 

State University (CSU) no longer had 

specific curricula designed to attract 

and educate future managers and 

technicians needed to operate the 

state’s power production, transmission 

and distribution facilities. In fact, 

professors at both schools lamented 

the fact that over the years utilities had 

gradually withdrawn their support for 

such programs, few students were 

being attracted, and the formerly robust 

teaching programs had withered. 

That’s why we were so pleased this 

summer when the utilities responded 

positively to our requests to begin a 

series of meetings with professors 

at CU and CSU designed to lay the 

groundwork for creation of powersector 

management and operation 

curriculum. We are optimistic that this 

utility/university partnership will provide 

the bright young minds we’ll need to 

ensure the power sector can continue 

to provide reliable, affordable electric 

energy to industry and consumers. 

Don Hurd 

President & CEO 

E3 Consulting LLC 

Denver 

I WOULD LIKE to comment on 

the utility outsourcing articles in your 

May/June issue. While outsourcing 

may be a valuable strategy for certain 

segments of the utility and energy 

supply business, it is also a valuable 

strategy for medium and large energy 

consumers. Energy procurement today 

is more complex than ever — with 

different rules in different states, prices 

that are through the roof, tight supplies, 

and futures prices worrisome to any 

company’s bottom line. Managing 

energy procurement is a daunting task, 

and more and more companies are 

looking for outside assistance after 

being whipsawed by volatile prices for 

all energy commodities over the past 

several years. 

Art Malatzky 

Director, Consulting Services 

Compass Energy Services, Inc. 

Killington, Vt. 

IN RESPONSE TO your cover 

story on wind power in the May/June 

issue, I think it’s time to allow utilities 

a preferred profit from renewable 

energy including wind, solar, biomass, 

etc. Fossil and nuclear fuels have 

external costs, such as environmental, 

health, proliferation and military 

expenses that are not factored into 

the costs we pay for them. Public 

utility commissions should allow 

a somewhat greater rate of return 

on clean, home-grown renewable 

projects that utilities undertake. This 

preferred renewable return could 

vary by renewable fuel, giving greater 

incentives to bring new technology to 

deployment faster. 

Bill Roush 

President, Heartland Solar 

Energy Industries Association 

Overland Park, Kan. 

EDITOR IN CHIEF Martin Rosenberg 

marty.rosenberg@energycentral.com 913 385 9909 

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By Roger W. Gale 

News Flash>> 


JAPAN BUILDS 

PLANT IN IRAQ 

Japan has agreed 

to provide aid to 

construct a 60 

megawatt plant in 

Samawah, located 

in southern Iraq. 

Power demand in 

the province in 

which the city is 

located amounts 

to 200 megawatts, 

but supply equals 

about 40 to 50 

megawatts, 

according to 

the Japanese 

government. 

Japan is committed 

to provide $1.5 

billion, or 162 billion 

yen, to help rebuild 

war-ravaged Iraq, 

with 12.7 billion yen 

to cover the power 

plant project. 


Energy Business 

What the New Mergers Will Mean 

MERGERS ARE BACK — and this time around 

the consequences will be mammoth, creating larger 

companies than we have ever seen and forcing 

regulators to take on a more fundamental restructuring 

of assets that has been politically acceptable until 

now. The undersized scale of today’s markets instantly 

introduces market power problems. In the case of 

the proposed Exelon-PSEG merger, this will require 

sloughing off control of 20 percent or more of the 

new company’s generation. That, in turn, is creating 

an emerging interest in a still-undefined, post-regional 

transmission organization (RTO) built around far 

larger swaths of transmission that might be better run 

by independent, investor-owned transmission-only 

companies than by today’s complex ill-defined, undersized 

RTOs. 

With three large mergers underway, merger-passionate 

CEOs are feeling the pressure to move faster, 

given the diminishing number of opportunities there 

are to tie up with simpatico, transaction-driven CEOs 

in their early 60s who run good companies in states 

amenable to mergers. The Duke-Cinergy merger may 

be seen as an anomaly — an injured proud company 

that’s long been one of the most admired in the 

industry whose CEO is a sell-off expert tying up with a 

partner that’s been out and about for years looking for 

the right deal. In fact, many wonder whether the chase 

was more fun than the deal itself. What we are likely to 

see in the future are mergers between healthy, aggressive, 

growth-driven companies where the acquisition 

premium is an acceptable accretive reach. 

Since there are opportunities out there, the pace 

of merger activity is almost certain to increase. The 

big question is how many of these mergers will get 

approved. That will depend on what happens to the 

Public Utilities Holding Company Act (PUHCA) this 

year, how the Federal Energy Regulatory Commission 

(FERC) treats mergers, and how pragmatic state 

regulators are. It will also depend on how all these 

players picture the new world created by such mergers 

and how much rejiggering of the vertically integrated 

model will be necessary to mitigate market power. 

The environment is vastly different from the 

landscape we saw in the last round of mergers 

ending in 2001. The see-saw on which the new 

mergers are balanced has the Exelon-PSEG merger 

on one side — with “excess” market power in one 

market space — and the Duke-Cinergy merger on the 

other side. These are definitely two companies in two 

different regions with little or no market power impact 

— unless, that is, FERC tries to force Duke into an 

RTO, in which case it would probably have to shed 

control of generation to gain approval. To forestall 

that, Duke is talking about an ISO-light, based on 

Entergy’s transmission model. 

What these two mergers have shown us is that 

the U.S. power and delivery markets are still far too 

balkanized. If we’re going to permit mergers among 

larger players, we are also going to have to increase 

the size of the markets within which companies 

operate. That means giving the FERC more power 

and states less — the perennial conundrum we find 

ourselves in again and again. 

At the same time, we are seeing some utilities 

retreat back into rate base as a way to grow. By turning 

inward to cater to state regulators, the new mergers 

are highlighting the need for a broader perspective 

with more Washington say-so. 

Not everyone likes the prospect of mergers in 

this market but when you compare this industry with 

others, electricity remains far too decentralized, less 

efficient, and extraordinarily resistant to new technology 

and investment. However, as in other industries, 

there is plenty of room for retail marketers and innovative 

new entrants if the broader infrastructure is large, 

robust, and operating under a single set of relatively 

transparent rules. 

The fruits of consolidation are already clear in 

generation — where the industry has had enormous 

incentive to improve efficiency. The remarkable 

improvement in the quality of nuclear generation is a 

direct result of competition and consolidation of assets 

into template-driven fleets. 

On the wire side of the transmission and distribution 

business, enormous amounts of new investment 

will be needed in the next decade to bring the 

technology base up to 21st century digital standards. 

The Electric Power Research Institute has identified 

the massive capital investment required to rebuild the 

grid and achieve the synergies and standardization 

essential to the de-balkanization of the industry. There 

are still far too many transmission owners and far too 

little capital being invested in the grid. The FERC is 

in a position to condition many of these mergers on

adequate business plans, focused on improving quality 

of service to investment in the technology. While that 

may result in rate increases, the long-term results will 

be more reliable service. 

After two decades of aborted effort to stimulate 

growth through diversification, the industry is now 

hunkering down into a two-pronged effort to grow 

— through rate base asset increases and mergers. 

For competition-driven companies like Exelon and 

Constellation, whose generation fleets are largely 

deregulated and not keen on rate-basing, mergers 

provide the opportunity to acquire more generation, 

run plants even more efficiently, and sell output at 

higher margins while they continue to grow their fleets 

into behemoths that squeeze even more juice out of 

their plants at lower operational and fuel prices. Exelon 

will own 21 nuclear plants if it completes the PSEG 

takeover — by far the largest fleet of low-cost generation 

in the United States. Well known as a skeptic, 

John Rowe has now become the industry’s leading 

advocate of a large nuclear fleet, the clear-cut profit 

engine in an otherwise under-performing industry. 

Many industry observers question the payoff of 

previous mergers and their ability to maximize the 

synergies that their proponents advertised to justify the 

move. There are also questions about the long-term 

benefit to consumers. However, scale does make a 

difference in generation, and as capital requirements 

skyrocket larger players will be in a better position 

to create the high-margin future grid. The process of 

becoming a larger player also means the management 

is more audacious and more likely, as a result, to 

commit capital in more innovative ways. 

It’s also clear that today’s RTOs are not large 

enough to successfully deal with the massive size of 

companies being created. If mergers are approved, they 

will create a greater need for transmission to be spun 

off, if not sold to companies focused on that business. 

As a consequence, the notion of independent transmission 

companies acting as regulated monopolies providing 

independent service — the UK model — may come 

back, resulting in the merger and acquisition of many 

transmission assets into the hands of a few very large 

transmission-owning entities. The scale of the mergers 

is also likely to breathe new life into the commercial and 

industrial competitive markets and eventually encourage 

a second look at residential competition and more 

unbundling of retail services — all of which are a way of 

limiting market power. 

While standard market design is dead for now, the 

large multi-regional mergers that we are likely to see will 

also require another look at how to set standards rules 

for the entire North American marketplaces. Eventually, 

we’ll also see more contiguous mergers — clean-up 

activities as opposed to the strategic scaling we’re 

seeing today. Although PUHCA is aimed at large noncontiguous 

mergers, the local contiguous mergers will 

probably necessitate a whole new look at retail market 

power in the end. 

Nothing could be better for the Exelon-PSEG and 

Duke-Cinergy mergers than the repeal of PUHCA this 

year. The recent Securities and Exchange Commission 

administrative law judge smack against the five-yearold 

AEP merger creates even more pressure to get 

PUHCA off the books. Therefore, it’s vitally important 

that Congress not only passes an energy bill this year 

but that it also includes PUHCA repeal. Repeal will not 

only mean more mergers, but it will also mean more 

kinds of mergers, including those with other energy 

industries such as oil. In addition, it will take the brakes 

off foreign investors who want to come back into the 

U.S. market for a second bite as well as for those 

looking for their first taste. 

What will the result of these new mergers be? A 

decade from now, the total number of investor-owned 

utilities will be way down, the American marketplace 

will be far more internationalized, and there will almost 

certainly be more unbundling of assets to minimize the 

negative impacts of the market power problems these 

large mergers will create. It will mean transmission 

markets will be far larger than those we see today. 

Whether they are part of regional transmission organizations 

or independent, they will cover much broader 

segments of the marketplace and allow for many more 

players to hold generation than in today’s markets, 

without the need for ceding control as Exelon is being 

forced to do today. In a decade, we’re likely to see 

many generation fleets of 50 to 100,000 megawatts 

made up of heavy baseload, including a new generation 

of coal-fired plants and new nuclear plants. 

The bottom line is mergers will create a more 

efficient industry that should serve customers 

better, enhance the introduction of new technology, 

and level prices nationally. They will also require 

additional unbundling of assets and sharpen the 

business performance of dedicated players, such as 

the independent transmission companies. 

A picture that we should see looming in the 

future is not one of large monopolies controlling the 

marketplace and gouging customers but rather one 

of relentless competition among the smaller number 

of aggressive but financially challenged entities. 

Roger W. Gale is CEO of GF Energy, 

based in Washington, D.C. 


By Loyola de Palacio 

News Flash>> 


BOLSTER GRID 

SECURITY 

A group of energy 

and security 

experts have been 

brought together 

by the federal 

Department of 

Homeland Security 

to tighten security 

around the nation’s 

transmission 

and distribution 

network. 

The group will 

be charged with 

outlining what 

research must 

be undertaken 

and what policies 

enacted to make 

power lines more 

secure from possible 

terrorist assault. 

Ed Badalato, a 

member of the 

group, told United 

Press International 

that every effort 

must be undertaken 

to secure the grid, 

which is essential to 

American security. 



The View From Europe 

EUROPE’S ENERGY MARKETS have 

been opened for competition for commercial and 

industrial customers. By 2007, residential customers 

will join them. 

Today, increased competition has transformed 

European markets. However, its energy market is not yet 

fully competitive. We face structural problems. National 

markets are still largely dominated by the incumbent 

electricity supplier. In the last few years, we have seen 

an increasing level of concentration of the industry. 

Deficiencies on the infrastructure side are at the 

root of many of the dysfunctions. In many cases, 

existing interconnections between national systems 

are not fully accessible to all suppliers. In other 

cases, the capacity of existing interconnections is 

simply too small. This situation could prevent real 

cross-border competition. 

Without a doubt, the main benefit already realized 

has been the gain in productivity of the utility sector, 

as shown in various studies. The gas and electricity 

sectors’ excellent performance underlines the contribution 

of the market-opening approach to drive efficiency 

improvements in productivity and the potential contribution 

of these sectors to European economic growth. 

Prices for large users have fallen by 15 percent in 

the last 10 years. For residential customers, they’ve 

been cut by 30 percent in several member states. 

The key to the overall market structure is generation. 

Experience in the electricity market to date has 

shown there is a general tendency for integration 

between generation and supply companies to avoid 

risk. Where generation capacity is concentrated in the 

hands of one, or even a few companies, the real possibility 

of consumers switching suppliers will be limited. 

This may, in turn, affect the performance of the market, 

since companies will be able to keep prices higher 

without fear of losing their share of the market. 

Like the United States, Europe will not be able 

to cope with future energy demands without a very 

important investment in capacity. According to our 

studies, with the expected increase of demand over 

the next 15 years, Europe will require additional 

capacity of 600 gigawatts. This means setting up a 

power station of 750 megawatts every week. 

The introduction of competition has changed the 

investment climate for new power plants. Instead of 

being a central government decision, investment will 

now develop in response to price signals. When the 

gap between generation capacity and demand narrows, 

prices will rise, making new investment profitable. 

The European Commission has proposed granting 

enough power to regulatory authorities, and requested 

that member states closely monitor the evolution of 

demand. If necessary, it may spur additional capacity 

investment efforts in infrastructure and use several 

tools to force the construction of new power plants. 

Typically there is one transmission system operator 

in each member state, except for Germany, where 

there are several. Although much progress has already 

been made in terms of unbundling network operators 

and introducing regulated third-party access, there are 

still certain aspects that remain unsatisfactory. A fully 

independent transmission system operator is crucial 

for a well-functioning market. 

The deficiencies in the grid coupled with the 

lack of spare capacity are other big risks we must 

overcome. We need to reinforce and invest in our 

grid and generation to face the increase of peak 

summer energy demand. 

CHALLENGES ABOUND 

We are not happy with the increasing level of 

concentration of the industry. We didn’t open and 

liberalize the energy business to encourage mergers 

and acquisitions. 

Turning to the environment, the implementation of 

the Kyoto Agreement has not been an easy task for 

the gas and electricity utilities. The energy market 

will need to develop in a manner consistent with the 

European Community’s sustainability objectives. In 

excess of 7,000 megawatts of additional renewable 

and efficient generation capacities was added to 

the market recently. This represents more than 50 

percent of new generation capacity added in 2003. 

The energy sector in Europe benefits from 

holding forums where utilities, regulators, and 

legislators from different levels can meet and deal 

with commons problems to enhance fair competition 

and the overall efficiency of the energy sector. 

Loyola de Palacio was European Union 

energy commissioner from 1999 to 

2004. She wrote this piece in response 

to questions posed by EnergyBiz.

New Lift in Customer 

Information Systems 

STUCK IN THE doldrums for several years, the 

utility customer information system (CIS) market 

seems to be poised for a rebound. Although no one 

is predicting a return to the pre-2000 “glory days,” 

when many large and small utilities alike replaced 

their CIS to head off year 2000 problems, things 

seem to be looking up for remaining vendors. That’s 

according to new data from the Energy Central 

Research and Advisory Division as well as the buzz 

heard at the annual CIS Conference and Executive 

Summit held May 16-20 in Phoenix. 

According to Energy Central’s survey of nearly 

100 utilities completed in June, an increasing number 

of utilities are considering CIS replacements within 

the next three to five years if not sooner. Reviews are 

underway at some of major investor-owned utilities 

that have been noticeably absent from the market for 

several years (see chart below). 

PERCENTAGE OF UTILITIES 

CONSIDERING CIS REPLACEMENT 

30% 

25% 

20% 

15% 

10% 

5% 

12-18 mos. 

IOUs Municipals Co-ops 

18 mos.- 3 yrs. 

3-5 yrs. 

12-18 mos. 

Percent 0 19 4.7 16.6 12.5 12.5 11.8 29.4 17.6 

Source: Energy Central survey 

18 mos.- 3 yrs. 

3-5 yrs. 

12-18 mos. 

18 mos.- 3 yrs. 

3-5 yrs. 

Contemplated CIS replacements are up 

considerably from the past two to three years. While 

many anticipated projects may not come to fruition, 

this graph still represents an increase in optimism 

among utility executives concerning possible CIS 

implementations. Although municipal and co-operative 

utilities are considering replacements within the 

next 18 months, no IOUs are that close. However, 

the fact that as many as 19 percent may consider 

CIS replacement within the next 18 months to three 

years is up sharply from surveys just two years ago. 

Supporting the survey results, anecdotal evidence 

from the CIS Conference also points to a recovery. 

PARTICIPANTS IN the second annual 

two-day Executive Summit held before the main 

conference were generally upbeat about the future 

of CIS as an important utility software system. In 

fact, several utility CIOs from IOUs indicated they 

either have CIS replacements underway or are 

anticipating them in the next few months. 

THE SUMMIT itself was also better attended 

this year than in the last several years, attracting some 

of the top utility and vendor representatives. Ironically, 

last year a major participant spoke about the demise 

of the CIS market and the likelihood that no exclusive 

CIS vendor would survive. This year, representatives 

of several stand-alone CIS vendors were in 

attendance, and utility speakers were discussing new 

implementations rather than how to take CISs apart 

and extend their lives indefinitely. 

ATTENDANCE THIS year was at slightly 

more than 1,200, which was about equal to last 

year’s conference in Miami Beach, Fla. Prior to that, 

there had been several years of declining attendance 

at this and other related conferences. 

What does this mean? All of this information 

represents a glimmer of hope for those parts of the 

industry concerned with customer information and 

the systems that track it. Although these findings 

do not indicate a full recovery from the crashes of 

2001, utilities and the vendors that serve them are 

anticipating slightly better times ahead. 

By Warren Causey 

News Flash>> 


RUSSIAN EXPERTISE 

KNOCKED 

The massive Moscow 

power failure in 

May was caused 

by a lack of skilled 

professionals 

operating the 

infrastructure of 

the Unified Energy 

System, according 

to a member of the 

Russian Duma. 

Boris Vinogradov, 

a member of the 

Duma committee for 

energy, transport 

and communication, 

said that the 

problem stems 

from 1998, when 

new management – 

primarily economists 

and investors 

– were brought 

into the utility. 

“System drawbacks 

in the energy sector 

reform launched in 

1992, which has led 

to uncoordinated 

actions between 

the federal grid 

company and the 

central dispatch 

administration, 

have also caused 

the blackout,” the 

legislator said, 

according to BBC 

Monitoring. 


By Neal Schmale 

News Flash>> 


EXCELSIOR PLANS 

POWER UNITS 

Excelsior Energy 

Inc. is proceeding 

with plans to 

invest $1 billion in 

clean coal-fired 

generation in 

Minnesota, with a 

decision to come 

later this summer. 

The company is 

hoping to forge a 

long-term sales 

contract with 

Xcel Energy. 

Bob Schulte, 

vice president of 

regulatory affairs 

and marketing 

at Excelsior, 

told Dow Jones 

newswires, “We’re 

in discussions with 

multiple utilities 

in the region.” 

Excelsior intends 

to construct 

coal gasification 

units that would 

produce about 600 

megawatts possibly 

starting in 2009. 



Sempra’s Schmale: 

Drivers to Success 

AS CFO OF an energy company, I have had the 

opportunity to execute, along with a top-notch management 

team, a business philosophy that combines deep 

industry expertise with rigorous risk management. 

Sempra Energy is a Fortune 500 energy-services 

company, serving 29 million consumers worldwide 

with more than 13,000 employees. We serve the 

largest customer base of any energy utility in the 

United States through San Diego Gas & Electric and 

Southern California Gas Co. 

Our group of competitive energy businesses 

builds and operates infrastructure, sells energy and 

related commodities, and provides risk-management 

services. These diversified assets and competencies 

are the cornerstone of our success. Due to our size, 

scope, and resources, we’re able to compete in 

national and international energy markets. 

The results have been superior stockholder returns. 

Sempra Energy’s earnings have increased an average 

of 20 percent annually every year since the company 

was formed seven years ago. As of May 31, total 

return over the past five years was 154 percent, as 

compared with 8 percent for the S&P Utility Index, and 

10 percent for the Dow Jones Industrial Average. For 

2004, Sempra Energy generated record earnings of 

$895 million, a 38 percent increase over 2003. 

How does a company produce results like this? 

Through organic growth and strategic acquisitions. 

We’ve been methodical, knowing it’s necessary to 

maintain a solid balance sheet and strong, investmentgrade 

credit ratings. As you begin to own more volatile 

businesses, you don’t simultaneously lever up. You 

must maintain a certain financial strength to ensure 

you’ll survive bumps in the road along the way. 

In the wake of a regulatory retrenchment in 

many states, faltering deregulation, and financial 

scandals, many energy companies have returned to 

their utility roots. We’re one of the few companies 

that has continued to pursue and effectively execute 

an integrated energy services strategy. Because 

of our financial stability and commitment to market 

research, we’ve been able to stay opportunistic in 

the marketplace. 

Risk management has been a key for us. We will 

not make any major investments in energy infrastructure 

without hedging our risks. For example, since 

2000, we’ve added more than 3,600 megawatts of 

Running an 

ethical workplace is 

an imperative. 

active generation assets to our portfolio — about 80 

percent of which is hedged through 2007. 

We’ve taken the same approach with the three 

new liquefied natural gas (LNG) receipt terminals 

we’re developing in Baja California, Mexico, and on 

the Gulf Coast. Fully contracted and under construction, 

the Mexico terminal should be operational 

in early 2008. We’re in the process of finalizing 

commercial arrangements for the other two terminals 

— one should begin construction by year’s end. 

These investments in LNG were driven by 

substantial in-house market research. Earlier in this 

decade, government and industry experts predicted 

that North America’s natural gas supplies would 

be adequate for decades to come. We questioned 

that conventional wisdom. Given our position in the 

marketplace as one of the nation’s largest natural gas 

distributors and marketers, we saw aberrations in 

the price of natural gas that we believed signaled a 

fundamental shift in the supply-demand balance. 

Our research confirmed that the widely held 

theories about gas supply were incorrect. Not only 

was the United States facing a growing natural gas 

shortfall, but given the static domestic resource 

base, drilling restrictions, and increasing demand, we 

forecast a serious market crunch. 

Reflecting on my experience at Sempra Energy, 

I am struck by what I think of as the drivers of our 

success. First comes being ethical, fair, and honest. As 

a businessman, looking at the wreckage strewn around 

the corporate landscape from ethically and financially 

bankrupt firms, I can say that running an ethical 

workplace is an imperative. Second, to a significant 

extent, we have benefited from challenging conventional 

wisdom. Our industry, like many others, tends to have 

a pack mentality. We trusted our instincts about the 

changes in the natural gas market and have benefited by 

assuming a leadership role in the emerging LNG business. 

Third, you have to be flexible, because whatever 

assumptions you make about the future, the only certain

thing is that at least some of those assumptions will be 

wrong. We have built flexibility into all of our business 

plans, so we can change course quickly to cope with 

regulatory, political, or market developments. Effective 

risk management involves understanding and learning 

how to mitigate risks inherent in any transaction or major 

business decision. 

What of the future? Our regulated California 

utilities are in solid financial shape. Our competitive 

energy businesses are on a strong growth trajectory, 

with stable earnings streams and many exciting 

opportunities ahead of them. 

We have a strong management team, and our 

sound business practices have enabled us to weather 

a number of storms in recent years. If we continue 

streamlining operations, opportunistically acquiring 

and building new businesses, and working as hard as 

possible to ensure all our businesses are the best in 

their fields of operations, Sempra Energy will have a 

very bright future. 

I take enormous pride in our collective success. 

Every day, I come to work and thank my lucky stars 

that I walked into the Colorado School of Mines 

and saw — even way back in the ancient 1960s 

— that the energy field was going to be interesting, 

rewarding, and a business full of new challenges 

and infinite possibilities. 

Neal E. Schmale is executive vice 

president and CFO of Sempra Energy. 

He will become COO in January. 

 

 

 

 

To view any of these events, please go to 

www.energycentral.com/quicklink and type 

the quick link code into the quick link box. 

AUGUST 10 – 11 

China Power Conference and 

Exhibition 

Beijing 

Quick link code: E12130 

AUGUST 14 — 17 

Energy 2005 — The Solutions 

Network 

Long Beach, Calif. 


AUGUST 14 — 18 

IEEE/PES Transmission and 

Distribution Conference and 

Exhibition Asia Pacific 

Dalian, China 



T&D Asset Management 

Conference 

New Orleans 



AusWEA’s 7th Annual National 

Wind Energy Conference and 

Exhibition 

Sydney 



COAL-GEN 2005 

San Antonio 



Production Forecasting in 

Upstream Oil & Gas 

Kuala Lumpur, Malaysia 


SEPTEMBER 7 – 8 

Electric Power Generation 

Association Conference 2005 

Hershey, Pa. 



17th Annual Chicago LDC Forum 

Gas Storage Strategies & 

Market Center Hubs 

Oak Brook, Ill. 


SEPTEMBER 12-14 

ESRI Homeland Security Summit 

Denver 



4th Annual Contact Center 

Management for Utilities 

New Orleans 



Alaska Oil & Gas 

Anchorage, Alaska 



Power Generation Summit 

Europe 2005 

Noordwijk aan Zee, The Netherlands 



Metering, Billing & CRM/CIS 

Europe 2005 

Barcelona 



Canada Power 2005 

Toronto 


OCTOBER 9 – 14 

2005 IEEE PES Transmission 

and Distribution Conference & 

Exposition 

New Orleans 



By Michael G. Morris 

News Flash>> 


STRATEGY NEEDED 

The United States, 

Mexico and Canada 

should band 

together to develop 

a North American 

energy strategy. 

That is the 

recommendation 

of the former U.S. 

energy secretary, 

Bill Richardson, 

who is now governor 

of New Mexico 

and a possible 

candidate for 

president in 2008. 

“This council will 

give our hemisphere 

the heft we need 

to counterbalance 

the powerful energy 

centers in the Middle 

East — creating 

more regional 

independence,” 

Richardson told the 

Associated Press. 


Legal Eagle 

THE VIEW FROM AEP 

Mauled by PUHCA 

AN ODD AND extremely frustrating thing happened 

to us in early May. We were going about our daily 

activities at American Electric Power — delivering 

reliable, affordable electricity to our more than 5 million 

customers in 11 states, installing additional environmental 

controls on our efficient fleet of coal-fired power 

plants, and continuing necessary work to implement 

leading-edge, clean-coal power generation technology 

– when we became entangled in the belts, sprockets, 

and gears of the Public Utilities Holding Company Act 

(PUHCA), a regulatory mechanism built in 1935 to 

protect investors from Depression-era abuses. 

An administrative law judge of the Securities 

and Exchange Commission (SEC) issued an initial 

decision on May 3 that said our merger with Central 

and South West, approved by the SEC in June 2000 

as the last step in 30 months of review by multiple 

federal and state agencies, meets the interconnection 

requirement of PUHCA, but “does not 

constitute a ‘single integrated public-utility system’ 

for failure to be confined in its operations to a single 

area or region under (PUHCA).” 

What does all that mean? In a nutshell, the merger 

had been challenged by public power organizations. 

In response, AEP and the SEC staff have filed 

separate petitions for review to the SEC — each 

supporting the commission’s June 2000 approval 

of the merger and each taking issue with interpretations 

made by the administrative law judge. 

The initial decision has no effect on the current 

structure or operations of our company, which has 

functioned on a fully integrated basis since the merger 

was completed five years ago. We’re confident that 

the merger will again prove consistent with the policy 

objectives of PUHCA. However, this initial decision 

changed the focus of merger announcements made 

later in the month by Duke and Cinergy as well as by 

MidAmerican and PacifiCorp. Instead of discussing 

the potential benefits the mergers bring for consumers 

and investors, the companies spent much of their time 

answering questions about compliance with PUHCA’s 

archaic requirement that the parties be directly interconnected 

and with the administrative law judge’s restrictive 

interpretation of the single area or region requirement. 

I’m confident the initial decision also triggered 

concern at other utilities considering merger plans, 

since it creates uncertainty on Wall Street. Again, it 

illustrates how PUHCA can be used as a barrier to 

consolidation necessary to reduce costs of operations 

in the highly fragmented utility sector. The outdated 

regulation also serves as a barrier to much-needed 

investment in an industry facing a growing need for 

infrastructure improvements, since fear of entanglement 

in PUHCA’s aging regulatory mechanism deters 

potential non-PUHCA acquirers of utility assets. 

In its 70 years of existence, PUHCA’s now-antiquated 

approach to investor protection has been 

superseded by much newer, more efficient regulations 

to protect investors in today’s instant-access, 

high-speed information business environment. The 

SEC’s authority to protect investors’ interests is 

backed by a database full of regulations that provide 

necessary transparency into corporate finances and 

activities — regulations that were recently enhanced 

by the additional disclosure requirements of the 

Sarbanes-Oxley Act of 2002. 

The SEC, the regulatory body charged with enforcing 

PUHCA requirements, has admitted this regulation 

no longer serves a purpose. In 1981, the commission 

recommended to Congress that PUHCA be repealed, 

saying its “provisions were either duplicative of other 

regulatory schemes or no longer necessary to prevent 

the abuses that led to enactment.” The SEC reaffirmed 

this recommendation in 1995 in a report issued as 

part of then-Vice President Al Gore’s “Reinventing 

Government” initiative. 

The Senate Banking Committee repeatedly has 

agreed with the SEC recommendation, supporting 

PUHCA repeal on an almost annual basis in reports 

issued under both Democratic and Republican 

leadership. Yet PUHCA lives on — the same aging 

collection of regulatory belts, sprockets, and gears 

now repainted as an important consumer protection 

machine by supporters who ignore the existence of 

newer consumer protection regulations. 

For instance, all proposed mergers undergo a 

thorough antitrust review by either the Department 

of Justice or the Federal Trade Commission. This 

review ensures that a proposed merger does not 

harm the competitive balance of the marketplace, 

thereby protecting the interests of consumers. 

For electric utility mergers, the Federal Energy 

Regulatory Commission (FERC) examines potential 

market power issues with consumer protection in

Repeal of such 

an outdated package 

of regulations seems 

like a no-brainer. 

mind. This review, which did not exist when PUHCA 

was enacted, creates a perplexing dilemma for 

merging utilities: How to convince one federal agency 

(SEC) that the companies’ operations are located 

close together to meet PUHCA’s interconnection and 

single-region requirements while convincing a second 

federal agency (FERC) that the companies’ operations 

are located far enough apart to successfully pass 

market power screens. 

In addition to the multiple federal reviews, utility 

mergers face reviews by well-established state regulatory 

agencies with authority over utilities in their states 

— another consumer protection that is substantially 

more developed than when PUHCA was enacted. 

Repeal of such an outdated package of regulations 

seems like a no-brainer. So why is PUHCA 

still standing despite more than two decades of 

discussion? It’s been used as a bargaining chip 

— although many say “held hostage” is a more 

accurate description — during debates on whatever 

industry issue was important at the time. 

To be quite frank, we’ve grown tired of debating 

and bargaining the empty promises of repeal in return 

for support by PUHCA-regulated companies of 

some specific initiative. In years past, PUHCA repeal 

was promised for support of wholesale and retail 

competition. Today, it’s offered in return for support of 

additional consumer protections following the improprieties 

of Enron and others after the wholesale and 

retail markets were opened to competition. I’m sure 

there’s another issue waiting to complete the “we’ll 

support PUHCA repeal if ...” statement tomorrow. 

A primary debate today focuses on increasing the 

FERC’s authority into the power generation sector, in 

the interest of protecting competition, before PUHCA is 

repealed. Historically, the state regulatory agencies have 

jurisdiction over generation located in their states and 

for addressing power-supply needs of customers within 

their states. This state regulatory authority assures 

that consumers in the state have a sufficient supply of 

electricity to meet their needs — today and in the future. 

The majority of the states where we operate continue 

to use the regulated model for electricity supply. 

We think it’s important that the states maintain their 

ability to work with utilities in approving future generation 

to serve retail customers. Other companies may 

favor federal jurisdiction over generation. 

While PUHCA does require the SEC to review 

the transfer of most utility assets (not just generation 

assets), such transfers also typically require a 

review by the Department of Justice or the Federal 

Trade Commission to address antitrust concerns 

— and potentially a review by state utility regulators 

to address local concerns. 

Admittedly, determining the appropriate regulatory 

jurisdiction for generation is an important policy 

decision, but not one where PUHCA repeal should be 

a bargaining chip. Retaining PUHCA will not resolve 

that federal vs. state jurisdictional debate; repealing 

PUHCA will not create a jurisdictional void that must 

be addressed in that debate. And holding PUHCA 

repeal hostage to the outcome of the debate also holds 

utilities operating in a fast-paced 21st century marketplace 

hostage to an outdated mechanism constructed 

to address Depression-era concerns. 

Repealing PUHCA will not free utilities of regulation. 

It simply removes one obsolete or duplicative 

layer, leaving multiple layers of federal and state 

regulation. That’s more than enough to protect 

investors and consumers. 

Until PUHCA is repealed, we at AEP will continue 

to spend time and money to again prove to the SEC 

in theory what we have demonstrated in five years 

of reality: that a post-merger AEP can operate on an 

integrated basis and meet the SEC’s interpretation 

of single area or region used in prior merger reviews 

under an obsolete regulation that the SEC itself has 

sought to eliminate for almost 25 years. This is time 

and money that could be better spent on activities of 

greater value to our customers and investors. 

Michael G. Morris is chairman, president 

and CEO of American Electric Power. 

News Flash>> 


NEW TVA CHIEF 

Bill Baxter, the 

new head of the 

Tennessee Valley 

Authority, says the 

job will be a parttime 

one under 

federal legislation 

enacted last year. 

President Bush 

named Baxter to 

replace outgoing 

chairman Glenn 

McCullough. 

Soon, the TVA will be 

governed by a ninemember 

part-time 

board, which will 

replace the threemember 

full-time 

leadership that 

has long governed 

the TVA for 72 

years. The new 

nine-member board 

will chose a chief 

executive officer. 


By Gary M. Stern 

News Flash>> 


TVA CHALLENGES 

The Tennessee 

Valley Authority 

must deal 

with major 

environmental 

and financial 

challenges, says 

Glenn McCullough, 

who is departing 

his position as 

TVA chairman. 

The TVA, the largest 

public utility in the 

country, may have 

to spend $5 billion 

on top of the 

$6 billion already 

spent to deal with 

pollution caused 

by its coal-burning 

generation units. 

Rate increases 

may be necessary 

for the authority’s 

customers in 

seven states. 

Yet McCullough 

is upbeat. 

“I think the future 

board will have to 

determine what 

rates need to be and 

when adjustments 

are necessary,” he 

told the Associated 

Press. “I don’t know 

how much, and I 

don’t know when.” 


Legal Eagle 

When States Raid 

Public Utility Funds 

WHEN ELECTRIC UTILITY deregulation and 

restructuring began in 1997, public funds ranging 

from $30 million to $100 million were earmarked to 

lower energy costs by increasing energy conservation 

and efficiency in about a dozen states, including 

Illinois, Wisconsin, and Ohio. But as state revenues 

dried up and budget deficits ballooned, states 

started raiding some of the money for general tax 

purposes. 

For example, $29 million of the $62 million targeted 

for energy efficiency in Wisconsin in 2004-05 

was diverted to general tax funds. In 2004-05, the 

entire $3 million Illinois energy conservation budget 

was transferred into general tax funds, according 

to Alecia Ward, executive director of the Chicagobased, 

non-profit Midwest Energy Efficiency 

Alliance. But a number of energy conservation 

agencies and watchdog groups are questioning this 

accounting sleight of hand and its effect on consumers 

and electricity prices. “Regulators got nervous 

that in the free marketplace there would be no incentive 

to invest in energy efficiency,” Ward says. 

Public benefits funds were created, stemming from 

minimal fees levied on ratepayers, and were administered 

either by utilities, state energy offices (such as 

the Illinois Commerce Commission and Ohio Public 

Utilities Commission), or independent third parties 

(such as the non-profit Vermont Energy Investment 

Corp.). “When the money was administered by a state 

agency, funds became more vulnerable than when a 

utility controls the money,” Ward asserts. 

Taxpayers are paying modest amounts — 90 

cents a month in Wisconsin and only 2 cents a 

month in Illinois — but when multiplied by millions of 

ratepayers, you do the math. 

The energy conservation funds should be used 

for a suite of energy efficiency programs that would 

impact residential, commercial, and industrial 

customers, Ward says. For example, customers 

would be offered rebates on buying energy-efficient 

washers and dryers, and builders would receive 

rebates of $500 to $1,500 for incorporating energysaving 

appliances in their homes. As rate caps 

disappear in 2006, Ward expects to see energy 

prices escalating even more. 

In Wisconsin, siphoning of funds has been on 

the increase. In 2003-04, $17.6 million was diverted, 

which increased to $29 million in 2004-05. In the 

proposed 2005-06 budget, this total will revert to 

$27 million, says Charlie Higley, executive director of 

the Citizens Utility Board of Wisconsin, a consumer 

advocacy organization based in Madison, Wis. 

“Energy efficiency is the best way to meet electricity 

needs and create the most jobs. Plus it’s cheaper and 

less polluting,” Higley says. 

Homeowners can save from 20 to 50 percent 

on electricity costs, which averages about $1,000 a 

year. That savings buys water heaters, furnaces, and 

windows, which leads to job creation, Higley suggests. 

“Wisconsin is building new power plants and 

power lines, rates are going up, and the only hedge 

against higher rates is our strong energy efficiency 

program,” he says. 

A powerful coalition of disparate forces, including 

the Sierra Club, Wisconsin Industrial Energy Group, 

and the Wisconsin Paper Council, are fighting the 

evisceration of these funds. Facing a lawsuit initiated 

by this coalition, Gov. Jim Doyle of Wisconsin 

created the Task Force on Energy Efficiency, which 

recommended that the state stop raiding its public 

utility funds, improve building codes and appliance 

efficiency standards, and have power plants help fund 

energy efficiency programs. 

Matthew Brown, energy program director at the 

National Conference of State Legislatures, based in 

Denver, says that energy funds “are easy targets to 

close the budget gap. Politically, it’s easier to simply 

find those funds that no one is noticing. It would be 

much more difficult to raise taxes.” Moreover, he 

acknowledges, “Energy efficiency is overlooked as a 

state economic development tool.” 

Yet he placed the onus on supporters of energy 

efficiency, who need to make a better case that it 

serves as a stimulant to economic development. 

Misplaced priorities by states is at the crux of 

the problem, suggests Bill Prindle, deputy director 

of the American Council for an Energy-Efficient 

Economy, a non-profit policy group in Washington, 

D.C. “For an elected official to take a special 

purpose fund and use it for general purposes is 

inappropriate,” he says. “ If the money is needed, 

raise taxes.” 

The effect of reducing funds has “an impact on air 

quality, greenhouse gas emissions, reliability of the

electricity grid,” he adds. “ It would be ironic if a power 

outage is triggered because electric demand ran too 

high and economic losses from one power outage 

costs 10 times the savings. It’s very short sighted.” 

Moreover, the money distributed by these utility 

funds benefits ratepayers in several ways, Prindle 

suggests. Incentive programs help consumers make 

their homes more energy efficient, lower their electric 

bills, and introduce new technology. “Once the 

program is over, everyone gets long-term benefits of 

this new technology,” he says. 

Many utilities are caught in the middle, not 

wanting to offend legislators or regulators, yet 

remaining reluctant to pass on rate increases and 

see their ratepayers lose the opportunity to use 

energy efficiently. “Continued cuts in the public benefits 

fund impede our state’s ability to have serious 

discussions on how to best deliver conservation and 

efficient programs in Wisconsin for the long term,” 

explains Janice Mathis, spokesperson for Alliant 

Energy, based in Madison, Wis. “Customers pay 

this in the belief that the money would be used to 

mitigate the need for new power plants and control 

electric rates.” 

Alliant Energy supports the recommendations of 

the Task Force on Energy Efficiency, which would 

end the practice of raiding public utility funds. If 

states continue on this path, “there’ll be no more 

political support for energy efficiency programs 

because funds keep getting diverted,” Higley says. 

“That will lead to fewer jobs, higher utility bills, and 

more pollution.” 

HEARD AT EEI 

NOTEWORTHY STATEMENTS BY industry leaders at the Edison 

Electric Institute annual convention in Las Vegas in June: 

WE CONSUME ONE-QUARTER of the world’s energy. We 

produce one-third of the world’s goods and services. 

One-third is bigger than one-fourth. Basic math. 

— Rep. Joe Barton, chairman of the U.S. House 

Energy and Commerce Committee 

WE’RE IN A rising price industry going forward. 

— David Ratcliffe, Southern Company chairman, president and CEO 

WE HAVEN’T EDUCATED people on what the 

costs are of carbon sequestration. 

— Jeffry Sturba, PNM Resources president and CEO 

WE CAN’T TAKE coal or nuclear off the table. 

They are absolutely all needed. 

— Steven Specker, EPRI president and CEO 

HOW WE GET to the best end game is being experimented 

with around the country, state by state. 

— Mayo Shattuck, Constellation Energy Group 

chairman, president and CEO 

THE COMMISSION STILL believes there is a significant 

problem in under investment in transmission. 

— Joseph Kelliher, commissioner, U.S. Federal 

Energy Regulatory Commission 

WE ARE NOT going to diversify. 

— Gary Rainwater, Ameren Corp. president and CEO 

WE LOOK AT everything in a risk model and hedge every risk. 

— Mark Snell, Sempra Global group president 

TODAY THE INDUSTRY has many business models… Speaking 

with one voice is critical to our industry and our nation. 

— Wayne Brunetti, Xcel Energy chairman and CEO 

 

 

 





Energy Efficiency and 

Renewables 

Seattle 



Energy in California 

San Francisco 


OCTOBER 6 - 7 

Environmental Issues in Energy 

Development 

Washington, D.C. 


OCTOBER 20 – 21 

Energy in the Northeast 

Boston 



An Interview with Nils Diaz of the NRC, 

who readies his agency for growth 


Illustration By Tod 

KAPKE 

NUCLEAR POWER IS 

MOVING CENTER STAGE 

AS THE UTILITY INDUSTRY, 

POLICY MAKERS, AND A SMALL 

BUT GROWING NUMBER 

OF ENVIRONMENTALISTS 

BEGIN TO FRAME 

AMERICA’S ENERGY FUTURE.



The nation’s reliance on foreign energy 

sources, predominantly oil, is a growing concern 

to many. So is global warming, believed to be 

caused by burning fossil fuels. 

At the same time, many energy leaders have 

been pointing out that the nation’s nuclear fleet 

of 103 units has been producing a reliable power 

supply with few problems for many years. On top 

of that, nuclear power plant designers say they have 

been putting the finishing touches on designs for 

plants that will be even more efficient and safe. 

As a result of these converging factors, Nils 

Diaz, the chairman of the U.S. Nuclear Regulatory 

Commission (NRC), which oversees the operation of 

nuclear power plants, believes that as many as 100 new 

nuclear units will be needed in the next two decades. 

A massive investment will be needed if nuclear is going 

to continue to provide the one-fifth share of electricity 

it represents today. That’s because a growing and evermore 

technologically sophisticated economy will soak 

up huge amounts of electricity. 

Diaz, now 67, was named chairman of the 

NRC by President Bush two years ago. He recently 

talked to EnergyBiz about his vision for the future. 

His comments, edited for style, follow. 

: You recently declared that 100 new nuclear 

plants may be needed in this country. Please elaborate. 

DIAZ: According to studies from the U.S. Energy 

Information Administration and Nuclear Energy 

Institute, about 100 nuclear power plants would 

be needed if nuclear is to remain 20 percent of our 

generation. 

: Is that predicated on the retirement of 

existing facilities and a 50 percent rise in demand? 

DIAZ: No. This is predicated on the present rate 

of demand increase and the addition of 100,000 

megawatts of base-load electricity, not on the 

retirement of existing facilities. 

: If that scenario is correct, is your agency 

prepared to step up licensing to allow that level of 

new activity? 

DIAZ: We are prepared to implement our PART 52 

advanced licensing process, which was made law in 

1992 by Congress. We have three legs of a stool that 

are combined to facilitate the regulatory oversight 

over the licensing process. First, there are standardized 

designs. People can actually pre-certify a design 

and bank it. Second, there are early site permits. If 

a utility says it’s considering a site for a power plant, 

then we conduct the site-specific analysis and environmental 

analysis. There is adjudication, a hearing 

on that process, because it is a major licensing decision. 

A utility can then bank the site for construction 

of a nuclear power plant. The third and final part of 

the process is where the payoff for the utilities lies. 

This is the so-called combined construction and 

operating license, which is referred to as a COL, 

when the utility applies for a permit to construct and 

operate a facility. It is one application for both construction 

and operation. Utilities will actually use a 

design and a site that have been approved. 

: What’s the intent here? 

DIAZ: In the 1970s and 1980s, too many plants 

were custom designed. Too many plants went to sites 

that were green sites, and there was significant environmental 

opposition. Too many issues got delayed; 

too many hearings were very burdensome. Congress 

passed a law that said, NRC, thou shalt make this 

process fair and equitable yet easier to follow so 

everybody knows their rights and responsibilities. 

: Do you in fact have standardized designs 

that have been approved? 

DIAZ: We have three standardized designs that 

have been approved: two in the late 1990s and one 

in early 2001. We are about ready to do the last 

one, called the AP1000 Westinghouse. The design 

approval has been done, and the rule-making is 

out. If everything goes according to plan, that will 

also be on the shelf by this December. 

: Who are the major firms working on 

these designs? 

DIAZ: Right now, we have Westinghouse and General 

Electric. However, we anticipate that Framatome 

Areva of France will be applying very shortly. 

: You have had a number of utilities applying 

for site permits. 

DIAZ: We had three early site permits that have 

been applied for — all of which are now in the stages 

of adjudication. Barring any substantial issues that 

we do not know about – all three should be in court 

and be resolved between June and December 2006. 

: Who are the utilities? 

DIAZ: Entergy, Exelon, and Dominion. 

: Do you have any indication that other 

utilities are waiting to apply?

A massive investment will be needed if nuclear 

is going to continue to provide the one-fifth share 

of electricity it represents today. 

DIAZ: Yes, there are some indications that TVA 

is seriously considering applying, and other utilities 

are flirting with the idea. They are looking 

at sites that already have existing nuclear power 

plants. The reasons are obvious. They have the 

infrastructure, water, electrical grid, roads, and 

railroads — not to mention the communities 

around the sites are used to them. They have 

security, which became so important after 9-11. 

It’s a lot simpler economically for a utility to look 

at an existing site than a green site. 

: Some think there will be a concentration of 

nuclear ownership and that today there are too many 

owners of single plants today. Will consolidation of 

ownership streamline the licensing process? 

DIAZ: I don’t know that it will streamline the process, 

but when there is consolidation, the units grow stronger, 

more technically capable, and more economically 

sound. So I do believe that what is taking place will 

continue to do so. I have no idea whether eventually 

there might be 11 to 15 owners. Those are the 

numbers I hear. 

: If the three-step licensing process now in 

place would have been operative in the 1970s and 

1980s, what do you think the magnitude of the 

savings to the industry would have been? 

DIAZ: Well, it certainly would have had a tremendous 

impact at the time because nuclear 

owners were hit with a double whammy: doubledigit 

inflation and high interest costs. At the same 

time, they were hit with regulatory uncertainty. 

Opponents could delay the actual operation of the 

plant even if it was already built. 

: You oversee 103 operating plants. If the current 

licensing methodology would have been in place 

for those plants, what would have been the impact? 

DIAZ: It would have cut years off the licensing 

process. I know it would have certainly helped some 

utilities that decided not to continue with construction 

to actually go ahead and finish their plants. 

: Assuming that we do have 100 new plants 

built in the next 20 years, what would that nuclear 

fleet look like compared to the 103 we have now? 

DIAZ: Well, they certainly would be better. The 

operators of the fleet that exists today have learned 

tremendous lessons. They have become very lean 

and efficient in their operations and in their safety. 

The new plants will have several features that will be 

Photo courtesy of the NRC 

attractive to utilities, energy consumers, and regulators. 

We know better what the issues are and the 

designs are addressing those issues. We know they will 

be safe. We know they will require less maintenance. 

They are going to have better instrumentation and 

control, fewer operators and fewer human errors. 

: What will be the economics of these new 

fleets? Will they drive down rates for consumers 

and industry? 

DIAZ: The rates that some of the top performers 

in the nuclear industry today are achieving are very 

good. Some of the best performers are around 1.2 

cents per kilowatt-hour, which is very good. That does 

not include the capital cost. Once you get outside the 

first two or three which always cost more, the newer 

units should be able to bring costs down to 1.1 or 1 

cents per kilowatt-hour. That certainly makes them 

very competitive as far as the ongoing costs of both 

coal and gas and the other technologies. 

: Let’s go back to the issuing of combined 

construction and operating licenses. How long 

may it take from start to finish? What would you 

be looking at, because you have looked at the site 

and the design? 

DIAZ: We would actually now take the design and 

the site, and look at the composition of the standard 

design at the site operating in that environment. We 

will do an additional environmental review. Then, 

we will actually look at other things that are not in 

the certified design, including how you tie it into 

the electrical grid, water usage, the way that you are 

going to do releases, and infrastructure. There will 

be an adjudication process. People will have the 

right to intervene, and we will conduct hearings. 

NRC Chairman Nils 

J. Diaz, left, with 

CP&L official at 

Brunswick nuclear 

power plant near 

Southport, N.C. 



: Will you look at the capabilities of that 

existing company? 

DIAZ: Of course, we will look at the capabilities of 

the existing company because it’s a package deal now. 

The staff prepares a complete package that looks at all 

of these issues and takes this to the Atomic Safety and 

Licensing Board — the case is presented in there. 

: Will the clock be running? 

DIAZ: There is no particular clock over the entire 

process, but every phase has a particular clock 

once it’s open for adjudication. 

: What is your objective, regarding processing 

time? 

DIAZ: We would like to make sure we are completed 

with that process in three years and were either able 

to grant the construction operating license or not. 

: Why so long? 

DIAZ: Because this is the United States of America, 

and it’s a democracy. Therefore, we value the opportunity 

to grant our citizens a hearing. 

: So practically, if a utility requests a construction 

and operating license today it will be June 

2008 before you could say go ahead and build? 

DIAZ: That’s correct. 

: How does that compare with the 1960s, 

1970s and 1980s? 

DIAZ: A two-step process sometimes took 10 

years to get to the operating licensing. There were 

a few cases of 13 to 15 years. 

: So three years is a significant improvement. 

DIAZ: By the way, we can do license renewal, 

which is a major licensing issue, in 30 months 

including adjudication. 

: Any snags in the new licensing regime? 

DIAZ: Let me tell you what the president and utilities 

are concerned about. A second hearing would 

take place if there are issues that create a serious 

doubt that the plant was not built or is not going to 

be operated in accordance with the license. 

: How long could this take? 

DIAZ: This could add another year to the process. 

But there is a very high threshold for that. The 

intervener will have to prove that the plant was 

not built in accordance to the criteria. 

: Does the Bush administration have a 

recommendation on this? 

DIAZ: Yes. The president proposed there would 

be an indemnification process that, if the licensing 

is delayed beyond three years time, the applicants 

will be reimbursed up to 50 percent of their cost. 

It’s going to go before Congress. 

: Turning to the nuclear waste issue, today 

we have waste being stored at 65 nuclear sites. 

How close to capacity are those sites? 

DIAZ: Well, some of them are approaching the 

end of their lives. In five years, more than half 

of these plants will be at full capacity. Many of 

them are already putting their fuel in dry storage 

because it gives them flexibility to operate. 

: What’s it going to take to solve this problem? 

DIAZ: It’s going to take Congress to decide how we 

are going to deal with this issue. We believe that a 

geologic repository is protective of public health and 

safety, and we support that eventually the fuel should 

be stored there. Until then, pools are safe and away 

from reactors; dry cask storage is also safe. 

: So we can go ahead with this new permitting 

and licensing even while the waste issue 

has not been fully resolved? 

DIAZ: Right. 

: Can you address the security of the 

existing nuclear fleet and the new generation of 

nuclear plants? 

DIAZ: Where we stand today is better than where 

we were last year. On October 29, all nuclear 

power plants in this country complied with new 

security requirements. They have the new defensive 

strategies, guard forces, new barriers, new 

security systems — all of those things that we 

believe enhance the protection of these plants are 

done. We continue to, as a good regulator should, 

verify that every one of those components is what 

it should be. We have a series of plant-specific 

assessments that are being conducted to ensure 

that every aspect of the orders and lessons learned 

from the industry are being applied. For the most 

part, I think the plants are operating in a safe and 

secure manner. 

: Will the new nuclear plants be safer? 

DIAZ: New generation should incorporate all 

these lessons learned. By the time they finish

their new design certifications, we expect vendors 

to incorporate all of these lessons learned so the 

plants will integrate security and safety. 

: In recent years, questions have been raised 

about whether a nuclear plant could take a strike from 

an airliner similar to what happened on 9-11. Do you 

think the existing plants can, and do you think there 

will be a different capability for the new plants? 

DIAZ: Our studies show that nuclear power 

plants are very hardened structures. The bottom 

line is we believe that existing nuclear power plants 

are capable of operating in a safe manner. Even if 

they are attacked by aircraft, there will not be a 

significant release of radioactivity from a plant. 

: Will the next generation of plants be 

more secure than existing units? 

DIAZ: The new generation of plants has additional 

safety features that, when integrated with 

the security features, should be even better. 

We would like to make sure 

we are completed with the process 

in three years. 

: Do you have adequate resources for your 

agency? 

DIAZ: Our budget is $7l5 million. We are actually 

a little short of money for conducting the additional 

work that needs to be done to finish some 

of the security assessments and also to conduct the 

Combined Operating License (COL) process. We 

budgeted for one COL in 2007-2008. Then we 

increased that to three — and the industry seems 

to be leaning to five. 

: What will be the future of nuclear power? 

DIAZ: Nuclear power should play an increasing 

role in the energy mix of the United States. We 

have learned a lot. Plants are operating in a safe 

and secure manner. The operators of the new 

fleet have learned their lessons well, and they are 

putting it into good designs. We are capable of 

regulating these plants in an efficient manner to 

avoid significant delays of the past, and the operators 

are capable of operating them very well. 


By Jim Reinsch 


Clean Power for the Future 

With the world’s population projected to 

grow 50 percent by 2050, global energy needs are 

projected to soar 130 percent. Given this reality, 

assuring secure and diverse energy supplies will 

present a major challenge for developed and developing 

countries alike in coming decades. 

As concerns about global warming and protecting 

the environment continue to rise, the world is now 

looking toward clean coal, hydro, new renewable 

energy sources, and nuclear to lead the way. Nuclear 

generation is notably clean, safe, reliable, and affordable. 

Promoting energy security/energy independence, 

nuclear’s abundant fuel is less subject to price 

volatility than many other fuels. The expanded use 

of nuclear energy is a good match with sustainable 

development principles — powering the world’s 

growing economies while protecting our environment 

and finite resources for future generations. 

Today’s nuclear reactors generate vast amounts 

of dependable, affordable electricity, with the smallest 

footprint of any emission-free electricity source. 

More than 441 nuclear power plants provide 16 

percent of the world’s electricity while emitting no 

greenhouse gases. This fleet of nuclear power plants 

currently displaces more than 2.5 billion metric tons 

of CO 2 per year and operates around the clock as 

reliable, efficient sources of base load electricity. 

In 2004, the world’s nuclear reactors set an alltime 

production record of approximately 2,696 

million megawatt hours. This record was attributable 

to particularly high performance in the United 

States and Sweden, along with restarts and commissioning 

of new units elsewhere. 

U.S. Perspective 

Soon to be joined by the restarted Browns Ferry 

Unit 1, America’s 103 nuclear power plants 

produce more electricity than any other energy 

source except coal, powering one of every five 

homes and businesses in the country. 

The U.S. Department of Energy (DOE) projects 

that the United States will need 50 percent more 

electricity by 2025 to drive the economy and sustain 

our quality of life. America must increase electricity 

output to provide energy for an ever-expanding 

population without damaging the environment. 

Nuclear power plants 

currently displaces more 

than 2.5 billion metric tons 

of CO 2 per year. 

Providing this new electricity supply and maintaining 

clean air are dual national imperatives. The 

nuclear energy industry is poised to build new, 

advanced nuclear plants to meet energy demands 

and clean air objectives. 

Environmental Considerations 

Nuclear energy must play a significant role in our 

future energy mix if we are to protect our most 

valuable asset: Earth. Today, approximately 30 

percent of America’s electricity already comes 

from sources that do not produce air emissions 

or greenhouse gases, including nuclear energy, 

hydropower, and renewable energy. Nuclear 

energy represents 72 percent of this non-emitting 

electricity supply. 

The carbon emissions prevented by U.S. nuclear 

power plants are equivalent to the emissions from 

approximately 130 million passenger cars. Without 

nuclear energy, U.S. electric-sector carbon emissions 

would be approximately 30 percent higher.



Improving Efficiency 

Since 2000, the nation’s commercial reactors collectively 

have operated at a 90 percent capacity 

factor — making them the most efficient baseload 

power generation plants. 

The improved efficiencies of nuclear plants have 

met much of the nation’s rising electricity demand 

over the past 10 years. These increases have been 

equivalent to adding 19 new 1,000-megawatt plants 

to the country’s electricity grid. To put this statistic 

into perspective, a single 1,000 megawatt plant 

would power a city the size of Boston or Seattle. 

In view of this record, most U.S. utilities are 

extending the operating licenses for nuclear power 

plants by 20 years. In fact, approximately threequarters 

of America’s nuclear power plants have 

either renewed their licenses or indicated their intention 

to do so. 

Business Incentives 

The nuclear energy industry and the federal government 

are collaborating to bring the benefits 

of new, advanced nuclear power plant designs to 

market. Congress and the current administration 

are creating and implementing programs to provide 

greater certainty to those who would risk capital on 

such projects. To this end, the U.S. government has 

undertaken a sustained, multi-year program with 

several major components, including: 

Cost-shared between industry and the DOE, 

the DOE’s Nuclear Power 2010 program (NP2010) 

would validate the new licensing process and 

establish a well-defined, predictable, and stable 

process; support detailed design and engineering 

on advanced reactor designs to provide cost and 

schedule certainty; and demonstrate the early site 

permit (ESP) and combined construction and 

operation license (COL) processes. 

Proposed legislation to offer financial incentives 

for utilities and suppliers to take the initiative 

necessary to secure financing for building the 

first few new nuclear power plants. 

Proposed “risk insurance” for unexpected delays 

caused by regulation or political obstacles. Under 

the current administration proposal, risk insurance 

would be limited to the first two nuclear plants of 

each design under the NP2010 program. Up to $500 

million in coverage would be available per reactor for 

qualified designs. 

Doing Their Part 

The nuclear energy industry is taking steps so 

that utilities will be ready to order a new nuclear 

power plant when market conditions are right. These 

include testing the new licensing process and creating 

favorable business conditions so that utilities can 

invest in new nuclear power plants. 

On the technology front, nuclear system 

vendors have engineered new designs that promise 

significantly lower construction and operating 

costs, greater reliability, and advanced passive 

safety systems. Several advanced designs being 

made ready for deployment include: 

General Electric’s Economic Simplified Boiling 

Water Reactor (ESBWR), 

Westinghouse’s AP1000 reactors, and 

Framatome ANP’s EPR. 

Members of a utility-led consortium, NuStart 

Energy Development, which includes Constellation 

Energy, Entergy, Exelon, FPL Energy, Progress 

Energy, Southern Nuclear, TVA, Dominion 

Generation, and Duke Power, are reviewing their 

options for future nuclear generation under the 

federal government’s NP2010 solicitation. 

Bechtel, which has performed engineering or 

construction on more than half of the commercial 

plants in the United States, has played a critical role 

in extending their lives in recent years by replacing 

steam generators and reactor pressure vessel heads. 

With 30 steam generator replacement projects completed 

or ongoing worldwide, Bechtel has set records 

for the lowest radiation exposure, shortest reactor 

outages, and best employee safety performance on 

such projects. 

It’s hard to imagine an energy future for 

America without a prominent and dynamic role 

for nuclear power. As the nation’s utilities prepare 

to invest in the next generation of nuclear plants, 

Bechtel will be there with other utilities, suppliers, 

engineering firms and stakeholders to support the 

U.S. nuclear renaissance. 

Jim Reinsch is president of Bechtel Nuclear and 

president of the American Nuclear Society.

Entergy’s Nuclear Strategy 

By Dan Keuter 

Entergy doesn’t have a crystal ball, 

but there are a few things that we know for 

sure about the future. There’s going to be 

a continuing demand for energy, especially 

worldwide with China and India but also 

in the United States. And there’s a finite 

amount of oil and natural gas. 

There’s going to be stricter regulations 

on air pollution and greenhouse gases. 

Common sense will tell you there’s a 

positive outlook for nuclear power, and 

we’re trying to put that into our vision 

and strategy for the future. 

If you look at 10 years ago, there were 

46 nuclear operators in the nation and 

now today there’s only 23. Ten years from 

now, we’ll probably be around 10 major 

nuclear operators. 

Six or so new nuclear plants could come 

on line by 2015. By 2025, possibly another 

30 to 40 at most will be built. Meanwhile, all 

103 existing nuclear plants will seek a license 

extension from the federal government. 

Consolidation in ownership of nuclear 

units will continue. Some utilities are 

operating small units that have been in 

operation for 30 years, and their book value 

is pretty close to zero. These utilities are 

motivated, if they can get state regulatory 

approval, to sell their plants because they 

still have all the risk but aren’t making that 

much money. 

There are some immediate benefits to a 

nuclear plant after it is acquired by a company 

like Entergy, which has a large organization 

and seeks to run the plant like a business. 

We reinforce that the unit has to be cost 

competitive and make money going forward. 

We work together for the benefit of the fleet. 

Many plants have operated independently and 

have their own computer programs and other 

individual processes. When we come in, we 

standardize the plants, use the same software 

and processes as well as share resources. 

Typically, when we take a nuclear plant 

over, it might have an 80 to 85 percent 

capacity factor. Our fleet average is 94 to 95 

percent. If you have a fixed cost and you’re 

spreading it over more megawatt hours, 

you’re cost per megawatt hour goes down. 

Our nuclear plant acquisitions have 

been very profitable. In fact, the five plants 

that we bought in the Northeast now, in 

the last five years, account for 25 percent of 

the earnings of the whole company. Back in 

1999, our stock was $18 a share, and today 

it’s greater than $72 a share. We’ve done 

other things, but one of our main growth 

strategies through this time has been 

growing nuclear power. 

Dan Keuter is vice president of nuclear 

business development for Entergy. 


GETTING 

SMART 

ABOUT 

UTILITIES STEP UP DISASTER 

PLANNING EFFORTS 

DISASTER 

When a tinder-dry forest suddenly ignited 

into a major firestorm west of San Diego on a hot 

windy afternoon in October 2003, officials at 

San Diego Gas & Electric (SDG&E), a division of 

Sempra Energy, quickly took action. As the fire 

gained momentum, moving through inland areas 

and threatening other communities, the utility 

activated an emergency operations center 

(EOC). From this site, officials coordinated 

their emergency response by deploying 

employees, communicating with the utility’s 

customer base, and preparing for major 

BY AL SENIA 

restoration work once the fire was quelled. 

ILLUSTRATIONS BY MIKE AUSTIN



“With that firestorm response, we really 

had to think quickly outside the box,” recalls Scott 

Drury, emergency services manager for the utility. 

“There were a lot of logistics issues to consider. 

We had 41 different staging areas to supply. Just 

feeding the repair crews alone was a major issue. 

Since a lot of the affected areas were remote, we 

had to send in 6,000 meals a day for two weeks.” 

The background organization work paid off. 

Officials quickly and accurately assessed the scope of 

the problem, coordinated with other emergency agencies, 

and promptly decided to ask for help from outside 

utilities in supplying repair crews, equipment, and even 

telephone polls. As the dry weather triggered additional 

fires throughout the region, SDG&E’s effort proved 

prescient. Days later, many other utility companies 

needed much the same infrastructure support. 

Such disaster planning is becoming more commonplace 

for utility companies across the country, 

as the Sept. 11, 2001 terrorist attacks triggered a 

renewed emphasis on disaster planning — both 

on the national and local levels. 

“Utility companies have always taken this issue 

seriously,” says Ken Hall, director of security for 

Edison Electric Institute, an industry trade association 

based in Washington. “But after 9/11, that 

whole experience has thrown the preparedness 

challenge into a larger focus. September 11 has 

been a big catalyst in thinking more about it.” 

National Plans 

Some of that focus has been prompted by national 

initiatives. In February 2003, President Bush 

issued a national directive to the Department of 

Homeland Security, ordering the establishment of 

a National Incident Management System (NIMS) 

to provide “a consistent nationwide approach 

for federal, state, and local governments to work 

effectively and efficiently together to prepare for, 

respond to, and recover from domestic incidents, 

regardless of cause, size, or complexity.” 

The aim of NIMS, which was placed under 

FEMA, is to integrate emergency preparedness and 

response under a comprehensive national framework 

for incident management. Utility companies are 

included in this framework, which is still being developed. 

It is to include “a core set of concepts, principles, 

terminology, and technologies covering the incident 

command system; multi-agency coordination systems; 

unified command; training; identification and management 

of resources (including systems for classifying 

types of resources); qualifications and certification; 

and the collection, tracking, and reporting of incident 

information and incident resources.” 

The directive also established a National Response 

Plan that integrates “government domestic prevention, 

preparedness, response, and recovery plans into 

one all-discipline, all-hazards plan.” 

Utilities, of course, are no strangers to coping with 

natural disasters — especially those in California, 

which have been at the forefront of disaster planning 

and response. Within the last few years, SDG&E 

coped with wildfires, Pacific Gas & Electric dealt with 

a major earthquake, and Southern California Edison 

experienced energy shortages that triggered rolling 

blackouts. Other natural disasters in the state included 

periodic flooding, landslides, and mudslides. 

Early Efforts 

Since the early 1950s, California has had its own 

emergency response office that sprang from the Cold 

War imperative to plan for nuclear disaster as well 

as established its own State Emergency Management 

Systems (SEMS), which provide a framework for 

emergency response and may well end up providing 

the framework for the NIMS plan, according to 

FEMA officials. No other state has such emergency 

preparedness programs in place.

California is way ahead of other states in emergency 

planning, says Ray Riordan, executive director 

of the California Utility Emergency Association 

(CUEA), which evolved from the original 1952 

Office of Emergency Services. Located in Mather, 

Calif., CUEA, a voluntary group with 92 private 

and municipal utility company members, basically 

acts as a clearinghouse for state utility emergency 

preparedness and response — sponsoring workshops 

and programs, helping develop mutual aid 

programs, and keeping the issue very much on the 

radar screen of utility executives. 

“We do a lot of lessons learned, best practices, and 

how we can improve response,” Riordan explains. 

CUEA also helps ensure utilities and other 

emergency responders work proactively with 

utility companies. “We are a voice with the [state] 

Office of Emergency Services to exchange information 

and resources for mutual aid,” he says. 

The mutual aid can involve both in- and outof-state 

responses: CUEA coordinated California 

utilities’ reaction in the aftermath of last year’s 

devastating Florida hurricanes. 

SEMS basically provides California with a 

coordinated response plan that ties together 

municipal and state organizations, including 

utilities, when emergencies occur, and helps 

ensure they can communicate with each other 

and respond effectively. In some cases, mandates 

specify that utilities, for example, must be able to 

communicate with their customers within a certain 

period about when power in affected areas will be 

restored. Essentially, it provides for a standardized 

response capability that flows through the state’s 

emergency operations centers that are activated 

when a disaster occurs. Jim Boland, director of 

safety and emergency services for SDG&E, says 

he’s noticed a dramatic change in the way utilities 

in California and other states approach disaster 

planning over the last 15 years. Back in 1990, the 

typical response plan was operationally focused. 

Now, such plans are much more geared toward 

customer outreach. “We looked more internally at 

ourselves in the past, he says. “Now it’s a more strategic 

approach” that includes, for example, letting 

customers know when power will be restored 

and establishing a system to check the status of 

employees own communities after a disaster, so 

they can focus more easily on restoring services in 

badly impacted areas. California’s programs also 

have prompted utilities to play a more proactive, 

planning role with other emergency agencies. 

Companies have become 

more sophisticated in disaster 

planning and response. 

Executives at other utilities also believe that 

their companies have become more sophisticated 

in disaster planning and response. Pat Laird, 

vice president of corporate security for Exelon, 

says utility companies have adopted a two-tiered 

approach to emergency planning. The larger 

parent company focuses on business continuity 

planning, making sure that the company itself 

can operate with key functions such as IT kept 

intact, perhaps from an alternate site, during an 

emergency. The individual utility divisions, on 

the other hand, are more focused on field operations, 

restoring services as quickly as possible 

during emergencies. 

“We have a solid emergency plan in place, and 

we conduct drills and tests,” Boland says. “We feel 

confident that we’ll be able to respond effectively 

to a crisis.” 

EMERGENCY CHECKLIST: 

What Utility Executives Need To Know 

Ray Riordan, executive director of the California 

Utility Emergency Association has a long history of 

helping utilities prepare for disasters. As the federal 

government becomes more involved with ensuring 

smooth communications and responses among 

various agencies, including utility companies, he 

offers the following checklist for executives: 

1. Learn how to collaborate with other 

agencies. To be most effective, a utility 

company must define a role among first 

responders to an emergency. At what 

point does the utility become involved? 

2. Take prudent measure of what to implement. 

It’s important to know what kind 

of minimum response you’ll be expected 

to provide beforehand and to ensure 

you’ll have adequate resources to do so. 

3. Support the emergency program once 

implemented. This includes providing 

the necessary training and emergency 

practices and making these visible and 

familiar enough so they become part of 

your routine daily operations. This lessens 

uncertainty during an emergency. 

4. Stress interoperability. Make sure your 

systems can communicate efficiently 

with other first responders so that all 

agencies – fire, police and utilities — will 

work together efficiently in an emergency. 



BY GARY M. STERN 

ILLUSTRATION BY JÜRGEN MANTZKE 

LAUNCHED AS A RESULT OF THE 1977 ENERGY BILL THAT 

OFFERED TAX CREDITS FOR ENERGY EFFICIENCY, ENERGY 

SERVICE COMPANIES (ESCOS) HAVE BECOME A STAPLE 

IN THE POWER AND UTILITY BUSINESS. SIGNING MULTI- 

MILLION DOLLAR CONTRACTS TO EVALUATE AND REDUCE 

ENERGY COSTS, MOST ESCOS WORK WITH INSTITUTIONAL 

CLIENTS SUCH AS GOVERNMENTAL AGENCIES, HOSPITALS, 

SCHOOL DISTRICTS, PUBLIC HOUSING AUTHORITIES, 

AND LARGE REAL-ESTATE FIRMS RATHER THAN 

SMALL BUSINESSES AND RESIDENTIAL CUSTOMERS. 

HOWEVER, SOME GO BEYOND TRADITIONAL SERVICES.



“We’re not primarily in the business of 

saving energy; we’re in the business of installing 

needed capital improvements, whose annual costs 

are retired by utility savings,” says Steve Morgan, 

manager of housing and residential activity at 

Ameresco, in Framingham, Mass., explaining that 

many contracts extend for 10 to 12 years based on 

repaying such capital improvements. 

As deregulation proliferates, energy prices rise, 

and mergers intensify, how have ESCOs adapted? 

“The rise in electricity prices hasn’t changed the 

business model of most energy service companies,” 

Morgan says. “The factors that most influence 

ESCOs involve the state of the general economy, 

higher interest rates, and governmental budgets.” 

These changes aren’t transforming non-profit 

ESCOs either, asserts Adam Parker, president of 

non-profit Conservation Services Group, based in 

Westborough, Mass. “Most of our customers are 

utilities, and we don’t see a big change in the way 

utilities are running their businesses,” he says. 

However, he adds that several utilities, such as 

N Star (formerly Boston Edison) and National 

Grid, are hiring ESCOs to provide energy efficiency 

audits for their customers. 

How have the subsidiaries of utility companies 

fared under these market conditions? 

Terry Singer, executive director of the National 

Association of Energy Service Companies 

(NAESCO), in Washington, D.C., notes that the 

buzz at her organization’s annual conference, held 

in Austin, Texas, in late May, revolved around 

industry consolidation. In the last few years, 

Ameresco acquired Duke Solutions and absorbed 

Citizens; Constellation Energy acquired Cogenex, 

which had an unusual business model of specializing 

in financing. 

Muscular, robust companies are the ESCOs 

that will thrive in the future, says Singer. But where 

will acquirers get the resources they need to exploit 

opportunities? “They’ll be looking for people who 

have great ideas, and are risk managers, and there 

aren’t that many in energy efficiency,” says Donald 

Gilligan, principal of Predicate LLC, an energy efficiency-consulting 

firm in Sharon, Mass., who also 

attended the conference. 

Despite all of these changes, three large ESCOs 

owned by conglomerates Honeywell, Siemens 

Building Technologies, and Johnson Controls, 

Inc., continue to be industry leaders. One industry 

insider backs up that theory by citing recent 

examples. Siemens has embarked on a global 

strategy and is expanding into Europe and Asia. 

Honeywell has retrenched after General Electric’s 

acquisition and rumored selling off fell through. 

Johnson Control is very strong, but has not tipped 

its hand on a growth strategy. 

ESCOs that were subsidiaries of utility companies 

debuted with much fanfare as utilities hoped to create 

synergy by cross-selling their commodity gas and 

electricity products. For the most part, those synergies 

didn’t materialize. While ESCO subsidiaries of Alliant 

Energy and Constellation are still operating, their 

operations have shrunk and revenues diminished. 

Some, such as PG&E Energy Services, even folded. 

Nevertheless, selected ESCO subsidiaries are 

thriving. For example, Pepco Energy Services, 

based in Arlington, Va., a holding company of 

Potomac Electric Power Co. and Connectiv, is in 

its tenth year and growing. Why has it succeeded 

when others have faded? 

“Pepco Energy stayed regional when other ESCOs 

went nationwide, kept our overhead low, and view 

ourselves as an independent commercial entity,” 

explains David Weiss, president of the performance 

contracting and energy division at Pepco Energy. 

Its success may be attributed to the fact that the 

company’s vision wasn’t to support its parent company, 

but to “open a commercial unregulated business to 

make money and be entrepreneurial,” he adds. 

In 2005, most ESCOs have been rebounding 

after an industry slowdown in the last two to three 

years, notes Singer. Why the lull? Energy-saving performance 

(ESP) contracts, a staple of the industry, 

stalled when the federal government had budgetary 

cutbacks and stopped awarding them. However, 

industry insiders expect that the Energy Bill of 2005 

will likely restore them, which will inevitably lead 

to new ESP contracts. Third-party ESP contracts 

resulted in nearly $1.5 billion in energy efficiency 

savings, Singer estimates. 

Parker sees a rising number of utilities hiring 

ESCOs for demand response or load control. ESCOs 

can help “optimally combine energy efficiency and 

demand response [load control] in the same program 

design,” Parker says, as CSG is doing for Southern 

California Edison (SCE). 

CSG is redesigning and replacing SCE’s residential 

central air conditioning system with a more energyefficient 

system. SCE has even been paying selected 

residential or small business customers $25 to $200 a 

summer if their air conditioner is turned off every 30 

minutes an hour for several hours. Consultant Gilligan 

sees an increasing number of ESCOs making proposals 

to utilities to reach small businesses and residential 

customers — a market typically avoided in the past. 

Another new area of revenue for ESCOs is just 

taking off: renewable resources. “Renewable is a major

new market for ESCOs. State agencies are becoming a 

larger piece of the ESCO market,” Morgan observes. 

Conservation Services Group has designed and 

built photovoltaic (solar panels) power plants for 

AEP in Texas, the Department of Defense, and 

Massachusetts Technology Collaborative. Chevron 

Energy Solution’s large solar project at the Santa Rita 

Correction Facility is another example of this trend. 

Gilligan notes that many ESCO renewable contracts 

have depended on federal or state incentives. Without 

them growth from this business can be difficult. 

Another new ESCO market is in the works but 

not finalized. Because of the Kyoto Protocol agreement, 

which set a ceiling on CO 2 emissions from 

country to country, utilities that want to build a new 

power plant must reduce emissions through energy 

efficiency or buying a credit. This development has 

led to ESCOs exploring an emissions trading market, 

where emissions credits can be traded. 

“The Chicago Climate Exchange has been 

formed to create the infrastructure for this trading,” 

notes Bill Prindle, deputy director of the American 

Council for an Energy Efficient Economy, based 

in Washington, D.C. ”The Regional Greenhouse 

Gas Initiative under which nine Northeast states 

would create a Kyoto-style carbon cap-and-trade 

system would allocate emission allowances directly 

to efficiency providers, which would stimulate new 

efficiency investments.” 

Parker anticipates ESCOs will play a large role 

in integrated resource planning, in which utilities 

seek cost-effective ways to provide reliable and 

environmentally sound energy. Gilligan expects to 

see further consolidation and envisions California 

as a leader, which will prove that “energy efficiency 

is just as good as supply in terms of meeting future 

energy needs,” he adds. But in order for ESCOs 

to grow there has to be “meaningful recognition 

of their multiple benefits including long-term 

reductions in energy consumption, benefiting all 

ratepayers, relieving congestion of transmission 

and distribution lines and precluding the need for 

power generation new construction,” Singer says. 

Finally, she asks, “Why hasn’t this administration 

thrown enough interest in promoting efficiency as 

a significant part of its energy portfolio?” 


38 ENERGYBIZ MAGAZINE July/August 2005

asset 

management 


Managing 

Complexity 

EVERYONE KNOWS WHAT ASSET MANAGEMENT IS — 

THEY’RE JUST NOT SURE WHAT TO CALL IT. 


Asset management seems to have as many names as there 

are vendors promoting it and utilities buying it. That’s because there 

is no one over-arching definition of the discipline. Is it enterprise 

resource planning (ERP)? Is it enterprise asset management (EAM)? Is 

it a system that produces process improvement from generation to 

the field? Is it inventory, financials, warehousing, wires and pipes, or 

people? What exactly constitutes an asset? Increasingly, utilities are 

determining that virtually everything they possess is an asset — from 

the information stored in automated systems, recorded on paper, or 

even communicated by word of mouth. 

The definition of asset management has shifted considerably since the 

early days when SAP, based in Germany, introduced the idea of “enterprise 

software” to U.S. companies back in the early- to mid-1990s. Considered 

prime targets, utilities were just coming out of a long slumber as regulated, 

protected, quasi-governmental organizations with great resources. 

Facing the very real risk of competition, utilities quickly realized that the 

“silo structure” of their information technology solutions wouldn’t work 

in the proposed new environment; nor would existing haphazard systems 

of locating, moving, and accounting for all kinds of assets. 

Thus, SAP and other vendors began expanding their footprints to 

compete with SAP. They expected to take the industry by storm and 

eventually drive out niche players with all-encompassing, tightly integrated 

software packages. However, some strange things happened 

along the way to this planned vendor nirvana: collapse of deregulation 

in California; the demise of Enron and other corporate malfeasance; 

and the implosion of the wholesale energy market. One interesting 

phenomenon that resulted, besides the splintering of the enterprise 

asset management computing market, is most “energy companies” 


now want to be called “utilities” again. They also want to define, 

configure, and determine management of assets on their own terms 

— not as some large vendors decided they should be defined. 

As a result, not only have SAP, Oracle, J.D. Edwards, PeopleSoft, and 

several others opted against creating monolithic “enterprise computing” 

empires at utilities, but also utility IT seems to be as splintered as ever 

— at least in the United States. The lineup of vendors also has changed 

considerably. First PeopleSoft acquired J.D. Edwards. Then Oracle acquired 

PeopleSoft. Traditional CIS/CRM vendor SPL WorldGroup acquired a smaller 

ERP/EAM vendor, Synergen, plus an OMS vendor, CES International, and 

now is playing in the “enterprise” asset management space. 

Several other ERP/EAM vendors have continued to broaden and 

expand their offerings to encompass more assets. Indus International 

of Atlanta, for example, acquired a CIS from SCT and now calls its 

overall package “Service Delivery Management.” 

Utilities did catch on to the idea of having their systems communicate 

across the enterprise, but they have done so much “picking 

and choosing” that many enterprise or asset management vendors 

find themselves having to link to their competitors’ products at the 

same utility. One example of that trend is evident at Nashville Electric 

Service, which acquired Mincom software, an enterprise software 

vendor, and integrated it with PeopleSoft/Oracle. National Grid of New 

England is another case in point. Its U.S. operations run primarily on 

PeopleSoft, but its United Kingdom parent has a former (before the 

PeopleSoft merger) Oracle EAM solution. Lattice, a newly acquired gas 

subsidiary, employs SAP. 

The idea of enterprise asset or resource software has split into 

competing ERP and EAM paradigms. Both have enthusiastic advo-

cates and overlapping software. Utilities continue to mix and match 

their asset management solutions, but view them as a necessary part 

of a whole. “Work management, asset management and financial are 

integrated into one system,” says Connie Woo, vice president and CIO 

at Toronto Hydro. “The rest (CIS, SCADA, GIS) are stand-alone systems. 

We definitely would like to see all of these systems integrated to 

support seamless processes.” 

“Seamless processes across all asset groups and functions” is 

the mantra of most utilities today, especially the large investorowned 

entities that dominate 75 percent of the market. That includes 

systems that deal with assets all the way to the residence or business. 

“I mentioned field service automation and SCADA, which are two areas 

I would like to see improved,” Woo says. “We also have a distribution 

management system, but we would like to expand it.” 

Even industry analysts categorize the asset management marketplace 

in different ways. Some will rank work management vendors in one 

study, EAM vendors in another, supply chain management (SCM) in yet a 

third category, and ERP vendors in a fourth or fifth category — sometimes 

even adorning the term ERP with Roman numerals for good measure. 

Vendors will stake claims to being the No. 1 solutions provider in 

one category or another. Sub-segments in the marketplace often are 

applied, for example, defining industry categories in different functional 

ways (energy companies including oil and gas as well as electric, or separate 

categories for electric generation vs. transmission vs. distribution), 

or by using three “tiers” to distinguish large-, mid-, and small-sized 

companies before analyzing the different vendors’ market shares. 

But for utilities, the main interest is in developing integrated software 

systems that enable them to improve the processes involved in 

dealing with their assets and doing so system-wide. “A major area that 

I’m really looking at where there needs to be a breakthrough is in business 

process orchestration,” says Gene Zimon, senior vice president, 

Information Technology, NSTAR, based in Westwood, Mass. “If you buy 

the logic that you’re implementing processes by assembling legacy and 

new software components, you end up with a set of systems that has 

to be integrated in order to deploy an effective business process.” 

Thus one important “asset” being sought from technology is 

improved “process,” making the definition even more complex. 

The complexity of the undertaking was expressed by Mahvash 

Yazdi, senior vice president, business integration and CIO, Edison International 

and Southern California Edison, 

in Rosemead, Calif. “Our engineering 

organization is looking into application 

of technology wherever it makes sense 

in terms of both transmission and distri- 

bution assets,” he says. “We also have a 

group that we call our technology watch 

group, and we are looking at informationrelated 

technology, such as automation of 

field tools. We are providing our linemen 

and trouble men with computers in their 

trucks and with tools that will enable 

them to manage their work in a real-time 

fashion, and have the right material 

[assets] at the right location. We’re looking 

at power line carriers in a private 

fashion, potentially for a narrow-band 

automated meter reading. So, we have 

technology groups that are doing technology 

evaluation as well.” That means 

meters and the systems and individuals 

who read them are assets, as well. 

Toronto Hydro’s Woo also views asset management as part of 

Vendors will 

stake claims 

to being the 

No. 1 solution 

provider in one 

category or 

another. 

“service-oriented architecture.” Woo says: “We are planning an 

upgrade of our EAM system, which is the system from Mincom that 

encompasses all our work management, human resources, asset 

management, our financials, our supply chain, and all of our back office. 

So we’re planning to upgrade to the next version of that system. Hopefully, 

that will move us to a new architecture — the service-oriented 

architecture. Hopefully that will position us better for the Web and 

future automation.” 

Despite the attempt by vendors and analysts to quantify and 

“pigeonhole” asset management, it continues to be elusive in terms 

of definition at utilities. But due to their asset-intensive nature, utilities 

know they need to be involved in it. They understand that assets 

include everything from the pole or transformer in the field to the 

business intelligence provided to the boardroom by integrated enterprise 

systems that enable executives to see the status of those poles, 

transformers, generating plants, and field service crews. 

www.energybizmag.com ENERGYBIZ MAGAZINE 41

Blending 

Solutions 

A GEORGIA CO-OP GOES “BEST-OF-BREED.” 


Cobb Electric Membership Corp.(EMC), in Marietta, Ga., 

is atypical of cooperative utilities in the United States. With its service 

territory located in one of the fastest-growing areas of suburban 

Atlanta, it’s larger than most co-ops with approximately 180,000 electric 

customers and more than 100,000 natural gas customers — all captured 

after the Georgia natural gas market was deregulated in July 1988. 

Cobb EMC also has morphed over the last 10 years from a traditional 

electric co-op to a multi-product company that sells everything 

from electricity and natural gas to local and long-distance telephone 

service, Internet service, home security, and more. 

To deal with its exploding list of services, Cobb EMC formed Cobb 

Energy Management Corp. (Cobb Energy) in 1997, a for-profit entity 

formed to be an aggregator of services for the membership of Cobb 

EMC and others. 

By 2003, it became obvious that Cobb EMC’s Orcom Customer 

Information System, which handled everything from financials and 

billing to tracking assets in the field, needed updating. 

“That software really served us well through the years, but the 

way our company looked in 1995 [when the Orcom CIS was installed] 

and today is totally different,” says Steve Paolucci, associate vice 

president of finance at Cobb Energy. “The old monolithic software just 

couldn’t handle it anymore.” 

As a result of that impasse, Cobb Energy began exploring enterprisewide 

asset management software in 2003. In 2004, it began installing a 

new set of solutions. Most software and hardware for the entire enterprise, 

including the original co-op, now reside with Cobb Energy. 

“When we went into this project, we had hoped we could find one piece 

of software that could do everything we needed done,” Paolucci says. 

The fact that it didn’t work out that way is typical of many utilities 

in the United States — they haven’t been fertile ground for the large 

enterprise computing firms like Waldorf, Germany’s SAP. 

“We started with five or seven different options and narrowed it 

down to three: Lawson Software, St. Paul, Minn., PeopleSoft [now an 

Orcom subsidiary], and SAP,” Paolucci says. “We did intense sessions 

with those companies, gave them our requirements, and asked 

whether they could meet our needs out of the box, with minor modifications 

or major modifications.” 


That process, which was assisted by Capstone Consulting Partners, 

now a subsidiary of Alliance Data Systems, of Dallas, extended through 

last summer. However, none of the companies could satisfy Cobb Energy’s 

needs completely, Paolucci says. At that point, the utility decided 

to go with a “best of breed” solution. The result is the kind of mix-andmatch 

software selection that has driven executives of “enterprise” 

software firms up the wall and resulted in considerable consolidation. 

Cobb Energy will implement the following line-up of asset management 

software: 

Lawson Software will handle financials and human resources/ 

payroll. 

A new Cordaptix CIS from SPL WorldGroup, San Francisco, will 

be installed for customer care and billing. 

A component of Worksuite, of Houston, will provide the frontend 

for Cobb Energy’s existing field automation system. 

Intelliplant, a product of Information Intellect, of Marietta, 

Ga., will handle fixed asset management accounting for 

power and distribution assets. 

“An EMC, like any distribution company, is pretty asset intensive, with 

most of the assets being in transmission and distribution,” says Paolucci, 

explaining why there is a separate accounting system for fixed assets. 

“Most generic accounting systems have one asset number for something 

such as a pole. Thus, they have to treat all those assets individually. To 

avoid that, there are some specialty software systems that handle these 

things as groups. Information Intellect 

has one of those.” 

Cobb Energy now is installing 

and integrating all of the software. 

“We’ve been through three conversions 

so far,” Paolucci says. “We 

decided to try to learn from our 

previous mistakes — one of those 

was to run the projects ourselves. 

That’s why we hired Capstone. We 

wanted a company that had some 

expertise in managing a project for 

us so we could stay sort of on the 

outside and be more concerned 

with learning the software and 

training.” 

Despite the assistance, the 

installation is progressing in 

stages and won’t be fully 

completed until sometime in 2007, 

Paolucci says. When it is, Cobb 

Energy/EMC will join a long list 

of utilities that entrusts asset 

management to a collection of 

best-of-breed software from 

several companies. 

definitions 

The following are offered 

as a guide. 

ERP – Enterprise Resource 

Planning 

ERP systems developed originally 

in heavy industry and tended 

to emphasize financials and 

resource planning, though they 

gradually grew to include work 

management, human resources, 

and other “softer” disciplines, 

including even customer information 

systems (CIS). 

EAM – Enterprise Asset 

Management 

EAM systems developed in more 

process-oriented industries with 

more emphasis on human resources 

and work management, but 

gradually grew to include financials 

and supply chain management/resource 

planning and CIS. 

SCM – Supply Chain 

Management 

SCM grew up in plants and 

factories and still concentrates 

primarily on the movement of 

parts, fuel, and other supplies 

within the heavy-industry supply 

chain. However, some SCM systems 

have grown to include other 

elements of ERP and EAM.


Improving Asset 

Efficiency for 

Productivity 

Gains 

By Brunson White 

Asset management capability within integrated enterprise 

solutions are rapidly transforming the ways in which both gas 

and water utilities monitor and repair their vast arrays of assets. 

Energen Corp. recently revolutionized its business processes and 

created valuable new efficiencies by successfully implementing an 

enterprise resource planning (ERP) system that features integrated 

asset management functionality. 

Providing natural gas to more than 460,000 customers statewide, 

Alagasco and Energen have experience with periods of sustained 

change and a long history of preparing for the future. The company 

got its start in 1852 as Montgomery Gas Light. The company has 

two major subsidiaries: Alagasco, its natural gas utility, and Energen 

Resources, its oil and gas exploration and production company. Through 

its two subsidiaries, Energen acquires and develops domestic oil and 

gas properties and distributes natural gas throughout Alabama. 

Energen’s presence in the upstream as well as the downstream 

side of the business enhances the company’s understanding and 

appreciation of the entire energy value chain. Operating within two 

distinct aspects of the energy industry further serves to emphasize 

the importance of an IT solution that can create communications with 

a strong information flow between different departments. 

In 2002, Energen reevaluated its outdated legacy systems and 

numerous manual processes that had become large cost centers, 

concentrating primarily on the operations of Alagasco. With approximately 

1,200 employees and significant operations in seven states, 

Alagasco was outgrowing the cumbersome manual processes it used for 

project approval and documentation. Rather than continue underutilizing 

the company’s physical assets by manually inputting project information 

into legacy systems, delivering documentation through inter-office mail, 

and manually reporting for regulatory compliance, management decided 

to employ an enterprise technology to manage all assets by aiming to 

maximize the return on investment within each asset. 

The company first declared the need to make asset-related work 

(maintenance, productivity, automation) safer and more efficient. From 

an asset management standpoint, there were several other problems 

to address as well. Operating expenses were consistently rising due to 


a lack of transparency between different systems and an inadequate 

IT infrastructure for alerting managers to equipment requiring repairs 

and replacement. Inaccurate data records detailing plant and fleet asset 

usage and repairs further stymied the company’s ability to operate 

at full production. Having looked at numerous solutions from several 

vendors to replace the homegrown systems, the IT staff’s first priority 

was a solution with a high level of integration. Not only would an easily 

integrated solution allow the company to streamline processes for work 

orders and maintenance, but it would also deeply embed within numerous 

departments across the enterprise — from accounting to maintenance, 

creating large productivity gains for a greater number of employees. As 

a company with a strong corporate culture spread throughout the state 

of Alabama, reaching a high level of employee buy-in to the implementation 

was another important goal. 

Energen officials chose the mySAP ERP system with asset management 

functionality. Aiming for a launch date of Jan. 1, 2003, the project 

team began the implementation phase in March 2002. The greatest 

impact of the implementation was within Alagasco’s distribution 

system. Consisting of more than 30,000 miles of pipe that deliver 

natural gas directly to thousands of customer locations, the distribution 

system remains the company’s most important asset. Any defect 

in the piping can lead to an immediate revenue and product loss. 

Through the ERP system, capital project approvals and materials 

management helped expedite the process of expanding and improving the 

distribution system. With workflow management, project approval time 

decreased from a full work week to within a day. Moreover, materials that 

were in shortage are quickly re-routed to projects with the most significant 

need. For example, if additional materials and workers are required 

for constructing a new border station, both maintenance teams and 

materials are quickly dispatched from lower priority projects to provide 

maintenance, avoiding job stoppages due to a shortage of materials. 

Additional productivity gains are derived from improving the processes 

for acquiring and maintaining company assets. All new asset acquisitions 

— from facilities to technology to office furnishings — are made within 

the system, approved by an internal check of real-time budget figures. 

After purchase, depreciation schedules are automatically added into the 

system for use by accounting and other departments, eliminating costly 

paperwork. For maintenance projects, entering work orders modularly 

into the system allows for information to be shared enterprise-wide, 

enabling different departments to move forward without having to wait 

for a paper trail to reach their desks. For example, while repair crews 

evaluate a work order for a fleet vehicle, the purchasing department can 

review the costs of replacing the vehicle. When the maintenance team’s 

final report is entered into the system, management has the up-to-theminute 

information to make an informed decision about replacement. 

As with any enterprise software installation, the Alagasco implementation 

experienced considerable challenges — the greatest of which 

rested in allowing the workforce to adapt to process changes. Through 

ongoing demonstrations of the advantages of the new enterprise 

system, Energen management was able to emphasize the time-saving 

benefits of the new system to end-users. Another obstacle arose from 

 

 

ebiz_banner1.indd 1 6/28/05 4:22:29 PM


the granularity of the data provided by the 

system, at first resulting in a hypothetical “data 

overload.” However, through ongoing exposure, 

end-users and customer-facing employees 

were able to quickly turn this hindrance into 

a strength. When making purchase decisions 

about field equipment, Energen management 

can now deftly search through the performance 

history of specific equipment, allowing 

for quicker, more-informed decision-making. 

As other utilities look to improve asset 

management, they should seek out an implementation 

option that can instantly integrate 

with established business processes and link 

throughout the entire value chain. Industry 

best practices often preach about the value 

of an integrated approach, but this is an area 

that cannot be stressed enough. An integrated 

solution provides for a quicker and 

easier installation. Moreover, by integrating 

all business processes, Alagasco achieved a 

sophisticated level of service and responsiveness. 

Flaws within the distribution system were 

easily tracked, setting a maintenance schedule 

ranking repairs by areas of need and resulting in 

the lessening of revenue and product loss. 

No matter how skilled the IT department, 

a successful and seamless enterprise implementation 

cannot be handled alone. Thirdparty 

or vendor personnel must be available 

to help employees learn new systems and to 

ensure that phased implementations stick 

to original timetables and meet pre-designated 

goals. All utilities must be able to trust 

a vendor. At Energen, the team consistently 

worked well with our software partners and 

consultants, who were able to quickly train 

employees to utilize the new software, while 

providing a rational, goal-driven template for 

future implementations and upgrades. 

Energen realized quick, significant returns 

from its ERP solution. Overall costs fell with 

particular improvements seen by reducing 

mechanical failures and providing responsive 

corrective maintenance. Critical plant, fleet, 

and distribution equipment saw maintenance 

costs drop as well. Moreover, operational efficiencies 

increased greatly with the advent 

of real-time information and near real-time 

budgeting, allowing for the widespread transmission 

of mission-critical information to 


departments throughout the enterprise. With 

the ERP solution to help manage Alagasco’s 

workload, response time has improved drastically, 

which in turn improves customer service 

and loyalty measures. 

With the widespread success of the ERP 

system featuring asset management capabilities, 

Energen continues to bolster its production 

and cut down on costs by targeting the supply 

chain. A project team is currently working to 

install a document management system (DMS) 

to facilitate the accounts payable portion of 

the supply chain, linking the finance department 

with production efforts. Company-wide, 

a new focus has been embraced, calling for 

ongoing examination of business processes 

with the intent of delivering greater returns to 

customers and shareholders. 

Enterprise asset management is evolving 

outside of the legacy systems of the past two 

decades, becoming a significant part of the 

fully integrated utility. The major barrier to this 

transformation is the unwillingness of corporations 

to address the change management 

issues concerned with leaving the interfaced, 

o n t o p i c 

Utility Outsourcing articles 

from EnergyPulse 

To view any of these articles, please go to 

www.energycentral.com/quicklink and type the 

quick link code into the quick link box. 

End the Asset Management Tug-of-War 

Richard MacDonald, SPL WorldGroup, Inc. 

Quick link code: P1025 

Optimizing EAM 

John Yolton, Solutions Associates 


It’s Always Been About Asset Management 

Frank Craig, MCR Performance Solutions 


Working Capital Reduction 

Donald Ryan, dynaTHinK LLC 


Asset Management, in Theory and Practice 

Bruce Humphrey, KEMA 


Capital Asset Life Extension 

Anthony Impelluso, AIM Engineering, LLC 


less-optimized world. The ROI to complete this 

transformation is available; organizations must 

be willing to venture outside of their comfort 

zones to realize the full potential of the integrated 

enterprise. While it’s difficult to predict 

when this trend will become the norm, integrated 

asset management will soon become 

the low-hanging fruit of the future as utilities 

look to complete supply chain optimizations. 

While some asset-intensive industries are 

unique enough to require highly specialized 

functionality within the asset management 

space, I would argue these are the exception 

rather than the rule. In the end, the ultimate 

answer for utilities lies in extending ERP 

systems with new open-standard architecture 

platforms that preserve the deep integration 

of all business processes. 

Brunson White is the CIO of Energen Corp., 

headquartered in Birmingham, Ala. He also 

currently serves as the chair of the American 

Gas Association/Edison Electric Institute 

Technology Advisory Council. 

A New Look At Spending Optimization 

Scott Sidney, UMS Group 


Seven Principles of T&D Asset Management 

Bill Cozzens, Soluziona USA 


Asset and Supply Chain Management 

Junaid Yasin, ProcureZone 


Value of Early Warning of Failure 

Tim Holtan, SmartSignal Corp. 


Asset Optimization 

Dunham Cobb, CGEY 


Utilities Need More Asset Management 

John Geoghegan, IBM 


Mixed Signals Cloud Reliability Picture 

Bruce Humphrey, KEMA 


Enterprise Exposure Management 

Kevin R. Rose, ENSIGHT Advisors 

Quick link code: P24


[ C A S E S T U D Y ] 

Mobile Computing Tools For Mobile Workers Improve 

Is the utility industry undergoing a sea change? Most analysts agree 

that it is not. They say, in fact, that it has already happened. The past 

model for increasing utility company profits — raising rates — is obsolete. 

New economic realities compel savvy executives to focus on bottom 

line improvements to increase market share, improve employee 

efficiency, maximize customer-retention levels and cut costs. 

And, they say, the 21st century’s emphasis on enterprise and productivity 

offers utility companies opportunities unseen since the early days 

of state and federal regulation threequarters of a century ago. These 

opportunities more than justify the challenges inherent in seizing them. 

As one recently retired marketing vice president put it, “When 

I started in the business our major sales efforts were directed at 

legislators. When I left, it was all about customers. Which is how it 

should be. The legislators made sure we never lost money, but they 

also limited what we could do to earn income and how much of that 

revenue we could retain. Utilities are a no-limits industry now. A guy 

starting out in my business today may wind up building something 

more profitable than Microsoft by the time he steps down.” 

Exploiting new worlds — unlimited worlds — requires new tools. Better 

tools. Faster tools. More fail-safe tools. Tools that will work anywhere, 

anytime, under any conditions. Tools with an almost infinite capacity to 

be scaled up to do more work and scaled out to perform new tasks. 

Next-generation, utility task-optimized rugged portable computers, 

such as the Panasonic Toughbook® CF-18 and CF-29, 

are prime examples of tools that generate a direct impact on a utility 

company’s bottom line. This positive impact is measurable and 

occurs on both the revenue and cost sides of the balance sheet. 

A typical case study proves that the deployment of cuttingedge 

mobile-computing technology not only improves the bottom 

line, it improves it dramatically. And, in some cases, such as that 

of the United Kingdom’s largest power supplier, British Gas, the 

word “dramatically” could fairly be called an understatement. 

Prior to digitalization, British Gas had hundreds of field offices 

and 17,000 tech and back-office workers, most of them spending 

their workday shuffling papers. Today that 17,000-person workforce 

numbers less than 4,000, and most of the field offices have been 

shuttered. 

Wireless-capable Panasonic CF-18 ruggedized “convertible” 

notebook/tablets help a field force handle over 6 million service 

calls a year. Errors in ordering replacement parts have been 

reduced from one-in-four to “practically nonexistent” and delivery 

of those parts takes 12 hours, not several days. 

According to British Gas, the productivity of their technicians 

using the CF-18 has more than doubled, going from an average 

of four calls per day to ten and resulting in a “huge reduction in 

infrastructure and labor costs.” 


The British Gas experience proves that ruggedized computers 

with multi-protocol wireless connectivity are an essential component 

in reducing utility company operating expenses on both a global and 

per-call level. 

But can that impact really be shown on the other side of the 

ledger? Can a piece of hardware such as a Toughbook actually 

increase revenue as well as reduce costs? 

Research shows that it can, but only if that new piece of hardware 

fits perfectly within the IT scheme of the company deploying 

it. It must be more than the correct tool for the job; it must be the 

right tool for the entire enterprise. 

After intensive study and stringent testing, British Gas decided 

on the CF-18 because it exceeded both the performance and 

durability specifications for generic field-force computers and the 

task-specific requirements of a huge, diversified power utility. 

In addition to being the United Kingdom’s largest industrial and 

consumer supplier of gas and electricity, British Gas engages in 

such varied enterprises as appliance sales and repair, financial 

services, and security system design and implementation. 

The company employs field technicians for such disparate 

tasks as meter reading, line and pipeline maintenance, central air 

and heating system installation, commercial and residential steamboiler 

repair, and kitchen appliance service. 

To equip such a diverse workforce without hobbling the 

IT department with a hard-to maintain assortment of differing 

computer models and platforms, British Gas needed a high-performance, 

standardized unit with exemplary multitasking and communications 

ability. 

A fully ruggedized 4.5-pound computer with extended battery 

life, a 40GB shock-mounted hard drive and a daylight-readable, 

pressure sensitive touchscreen, the CF-18 instantly converts from 

a high-performance Windows XP notebook to a Windows XP tablet 

computer via a unique swiveling and folding screen. 

The Toughbook’s ability to replace both outdated notebooks 

and traditional, proprietary-software-driven pen tablets was 

critically important to British Gas, as was the CF-18’s full Intel® 

Centrino compliance and simultaneous wireless WAN, wireless 

LAN, Bluetooth and GPS capability. 

The time, effort and expense British Gas invested in its quest to 

maximize the return on its field-force computerization investment 

has paid off handsomely. Not only have the ruggedized portables 

dramatically reduced the sales, general and administrative share 

of every dollar British Gas spends on field force labor and materials, 

they have produced measurable revenue gains in areas susceptible 

to competitive pressures. 

According to British Gas Home Services IT business manager, 

Peter Ransom, the Panasonic “convertibles” are providing “absolutely 

fantastic” service. “Mobile computing has helped us reduce 

response times to call-outs, increase the speed of job turnaround, 

and ... present a fresh, clean and very professional image to the 

customer,” Ransom said. 

A D V E R T I S E M E N T

A D V EE RR TT II SS E M E N T 


To put it simply, the Toughbook implementation has helped 

British Gas achieve unusually high customer-satisfaction levels 

— the Holy Grail of all enterprises trying to increase market share, 

profits and ROI via new business acquisition and retention. 

Another utility company that has used cutting-edge mobile computing 

and communications technology to lead its industry in customer 

satisfaction is Arizona’s Salt River Project, recipient of the 2004 J.D. 

Power and Associates Distinction for Electric Utilities Award. 

SRP, which uses fully ruggedized Panasonic notebooks such 

as the Toughbook CF-29—a MIL-STD-810F-tested, Centrino-compliant 

portable—reports that increased use of rugged portable 

computers in the field has resulted in substantial savings in both 

dollars and personnel hours. 

And, SRP says, those are only some of the benefits attributable 

to the Toughbook deployment. Others include increased work crew 

efficiency, better communications and scheduling, safety improvements 

related to having the most current electric maps available 

for each job, safety improvements related to a decrease in miles 

driven to obtain maps and support at field offices, decreased radio 

and cell-phone traffic, an increase in customer service quality and 

a decrease in the amount of time customers are out of service. 

Since SRP’s corporate culture orbits around customer service, 

the last two items on that very impressive laundry list are arguably 

the most important. The company’s 2004 rating of 112 on J.D. 

Power’s utility customer satisfaction list outranked that of every 

other electricity supplier in the U.S., and company officials plan to 

do at least that well this year. 

SRP managers attribute a good part of their long-term customer 

honeymoon to the company’s policy of constantly upgrading and 

updating their mobile computing capability, adding applications 

and enhancements as they become available rather than waiting 

for the end of their hardware’s life cycle to renew the system. 

While companies throughout the utility spectrum are faced with 

the challenge of increasing profits without raising rates, there is no 

place where the shift to a new earnings model is more dramatic 

than in the cable television and telephone industries. 

Faced, for the first time, with competition from other cable 

companies as well as satellite providers, cable operators in many 

parts of the country are fighting increasingly bitter market-share 

wars. Rates are going down, the number of basic, nonpremiumtier 

channels is going up, and customer acquisition and retention 

enhancements like HDTV receivers or personal video recorders 

are being offered at cost or below. Despite all these factors, surveys 

still identify dissatisfaction with customer service as the most 

common cause of television provider churning. 

If market conditions in the broadcast-delivery business are 

chaotic, those in the telephone industry are in a state of complete 

bedlam. According to some surveys, the number of households 

that switched local telephone providers increased by more than 

60 percent in 2003-2004, with more than 10 percent of all U.S. 

telephone users either changing their primary carrier or abandoning 

traditional copper-wire service completely. 

Virtually every consumer willing to spend 30 minutes in online 

research can find a cellular provider offering them an almost unlimited 

number of online minutes, free voicemail, free long distance and 

free nationwide roaming for less than $50 a month. And they are 

willing to deliver all this service, as well as a “free” phone, directly to 

the customer’s mailbox, thus changing the service equation from a 

standoff — sitting at home waiting for an installer vs. standing in line 

at a cell phone store — to a win for the cellular provider. 

Given the advantages of reasonable monthly costs, free longdistance, 

no in-home service calls and portability, it’s no surprise 

that increasing numbers of Americans are firing their landline 

phone companies. 

“Utility professional 

continually trust the 

Toughbook CF-29 and 

convertible 

Toughbook CF-18 for 

rugged reliability and 

industry-leading uptime 

at a significantly lower 

total cost of ownership.” 

Responding to this pressure, many traditional phone providers 

have relinquished some of their most historically cherished profit centers 

to maintain market share. Package plans bundling unlimited local 

and long distance calling and a range of premium services — everything 

from call waiting and voice mail to distinctive ring tones and, in 

some cases, DSL — for a fixed, cut-rate price are proliferating. 

Making money while offering customers more bells and whistles 

for fewer dollars demands rigorous attention to cost control 

and employee productivity. Getting customers to subscribe — and 

stay subscribed — to those packages, regardless of their value, 

requires an almost obsessive focus on customer service. “While 

price will always be an important factor, satisfying customers has 

become more about the quality of the relationship and the provider,” 

says telephone industry analyst Steve Kirkeby. 


Explaining why his company recently pulled almost 3,000 

supervisors out of their offices and sent them into the field 

with ruggedized notebook computers, a key executive with one 

of America’s biggest telecommunications companies echoed 

Kirkeby. “The program is designed to enable us to do better work, 

more tightly scheduled work, and safer work,” he said. “It all comes 

down to increasing the quality of our customer service.” 

Improving customer relations by redefining its concept of service 

and spending millions of dollars on better tools was a formidable 

challenge for this company, but given the importance of every 

single market-share point won or lost, one it had to undertake. 

Since abandoning the concept of behind-a-desk supervisors 

in favor of “floating field offices” required portable computers 

capable of wearing many hats, selecting the perfect hardware 

platform was crucial. 

The notebooks would be used to monitor and evaluate field 

technicians while they worked, allowing supervisors to give them 

real- time problem-solving guidance. The units would need to be 

automatically updated with new cable maps, location records and 

service procedure changes and each would have to be capable 

of connecting to any of the several wireless protocols used in the 

company’s vast service area. 

And they would have to run all the applications the supervisors 

had previously performed in-office and file the generated e-documents 

on the company’s servers from wherever the supervisor happened 

to be. Finally, the computers had to be bulletproof. Failure 

of a technician’s computer, with the resultant backing up of service 

orders, is bad. Failure of a computer in the truck of someone with 

15 employees to support is unacceptable. 

The decision to use ruggedized Toughbooks such as the CF- 

29 was based on many factors, not the least being Panasonic’s 

unique position as the industry’s only core manufacturer of rugged 

computers and rugged computer components. 



CONTACT INFORMATION 

Rance Poehler, President 

Panasonic Computer Solutions Company 

Jim King 

VP of Operations 

Jared Gould 

VP of Engineering 

Brandi Gil 

Director of Marketing 

PANASONIC COMPUTER SOLUTIONS COMPANY 

50 Meadowlands Parkway 

Secaucus, NJ 07094 

Phone 800.662.3537 

Fax 201.392.6618 

www.panasonic.com/toughbook 

BUSINESS CONTACT 

Thell Gillis 

Phone (281) 395-8420 

thell_gillis@p2c2.com 


A D V E R T I S E M E N T 


 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 


Sourcebook 

Listing Categories 

ENTERPRISE ASSET MANAGEMENT PAGE 52 

MAINTENANCE MANAGEMENT PAGE 56 

SW IMPLEMENTATION/SYSTEMS INTEGRATION SERVICES PAGE 56 

BUSINESS PROCESS PAGE 58 

MAINTENANCE OUTSOURCING PAGE 59 

OTHER PAGE 59 

ENTERPRISE ASSET MANAGEMENT 

Advantica 

PO Box 86 

Carlisle, PA 17013 

(717) 243-1900 

www.advantica.biz 

American Software 

470 East Paces Ferry Road 

Atlanta, GA 30305 

(404) 264-5296 

www.amsoftware.com 

Artemis International Solutions Corporation 

4041 MacArthur Boulevard, Suite 401 

Newport Beach, CA 92660 

(800) 477-6648 

Fax (949) 660-6501 

www.aisc.com/sao 

Contact 

Dan Niswonger, SAO Solution Sales Manager 

(847) 441-1802 

Dave Thomas, SAO Solution Sales 

(312) 231-7170 

Artemis International Solutions Corporation is 

the world’s leading provider of Investment Planning 

and Control solutions. The Artemis Strategic 

Asset Optimization Solution is based on a proven 

enterprise portfolio and project management platform 

by the world’s largest energy companies. This 

robust and highly configurable platform permits you 

to think big for the long term, but lets you start small 

and obtain highly measurable productivity results 

and/or ROI benefit in the short term. 

Champs Software, Inc. 

1255 North Vantage Point Drive 

Crystal River, FL 34429 

(352) 795-2362 

www.champsinc.com 


Data Systems & Solutions, LLC 

12100 Sunset Hills Road, Suite 310 

Reston, VA 20190 

(703) 375-2800 

www.ds-s.com 

Datastream Systems 

50 Datastream Plaza 

Greenville, SC 29605 

(864) 422-5001 

www.datastream.net 

Datria Systems, Inc. 

7211 South Peoria Street, Suite 260 

Englewood, CO 80112 

(303) 728-1300 

www.datria.com 

EPRI Solutions, Inc. 

942 Corridor Park Boulevard 

Knoxville, TN 37932 

(865) 218-8000 

www.eprisolutions.com 

ESRI 380 New York Street 

Redlands, CA 92373 

(909) 793-2853 

www.esri.com 

GEAC Enterprise Solutions 

11 Allstate Parkway, Suite 300 

Markham, ON L3R 9T8, Canada 

(905) 475-0525 

www.geac.com 

Hansen Information Technologies 

11092 Sun Center Drive 

Rancho Cordova, CA 95670 

(916) 921-0883 

www.hansen.com 

IFS 10 North Martingale Drive, Suite 600 

Schaumburg, IL 60173 

(888) 437-4968 

www.ifsworld.com 

Indus International Inc. 

3301 Windy Ridge Parkway 


(770) 952-8444 

www.indus.com 

Intenia Americas 

Two Century Plaza 

1700 East Golf Road, Suite 900 

Schaumburg, IL 60173 

(847) 762-0900 

www.intentia.com 

Ivara Corporation 

935 Sheldon Court 

Burlington, ON L7L 5K6, Canada 

(877) 746-3787 x312 

www.ivara.com 

Contact 

Gary Davies, Vice President, Sales 

(905) 632-8000 x263 

Brian Maguire, Vice President, Marketing 

(905) 632-8000 x311 

A leader in asset reliability solutions, Ivara 

combines advanced technology and reliability 

expertise to help utilities achieve and sustain a 

proactive, reliability-focused approach to asset 

management. Ivara EXP software supports the 

asset reliability process – effectively managing 

asset health and ensuring the right work is always 

done on the right equipment, at the right time. 

With Ivara, customers can achieve higher returns 

on their asset investment and reduce costs while 

ensuring safety and environmental integrity. 

Lawson Software 

380 St. Peter Street 

St. Paul, MN 55102 

(651) 767-7000 

www.lawson.com 

LogicaCMG 

10375 Richmond Avenue, Suite 100 

Houston, TX 77042 

(713) 954-7000 

Fax (713) 785-0880 

www.logicacmg.com/us 

Contact 

Gary High, Vice President, Sales & Marketing 

(713) 954-7096 

Sue Wilson, Marketing Manager 

(713) 954-7308

Demand dramatic improvement— 

unify your workforce, assets and culture 

LogicaCMG’s Asset & Resource Management (ARM) suite provides 

the foundation utilities need to achieve dramatic business 

improvements. With ARM, utilities can unify their workforce, assets 

and culture to reduce costs and better manage their business. 

By optimizing the use of information and assets with ARM, 

companies can produce significant operational changes and move 

to the next level of business benefits. ARM provides the critical 

information technology that supports smarter business decisions 

and enables a utility to stand out from the crowd. 

The ARM product suite includes work management, mobile 

computing, asset management, compliance tracking, dispatch, 

scheduling and reporting capabilities delivered as a pre-integrated, 

seamless solution. 

LogicaCMG is a major international force in IT services and wireless telecoms. 

It provides management and IT consultancy, systems integration and 

outsourcing services to clients across diverse markets including energy and 

utilities, telecoms, financial services, industry, distribution and transport and 

the public sector. For more information, contact us at 1-800-334-7101 or see 

www.logicacmg.com/us. 

SOLUTIONS THAT MATTER 


For over 40 years, LogicaCMG has been a 

major international force in IT solutions, systems 

integration, consulting, products and services. 

LogicaCMG’s Asset and Resource Management 

(ARM) product suite combines work management, 

mobile computing, asset management, compliance 

tracking, dispatch, scheduling and reporting 

capabilities into a single, seamlessly integrated 

environment. 

From the office to the field, ARM streamlines 

a utility’s business processes, manages the entire 

work stream, controls operational costs, and 

manages maintenance and regulatory compliance 

activities. 

Mainpac 

10-12 Clarke Street, Suite 201 

Crows Nest, NSW 2065, Australia 

+ 61 2 9438 1411 

www.mainpac.com.au 

Mainsaver 

9890 Towne Centre Drive, Suite 100 

San Diego, CA 92121 

(858) 550-5300 

www.mainsaver.com 

Mincom 

9635 Maroon Circle 


(303) 446-9000 

Fax (303) 446-8664 

www.mincom.com 

Contact 

Marc Duame, Inside Sales Manager 

(303) 446-9000 

Utility organizations invest billions of dollars 

in assets – from personnel to equipment. A single 

system to manage equipment maintenance, 

purchasing, finance and workforce planning 

is critical to ensure cost efficiency and quality 

service delivery. 

Mincom provides Enterprise Asset Management 

(EAM) and e-business solutions to power 

generation, transmission and distribution; water 

and wastewater; and gas utilities around the world. 

Mincom offers a range of consulting services 

delivered by experienced professionals with deep 

industry knowledge and implementation expertise. 

MRO Software 

100 Crosby Drive 

Bedford, MA 01730 

(800) 2 44-3346 

Fax (781) 280-2202 



www.mro.com 

Contact 

Ron Wallace, Industry Marketing Manager, 

Utilities 

(781) 280-6875 

Charles Maul, Enterprise Marketing Support 

Representative 

(770) 481-3070 

Jerry Schinski, Senior Sales Consultant 

(201) 909-3765 

MRO Software is the leading provider of 

strategic asset and service management solutions. 

Maximo Enterprise Suite, the company’s 

flagship solution, is delivered on a web-architected 

platform and increases productivity, 

optimizes asset performance, and service levels, 

reduces costs and enables asset-related sourcing 

and procurement across the entire spectrum of 

strategic assets. 

MRO Software (Nasdaq: MROI) is a global 

company based in Bedford, Mass., with approximately 

900 employees, 10,000 customers and 

more than 260,000 end-users. 

NISC (National Information 

Solutions Cooperative) 

#1 Innovation Circle 

Lake St. Louis, MO 63376 

(866) 999-6472 

www.nisc.coop 

NewEnergy Associates, A Siemens Company 

400 Interstate North Parkway, Suite 1500 


(770) 779-2800 

www.newenergyassoc.com 

Open Systems International, Inc. 

3600 Holly Lane North, Suite 40 

Minneapolis, MN 55447 

(763) 551-0559 

Fax (763) 551-0750 

www.osii.com & www.e-scada.com 

Contact 

Mary Jo Nye, Director of Business 

Development 

(763) 511-0559 

Open Systems International, Inc. (OSI) 

provides open and high performance solutions 

to utilities worldwide. These solutions include 

Supervisory Control and Data Acquisition 

(SCADA), Energy Management System (EMS), 

Generation Management System (GMS), and 

Distribution Management Systems (DMS), as well 

as individual software products for electric utility 

operation. OSI’s products include monarch, a 

Linux, Windows and Unix-based system platform 

and Osiris, a new Linux-based secure Remote 

Telemetry Unit. 

Oracle USA 

500 Oracle Parkway 

Redwood Shores, CA 94065 

(650) 506-7000 

www.oracle.com 

Peregrine Systems, Inc. 

3611 Valley Centre Drive 

San Diego, CA 91230 

(800) 638.5231 

www.peregrine.com 

Perfect Commerce 

850 NW Chipman Road, Suite 5050 

Lee’s Summit, MO 64063 

(816) 448-4444 

www.perfect.com 

Ramco Systems Corporation 

Crossroads Corporate Center 

3150 Brunswick Pike, Suite 100 

Lawrenceville, NJ 08648 

(609) 620-4800 

www.ramco.com 

R.W. Beck, Inc. 

1801 California Street, Suite 2800 

Denver, CO 80202 

(303) 299-5200 

www.rwbeck.com/emc 

SAP America, Inc. 

3999 West Chester Pike 

Newtown Square, PA 19073 

(610) 661-1000 

Fax (610) 661-8868 

www.sap.com 

Contact 

Leila Ahmed, leila.ahmed@sap.com 

Paul Jablon, paul.jablon@sap.com 

Carl Cross, carl.cross@sap.com 

SAP for Utilities is a set of state-of-the-art 

software solutions for utilities worldwide. The 

integrated, highly reliable, and scalable solutions 

enable the end-to-end management of business 

processes because they are built on the open 

architecture of the SAP NetWeaver platform. 

Today, in 70 countries around the globe, more 

than 950 leading electricity, gas, water, and 

municipality utilities in regulated, transitioning, and 

deregulated markets rely on SAP for Utilities. 

Soluziona 

Rosetree Corporate Center 

1400 North Providence Road, Suite 4005 

Media, PA 19063 

(610) 892-8920 

www.soluziona.us 


A D V E R T I S E M E N T 


Westar Energy Proves Knowledge is Power 

POSITIVE CHANGE 

Westar Energy, the largest electric energy provider in Kansas, is 

dedicated to providing its 650,000 customers with high quality 

service at below average prices. Although Westar Energy has 

received national recognition for maintenance and performance, 

the utility’s seven energy centers were constrained by homegrown 

mainframe information systems and reactive maintenance 

practices. The Company’s executives knew they could do better. 

They set out to grow best-in-class maintenance organizations. 

A select team of Westar Energy employees was created as a task 

force to plan the foundation for positive change. Goal-driven metrics 

were identified, and a new Enterprise Asset Management (EAM) system 

was chosen and put into place. David Walter, Engineer VI in Westar 

Energy’s “Engineering Reliability” department explains, “If you can 

measure against a goal, you can fix and improve the process. Metrics 

force the issue and fuel an environment of continuous improvement.” 

The value of this strategy became immediately apparent, and the utility 

expanded the EAM initiative over the next four years to include additional 

processes, modules, reports, and increasingly aggressive goals. 

THE SOLUTION 

In 1998, Westar Energy chose SPL WorldGroup’s Enterprise Asset 

and Work Management (SPL EAM, formerly known as the Synergen 

Series®), to replace its legacy systems. SPL EAM was selected 

over other vendor solutions because of its user friendliness, robust 

features, configurability, and low overall total cost of ownership. The 

application would enable standardized work practices and data formats 

across Westar Energy’s seven energy centers. 

In less than two years, all sites were live on SPL EAM and maintenance 

managers were ready to implement a new, three-pronged 

approach to power plant maintenance: 

1. Improve Planning and Scheduling: Westar Energy wanted 

to modernize its maintenance system and organization by 

implementing best practice work planning and scheduling. 

2. Integrate Maintenance and Supply Chain: Purchasing 

and inventory organizations would be a more closely 

integrated partner in support of maintenance efforts. 

3. Measure and Improve Results: The utility sought to 

increase accessibility of information and better manage 

results by establishing goals and performance metrics. 

Westar Energy’s greatest challenge involved the cultural/ 

behavioral and procedural changes necessary to successfully 

implement goal-driven practices. Metrics would determine where 

weaknesses existed, and procedures would be implemented to 

improve performance. Personnel throughout the fleet were motivated 

to work together to overcome each limitation in pursuit of 

maintenance excellence. 

MEASURING SUCCESS 

SPL EAM serves Westar Energy work management needs, in the 

areas of work and project planning, scheduling, permitting, timekeep- 

ing, purchasing, inventory control, and more. Every transaction that 

occurs in a power plant is sent to the general ledger via SPL EAM. 

Using the data collected and stored in SPL EAM, Westar Energy 

executives are now able to track and measure performance and chart 

progress toward maintenance practice improvement goals. 

Westar Energy’s plant maintenance departments perform 

approximately 30,000 work order tasks per year and generate about 

17,000 work schedules annually. The utility has met several of its 

“This year we met our goal for the 

percentage of hours spent on predictive 

and preventive activities, and we will 

very likely raise the bar next year.” 

goals in transitioning from reactive maintenance to a more planned 

and scheduled environment, and was able to build upon its success 

by measuring and improving work package planning, advance 

scheduling, schedule compliance, planned materials percentages, 

and related metrics. According to Walter, “About 18% of our maintenance 

work is currently unscheduled. Recognition of, and visibility 

into, the inefficiency of unscheduled work is helping us to change 

our work culture.” He adds, “This year we met our goal for the percentage 

of hours spent on predictive and preventive activities, and 

we will very likely raise the bar next year.” 

Westar Energy’s materials and purchasing organizations also 

tended to be reactive. With metrics this is changing. The utility 

stocks nearly 60,000 SKUs in its warehouses and executes more 

than 17,000 purchase orders each year. Objectives such as reduced 

inventory, increased use of blanket purchase orders, achieving consignment 

goals, and meeting required dates are measured. Westar 

Energy’s Generation Business Analyst, Sue Gordon says, “The 

internal lead time from requisition generation to purchase order 

issue has been dramatically reduced. Replacing previously arduous 

tasks with the capabilities of SPL EAM made this possible.” 

EFFICIENCY OF INFORMATION BREEDS SUCCESS 

Walter concludes, “We’ve always felt that our maintenance organizations 

were effective. Today though, with the help of the SPL EAM 

solution and a strong focus on continual improvement in our work 

management process, we are even better. We are far more efficient in 

collecting intelligence now. Having ‘exploded’ in this respect is proving 

invaluable to our efforts. We now have the ability to continuously evaluate 

our progress and raise the standard as we meet our goals. The end 

result is a more efficient operation, more reliable service, and greater 

customer satisfaction.” 


SPL WorldGroup, Inc. 

525 Market Street, 33rd Floor 

San Francisco, CA 94105 

(415) 963-5600 

Fax (415) 963-5601 

www.splwg.com 

Contact 

Cathy McCause, Vice President, Marketing 

(925) 658-1056 

SPL WorldGroup delivers a leading Enterprise 

Asset Management software solution — SPL 

Enterprise Asset and Work Management (SPL 

EAM) — for collaborative work management and 

asset optimization across the enterprise. SPL 

EAM is also available as part of an integrated suite 

of best-in-class utility-specific software solutions 

including SPL Customer Care & Billing, Mobile 

Workforce Management, and Outage and Distribution 

Management that helps utilities around the 

world achieve competitive advantage while ensuring 

a lower total cost of technology ownership. 

Southeastern Data Cooperative, Inc. 

2100 East Exchange Place, Suite 300 

Tucker, GA 30084 

(770) 414-8400 

www.sedata.com 

TMA Systems, LLC 

5100 East Skelly Drive, Suite 900 

Tulsa, OK 74135 

(918) 858-6600 

www.tmasystems.com 

Xtensible Solutions 

PO Box 372969 

Satellite Beach, FL 32937 

(321) 777-3789 

Fax (321) 777-3810 

www.xtensible.net 

Contact 

Greg Robinson, President & CEO 

(321) 777-3789 

Joe Zhou, CTO 

(303) 229-4328 

Terry Saxton, VP Special Projects 

(763) 473-3250 

Achieving your asset management objectives 

will require unambiguous information to be shared 

among many applications and users. Xtensible 

Solutions offers the Model Driven Integration (MDI) 

Framework to meet this requirement in a timely and 

cost-effective manner. MDI provides the process 

and capability whereby your enterprise can lever- 


age a common language for asset management 

goals and objectives, roles and responsibilities, 

and asset performance metrics that are understood 

and correctly used across your enterprise. 

MAINTENANCE MANAGEMENT 

ABB Inc. 

940 Main Campus Drive 

Raleigh, NC 27606 

(800) 919-4995 

www.abb.com/us 

Burns & McDonnell 

9400 Ward Parkway 

Kansas City, MO 64114 

(816) 333-9400 

Fax (816) 333-3690 

www.burnsmcd.com 

Contact 

Doug Riedel, Associate Vice President 

(816) 822-3391 

Jeff Greig, Associate Vice President 

(816) 822-3392 

Founded in 1898, Burns & McDonnell is a fullservice 

engineering, construction, environmental 

and consulting solutions firm. 

The company’s multi-disciplined staff of 

more than 1,800 includes engineers, architects, 

contractors, planners, estimators, economists, 

technicians and scientists, representing virtually 

all design disciplines. Burns & McDonnell plans, 

designs, permits, constructs and manages facilities 

all over the world with one mission in mind 

— to make our clients successful. 

Camcode Barcode Labels 

18531 South Miles Road 

Cleveland, OH 44128 

(800) 627-3917 

www.camcod.com 

Caver-Morehead Systems, Inc. 

5000 Legacy Drive, Suite 170 

Plano, TX 75024 

(972) 599-9330 

www.caver-morehead.com 

Cetaris 

41 Constellation Court 

Toronto, ON L0G 1J0, Canada 

(416) 679-9555 

www.cetaris.com 

Engica Technology 

Newcastle Technopole 

Kings Manor, Newcastle upon Tyne, NE1 6PA 

United Kingdom 

+ 44 (0) 191 201 7777 

www.engica.com 

har*GIS Field Information Systems 

6551 South Revere Parkway, Suite 210 

Centennial, CO 80111 

(303) 220-0253 

www.truckmap.com 

Harris Computer Systems 

1 Antares Drive, Suite 400 

Ottawa, ON K2E 8C4, Canada 

(613) 226-5511 

www.harriscomputer.com 

LinearVision, LLC 

198 Van Buren Street, Suite 120 

Herndon, VA 20170 

(250) 388-0500 

www.linearvision.com 

LogicaCMG 

See complete listing on page 52 

Meridium 

10 South Jefferson Street 

Roanoke, VA 24011 

(540) 344-9205 

www.meridium.com 

SMGlobal Inc. 

2911 Waterford Forest Circle 

Cary, NC 27513 

(919) 434-5146 

www.smglobal.com 

SW IMPLEMENTATION/SYSTEMS INTEGRATION 

SERVICES 

Accenture 

128 Third Street South 

St. Petersburg, FL 33701 

(727) 897-7000 

www.accenture.com 

AMEC Americas Limited 

2020 Winston Park Drive 

Oakville, ON L6H 6X7, Canada 

(905) 829-5400 

www.amec.com 

Deloitte 

127 Public Square, Suite 3300 

Cleveland, OH 44114 

(216) 589-1300 

www.deloitte.com/us 

Delve Energy Group LLC 

855 Foxberry Farms Road, Suite 200 

Minneapolis, MN 55340 

(763) 478-3580 

www.delveenergy.com


Doble Engineering Company 

85 Walnut Street 

Watertown, MA 02472 

(617) 926-4900 

www.doble.com 

Enspiria Solutions, Inc. 

10475 Park Meadows Drive, Suite 200 

Littleton, CO 80124 

(303) 741-8400 

Fax (303) 799-6766 

www.enspiria.com 

Contact: 

Hahn Tram, Executive Consultant 

(303) 521-3055 

Mehrdod Mohseni, VP, Business Development 

(303) 521-5395 

Chip Scott, EVP, Operations 

(303) 949-6144 

Enspiria Solutions provides consulting and 

systems integration services to help utilities plan and 

implement technology-enabled solutions including: 

Asset Management, Geographic Information Systems, 

Automated Meter Reading, Substation Automation, 

Outage Management, Work Management, 

and Mobile Field Dispatch. Our experts offer a range 

of Asset Management services to enable clients 

to succeed across their T&D enterprise including 

reliability management solutions, investment project 

prioritization, performance benchmarking, key performance 

indicators, and executive dashboards. 

ICF Consulting 

9300 Lee Highway 

Fairfax, VA 22031 

(703) 934-3637 

www.icfconsulting.com 

KEMA One Burlington Business Center 

67 South Bedford Street, Suite 201 

East Burlington, MA 01803 

(781) 273-5700 

Fax (781) 299-4867 

www.kema.com 

Contact 

Jennifer Krabbenhoeft, Director, Strategic 

Marketing 

(303) 708-9355 

Kristen Brewitt, Corporate Communications 

(781) 273-5700 

KEMA offers technical and management 

consulting, testing, inspections, certification, and 


training services to more than 500 electric and utility 

industry clients in 70 countries. KEMA applies 

global experience and regional insight in offering a 

full complement of services supporting generation 

through the consumer side of the meter. Headquartered 

in Arnhem, the Netherlands with subsidiaries 

and offices worldwide, KEMA employs more than 

1,500 full-time professionals and leading experts in 

many facets of the energy utility industry. 

LogicaCMG 


Navigant Consulting, Inc. 

615 North Wabash Avenue 

Chicago, IL 60611 

(800) 621-8390 x5736 

www.navigantconsulting.com 

PA Consulting 

1750 Pennsylvania Avenue NW 

Washington, DC 20006 

(202) 442-2000 

www.paconsulting.com 

POWER Engineers 

1295 South Eagle Flight Way 

Boise, ID 83709 

(208) 685-6355 

www.powereng.com 

Radio Satellite Integrators 

19144 Van Ness Avenue 

Torrance, CA 90501 

(310) 787-7700 

www.radsat.com 

Telemetric Corporation 

9941 West Emerald Street 

Boise, ID 83704 

(208) 658-1292 

www.telemetric.net 

UMS Group Inc. 

20 Waterview Boulevard 

Parsippany, NJ 07054 

(973) 335-3555 

www.umsgroup.com 

BUSINESS PROCESS 

Boreas Group LLC 

730 South Elizabeth Street 

Denver, CO 80209 

(303) 744-2108 

www.boreasgroup.com 

Bottom Line Impact 

1040 North Michigan Avenue 

Pasadena, CA 91104 

(626) 794-7894 

www.bottomlineimpact.com 

E3 Consulting, LLC 

3333 South Bannock Street, Suite 500 


(303) 762-7070 

www.e3co.com 

Elevon 

500 West Madison, Suite 1600 


(312) 258-6000 

www.elevon.cc 

GE Energy 

4200 Wildwood Parkway 


(678) 844-5476 

www.gepower.com 

Hannon Armstrong 

1997 Annapolis Exchange Parkway 

Annapolis, MD 21401 

(410) 571-9860 

www.hannonarmstrong.com 

INOVx Solutions 

17701 Cowan, Suite 260 

Irvine, CA 92614 

(949) 752-3700 

www.inovx.com 

Invensys 

33 Commercial Street 

Foxboro, MA 02035 

(508) 543-8750 

www.invensys.com 

Itron 2818 North Sullivan Road 

Spokane, WA 99216 

(800) 635-5461 

www.itron.com 

Ivara Corporation 


MCR Performance Solutions 

400 Skokie Boulevard, Suite 375 

Northbrook, IL 60062 

(847) 562-0066 

www.mcr-group.com 

Panasonic Computer Solutions Company 

50 Meadowlands Parkway 

Secaucus, NJ 07094 

(800) 662-3537, Option 5 

www.panasonic.com/toughbook/utilities 

Contact 

utilities@p2c2.com 

(800) 662-3537, Option 5

© 2005 Enspiria Solutions, Inc., an Osmose company. 

The Zen of Asset Management 

Hahn Tram – Student of eastern philosophies, father of two, collector 

of toy pigs, recipient of the Westinghouse Engineering Achievement 

award, foremost industry expert on utility asset management. 

While others fret, deliberate and struggle with the uncertainties of 

asset management, Hahn applies the same calm intelligence, 

enlightened intuition and clear comprehension that pervade all aspects 

of his life. And while elsewhere confusion may reign, Hahn’s confident 

experience make him always mindful of that which has come before, 

and that which is likely to follow. Ever aware of the need for balance, 

Enspiria’s Hahn Tram is the Zen of asset management. 

Real People with Inspired Solutions to Real Problems 

www.enspiria.com • 303.641.2968 

For over fifteen years, Panasonic Computer 

Solutions Company has produced the industry’s 

most dependable mobile PCs—legendary Panasonic 

Toughbooks®. Toughbook reliability assures 

utility industry professionals maximum uptime and 

a significantly lower total cost of ownership. With 

durability built into every seal, hinge and connector, 

Toughbooks offer the highest reliability rates in the 

industry. Toughbooks are ideal whether you’re up in 

the bucket, above or below ground or driving over 

rural roads. 

Toughbooks’ rugged features are unmatched 

for durability, with magnesium alloy cases, shockmounted 

hard drives and moisture- and dust-resistant 

LCDs and keyboards. And with integrated 

wireless capabilities, utility workers are able to 

receive work orders and make schedule changes 

in the field, dispatch and manage crews from 

virtually anywhere and instantly access customer 

service histories and inventory information. 

Platts UDI 

1200 G Street NW, Suite 1000 

Washington, DC 20005 

(202) 942-8788 

www.platts.com 

Powerlink Corporation 

20 South Santa Cruz Avenue, Suite 320 

Los Gatos, CA 95030 

(408) 399-3355 

www.powerlink.com 

Sargent & Lundy LLC 

55 East Monroe Street 


(312) 269-2000 

www.sargentlundy.com 

SmartSignal Corporation 

901 Warrenville Road 

Lisle, IL 60532 

(630) 829-4000 

www.smartsignal.com 

MAINTENANCE OUTSOURCING 

Asset Management Consulting Limited 

221 St. John Street 

Clerkenwell, London, EC1V 4LY 

United Kingdom 

+ 44 (0) 20 7688 2828 

www.amcl.com 

OTHER 

SensorLink Corporation 

PO Box 301 

1975 Valley Highway #9 

Acme, WA 98220 

(360) 595-1000 

Fax (360) 595-1001 

www.sensorlink.com 

Contact 

Ken Borbe, Director of Marketing & Sales 

(360) 595-1000 

Manufactures meters, sensors, and recorders 

for primary voltage. They read current, voltage, 

power factor, harmonics, and micro-ohms resistance. 

They record profiles including current and 

power factor. 

Our sensors measure in high voltage environments 

where a traditional potential or current 

transformers may not be the answer. Our research 

team is dedicated to designing high quality, easy to 

use sensors that give the right answer. Past projects 

include: Open core current transformers, Non-Contact 

power factor sensors and Current sensors for 

special SCADA applications. 



Asset Management: 

Optimized Business Use of Aging System 

Information Base 

INTRODUCTION 

Oklahoma Electric and Gas is completing implementation of a 

comprehensive asset management framework for its distribution 

business unit. Working with KEMA T&D Consulting, OG&E has 

implemented a method based on a unique approach to T&D system 

management that incorporates an aging infrastructure model 

into its investment, utilization and maintenance decision-making 

processes. Its approach also applies an option-based portfolio 

optimization method to maximize “bang for the buck” performance 

enhancement of its power delivery operations. 

OG&E moved to asset management to improve business performance. 

According to Terry Henry, Leader of Strategy, OG&E 

Electric Services, “Asset management is a change from traditional 

engineering standards and operations-guideline driven approach 

for decision making and spending to a management system that 

coordinates all decisions to maximize their joint contribution to the 

corporate business case. We believed it would help us focus on 

achieving maximum performance for our customers, our stockholders, 

and our employees.” 

Henry further notes that OG&E knew from the outset that it also 

needed to look at the issues and trends it faced due to continuing 

wear and tear on an aging T&D system. “We saw trends in our cost 

and operations data that indicated potential rising costs and reliability 

problems down the road. OG&E wanted to get out in front of 

such trends before they became problems. An asset management 

approach seemed the ideal way to put any such problems in a business 

perspective and to optimize their solution.” 

“KEMA had a solid, 

fact-based methodology 

to address the aging 

infrastructure issues and 

made a good argument 

for including those issues 

directly in the asset 

management project.” 

PROPER TEAMWORK WAS A KEY 

OG&E assembled a team that cut across all relevant departments 

and backgrounds. They also went outside the company 

for expertise that could help them do the job quickly and well. 

“OG&E picked KEMA because it had a solid background in business-based 

asset management approaches,“ said Henry. “We 

were confident they would listen to us and work with us toward 

our goals and needs. KEMA had a solid, fact-based methodology 


to address the aging infrastructure issues and made a good argument 

for including those issues directly in the asset management 

project.” OG&E and KEMA also worked closely with ABB Power 

Technology Services, which provided expertise and support in 

evaluation, diagnosis, and condition assessment of major electrical 

equipment like transformers and breakers. 

AGING INFRASTRUCTURES: 

DURABILITY VERSUS JUST RELIABILITY 

Lee Willis, Vice President of Asset Management and Planning for 

KEMA T&D Consulting, says that equipment aging and its effects 

are not well understood in the power industry, particularly their 

interaction with business performance. “When people talk about 

aging, they use it as a proxy for condition deterioration. Age and 

time in service create wear and tear that gradually erodes condition.” 

But age itself is a good thing, Willis insists. “An optimum 

business strategy means getting the most value out of everything 

the utility owns or buys, and that means making it last as long as 

practicable.” 

Working with utilities in Europe and the US, KEMA developed a 

unique “sustainable point” durability analysis of historical asset base 

operating data, which projects future changes in condition, failure 

rates, repair and replacement costs. The utility can see where, how, 

and why its costs and reliability challenges will change over time or 

as a function of decisions made about utilization and maintenance. 

Willis explains the approach finds an optimum sustainable business 

case. “There is an optimum age or condition profile for each class 

and type of equipment in the system, one most compatible with the 

utility’s business needs. Even fifty-year old poles and transformers 

can have decades of life remaining in them if well serviced. A utility 

that has the right base of information can determine where and how 

to allocate budget and scarce resources to do the best job of getting 

value out of its assets, old and new.” 

A utility must be pro-active, and work hard, to get maximum 

value from its older equipment. “Older equipment can be a lot like 

older people,” explains Randy Schrieber, Senior Vice President, 

Power Technology Services, at ABB, whose group did much of 

the project’s major equipment evaluation. “It can go from good 

condition to bad more quickly than new. It’s prone to more frequent 

breakdowns. So you have to inspect and monitor it a bit 

more frequently, and maybe perform more maintenance. You have 

to balance those costs, remaining life, and risk of failure against 

the cost of replacement. This means a lot hinges on your understanding 

of the equipment’s condition.” 

OG&E’s Henry agrees, adding that the utility needs to look beyond 

just its equipment cost and lifetime issues, at Operations costs and 

performance issues, too. The optimum way to provide good service 

quality to customers might be to learn to ‘live with’ a slightly rising 

failure rate from aging equipment through improved operations. “You 

might eliminate the effects of aging trends on customer service by 

improving response and restoration – by more efficiently handling 

high outage rates.” 


A D V EE RR TT II SS E M E N T 

TAKE BUDGET OUT OF PROJECTS, 


NOT PROJECTS OUT OF THE BUDGET 

The best way to balance all these disparate issues is by using a 

rigorous asset management approach to select the best matching 

set of programs and strategies, says KEMA’s Willis. “But the 

key point, based on the results I’ve seen, is that you can’t ignore 

equipment aging trends if you’re trying to do effective asset management. 

The two go hand in hand.” 

Zac Hager, Strategy and Total Quality Engineer with OG&E’s 

Asset Management team, notes that KEMA helped his team apply 

two other features that further improve asset management. “First, we 

think in terms of three budget areas, investment, maintenance, and 

operations, rather than two.” On KEMA’s advice, the traditional O&M 

area is viewed as two separate spending areas that buy different 

types of performance. Inspection and maintenance extend equipment 

lifetime and lower failure rate. Operations budget improves response 

and restoration to lessen the effects of escalating failure rates. “It can 

make better business sense to prepare and be able to react well,” 

he says, “than to try to lower breakdown rates. The key, always, is to 

balance and target spending and resources across those areas well. 

Second, OG&E’s asset management framework uses an optionbased 

approach which allows it create extra leverage as it balances 

activities and investment areas.” 

KEMA’s Willis notes that several utilities have reported rather 

disappointing results from asset management. “In every case they 

were using an asset management portfolio method to prioritize or 

optimize projects defined and scoped in the traditional manner. 

That just doesn’t work. If the traditional project paradigm goes 

in, traditional results come out. You have to set up a system that 

will take budget out of projects, not projects out of the budget.” 

The secret is creating a set of flexible, performance-based project 

options guidelines to replace the traditional engineering standards 

approach to the assessment of needs and specification of project 

design. “There are always several ways to do any project,” 

Willis adds, each with different costs and different results. Halfmeasures 

sometimes deliver far more than half results, and are 

a preferred approach. Other times ‘gold-plating’ will be justified 

based on what it brings. “The key is to let the portfolio optimization 

see those options, their cost and results differences, and make the 

decision about how to best balance all options from all considerations.” 

Do that, Willis says, and the utility will get the big impacts 

its upper management is expecting. 

Doug Patterson, Senior Planner at OG&E, and project manager 

for the effort, reports that a third of the project involved 

determining how to construct project and program options objectively, 

comprehensively, and efficiently. “Absolutely nothing can be 

untouchable when it comes to cost reduction. Remember, if you’re 

taking money from one place it’s because you want spend it where 

it will provide more value. It’s all to make the greatest contribution 

to overall company business goals.” 

OG&E also uses its portfolio optimization to select the penetration 

of maintenance and technology programs. “A big part 

of our planned performance improvement is based on what you 

might call optimized cherry picking,” Patterson adds. “We don’t 

have to inspect all breakers if we can target the ones that need 

service. Some feeder line switches produce six times the ‘bang’ 

when you automate them compared to others.” Patterson’s team 

entered such programs in targeted 10 percent increments and let 

the optimization determine penetration and timing. 

“The key is to let the 

portfolio optimization 

see those options, their 

cost and results 

differences, and make 

the decision about how to 

best balance all options 

from all considerations.” 

GOOD RESULTS 

“This project has gone a long way toward helping OG&E prepare 

for the future,” OG&E’s Henry reports. The biggest impact may not 

be the technical, but rather the institutional and team understanding 

OG&E gained. “This project helps us take a business basis 

in our decision-making and focus on coordinating our activities 

so all decisions are coherent.” And OG&E gained a firm handle 

on system aging and how to manage for the inevitable results of 

wear and tear on its system. “We better understand what we face. 

We know what we know and what we don’t know, along with the 

priorities we should put on improving areas of our knowledge base 

and our system. Most important, we have a good roadmap for the 

future, for both IT and process improvements, and for how to invest 

and manage our T&D system going forward.” 


62 ENERGYBIZ MAGAZINE July/August 2005

Xcel Energy Fields 

Its IT Dream Team 

XCEL ENERGY EXECUTIVES say they are 

looking to eventually save as much as $50 million a 

year in operating expenses as a result of innovations 

to be forged through a unique partnership with 

information technology vendors. 

In mid-May, the utility unveiled its unique collaboration 

with IBM, Indus, Itron, Mercury and SPL 

WorldGroup at a press conference in its Denver office. 

Raymond E. Gogel, Xcel vice president and CIO, 

said that his company invested $3 million and its 

IT partners put up $10 million to launch the “Utility 

Innovations” program. 

“Ours is an industry that, as you know, is costconstrained,” 

Gogel said. “It is also an industry that 

typically doesn’t have a lot of research and development. 

So what we really wanted to prove was that 

you could bring partners together who have their 

own R&D and synergistically pull them together so 

that they all work with each other.” 

Wayne H. Brunetti, Xcel chairman and CEO, 

cited the path-breaking nature of this effort. “I had 

never seen where you get five fundamentally different 

technology companies who compete with one 

another in one form or another, to sit down and share 

their technology across the board, to come up with 

a product line to couple their technologies together,” 

Brunetti said. “That is incredibly unique.” 

Guido Bartels, IBM general manager of global 

energy and utilities, said that IBM’s relationship with 

Xcel will demonstrate how new technology can help 

develop the concept of a digital utility. Xcel has had a 

decade-long relationship with IBM. Utilities are in a difficult 

position, facing increasing demand from customers 

for a more reliable supply of energy while regulators 

remain reluctant to allow an increase in energy prices. 

“The whole intelligent network is an escape out of that 

dilemma,” Bartels said. “We’re seeing the digitalization 

of the electric grid, with fuel cells and distributed generation 

on the horizon. That represents a tremendous 

opportunity for IBM and, obviously, our competitors.” 

Even though IBM is a major player in information 

technology, Bartels says it welcomes the opportunity 

to work together with other players on the 

strategic advisory board that Xcel has put together. 

“With different parties at the table, you wind up with 

different solutions than you thought of,” Bartels said. 

“It’s about the transformation of the industry.” 

News Flash>> 

Technology Frontier 

XCEL ENERGY’S TECHNOLOGY PARTNERS 

IBM – Providing industry expertise, 

technology and software, project 

management and systems integration. 

Indus – Providing the work management and 

supply chain system, resource optimization, 

scheduling and mobility solutions. 

Itron – Providing meters and meter reading 

automation, meter data management, 

billing and asset management. 

Mercury – Providing software monitoring IT 

demand, improving business performance. 

SPL WorldGroup – Providing systems that 

leverage existing technology for outage 

response, operational efficiency and safety. 

Gogel agreed that the utility business is changing, 

and some of that change will be pioneered at 

Xcel. “We are the gadfly and the subject matter 

experts that work with the technology companies to 

make new capabilities start to appear,” Gogel said. 


BRITS BRING WIND POWER HOME 

British Gas envisions a future of small 

wind turbines atop homes in the United 

Kingdom. A pilot program will soon 

be rolled out across the country. 

Windsave will produce a small unit that will 

generate 1 kilowatt of power, enough to 

run assorted devices and appliances. It will 

work when breezes are as gentle as 3 miles 

per hour as well as in more robust winds. 

Diana Montgomery, environmental strategist 

at British Gas, said, “Having a roof-top turbine 

means householders can save money and 

help do their bit for the environment. Initial 

estimates show one unit could cut annual 

electricity bills by up to a third and reduce 

CO 2 emissions by half a ton per annum.” 

A cable leads directly from the turbine 

into a control box and on into household 

wiring through a 13 amp plug. 

A squad of engineers will install the 

satellite dish sized turbines and service 

them under a maintenance contract. 

By Martin Rosenberg 

Photos courtesy of: British Gas 



News Flash>> 


COLLEGES GET 

SMART 

Two California 

community colleges 

will save $1.2 million 

by curbing use of 

6 million kilowatt 

hours of power, 

under a program 

funded by Southern 

California Edison. 

The program is 

designed to achieve 

greater energy 

efficiency on the 

campuses of the 

San Bernardino 

Community College 

District and the Los 

Angeles Community 

College District. 

The retrofits 

include interior and 

exterior lighting, 

chiller upgrades and 

other HVAC-related 

energy efficiency 

improvements, 

thermostats 

and motors. 

INDIA AND RUSSIAN 

TIES 

India is seeking 

Russian help to 

bolster its nuclear 

energy sector. 

Word of the joint 

efforts on nuclear 

power came out of 

a recent meeting 

in Moscow between 

leaders of the 

two countries. 



The Inside Story 

XCEL ENERGY COULD be considered a test 

bed for many of the innovative ideas implemented 

over the last 10 years to deal with the deregulation—and 

then post-deregulation—realities of the 

U.S. utility industry. 

Outsourcing at Xcel is part of a history of the 

company going back prior to the two mergers that 

actually started Xcel. Xcel CEO Wayne Brunetti 

initiated IT outsourcing with IBM when he joined Public 

Service of Colorado, which later became part of New 

Century Energies, which merged with Northern States 

Power to become Xcel Energy. Brunetti says he felt 

a utility just didn’t have the resources to stay up with 

rapidly evolving automation. Wanting to turn that over 

to experts, he chose IBM. That marriage has been a 

good one for both Xcel and IBM. Xcel has been able 

to reduce its costs while at the same time improving its 

IT infrastructure and rolling out massive new integrated 

systems across its vast service territory, which extends 

from Texas to the Canadian border. IBM has been able 

to increase its share of Xcel’s overall IT spending from 

less than $50 million in the early years of the contract 

to almost $150 million per year. 

As the IBM relationship evolved, Brunetti hired Ray 

Gogel, formerly vice president of client services for 

IBM Global Services, as vice president and CIO of the 

newly created Xcel. Gogel has a doctorate in philosophy 

and probably is one of the most creative thinkers 

working in utilities today. The Xcel-IBM relationship 

consciously sought to incorporate “thought leadership” 

at each level of the utility’s operations. Gogel, along 

with Brunetti and Xcel president and CIO Richard 

Kelly, became a triumvirate working with IBM to elevate 

IT to the point where it could drive innovation to realize 

overall corporate goals and strategies. In the process, 

the outsourcer, IBM, became closely intertwined with 

Xcel’s strategic and bottom-line financial goals. Xcel 

structured the agreement so that IBM has incentives 

not only to cut costs, but also to generate dramatic 

improvements in the ways things are done. Xcel has 

been able to draw upon IBM’s global IT expertise to 

push its IT operations to a new level. 

As IBM and Xcel have worked to update, 

elevate and consolidate IT as a corporate driver for 

innovation, Xcel has invited the CEOs of other major 

vendors, or their direct representatives, to be part of 

a strategic advisory board designed to tap some of 

the best IT thinking in a variety of areas. This level of 

cooperation has encouraged the vendors, including 

IBM, Indus, Itron, SPL WorldGroup (its acquisition 

CES International was part of the original group) 

and Mercury to work closely with Xcel to develop 

new ways of doing things. Xcel gets a cost break in 

the process, although it does not ask for or retain 

any intellectual property rights for jointly developed 

projects. The result has been extensive retooling 

and upgrading of software brought in by the various 

strategic partners who can sell those improved 

products into the industry at large. 

Wayne Brunetti is a disciple of W. Edwards Deming, 

and Deming’s “total quality management” theory has 

been installed through Xcel. Senior level executives 

meet together twice a month for four to six hours to go 

over all performance metrics of the corporation. 

Brunetti likes to say, “I’m not going to get linemen 

to climb poles any faster or meter installers to put 

in meters any faster. The future of productivity 

improvements has to do with the systems we use to 

plan, buy, and schedule things for our crews and our 

company.” Xcel has taken that philosophy seriously, 

pushing integrated systems into service trucks with 

integrated work management, GIS and CIS, to 

enable everything in the field to be done as quickly 

and cost effectively as possible. 

While none of the initiatives are totally new—with the 

possible exception of the strategic advisory board 

involving CEOs—the combination has proven to be 

quite powerful and somewhat unique. A lot of utilities 

have talked about making IT strategic, but Xcel seems 

to have done it. IT drives virtually everything being done 

in the company and has extensive control over finances, 

operations and other parts of the organization. 

Xcel has knitted together a group of what once 

were separate utilities into an organization that seems to 

operate seamlessly. Many merged utilities still are struggling 

with the integration problem years after mergers. 

Xcel also overcame the collapse of deregulation, 

re-integrated a deregulated subsidiary that was 

bleeding cash, and weathered the post-2001 storms 

that have plagued the industry. Overall, while Xcel’s 

future success remains to be seen, the results so far 

are good. Xcel is molding its vision of the future of 

information technology into its corporate structure 

and culture.

Enhancing The Value 

of Meter Data 


UTILITIES CAN GET smarter about their maintenance 

efforts by using sophisticated metering software, 

says Larry Nosbaum, CEO of Itron. 

Itron is one of the partners working with Xcel 

Energy in its utility innovations initiative. Nosbaum 

became president of Itron in 2000 and chairman in 

2002. Recently, Nosbaum discussed the project 

and its implications for Itron. His edited comments: 

: What is the significance of the Xcel project 

to Itron? 

NOSBAUM: We have been able to develop a 

number of new products here, such as distribution 

asset optimization and meter reading technology. 

We can go talk to other utilities and we can point to 

Xcel and say they are using it. 

: What exactly is new, from a metering 

standpoint? 

NOSBAUM: What’s really new is some of the 

software and the information technology applications 

that are enabling us to take data that is coming 

from meters and the fixed network and do a whole 

host of other things with it. That is really some of the 

magic here in terms of product. 

: For example? 

NOSBAUM: For years, Itron has been collecting 

meter reading data and sending out bills to customers. 

You can do a whole host of things with that data 

such as distribution asset optimization. You can 

take that data and look at how heavily or lightly the 

distribution network is loaded. Once you have done 

that, you can begin to do predictive maintenance 

and analytics on the entire delivery system. 

: What is the state of the meter industry 

right now? 

NOSBAUM: If you look at the United States, the 

penetration rate of AMR technology is about 25 

percent for electric, gas and water. It has been 

growing over the last five years time at about 18 

percent, although last year the electric and gas 

group actually slowed down by 10 percent. That was 

coming off of utilities not spending capital dollars in 

2004. It appears that that has turned around for us 

in 2005. The growth in AMR is headed back toward 

The software ... 

does some very 

incredible things. 

perhaps 18 percent, a level that it has certainly been 

at for the last five years. 

: What do you like about this business? 

NOSBAUM: First of all, Itron is a utility-based 

business. We will always sell to utilities. There are 

nice growth rates in electric meters and in AMR and 

potentially nicer growth rates in software. One of 

the things we like about the software business is, 

while it is only about 10 percent of our total business 

today, it pulls together all the rest of it. The software 

is really what takes all that data that we create and 

gather and does some very incredible things. 

News Flash>> 


SOUTHERN KUDOS ON MERCURY 

Southern Company efforts to reduce 

mercury emissions were recently 

singled out for special recognition by 

the Electric Power Research Institute, 

the power industry’s research arm. 

Hank Courtright, EPRI’s vice president of 

generation, said, “...employees of Plant 

Yates are to be commended for offering 

their plant, their time and their skills 

to evaluate and improve not just one 

mercury control technology, but four.” 

Tested were technologies involving 

activated carbon injection, EPRI’s patented 

plates designed to capture mercury, 

low-temperature oxidation catalysts 

and additives that could sequester the 

mercury captured by the SO 2 scrubber. 

TRASH TO ENERGY 

Global Energy 

Resources, of 

California, is 

proposing to invest 

$50 million to 

produce energy 

out of garbage 

in Arizona. 

A plasma arc 

converter will 

transform trash in 

a sealed chamber 

lacking oxygen to 

create electricity, 

fuels and water, 

according to an 

article in the 

Arizona Daily Star. 

“This is a technology 

whose time has 

come,” Wesley 

Bilson, CEO of Global 

Energy Resources, 

told the newspaper. 






Southwest Renewable Energy 

Conference 

Sante Fe, N.M. 



ISES 2005 Solar World Congress 

Orlando, Fla. 



Fifth EPRI International 

Conference on Maintenance 

Jersey City, N.J. 




Indus Chief Heralds 

Era of Discovery 

By Martin Rosenberg Utilities want to have 

XCEL ENERGY’S LAUNCH of its utility 

innovation program will demonstrate to the utility 

industry the benefits of knitting together information 

technology, in the view of the top executive of one of 

the firms partnering with the utility. 

Gregory J. Dukat, Indus president and CEO, likens 

today’s technology to “the Columbus era.” Discovery of 

new benefits and opportunities await vendors and utility 

clients alike as a result of work now being done by Xcel 

Energy and its technology partners, said Dukat, who 

became president of Indus two years ago. 

In a recent interview, Dukat commented on the 

Xcel project. His edited comments: 

: On the Xcel project, Indus has worked together 

with companies that are sometimes competitors. 

Might this lead to mergers or more collaborative efforts? 

DUKAT: You can never predict the future, especially 

in the technology business. I don’t foresee anything 

imminent, but one never knows about the opportunities 

there. 

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one solution across 

the entire enterprise 

: What is Indus’s position in the market today? 

DUKAT: Indus is a 30-year-old software company 

that has been very successful. We are based in 

Atlanta and have about 700 employees. In the early 

2000’s we had quite a few challenges, lost money 

and lost focus. We have refocused the company and 

it has become profitable, cash flow positive, and a 

very good success story. 

: What share of your revenues is tied to the 

utility industry? 

DUKAT: About 75 percent of our business is utility 

focused. We have about 255 utility customers that 

have either our customer information system which is 

a billing and CRM system, or the asset management 

system which helps automate maintenance. We also 

offer workforce management optimization. We have 

42 percent of the utilities that have more than a million 

customer bills using our customer information system. 

We have 44 percent market share in the enterprise asset 

management for software and services, which is about 

three times larger than our next closest utility competitor. 

: What is the potential for growth for your 

products and services? 

DUKAT: Many of the utilities have disparate systems. 

They might have our system in a part of the business 

such as generation and then someone else’s 

system in transmission and distribution. In many 

cases, there is no system in place for the extended 

workforce. Utilities want to have one solution across 

the entire enterprise, and that is what Xcel is doing. 

: What is the potential business of bringing 

all utilities up to where they could be technologically? 

DUKAT: It is a huge opportunity. It’s potentially tens 

of millions of dollars of revenue, opportunity-wise. 

: If the whole industry adopted what Xcel is 

just beginning to explore, what would be the impact? 

DUKAT: The cost of delivering power would 

be greatly reduced. Reliability would be greatly 

enhanced. Customer loyalty and the service levels 

would be increased dramatically.


2005 UNITED STATES ELECTRIC SURVEY SUMMARY 

UTILITY 2004 2005 2004 CENTS/KWH 


Metrics 

Industrial Power Rates Jump 

INDUSTRIAL POWER USERS saw their rates 

increase an average of 5.2 percent in the past year, 

according to a recently released survey. 

The average industrial rate was 7.95 cents per 

kilowatt-hour in April 2005, compared with 7.56 

cents one year earlier at two dozen large utilities, 

according to NUS Consulting. The study focused 

on the rates for a large industrial customer using 

2005 CENTS/KWH 

CHANGE 

1 CON EDISON $58,080.17 $66,798.97 12.91 14.84 15.01% 

2 NIAGARA MOHAWK $50,112.43 $53,870.96 11.14 11.97 7.50% 

3 SOUTHERN CALIFORNIA EDISON $52,449.28 $51,541.04 11.66 11.45 -1.73% 

4 PACIFIC GAS & ELECTRIC $50,913.73 $50,903.34 11.31 11.31 -0.02% 

5 PUBLIC SERVICE ELECTRIC & GAS $46,162.69 $44,551.69 10.26 9.9 -3.49% 

6 RELIANT ENERGY $39,092.70 $44,305.75 8.69 9.85 13.34% 

7 BALTIMORE GAS & ELECTRIC CO. $32,358.16 $43,250.18 7.19 9.61 33.66% 

8 PECO ENERGY $39,762.94 $39,631.10 8.84 8.81 -0.33% 

9 TEXAS UTILITIES $33,843.16 $37,899.46 7.52 8.42 11.99% 

10 COMMONWEALTH EDISON $36,591.05 $36,546.05 8.13 8.12 -0.12% 

Survey Model: 450,000 kWh/Month; 1,000 kW Demand; 85% Power Factor; and Customer-Owned Transformer 

Texas Beefs Up Generation 

WHEN TEXAS DEREGULATED its electric 

power markets in 1999, it spurred a large volume of 

new investment in new power plants. Independent 

power producers plowed more than $15 billion into 

Texas from 1998 to 2004. 

This investment brought 22 gigawatts of highly 

efficient combined-cycle gas turbines (CCGT) into the 

ERCOT generation market, second only to baseload 

generation by nuclear and coal power plants. Almost all 

the generation in the CCGT category (see chart) was 

added during this post-1999 window. These additions 

had the effect of “pricing out” higher-cost, less efficient 

generation on wholesale markets since the new generation 

filled part of the average demand for electricity. 

As a result of the improved heat rate efficiency, 

wholesale power prices are 44 percent lower than 

they might have been without the new capacity, 

according to TXU Energy. 

Source: NUS Consulting Group 

450,000 kilowatt-hours a month and with a demand 

of 1 megawatt. 

An industrial customer of Con Edison in New 

York paid $66,799 for the power in April, up from 

$58,080 one year earlier. The utility’s rate increased 

15 percent in one year. 

Baltimore Gas & Electric had the highest annual 

rate increase – 33.7 percent — in the group of utilities 

reviewed. However, six utilities charged a higher 

industrial rate than Baltimore Gas & Electric in April. 

“As world energy prices continue to rise, the U.S. 

electric industry will reflect this growing trend,” said 

Richard Soultanian, co-president of the NUS Consulting 

Group. “This year’s increase of 5.2 percent is one of the 

highest recorded for the United States, and there is little 

sign that future electricity prices will abate.” 

David Brown, NUS vice president, said, “The highcost 

states are deregulated states. They were high-cost 

before deregulation, and they remain high cost.” 

Deregulation and the promise of competition failed 

to lower electric rates, and as a result, “retail deregulation 

is pretty dead in this country,” Brown said. 

TEXAS GENERATION INVESTMENT 

Capacity Additions (GW) 

Year 98 99 00 01 02 03 04 

Reserve 

Margin (%) 

0.2 0.7 5.5 6.8 5.7 4.4 2.9 

8 7 12 26 35 32 33 

Between 1998 and 2004, $15 billion was invested 

in adding 26 gigawatts of generation. 

Source: Energy Velocity; NERC AND TXU Energy

Source: University of Michigan 

Your Friendly Power Company 

CUSTOMERS ARE MORE satisfied with PPL 

Corp. and Southern Company than about 30 other 

utilities. 

And generally, they are more satisfied with their utility 

than their telephone company, cellular provider, cable 

company, airlines or newspapers. Those are the findings 

of a study of customer satisfaction by the University 

AMERICAN CUSTOMER SATISFACTION INDEX 

2005 % Change 

UTILITIES 73.1 1.5% 

Energy Utilities 73 1.4% 

Airlines 66 0.0% 

Fixed Line Telephone Service 70 -1.4% 

Wireless Telephone Service 63 -3.1% 

Newspapers 63 -7.4% 

Cable & Satellite TV 61 0.0% 

All Others 74 0.0% 

GAS SERVICE 

CenterPoint Energy, Inc. 73 NA 

KeySpan Corporation 70 -5.4% 

ELECTRIC SERVICE 

Southern Company 79 -2.5% 

Duke Energy Corporation 78 0.0% 

Edison International 75 5.6% 

Entergy Corporation 75 2.7% 

American Electric Power Company, Inc. 74 -1.3% 

FPL Group, Inc. 74 -2.6% 

FirstEnergy Corp. 71 2.9% 

Reliant Energy, Inc. 69 1.5% 

GAS & ELECTRIC SERVICE 

PPL Corporation 80 1.3% 

Sempra Energy 79 2.6% 

Ameren Corporation 75 1.4% 

Cinergy Corp. 75 1.4% 

Progress Energy, Inc. 75 -3.8% 

Allegheny Energy, Inc. 74 -1.3% 

CMS Energy Corporation 74 4.2% 

Northeast Utilities 74 8.8% 

Public Service Enterprise Group, Inc. 74 1.4% 

Energy East Corporation 73 4.3% 

Pepco Holdings, Inc. 73 1.4% 

National Grid Transco plc 72 4.3% 

TXU Corp. 72 -2.7% 

Dominion Resources, Inc. 71 6.0% 

Exelon Corporation 71 0.0% 

Consolidated Edison, Inc. 68 0.0% 

DTE Energy Company 68 -4.2% 

NiSource Inc. 68 0.0% 

Xcel Energy Inc. 68 -2.9% 

PG&E Corporation 67 1.5% 

from previous year 

of Michigan, which produces an American Customer 

Satisfaction Index (ACSI). 

The study is based on interviews with 250 customers 

of each company. The questions are used to generate a 

rating on a scale of 1 to 100, with 100 being the highest 

score. PPL stood at 80, and Southern Company and 

Sempra Energy were at 79. Utilities averaged 73.1. 

In comparison, telephone companies averaged 70, 

and cable and satellite TV companies averaged 61. 

“Of the 30 measured utilities, this year 54 percent 

increase, 33 percent decline, and only 13 percent are 

unchanged,” said Claes Fornell, director of the National 

Quality Research Center at the University of Michigan. 

Northeast Utilities, the largest electric provider in 

New England, increased its score 9 percent to 74, 

he pointed out. 

Industry Hiring Heats Up 

ENERGY INDUSTRY JOB openings in May set 

12-month records at the EnergyCentralJobs.com web 

site. The chart shows total new job postings submitted 

to the site in the 30-day period preceding each date. 

While the data is but an indicator of hiring trends, it 

suggests that human resources departments at energy 

companies are increasingly on the lookout for new 

talent for their organizations. 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Hiring Index>> 

 

 

 

 

 

 

 

 

EnergyCentralJobs.com 

As of May 9, a record 

1,181 jobs were posted. 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

www.energycentral.com ENERGYBIZ MAGAZINE 69 

Source: EnergyCentralJobs.com



Introducing 

FELSINGER SEMPRA ENERGY 

Challenging Conventional Wisdom 

AT 29 MILLION customers strong, Sempra Energy 

is an industry colossus. With several larger mergers 

recently rocking the industry, Sempra Energy already 

has the critical mass other utilities are striving to 

assemble. Donald E. Felsinger, company president 

and COO, believes economic forces will continue to 

spur further industry consolidation. 

In a recent interview with EnergyBiz, Felsinger 

also commented on the unique problems confronting 

California’s energy sector, the reason Sempra is 

building three major liquefied natural gas terminals, 

and other related issues. Felsinger, who becomes 

Sempra chief executive in February, is 57. His comments, 

edited for style, follow. 

: Do you think power blackouts may return 

to California this summer? 

FELSINGER: None of us can predict the weather. If 

you look at an extreme forecast where we have warm 

weather and there is a disruption of a transmission 

line or a major power generating station is off-line, we 

could drop down to very low percentages in terms of a 

reserve margin. That may create a need to shed load. 

California is still on a path of recovery and will probably 

continue down that road for another couple of years 

— until we get new transmission, generation, and 

demand-side management programs in place. 

: Let’s look at a worst-case scenario. 

Say there isn’t enough hydroelectric power in the 

Northwest this summer, and it’s a hot August in 

California. What happens? 

FELSINGER: You typically would like to operate a 

system that has reserve margins of 15 to 20 percent. 

I have seen scenarios that show us getting down to 

3, 4, or 5 percent. That’s not the place you want to 

be when you operate a system. 

: If there are blackouts or rolling outages 

again this summer, what do you think the political 

impact would be? 

FELSINGER: Most politicians as well as the general 

population would consider that unacceptable and 

would want to have questions answered. 

: One governor’s career was destroyed by an 

energy crisis. Is there still no fix? 

FELSINGER: California has more than just energy 

problems. It has financial problems, budget problems, 

and Gov. Schwarzenegger has been trying to 

right many things that are wrong about California’s 

economy. He has been a champion of trying to get 

the various regulatory agencies to ensure utilities 

are doing all they can in terms of demand side 

management, renewables, new generation, and new 

transmission — to make sure California’s energy 

future is met. But it takes a lot more than just that. The 

marketplace has to have confidence in California. 

: What are some of the ongoing problems? 

FELSINGER: Today, we still have regulatory 

uncertainties. It is not clear in anyone’s mind what 

the role will be for regulated utilities in California 

going forward. Will they be allowed to build new 

generation, or will the marketplace be allowed to 

build new generation? 

: Since 2000 Sempra has built five power 

plants in the Southwest with a combined 2,800 

megawatts, and three more are being proposed. 

FELSINGER: That’s correct. We invested 

$1.1 billion in these assets. 

: Are these owned by the regulated entity, or 

are they considered unregulated assets? 

FELSINGER: These are unregulated assets that have 

been contracted back through the state of California. 

: Let’s talk about the gas situation. Natural 

gas demand is expected to rise 40 percent by 2025. 

Are we getting ready? 

FELSINGER: Well, we are starting to. For a 15-year 

period, from about 1985 to 2000, we were living in 

a large bubble where we had more production than 

demand and prices were in the $2 per million BTU 

range. In 2001, for short periods of time, prices 

at the California border and other locations would 

spike up to two and three times that amount. The 

conventional wisdom was that these were just aberrations 

in the marketplace. We didn’t believe that, or 

at least we wanted to challenge that. 

: Describe your gas business. 

FELSINGER: We have 20 million gas customers in

Photo by: Ted Walton 

Southern California, we have a large fleet of gasfired, 

combined-cycle power plants, and we are a 

large marketer of natural gas, moving 10 to 12 billion 

cubic feet a day. 

: Where does Sempra think gas is headed? 

FELSINGER: We came to the conclusion that as a 

country we’re not producing enough gas to keep up 

with demands. Prices are trading at $5.50 today. 

They are forecasted to be in the $7 range next year. 

It’s all driven by the fact that we are consuming more 

than we can find. 

: To increase supply, Sempra is building 

LNG facilities in Baja California, Mexico, Port 

Arthur, Texas and Lake Charles, La. How large are 

the investments? 

FELSINGER: The LNG facilities with the associated 

infrastructure, such as the pipeline to get it to the 

marketplace, will cost $2 billion to $2.5 billion. 

: And the combined capacity? 

FELSINGER: About 4 billion cubic feet of gas a day. 

: This will make Sempra one of the largest 

LNG operators in the country? 

I look at the transmission grid 

not only in California but also 

across the United States as inadequate. 

FELSINGER: Yes. 

: Why are you moving so aggressively? 

FELSINGER: When we started looking at the 

fundamental gas market, we concluded it wasn’t 

that the country is running out of gas. We are 

running out of $2 gas. Prices will probably level out 

at current consumption in the $5 to $7 range. We 

knew that we could get gas from other parts of the 

world landed in North America for much cheaper 

than that — say the $3.50 to $4.50 range. By 

doing that, we would have an instant marketplace. 

We would help consumers, industries, and business 

by lowering their gas costs. 

: Would you need to buy pipelines? 

FELSINGER: We are building pipelines. These LNG 

receipt facilities will require $50 to $200 million 

worth of new piping systems to connect them to the 

existing pipeline. 

: How would you describe the adequacy of 

the transmission grid? 

FELSINGER: I look at the transmission grid not only 

in California but also across the United States as 

inadequate. The blackout that took place in New 

SYMPRA ENERGY 

FACT BOX 

2004 revenues 

$9.4 billion 

2004 profits 

$895 million 

Number of electric/ 

gas customers 

1,318,513/ 

6,294,548 

Generation 

3,670 megawatts 


We never 

got caught up 

in conventional 

wisdom that 

the country 

had plenty 

of gas. 


Introducing 

York in 2003 was caused by transmission problems. 

Our country doesn’t have an up-to-date, integrated 

transmission system. 

: What is most troublesome about the energy 

business today? 

FELSINGER: The thing that troubles most of us 

is that we don’t have a national energy plan. In 

California, we don’t even have a state energy plan. 

Hopefully, this year Congress will put out an energy 

bill that will provide some guidance and structure. 

In California, Gov. Arnold Schwarzenegger has 

proposed a new energy secretary for the state who 

would have responsibility for electric generation and 

electric transmission. We have to decide what it is 

we want as a country and put in place the organizations 

and people to make it happen. 

: What do you find most rewarding about 

your work? 

FELSINGER: We are providing the foundation for 

the future growth of this country and a quality of life 

for the people that use our service. 

: How did Sempra develop its recent business 

strategy? 

FELSINGER: We decided to stay fairly close to our 

core competencies, such as power plants, pipelines, 

utility distribution systems, and gas storage. One fairly 

unique move was to acquire a commodity and risk 

management business. We acquired a small gas trading 

and marketing business that we have since grown into a 

multi-dimensional business that markets electricity, gas, 

oil, and metals in North America, Europe, and Asia. 

: How large is Sempra Commodities? 

FELSINGER: In terms of physical commodities, we are 

now the second largest mover of natural gas in North 

America. On average, we move between 10 billion and 

12 billion cubic feet of gas per day. The commodities 

business contributed about one-third of Sempra 

earnings in 2004. 

: What impact did the collapse of Enron have 

on your commodity business? 

FELSINGER: At the time Enron had its problems, there 

were probably 15 major commodity traders that were 

housed within energy companies. Today that number 

has diminished to maybe two or three. The banks and 

financial institutions came in and filled the void that was 

left by the energy companies. 

: Some big mergers have been reported 

recently. Will there be more? 

FELSINGER: There definitely will be consolidations. 

There are a lot of small utilities — investor-owned, 

co-ops, REAs, and municipals. Probably several 

thousand serve the United States. There is no doubt 

that you could achieve great efficiencies by having a 

smaller number. Why do we need this many utilities? 

It’s just an artifact of our history. 

: Will Sempra try to engineer some merger 

deals? 

FELSINGER: Sempra was the result of a 1998 

merger. We thought we needed to have size and 

scale and have some efficiencies going forward. We 

are now focused on growing our business outside of 

our regulated utilities so that our investors can have 

a mix of investments. 

: How would you describe your corporate 

culture? 

FELSINGER: We are much more prone to look 

at nontraditional investments. We think about the 

industry differently. As a case in point, we never got 

caught up in building merchant power plants. We 

felt that we needed to have customers for assets 

like that. We never got caught up in conventional 

wisdom that the country had plenty of gas. When 

we look at an investment in the United States or the 

world, we approach it with a strong dose of risk 

management to make sure we understand all the 

risks before we invest shareholder money. 

: Could you provide an example? 

FELSINGER: The industry today is awash in excess 

generation capacity because a lot of utilities and 

utility affiliates rushed out to build as many gas-fired 

combined cycle power plants as they could, thinking 

the market would pay them. We had to be convinced 

we could get contracts in place for a long enough 

period of time to provide a return to our shareholders. 

We signed up contracts for about 2,000 

megawatts for a 10-year period we thought was 

a fair return and built those plants. Our plants are 

providing a nice return for our shareholders. 

: If you were starting your career, would you 

sign up for a job at a utility? 

FELSINGER: I would. I really enjoy this work. It has 

great rewards and a lot of frustrations. But it’s something 

that I think makes all of our lives better.

COMPELLING editorial. 

PROVOCATIVE commentary. 

INSIGHT you can use. 

TOUGH to put down. 

In every issue, you will find the 

top strategies, practices and 

technologies that you will need 

to run a leading utility in the 

21st century. Don’t be surprised 

if you find yourself reading 

EnergyBiz from cover to cover. 

Don’t miss the next issue! 

Sign up today for your free subscription at 

www.energycentral.com/energybiz 


y Mike Williams 

AWARDS 

METHODOLOGY 

The Fossil 

Productivity 

Committee of 

EUCG recognizes 

best performers 

on the basis of 

cost and reliability 

performance. A 

regression analysis 

predicts the O&M 

costs for plants 

based on factors 

such as number of 

units, capacity, 

and net generation. 

The ratio of actual 

to predicted O&M 

costs indicates 

how well each 

plant performed 

in relation to 

expectations. 

Reliability 

performance is 

based on Equivalent 

Forced Outage 

Rate (EFOR). The 

best performers 

are identified 

by the combined 

rankings of O&M 

Ratio and EFOR. 

Plants compete 

in two categories: 

large and small 

plants. Small plants 

average 

210 megawatts 

or less and large 

plants exceed 

that output. 


Final Take 

The Best of 

Generation 

IN CONFERENCE ROOMS, break rooms, and 

hallways throughout Progress Energy, are copies of 

our company’s culture statement. Although designed 

to be inspirational, the core message of this statement 

– People, Performance, Excellence – is also a blueprint 

of how we’ve made our fossil generating fleet one of 

the top-performing groups in the industry. 

In April, the Electric Utility Cost Group (EUCG) 

released its rankings of best-performing large and small 

generating plants. Our facilities dominated the lists. 

We are particularly proud of our first-place winners 

– Roxboro Plant in the large plant category and Asheville 

Plant in the small plant category – but their success 

is shared throughout our fleet. The EUCG rankings 

were based on data from 1999 to 2003. Prior to that 

time, we made some significant changes that have 

continued to reap solid benefits. For example, Roxboro 

Unit 4 surpassed 748 days of continuous operation – an 

outstanding record for a coal-fired unit. 

Our path to success actually began with the third 

part of our culture statement – the expectation of 

excellence. Beginning in the mid-1990s, the nuclear 

plants owned by Carolina Power & Light (which 

later merged with Florida Power Corp. to become 

Progress Energy) conducted a dramatic turnaround. 

Progress Energy nuclear plants are now recognized 

as among the best in the world. The company’s 

senior leadership raised the bar for fossil fleet performance, 

applying the same expectations of excellence 

from the nuclear program. Those standards ranged 

from simple housekeeping items, such as lighting and 

painting, to the implementation of work management 

and outage management systems. 

But we matched those higher expectations with 

appropriate resources. In the late 1990s, we evaluated 

the improvement needs of each facility and invested 

money where required. Technology was part of those 

investments as we upgraded control systems and 

installed distributed control systems (DCS) in our plant 

control rooms. 

Another key element was a significant reorganization 

coinciding with the merger in 2000. We 

created three regions, with plant managers reporting 

to regional general managers (GMs). We also 

moved most engineers from the plants and general 

office to the new regional organizations, reporting 

to the GMs. We kept a small group of trainers and 

Get the right people 

in the right jobs. 

engineers at headquarters to serve as subject 

matter experts and assist with training and systemwide 

programs. Getting the right people into the 

right jobs throughout the fleet was the single most 

important factor in our success. 

Beyond hiring and training, we are constantly 

working to make our workforce feel valued and appreciated, 

both through a competitive salary and benefits 

program and ongoing management/employee communications. 

For example, we host facilitated employee 

meetings with senior leaders to identify concerns and 

highlight things that are working well. We also conduct 

regular, confidential employee opinion surveys and take 

action on the results. 

Our company places a great deal of emphasis on 

career development, and we move people appropriately 

to share their knowledge and grow employees 

professionally. Progress Energy has incentive 

programs for managers and employees that provide 

a link between fleet and company performance and 

individual financial rewards. We also recognize 

outstanding performance through smaller bonuses 

and the company-wide Pinnacle Awards. 

We also want to make some significant improvements 

in safety. We do well in this area by industry 

standards, but we’re not really interested in being 

top quartile or top decile. We’re working to create 

a culture where zero accidents is both the expectation 

and the norm. One of the tactics we’re using to 

improve safety and operations is a more vigorous 

human performance program. We have made some 

progress with these tools, but we will be working to 

enhance this program in the near term. 

The secret formula is actually pretty simple: Get 

the right people in the right jobs. Set expectations, 

give people the authority, resources and accountability 

to get the job done, and then reward them on 

their performance. 

Mike Williams is senior vice president of 

power operations at Progress Energy.

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