It's a New Day

In an unexciting business that intrudes on the public's consciousness only rarely, people take the nation's electric utilities for granted as part of

In an unexciting business that intrudes on the public's consciousness only rarely, people take the nation's electric utilities for granted as part of the gritty infrastructure that keeps the economy going. The hazards of deregulation, which have been amply described over the past several years, thrust the industry into the limelight. Consumers suddenly found their trusted local utility was no longer acting like a beneficent provider of energy. It was one of those hateful business trusts that expounded the age-old warning of the marketplace, “Let the buyer beware!”

Nowhere was this circumstance more graphically illustrated than in California, where the price of energy skyrocketed from US$30 per MWh to US$3880. In its panic to bring some rationale to its power-supply problem, the state negotiated 55 long-term contracts to buy power at the bargain-basement price of US$69 per MWh. California suddenly found that energy, which apparently had been withheld from the market to artificially inflate prices, was now in abundant supply and selling for only US$19.

It may only be coincidence that Enron (Houston, Texas, U.S.), which emerged as the 800-pound gorilla in the energy business, was suddenly pummeled by a U.S. Securities and Exchange Commission (SEC) investigation regarding a US$1.2 billion reduction in shareholder equity. The questioning of its trading practices cast a revealing light on the shift in energy operations by conglomerates that emerged as the industry began the mandated process of deregulation.

Business Trends

As the power-broker segment proliferated, the existing investor-owned utilities (IOUs) began a historic reorganization exercise. New business ventures to enhance bottom lines redefined the roles of these traditional energy providers. The utilities were intent on joining the Great American Free Market. If rid of regulators, energy providers whose CEOs previously earned US$300,000 to US$400,000 per year, now could be in the same league as those CEOs in other industries earning millions of dollars a year.

In this respect, the IOU mergers underscored the business rationale that by combining resources, companies could streamline operations to enhance profitability. A case in point is the combination of Philadelphia Electric Co., (Philadelphia, Pennsylvania, U.S.) and Commonwealth Edison (Chicago, Illinois, U.S.). Geographical separation no longer poses a hurdle in the formation of a new company. Similarly, GPU Energy (Morristown, New Jersey, U.S.) is looking to merge with First Energy Corp. (Akron, Ohio, U.S.).

All over the country, electric utilities restructured their organizations to form umbrella corporations that consist of individual businesses, some of which are unrelated to the delivery of electricity. Under these circumstances, the electric utility component of the corporation can experience unintended financial constraints. In California, for example, PG&E (San Francisco) and Southern California Edison (Rosemead) transferred the proceeds from the sale of their generating assets to their respective umbrella corporations. In doing this, the electric-utility component faced bankruptcy when its power costs under deregulation exceeded its ability to meet financial obligations.

Not only are utilities searching for new partners within the United States, they are expanding worldwide to export their experience in the business by moving overseas in pursuit of profits. For example, Public Service Electric & Gas Co. (PSE&G, Newark, New Jersey), which has been reorganized into PSEG Global, sees enticing prospects for business in the third-world countries where electric power is only a dream. Despite financial risks associated with gaining approval from local governmental bodies, the potential rewards are electrifying.

In the other direction, overseas companies are buying U.S. properties. This action breaks with domestic history that limited ownership to homegrown companies. For example, National Grid of England — already operating systems in Korea and Japan — purchased the New England Electric System.

As part of the new corporate strategy to reduce overhead in terms of salaries and benefits for full-time employees, some electric-utility segments of reorganized companies streamlined their organizations by eliminating entire departments. Where it was standard practice to have a construction department, a meter-reading group, a customer-service department and a billing department, utilities have elected to outsource these activities to eliminate in-house employees. A particularly revealing example of this trend is Central Maine Power's (CMP, Augusta, Maine, U.S.) spin-off of its construction department into a separate company, manned by its former employees. The new company, On Target, assumed responsibility for construction work at CMP in addition to bidding on work at other utility sites.

An interesting application of outsourcing was demonstrated by the Long Island Power Authority, established by the New York Legislature to take over the Long Island Lighting Co., which was reorganized as Keyspan. In this case, the authority took over ownership of the pipes and wires on the system, sold the generating assets to Keyspan and contracted with Keyspan to operate the new utility.

With the competitive energy market still developing, restructuring of the industry has shown some weaknesses in its operations. It is clear a comprehensive policy would ensure adequate, reliable supplies to meet the demands of all classes of service. This would require additional generation and an expansion of the transmission system, which presently appears unable to support the emerging energy market. In this respect, the development of new technologies has emerged to increase transmission capabilities and to provide improved communications, control and metering capabilities. Altogether, some modeling and simulation will be necessary to understand the engineering and economic consequences of a deregulated industry.

Technology Trends

At the inception of open access and deregulation, reliability became hostage to the new paradigm. Serious power interruptions occurred on the West Coast and in other parts of the United States. Especially significant was the blackout Commonwealth Edison suffered when its whole downtown Chicago system failed, forcing the closure of businesses and offices. At almost the same time, Con Edison in New York lost an entire service area in upper Manhattan.

The reliability issue was framed in terms of the inadequacy of existing equipment to handle a vast increase in demand. Not only was the investment in maintenance lagging, but transmission capabilities also proved insufficient to handle requirements for the interchange of power. These problems were addressed by calls for new and improved technology to overcome deficiencies in system operations.

A new development presented to the industry was the superconducting technology that could be applied to substation operations in the form of superconducting magnetic energy storage (SMES). In this application, a power electronics module detects voltage sags and immediately energizes the SMES to inject precise quantities of real and reactive power to boost voltage within 0.5 msec. Wisconsin Public Service Corp. (Green Bay, Wisconsin, U.S.) installed six units to enhance the stability of its transmission grid.

In a companion application of superconducting technology, American Superconductor (Westborough, Massachusetts, U.S.) developed high-temperature superconducting cables. By using rare-earth ceramics, it was no longer necessary to cool the conducting medium to a temperature near absolute zero. This advance in the physics of superconductors made it economically feasible to operate the new generation of superconductors at significantly higher temperatures while still obtaining the benefits of an almost lossless conductor. Pirelli (Milan, Italy) fabricated such a cable, which is being installed in downtown Detroit, Michigan, U.S., as a replacement for an existing XLPE cable. The smaller diameter superconducting cable can conveniently replace the larger copper cable without having to rebuild any of the underground duct work.

With respect to increasing conductor loadings for overhead lines, the absence of available rights-of-way creates an insurmountable hurdle for building new lines. New approaches are required for achieving greater load-carrying capabilities. CMP faced this problem when five new merchant plants presented their requirements for access to CMP's lines with an additional load of 1600 MW. The existing 345-kV pole line, designed on the basis of a 120°F (49°C) sag curve, would not have adequate ground clearance to handle the added load. A new technology was implemented to increase the height of the conductors above ground by increasing the length of the poles. The technique involved cutting the poles about 5 ft (1.5 m) above the ground line and raising the upper portion hydraulically to provide a vertical gap of between 5 and 20 ft (1.5 and 6 m) between the cut ends of the separated poles. Steel members were bolted to the ends of the poles to provide additional length and stability. By increasing the pole height, conductor ampacity was increased sufficiently to accommodate the added load without impairing clearances.

In addition to raising conductors to avoid clearance problems, wire companies developed new conductor technology for high-temperature operation without running the risk of producing excessive sag. So-called high-temperature low-sag conductors have been developed to achieve the objective. Conductors are designed to operate at significantly higher temperatures than common in the past, substantially increasing load capabilities.

An existing technology developed by The Valley Group (Ridgefield, Connecticut, U.S.) rates a line in real time on the basis of a monitoring scheme that measures the actual ambient air temperature and wind speed. Using a load cell at suspension points on the line, it is possible to monitor the conductor tension (the lower the measured tension, the greater the sag). The data collected from the load cell determines if the line can carry increased load before impairing clearances. The system has demonstrated that line loadings can be increased 10% to 15%.

New York Power Authority (NYPA, Albany, New York, U.S.) used another technique for increasing power-carrying capabilities on existing lines to overcome a transmission bottleneck that exists on its critical west-to-east corridor between the cities of Utica and Albany. Using the latest in a series of transmission control technologies known as Flexible Alternating Current Transmission Systems (FACTS), the NYPA installed the convertible static compensator (CSC) to strengthen voltage stability and support on its Utica-Albany segment to increase line capacity by 60 MW. When fully operational, the CSC will provide unprecedented control of both voltage and power flow, permitting an increase of 200 MW or more on the statewide system. If widely adopted, the technology could revolutionize the delivery of electricity in the United States and throughout the world.

Technology-Business Convergence

The greatest impact of the developing technologies is probably in their ability to connect with every aspect of the business through interconnected computer programs. This process provides the integration of all information systems that are part of the operations involving distribution automation, automated meter reading, AM/FM/GIS, SCADA and microprocessor-based relays.

  • Using the Internet for e-business

    Other new technologies will enhance utility operations. For example, the Internet will allow customers to access information without using the traditional customer service call center.

    An example of a utility's migration into an e-business enterprise is the experience at Cinergy Corp. (Cincinnati, Ohio), which was created by the merger of Cincinnati Gas & Electric Co., PSI Energy Inc., Union Light, Heat and Power Co. and Lawrenceburg Gas Co. Cinergy used the services of The Convergent Group (now Schlumberger-Sema) to develop a plan to ensure competition on the Internet for the deregulated industry.

    Every aspect of the company's operations is part of the plan, which encompasses outage management, work management, mobile dispatch and distribution planning. The impact on customer service has been significant because all operating data translates into customer-usable information. For example, service can be scheduled to accommodate the customer; data from hard-to-read meters can be entered directly into the billing system; bills can be delivered directly to customer's e-mail; and customers can access payment information and report outages. In this context, Cinergy developed a new energy business by integrating Web applications into its operations.

  • Outsourcing IT

    In preparing for customer choice, American Electric Power (AEP, Columbus, Ohio) faced a particularly complex set of requirements as the result of having operations in 11 states, each of which might have different rules regarding the new utility scenario.

    Having merged with Central and South West Corp. (CSW), AEP needed to accommodate its operations to different market models and three different reliability regions. Instead of developing a total in-house solution, which would have required a large upfront investment, AEP contracted with Logica (Houston, Texas) to manage its IT operations. Using its Market Data Clearinghouse (MDCH) program, Logica provided an outsourced solution consisting of a suite of software modules for business processing, a message/data delivery service and a data warehouse. In addition, the suite registers competitive service providers, handles enrollment and subsequent customer switches, and transmits and receives billing data. The MDCH enabled AEP to meet changing regulatory requirements and to adopt a clearinghouse platform as its solution to customer-choice implementation.

Moving Forward

Continuing research should result in more efficient operations of utilities as they streamline their organizational structures and use new technologies. With all the developments under way to ensure profitable operations of utility systems, it is important to emphasize the necessity of establishing a competent work force. The utility industry will need an estimated 20% more engineers by 2008. In the face of a nearly 40% decrease in engineering graduates over the past decade, there is reason for concern regarding technical capabilities necessary for efficient operations. While deregulation proceeds, give strict attention to the fact that utilities still need people and need to undertake downsizing with extreme caution.

Exotic Conductors

  • Zirconium high-temperature aluminum alloy conductor Invar steel reinforced (ZTACIR) is capable of operating at temperatures as high as 200°C (392°F).

  • Gapped high-temperature aluminum alloy conductor extra-high-strength steel reinforced (GTACSR) uses trapezoidal-shaped aluminum alloy strands with a grease-filled gap over the steel core. This conductor is designed for operation at 150°C (302°F).

  • Aluminum conductor composite reinforced (ACCR) employs high-temperature Zirconium alloy strands over an alumina fiber composite, high-conductivity low thermal expansion core. This conductor is rated at 200°C (392°F).

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