Report Reveals Lower-than-average IT Spending for Utilities in 2005
The annual “Worldwide IT Trends & Benchmark Report” reveals a lukewarm IT economy at large, and an even cooler climate for IT spending in the utilities sector. The report, published by META Group-a provider of IT research, advisory services and strategic consulting- reveals a new IT reality in which cautious technology spending has fundamentally altered how organizations invest their IT dollars. For the utilities sector, this new IT reality means an industry that lags its peers in terms of traditional IT intensity measures.
Utilities industry IT spending in 2005 is projected to decrease by 4 percent. The figure is lower than the 1 percent decline experienced in 2004, and is markedly less than overall IT spending growth projections of 4 percent to 5 percent. META Group analysts argue that such benchmarking is a critical measure for utilities executives with far-reaching implications on organizational health, agility and scalability.
According to META Group, there are five critical categories by which industry IT intensity can be measured. While IT spending growth is the measure most often highlighted, analysts argue that it is also the measure that provides the least contextual information regarding the role IT plays within a given industry or organization. For more contextual relevance META Group examines IT spending as a percentage of revenue and as a percentage of operational expense.
In both cases, the utilities industry falls below overall averages, with projected IT spending of 2 percent of revenue in 2005, compared to an average of just over 4 percent, and projected spend of 3 percent of operational expenses, compared to an average of 5 percent. Perhaps more important than how the projections compare to overall spending is the relatively stagnant utilities industry year-over-year increases from 2004 to 2005.
The report also measures the relative importance and priority assigned to IT based on human capital expenditures. These “workforce” benchmarks tell a different story of utilities sector IT spending. In fact, utilities sector human capital spending is in line with other industries. While the average organization is projected to dedicate $14,107 to technology spending in 2005, per employee, the utilities industry will allocate only slightly less per worker ($13,106). The sector is also on par with other industries in terms of the relative number of IT employees. Across the board, the average company’s IT organization represents roughly 5 percent of the total worker population; in the utilities sector, that figure is closer to 6 percent.
However, META Group acknowledges that all five critical measures, even when considered in sum, may not be the most accurate means of measuring IT intensity. Instead, the new steady state of IT may demand “velocity” benchmarking by which organizations can measure IT spending changes relative to business metric (revenue, operational expense) changes. Such “agility” measures demonstrate the relationship between IT investments and other business investments/costs, providing insight into whether industries are realizing the value of their IT infrastructure.
Viewing the utilities industry in this context provides a more holistic view of IT intensity. Indeed, unlike most industries surveyed, IT spending in the utilities industry has decreased despite correlating increases in revenue. Another, equally important agility measure also proves quite telling. Projections for 2005 indicate that utilities will decrease IT investments while simultaneously increasing other business expenses. However, given the complexity of utilities sector budgeting, even the agility metrics may not tell the entire energy IT story.
“Despite traditional measures to the contrary, there is palpable IT spending in the utilities sector, today,” said CD Hobbs, META Group president and COO. “Much of that investment is focused on the integration of operating systems that are largely unaccounted for in the utilities IT budget. Pursuing cost management through increased operating efficiency will continue to dominate utility IT investment for the next several years, creating the illusion of lower IT spending as business systems are put on the back burner.”
Much of the business system spending that will occur, according to META Group, will be driven by heightened regulatory compliance, legislated and proposed utilities policy changes, security, grid reliability and wholesale market operations requirements. More specifically, the utilities industry will increase its technology spending in specific micro-climates of technology such as security.௣௣
Company Downsizing Canadian Transformer Factory
The VA TECH supervisory board has decided to significantly downsize and restructure its Ferranti-Packard Transformers factory in St. Catharines, Canada, which presently employs a workforce of 230.
The production of new transformers at the factory will cease in 2005. Ferranti-Packard St. Catharines will continue as a service center for transformers with sales, marketing, technical and engineering support for customers. VA TECH T&D has said it will ensure that the current order backlog will be completed in full.
The transformer factory has faced a difficult situation for several years and will incur substantial losses in 2004. Despite restructuring measures implemented by the company earlier in 2004, VA TECH said the situation has not improved as the transformer market price deterioration in North America continues. Significant increases in major commodity prices and unfavorable exchange rate have further increased the facility’s operating costs, according to the company.௣௣
G&W Electric Celebrates 100 Years of Service
G&W Electric Company is celebrating 100 years of service to the electric power industry. The company was founded in 1905 when Harry Gear and Paul Williams, two Commonwealth Edison engineers, had a better idea for connecting underground to overhead cables. The result was the first detachable-style porcelain pothead, now referred to as a cable termination. Many new innovations followed as the company built their reputation on engineering expertise in providing quality products customized to customer specifications.
The company started in a small machine shop on Jackson Blvd. in Chicago and moved numerous times within the Chicago area as the business grew. Today G&W headquarters occupies a 162,000-square-foot, state-of-the-art manufacturing facility in Blue Island, a southwest Chicago suburb. The company also has a manufacturing facility in Shanghai, China.
Today’s G&W offers a variety of products. The original detachable pothead line has grown into a complete line of cable terminations and joints from 5 kV through 800 kV. Load and fault interrupting switchgear is available with either SF6 gas or solid dielectric insulation for underground and overhead distribution. Solid dielectric and magnetic actuator technology has led to flexible line of reclosers which can work with a variety of controls. Current limiting protectors are also available through 38 kV, 5,000 A continuous and 120 kA interrupting.
According to President, John H. Mueller, “We are extremely proud to be among the select few in our industry to achieve such a rare milestone. G&W has always been very fortunate to employ people with extraordinary talent, commitment and vision. Our longevity in the industry is a testament to the quality of our products. But a quality product is not enough. We realize what it takes to be a leader in the industry. We believe this strong foundation and our continued commitment toward customer satisfaction will assure our growth in the future. I personally want to thank all our customers and industry associates for their cooperation over the years.”௣௣
Smart Building Controls May Help Manage Peak Energy Demand in Northwest
Can information technology and smart building controls reduce the need to build new transmission lines? Researchers at the Department of Energy’s Pacific Northwest National Laboratory think they might. In a demonstration with the Bonneville Power Administration (BPA), PNNL is exploring the impacts of reducing electrical demand and on-site energy production at several buildings in Richland, Wash., where PNNL performs research for the federal government.
At the Applied Process Engineering Laboratory, PNNL installed a 30-kW microturbine system. BPA can start the small, natural gas-powered turbine remotely to produce electricity for the building during times of peak electrical demand. This helps reduce stress on transmission lines by supplying some of the power for the building directly instead of pulling from the regional power grid.
The second project eases stress on the grid by allowing BPA to shed load by remotely turning off air conditioning and HVAC equipment at two smaller buildings and the 200,000-square-foot Environmental Molecular Sciences Laboratory. At the lab, six air handlers are cycled on and off, for approximately 10 minutes at a time.
Unlike radio-controlled methods, which utilities have used elsewhere, this system uses the Internet and computerized equipment to make changes without any physical action necessary at the buildings.
“Our engineers have preprogrammed a sequence of power-saving actions that take place once BPA remotely initiates load shedding,” said Srinivas Katipamula, PNNL’s project manager. “But ultimately, occupant safety and comfort take precedence.”
Elsewhere, utilities have demonstrated load shedding and distributed generation as a way to defer building new electrical generation facilities. In the Northwest, BPA, through its Non-Wires Solutions program, is exploring ways to defer the construction of new transmission lines throughout the region. The PNNL demonstration project is part of this effort.
“We are evaluating whether we can use direct load control to shave load at peak demand times to keep prices lower for everyone,” said Mike Hoffman, a BPA public utilities specialist.
Commercial buildings are considered an untapped resource for direct load control with more than 4.7 million commercial buildings in United States.
The PNNL demonstration project uses features found in existing building automation controls and allows them to communicate directly through the Internet without intermediary devices. BPA can control the load through a website which provides status of the equipment and feedback on how the commands have been executed.
This project will help BPA quantify whether this type of non-wire solution will work to help reduce demand during peak periods. The project is expected to continue through the end of 2005.௣௣
EPRI Reaches Advanced Power Electronics Milestone with Silicon Carbide Switch
Researchers at the Electric Power Research Institute (EPRI) have announced the development of high-power switches made from silicon carbide (SiC) crystals. The one-square-centimeter devices represent a milestone in power and size that could significantly improve the performance of advanced power electronics used to control the bulk flow of electricity.
“The silicon carbide switch is a critical enabling technology for the future of the electricity system that we have outlined in the EPRI Electricity Technology Roadmap,” said Clark Gellings, EPRI’s vice president for innovation. “As power electronics are incorporated into the power delivery system, utilities will be able to exert better control over power flow and protect their customers from outages and other power quality problems.”
The new technology has an electronic structure that allows it to support 10 times higher voltage gradients and operate at higher temperatures than silicon. It also has a thermal conductivity three times higher than silicon-slightly better than copper. Because of these properties, SiC has the potential to provide devices with 10 times the voltage limit of silicon and with two to three times the current density. The SiC switch, manufactured by Cree Inc., blocks 1,750 V and conducts 250 Amps, and operates up to 250 degrees Celsius junction temperature.
Commercialization of SiC technology was inhibited for many years by the quality of available SiC crystals, says Dr. John Palmour, Cree’s executive vice president for advanced devices. However, recent R&D funding from the U.S. government has enabled researchers to increase the diameter of production wafers to 75 mm and to drastically reduce the number of defects in the crystal. EPRI subsequently funded a demonstration project employing the wafers in prototype power electronics devices. The reduction in defect density allows the devices to be larger than ever before, which in turn makes the devices more commercially viable.
This important development in SiC wafer production has implications for the use of power electronics as it will allow devices to be smaller, less costly and have fewer parts than their silicon counterparts. Initially, this type of device will be used in motor drives for industrial plants and eventually in the thyristors of flexible AC transmission system (FACTS) devices that provide control over the flow of power through high-voltage transmission lines.௣௣
CPUC Approves Accelerated Construction of SDG&E Transmission Line
The California Public Utilities Commission (CPUC) in mid-December approved San Diego Gas & Electric’s (SDG&E) proposal to accelerate construction of a key transmission line to try to put it in service by September 2005-or sooner, if possible-to help avert potential electricity supply shortages and reduce energy costs for consumers.
In July 2004, the CPUC approved construction of the new 230-kV transmission line along SDG&E’s existing right-of-way from its Miguel substation in the southeast region of San Diego County to its Mission substation in Mission Valley. The original in-service date for the line was June 2006, but SDG&E filed a petition for modification with the CPUC in September 2004 to obtain regulatory approval of minor technical changes in the project that would allow the utility to operate portions of the upgraded facilities as early as September 2005.
“We are pleased the Commission has recognized the importance of moving ahead as quickly as possible on vital infrastructure improvements that will enhance overall reliability of the system and provide immediate cost savings to customers,” said David L. Geier, SDG&E’s vice president of electric distribution & transmission.
“The line also will ease congestion on the power system and, as a result, reduce overall energy costs for consumers throughout Southern California. Getting the line in sooner will mean an estimated cost savings of $8 million to $13 million for customers,” Geier said.
State officials are increasingly concerned about whether electricity supplies will be adequate next summer and fall, especially if there is a heat wave. The California Energy Commission now estimates the Southern California region will need another 1,700 MWs to meet reserve margins next September, if hot weather drives up demand.
“By easing the transmission bottleneck in Southern California, this line improves access to electricity outside the area,” Geier said. “It will help California utilities bring in as much as 500 MWs from other sources-such as power plants in Arizona and along the U.S.-Mexico border-to meet the power shortfall.”௣௣
CTC Supervises ACCC Cable Installation in Kansas
Composite Technology Corporation (CTC), a developer of high-performance composite core cables for electric transmission and distribution lines, recently announced a commercial overhead installation of its proprietary Aluminum Conductor Composite Core (ACCC) cable in Kingman, Kansas.
Kingman Municipal Utility, assisted by CTC, installed 1,000 feet of Hawk-sized conductor to replace existing conventional power cable in the municipality’s power distribution system between the city’s power generation plant and a new substation. The city of Kingman installed this span in preparation for connection with a previously announced 21-mile transmission line scheduled for completion during the first quarter 2005. The new line will utilize ACCC cable and CTC’s new composite utility structures to tie-in to the regional electrical grid, effectively upgrading the system to meet the energy demands of the city’s growing customer base while providing a reliable source of electrical power more economically.
Ira Hart, the City of Kingman’s utilities superintendent, said “This project is specifically designed to prepare the distribution side of our system for integration with the new transmission line we have commissioned from CTC. We are convinced that the new ACCC cable is a cost-effective solution for our tie-line project, and will allow us to significantly increase system capacity as our community grows, and the cable’s high-temperature performance characteristics will improve reliability.”
CTC also recently announced the completion of a pilot installation of its ACCC cable by Austin Energy. The pilot project will allow Austin Energy to observe the high performance, low sag, increased capacity capabilities of ACCC cable under rigorous operating conditions.
Austin Energy plans to upgrade its transmission and distribution system over the next several years to better meet the energy demands of its growing community, while improving reliability with the most advanced technology available.
The pilot installation of ACCC cable by the City of Austin, Texas, replaced conventional ACSR bundled Drake-size cables with a single ACCC cable on a span of existing transmission line within one of the utility’s primary substations.௣௣
NERC President Set to Retire at Year’s End
Michehl R. Gent, president and CEO of the North American Electric Reliability Council (NERC), announced in mid-January that he intends to retire at the end of 2005. Gent, who is 64, joined NERC in 1980 as executive vice president and was elected president in 1982.
“Leading this team of exceptional professionals for the past 23 years has been a genuine privilege and I will truly miss the close working relationships we have formed,” Gent said. “Working to transform NERC into an independent electric reliability organization has truly been the highlight of my career. Although Congress still has not passed legislation that would provide NERC with the authority to enforce its reliability standards, we have made great strides towards that goal. The time has come to pass the torch to the next generation of leaders.”
Under Gent’s leadership, NERC has grown from an organization of just five people to one that has more than 50 employees today. Mr. Gent has been at the forefront of the industry’s efforts to improve the protection of critical and cyber assets, both before and after Sept. 11, 2001. Most recently, he led the technical investigation into the Aug. 14, 2003, blackout and over the past year he has overseen the successful implementation of many of the recommendations resulting from that investigation.
Prior to joining NERC, Gent was general manager of the Florida Electric Power Coordinating Group. Before that, he held management positions at the Los Angeles Department of Water & Power.
He earned his BSEE at Texas A&M and MSEE at the University of Southern California, taught in the graduate schools of USC and Loyola, and is a registered professional engineer. Gent currently serves on several high-level energy policy committees and boards, including the United States Energy Association, the Consortium for Electric Reliability Technology Solutions, and the IEEE-USA Energy Policy Committee.
“Mike Gent will be a hard act to follow,” said NERC Chairman Richard Drouin. “He has led NERC with absolute integrity, dogged determination, and a clear sense of mission for the entire electric industry.
“Mike has told the board that, even though he prefers to retire by the end of the year, he is willing to stay on until we have found a replacement,” Drouin continued. “I’m sure that the entire industry will join me in wishing Mike all the best.”
Drouin said that NERC’s board of trustees would appoint a special committee to identify Gent’s successor.௣௣
Alabama Power Company Trials 500 AMDS Meters
Advanced Metering Data Systems, a metering and wireless connectivity company based in New Orleans, La., is proceeding with a 500-meter trial at Alabama Power Company. The initial installations in Alabama Power Company’s Birmingham, Ala., service area this past summer have been completed with the trial scheduled for completion in March 2005, according to Marc Reed, vice president of systems and software for AMDS.
The patented (and patent pending) technology employed in the AMDS network architecture allows a meter end-point to reliably communicate directly with tower-mounted AMDS base stations that are 5 to 10 miles away, thus eliminating hundreds or even thousands of complex, intermediate tier pole-top and/or roof-top mounted data collectors.
“The entire Birmingham-area network installation required only three towers outfitted with AMDS base stations yet it provides over 200 square miles of coverage in an unforgiving terrain marked by hills and valleys,” Reed said. “The fact that our system is reliably providing synchronized hourly read interval data and demand reads with such a lean installation profile underlines one of the key benefits of our design,” Reed said.
Derl Rhoades, principal in Alabama Power Company’s power delivery metering department added, “The integration to our billing system was flawless, eliminating the need for manual meter reads.”
Earlier this year, AMDS licensed Sensus Metering Systems of Raleigh, N.C., to manufacture an under-the-glass AMDS meter module for the Sensus iCon meter, which is now in full production.
“So far the installations and field testing have gone smoothly,” Reed said. “The combination of our wireless technology coupled with the latest generation of Sensus iCon meters has already been demonstrated to be a winning combination. We believe that the ongoing deployment of our dedicated, FCC-licensed fixed wireless network will quickly prove its value as a reliable yet simple advanced metering infrastructure for utilities of all types, sizes and locations.”
The advanced metering infrastructure (AMI) network developed and deployed by AMDS is based on a wireless network architecture that is simple, reliable and inexpensive to purchase, install and maintain, according to the company. Similar deployments are also in progress at various utilities across the United States.௣௣
Exelon Corp. and Public Service Enterprise Group Inc. (PSEG) have entered into a merger agreement to create Exelon Electric & Gas. It would be the nation’s largest utility. The combined company would have total assets of $79 billion and serve 7 million electric customers and 2 million gas customers in Illinois, New Jersey and Pennsylvania. The merger is contingent on shareholder and regulatory approval.
Siemens Power Transmission & Distribution has acquired the business activities of Shaw Power Technologies Inc. in the U.S. and Shaw Power Technologies Limited in the U.K. With this acquisition and its Siemens Network Calculation product suite, Siemens can offer a range of software and consulting expertise to simulate, analyze and optimize network reliability and performance.
In late December, GFI Energy Ventures completed its majority share acquisition of SPL WorldGroup Inc. as well as the completion of the merger of Synergen Inc. with SPL. The new company will be known as SPL WorldGroup Inc., and will offer a utility-specific suite of software solutions that includes customer care and billing, enterprise asset and work management, mobile workforce management, outage management and distribution management.
MRO Software, a provider of asset management solutions, and MDSI Mobile Data Solutions, a provider of mobile workforce management solutions, have formed an alliance to offer a complete work and asset management solution for electric, gas and water utilities.
MacLean Power Systems has acquired the assets of Joslyn Manufacturing Co. The acquisition creates one of the broadest-based suppliers of transmission, distribution and substation products to the electric utility industry.
Alliance Data Systems‘ Utility Services Division has acquired Capstone Consulting Partners Inc. The acquisition will enable Alliance Data to expand its capabilities for utility clients beyond billing and customer care to services within the construction/maintenance, field services and administrative departments of utilities.
ABB has acquired the assets of Pacific Breaker Systems Inc., a supplier of solutions that improve the performance of installed medium-voltage switchgear and circuit breakers.
Telvent has acquired a majority equity stake in Miner and Miner Consulting Engineers Inc. Telvent reports that the acquisition is part of the company’s strategy of offering seamless enterprise integrated real-time data to increase the efficiency, security and profitability of customers in the energy, traffic, transport and environment sectors.௣௣
