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electric utility
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15
Electric Utilities and the NII: Issues and Opportunities
John S. Cavallini and Mary Anne
Scott
U.S. Department of Energy
Robert J. Aiken
U.S. Department of Energy/Lawrence Livermore National
Laboratory
The electric utility industry is immersed in a changing
environment, and deregulation is a key pressure driving this
change. Careful strategic planning is needed to determine what the
future business of the electric utilities will be, and there are
concerns about the utilities' competitive status. Embedded in this
restructuring evolution and coupled to the growing need to provide
more in supply-side and demand-side management is the opportunity
for the electric utility industry to become a significant player in
the deployment of the national information infrastructure (NII). As
an Electric Power Research Institute (EPRI) study concluded,
Energy production and delivery will be tightly
coupled withtelecommunications and informationservices for the
foreseeable future. In order to control access to thecustomer and
prevent erosion of theircustomer bases, utilities will be driven to
become more aggressive indeploying both supply-sideinformation
technologies for improved operation of their
generation,transmission, and distributionfacilities; and
demand-side Energy Information Services (EIS). Thoseinformation
services will enableutilities to provide higher quality services at
lower cost with lowerenvironmental impact, and to givetheir rate
payers better control over their power usage 1R.
The entry of the electric utility industry into the
telecommunications arena, which is driven by the need to provide
energy information services for the generation, delivery, and
utilization of electric power, can affect competition in this
market and contribute to the goal of universal service. However,
significant policy implications must be addressed.
An Industry in Transition
After two decades in which competition in the energy market
increased somewhat, the Energy Act of 1992 provided legislative
authority to the Federal Energy Regulatory Commission (FERC) to
mandate open wholesale transmission access. As a result, there is
an even greater imperative for the electric utility industry to
reexamine its business strategy. Utilities must determine how to
remain competitive as this historically vertically integrated
monopoly becomes restructured into focused organizations that will
compete in the marketplace for energy supply and delivery services.
The overall issue is how to provide high-quality energy cost
effectively, while reducing the need for the capital investment of
new generating capacity, cutting back on the depletion of
nonrenewable fuels, and reducing emissions. Coupled with these
elements is the need to focus on customer service and satisfaction.
On an individual utility basis, the issue is deciding what part of
the market to focus on, how to maintain and build the appropriate
customer base, and how to maintain and increase market share. The
utility choice of business lines includes generation, transmission,
distribution, and value-added services, and these businesses may or
may not be segregated into separate subsidiaries.
In a strongly regulated environment, industry has little
incentive to be innovative—there is a vested interest in
proven technology. The prevailing philosophy is that it's okay to
be Number Two and that there is no need to lead the pack. However,
the competitive, nonregulated marketplace encourages innovation,
and industries adopt strategies to manage rather than avoid risks
in their use of new technologies. The electric utility industry
is
Page 124
moving toward the latter and as such will be forced to consider
the opportunities offered through telecommunications and
information services to a much greater extent. As is discussed
below, this is fortuitous for the deployment of the NII. It
supports the vision that it is possible to create an information
infrastructure and the tools to support smart energy decisions by
all consumers and lessen the U.S. balance of payments and
dependence on foreign energy sources.
Many electric utilities have extensive telecommunications
facilities that they use for conducting their
business—maintenance and operation of their generation and
distribution systems to ensure reliability and quality of service
to their customer base. But some utilities rely on services
provided by telecommunications providers. Important assets that
utilities bring to the table that could be used in providing
telecommunications services for themselves or others include
extensive rights-of-ways extending to businesses and residences, a
ubiquitous presence in residential and business locations, and
extensive system facilities (such as conduits, poles, transmission
towers, and substation sites) that could be used in
telecommunications networks.
The FERC recently announced a Notice of Proposed Rulemaking
(NOPR) that outlines the mandate for the electric utilities to open
their transmission facilities to all wholesale buyers and sellers
of electric energy 2R. Included in
the NOPR is a notice (RM95-9-00) of a technical conference on
"real-time information networks" (RINs) that would give all
transmission users simultaneous access to the same information
under industry-wide standards. Thus it is clear that within a
relatively short time frame, the need for this information system
and telecommunications service will directly affect the 137
utilities required to open up their transmission facilities.
The Organization of the Electric
Utility Industry
There are three main categories of electric utilities
today—the investor-owned utility (IOU), the municipal utility,
and the rural cooperative. A fourth, often-discussed utility is the
registered holding company (RHC), a subcategory of investor-owned
utilities. These are the multistate, investor-owned holding
companies that must be registered with the U.S. Securities &
Exchange Commission (SEC) under the Public Utility Holding Company
Act (PUHCA). Reform of this act is being considered.
When the electric utility industry was born late in the
nineteenth century, it appeared first in the form of IOUs with the
corresponding corporate charters shaping its existence. As electric
service spread and came to be viewed as a necessity rather than a
luxury, public discontent grew with the selective nature of the
coverage provided by the IOUs. By 1900, many cities and some
counties had created a municipal utility as a unit of the local
government, with the charter to provide service to all its
constituency. Financing was primarily through tax proceeds and
future system revenues. Later, during the New Deal, the rural
cooperative was born as a customer-owned, not-for-profit membership
corporation. This progression of organizations was driven by
requirements of customers and (to some extent) strategic objectives
of the industry. This progression continues today, albeit in a
somewhat different form.
About 95 percent of the U.S. population is served by the
electric utilities 3R. Of these
customers, 76.4 percent are served by IOUs, 13.7 percent by
municipal utilities, and the remaining 9.9 percent by rural
cooperatives 4R. Few can choose
their supplier of electricity—in most cases it has to be the
local provider. However, the possibility for options in choosing a
provider offered through what is referred to as "retail wheeling"
could make more competitive choices available 5R.
Utility Authority with Respect to
Telecommunications
Each utility organizational type functions differently within
regulatory environments that vary according to jurisdictional
boundaries. As discussed extensively in a report examining these
issues, all have legal authority with respect to telecommunications
to build infrastructure and to deliver at least some
telecommunications-based services related to the delivery and
consumption of energy 6R. It is
legally sound, though possibly contentious, for a utility to build
the facilities needed to communicate with its customers and
possible suppliers and to develop the information services needed
for effective energy management. However, the reaction of
regulators and
Page 125
competitors could be negative should the utility attempt to
exploit the excess capacity created by using this infrastructure.
The utility has at least three strong arguments to counter any
challenges and support its position:
First, since utilities have clear rights to
bring such facilities andenterprises into being, theyhave
considerable leverage with regulators and competitors alike to
achievenew arrangements thatacknowledge the utilities' rights and
interests and build upon them.
Second, since utilities have undeniable rights
to read their own electricmeters throughtelecommunications pursuant
to their existing authorities, they may also haveFirst
AmendmentProtections…to send any information they wish over
their wires.…
Finally, the nation's need to finance
construction of the NII and make ituniversal gives
electricutilities a compelling reason to gain regulatory favor for
the use of andprofit from their excesstelecommunications
capabilities 6R.
Of these arguments, the final is the most compelling, because it
provides leverage that can further the goal of universal access for
the NII, especially in rural areas. The cable industry and
telecommunications providers are less likely to provide the
necessary infrastructure in rural areas because of the low-density
customer base.
Benefits of Energy Information
Services
There are several characteristics of energy supply,
distribution, and consumption that can be and have been exploited
to realize efficiencies and energy savings. The use of
telecommunications-based information services could potentially
enhance efficiency and savings substantially. From the industry's
perspective there are many benefits to be accrued from the
application of both supply- and demand-side information services.
From the supply side, real-time information permits a shift to less
conservative operations. Smoothing of peak power loads is possible,
and spinning reserves can be reduced. Increased information can
lead to reduced energy theft. Load balancing between utilities is
feasible. Meters can be read remotely, and remote control of
service is possible. Most importantly, power can be used more
efficiently, reducing the need for new generating facilities.
For example, linking electronic sensors and automated control
systems along transmission and distribution lines offers the
possibility for applications such as the optimization and brokerage
of dispatch and emissions credits, automatic meter reading, and
remote service control. Similar deployment could be made in a
commercial building with transmission to the utility of detailed
information on end-use energy consumption, along with temperature
and other relevant measurements. The analyses of such data could
produce models that could be applied to improve utility load
forecasting, improve building energy models, improve analysis of
building energy efficiency, and diagnose electrical system problems
in the building.
Energy consumption varies with the consumer as well as the time
of day. Residential, commercial, and industrial sectors have
differing requirements. The use of real-time pricing (RTP), which
provides a direct relationship between the cost of electricity and
its demand, can provide an incentive to encourage customers to
conserve power when demand (and hence cost) is highest. This choice
gives the customer a reasonable amount of discretionary control.
The use of direct load management involves direct utility control
of customer appliances to reduce consumption during periods of peak
demand. Target appliances include those used for electrical
heating, air conditioning, and hot-water heating. The demand-side
management approach with the most stringent time response
requirements is rapidly curtailable loads (RCL). Load must be shed
within 20 seconds or less. Only large commercial and industrial
customers currently have interruptible power tariffs. Customer
applications are generally referred to as demand-side management
(DSM). A more comprehensive term, energy information services
(EIS), is used when DSM is coupled with remotely provided
information services.
Although each of these approaches (as well as others) is
currently being used, the benefits derived can be enhanced with the
increased application of the evolving information and
telecommunications technologies.
Page 126
Issues and Approaches
The pressures of increased competition and rapidly evolving
technology converge forcefully enough to mandate that utilities
develop robust business strategies. There are also compelling
arguments to justify the consideration of public policy issues
related to electric utility involvement of the electric utility in
an effective deployment of NII. Those arguments are tied to
economics, technology, and regulatory issues. Utilities,
legislators, and the public are struggling with the notion that
utilities could provide the ''last-mile" energy service capability
as well as more general NII access to the consumer, either
competitively or together with the cable and telecommunications
services sectors. Should the electric utilities provide the
last-mile access to support their energy services requirements,
only about 5 percent of the fiber-optic network capacity would be
needed to satisfy that requirement. The excess capacity could be
leased or sold to other information service providers, subject, of
course, to appropriate regulatory provisions. All these elements
are important to the vision for the NII wherein deployment is
accomplished economically and equitably in an open, competitive
marketplace and with universal service assured.
Economic Issues
Since electricity is fundamental in some way to every product
and every service in the United States, it is not unexpected that
the cost of electricity should have an economic impact. Consistent
cuts in real electric power costs during the 1950s and 1960s were a
factor in economic growth. The following decade saw a reversal in
that trend, with real prices for electric power increasing. Energy
information services offer the means to help reduce total energy
costs. Summarizing the benefits discussed above, total energy costs
can be reduced through (1) improved operating efficiency, safety,
and productivity of electric utilities; (2) optimized power
consumption, reduced energy costs, and improved energy efficiency
for customers; and (3) deferral of capital investments in new
generation, transmission, and distribution facilities, and
minimization of environmental impacts. In addition, there are at
least two other significant effects with positive economic
implications: (1) the creation of new energy-related businesses and
jobs, and (2) new growth opportunities for utilities as well as for
other sectors of the economy. Finally, telecommunications
facilities and services provided by the electric utility that did
not exist before would be available to support the emerging
information infrastructure. These benefits can be illustrated
quantitatively by economic research analyses, by proposed utility
projects and their projections, and by utility projects in
operation.
In a plan filed by Entergy, Least-Cost Integrated Resource
Plan—A Three-Year Plan, with several public utility
commissions in its service area, that utility proposed a
Customer-Controlled Load Management (CCLM) project that would
eventually serve over 400,000 customers. Its projections showed a
cost/benefit ratio of 1 to 1.57. That is, the projected 20-year
electricity benefits (or avoided energy supply costs) would be
$1,845 per household, while the cost of deploying and maintaining
broadband telecommunications infrastructure would be $1,172 for
each household 7R. The local
regulators in the city of New Orleans, included in the plan,
challenged Entergy on the basis of technical and regulatory
uncertainties. The utility's intentions for the use of excess
capacity and accounting for it were never clearly stated. Critics
were concerned that the utility stockholders would exploit the
windfall excess bandwidth for profitable, unregulated
telecommunications. This concern must be dealt with for any future
such proposals.
There are also indirect economic benefits of electric utility
contributions to information infrastructure and services
deployment. Several recent studies have considered and quantified
the ties between telecommunications and competitiveness. A
selection is highlighted here.
1.
By instituting policy reforms to stimulate
infrastructure investments in broadband networks, an additional
$321 billion in GNP growth would be possible over a 16-year period
beginning in 1992.8R
2.
Jobs can be created through investments in
telecommunications infrastructure. Should California increase its
telecommunications infrastructure investment by $500 million to
$2.3 billion per year over an 18-year
Page 127
period, such investments would produce 161,000
jobs, $9.9 billion in additional personal income, and $1.2 billion
in additional state and local tax revenues.9R
3.
Productivity is enhanced through access to
telecommunications infrastructure. It has been calculated that
between 1963 and 1991, telecommunications have saved the U.S.
economy $102.9 billion in labor and capital expenditures 10R.
4.
Export activities are also supported by
telecommunications infrastructure investments. One study
demonstrated that between 1977 and 1982, increased competitiveness
induced by improvements in telecommunications infrastructure led to
an increase in U.S. exports of over $50 billion 11R.
A recent study conducted by DRI/McGraw Hill under conservative
assumptions and determined that the deployment of energy
information services and the full use of the telecommunications
infrastructure supporting those services could make a significant
contribution to the U.S. economy. Specifically, it would do the
following 12R:
•
Improve U.S. productivity by reducing total real
energy costs by $78 billion between 1995 and 2010;
•
Increase national employment by an average of
63,000 jobs per year;
•
Produce a cumulative $276 billion increase in GNP
between 1995 and 2010;
•
Achieve a cumulative increase of $25 billion in
U.S. exports because of improved business productivity;
•
Reduce the federal deficit by 2010 by a cumulative
$127 billion; and
•
Increase real personal income by a total of $173
billion, or $280 per household, through both energy cost savings
and improved economic activity.
As noted above, most utilities have telecommunications
infrastructure that they use for their internal business needs.
Some have begun to develop and test energy information services.
Few, however, have entered into providing telephone or cable TV
services. An exception is the municipally owned electric utility in
Glasgow, Kentucky, a community with a population of 13,000. In
1988, the Glasgow Electric Power Board installed a broadband
network designed to support the standard communications needs of
the utility, to provide innovative new energy information services,
and to offer cable TV services. The program has been quite
successful. An interesting observation made by this utility is that
a customer might not be interested in having his or her water
heater controlled to gain a credit of $3 to $4 a month on the
electric bill but may well be interested in having the water heater
controlled in exchange for reception of a premium channel such as
HBO 13R. This observation offers
support for the concept of having a single gateway into the home
for all information services. The customer's perception of value is
just as important as the real value.
This competition in cable TV in Glasgow has reduced prices.
Before the broadband network installation, the local cable
provider, TeleScripps, offered standard service in the area for
$18.50. After the utility offered its service at $13.50,
TeleScripps immediately dropped its rate to $5.95 and increased the
basic service from 21 to 48 channels. Despite this aggressive
competition, the utility has reached a market share of about 50
percent. A more significant point, however, is that the local
citizens in Glasgow have reduced their cable TV bills, and those
savings have stayed in the local economy and are supporting local
development 13R.
Statistics are not available on the energy savings results,
since to this point those have been limited. Glasgow purchases all
its electricity from TVA, and at the time the network was installed
TVA did not offer a time-differentiated wholesale rate structure.
It was not possible to pass the cost savings from load shift to
customers. However, when wholesale wheeling becomes available,
Glasgow is clearly positioned to use that to its advantage. It is
also well positioned to provide its population access to the
NII.
Recent Strategic Alliances
In recent months there have been a number of alliances announced
that are aimed at teaming players in the areas of energy services
with those who provide telecommunications services and develop
sensors. Retail
Page 128
competition for large customers is likely in the near future,
analogous to the situation wherein many large facilities have more
than one major telecommunications service provider selected on the
basis of the best possible price and for ensuring reliability. The
time line for extending retail choice to residences and other
industrial and commercial sectors is less certain except for
isolated pockets that demonstrate certain advanced technology
applications. In any case, it is clear that the alliances mentioned
below, as well as others, are moving in anticipation of this
eventuality by virtue of changes in their business and technical
models.
In January 1995, AT&T announced the formation of a
multicompany team "to develop and deliver a cost-effective, fully
integrated, two-way customer communications system for the utility
industry" 14R. Its development
partner in this activity is Public Service Electric & Gas
(PSG&E). Members of the team are American Meter Company,
Anderson Consulting, General Electric, Honeywell, and Intellon. The
short-term objective is to provide remote meter reading, power
outage detection, real-time load management, and warning of meter
tampering. The long-term objective will focus more on increasing
customer control of their energy use. A notable observation about
this alliance is that the utility has managed to share the risks 15R. Although AT&T is heading the
project, the niche expertise of several other companies is key to
the success of the endeavor.
In mid-April 1995, TECO Energy and IBM announced a pilot
agreement "to demonstrate and evaluate an advanced 'smart' home
energy management and communications system that will enable
residential electric utility customers to better control and track
their energy consumption, right down to their appliances" 16R. In addition, the system can serve
as a gateway to the home for a variety of communications by serving
as the interface for providers of voice, video, and data
services—it can be the access point for the emerging
information infrastructure. The system is configured to connect
energy measuring and monitoring devices to a personal computer in
the home and to a control processor attached outside the home. This
processor acts as a central controller for a local area network via
the existing in-house electrical wiring. With this configuration,
residential customers can measure their energy use and costs 24
hours a day, and utilities can administer new, more effective
energy management programs.
Also in January 1995, CableUCS was announced as a consortium of
four of the nation's top cable operators—Comcast Corporation,
Continental Cablevision, Cox Communications, and
Tele-Communications Inc. 17R.
CableUCS was formed to foster, build, and manage strategic
relationships between cable operators and utilities—gas and
water, as well as electric—and to promote the development of
equipment and systems that will use the two-way telecommunications
capabilities being deployed by the cable companies.
Other notable strategic alliances are (1) Entergy with First
Pacific Networks, (2) SoCal Edison with Cox Cable, and (3) PG&E
with Microsoft and TCI. In addition to the energy services
mentioned specifically above, others addressed by these alliances
include energy theft detection, customer surveys, real-time
pricing, power quality monitoring, and distribution system
automation.
Factors Influencing Strategic
Alliances
As discussed above, the electric utilities have a
choice—deploy and operate their own telecommunications
infrastructure, or use infrastructure provided by other
telecommunications service providers. A study by Anderson
Consulting stated, "In most cases, the benefits and risks of using
a third-party provider's network outweigh the benefits and risks of
a utility owning and operating its own network" 18R. This is especially true with
respect to the utilities' Supervisory Control and Data Acquisition
(SCADA), which requires real time and high reliability.
Although most of the management of the electric grid is through
use of the utilities' own telecommunications infrastructure, there
are some experimental projects that use cable, wireless, and other
services for providing last-mile access for energy services
management. Possible synergism between the utilities and the cable
and telecommunications providers could be exploited such that the
utilities could take advantage of the last-mile infrastructure
already in place to address the energy application currently
deployed. However, the future will require enhanced capabilities,
as noted in the Anderson Consulting study: "For the present,
narrowband alternatives such as radio-based infrastructures are
adequate to deliver many of the communications-enabled
Page 129
services being considered. Nevertheless, trends in other
industries are moving toward customer interfaces through
televisions and personal computer; these interfaces will require
broadband" 18R.
To use existing cable infrastructure for two-way communication,
the cable providers will be required to retrofit their
infrastructure to handle high-bandwidth, two-way interactive
traffic. In addition, since most of their current infrastructure is
residential, they will have to partner with other providers or
extend their reach to the business and industrial sectors. The
cable companies reach about 62 percent of residences 19R. The local telecommunications
providers, local-exchange carriers or regional Bell operating
companies (RBOCs), have a much larger footprint with respect to
residential customer base, 94 percent—one percentage point
less than the electric utilities
13R. However, even though the telecommunications industry has
made strides in the amount of information provided over
conventional twisted pair lines, a more economical approach for the
utilities is probably providing fiber directly to their customers.
This could be funded by the sale of excess capacity as mentioned
above or through energy savings earned through energy management
services by the utility or the customer.
Technologies
The current technologies for energy information services are
quite diverse. They range from proprietary SCADA and energy
services protocols to systems based on open protocols, such as Open
Systems Interconnection (OSI) and the Transmission Control
Protocol/Internet Protocol (TCP/IP).
Most residential solutions rely on the X10 protocol, implemented
with simple command controls using frequency modulated power line
carrier communications. CEBus, a protocol proposed by the
Electrical Industry Association, and the LONWORKS protocols
developed by a joint effort of the Echelon Corporation, Motorola,
and Toshiba, are two new entries in the residential energy
management arena 20R. These two
solutions can be implemented over a variety of media that include
twisted pair lines, infrared, fiber, coax, and radio frequency. Yet
most of these solutions have significant drawbacks for addressing
the requirements of a general local area network configured to
support advanced information and energy appliances.
Advanced energy distribution and management systems are being
tested with infrastructure deployed by utilities, through Internet
services, and with infrastructure formed by combining the resources
of existing utility, telecommunications, and cable providers 13R,21R. There are also some instances
of more advanced systems. PG&E is using the TCP/IP protocol
suite for managing its energy distribution system. In addition,
EPRI provides an energy information services network that is
multiprotocol, using both OSI and TCP/IP based services such as
WAIS and Mosaic.
In the future, technical requirements will require compatibility
with existing as well as emerging technologies such as asynchronous
transfer mode (ATM), multimedia, field data transfer, security,
wireless quality of services/resource management, TCP/IP, and more.
Trials are under way for enhanced monitoring and predictive
maintenance of energy distribution and generation systems. This
application requires a large number of addressable nodes with the
capability for gathering and transmitting observation data to a
centralized location for analysis. Access to such energy-related
information, including accounting and billing information, will be
required by users. Such access will be over both the Internet and
any alternate route provided as part of the utility/user
infrastructure for real-time energy demand management and control.
To meet this requirement, utilities must operate a multiprotocol
system, and the end user will need an inexpensive multiprotocol
gateway/interface/desk-top box. Real-time protocol support will be
needed for such applications as time-of-day pricing or real-time
pricing and both multicast protocols and the infrastructure to
handle the reverse aggregation of responses in real time. Scalable
network management tools are also required to handle the plethora
of devices employed to support both the energy related and
information related infrastructure. These same tools must also
allow for the end-to-end maintenance and operation of the energy
system over the various media that may be used. Finally, secure
mechanisms and protocols are needed before any real energy related
business will be conducted over an open packet switched network
such as the Internet. Remote control of end-user appliances can be
done only in a secure environment, and users will likely demand
reasonable control over the other data and information that pass
through their information access gateway. Technologies are
beginning to emerge that can handle these requirements, and so
considerable growth in this area can be forecast.
Page 130
A real need exists that is not being adequately addressed. A
general purpose gateway and a control model implementation should
be configured for residences so that consumers can control both
their energy and their information appliances from a single
source—a PC or a unit attached to their television. In
addition this concept should permit users to control what data and
information pass beyond the walls of their premises. To effect such
a solution, the utilities must define the data and information
exchange paradigm, that is, the electronic data interchange (EDI)
between the utility and the customer. The beginnings of this
activity are the focus of part of the recent NOPR issued by FERC
and discussed above.
The decision of utilities to adopt a narrow set of technical
standards for the purposes of achieving interoperability or
economies of scale may at first seem to be a sound choice. But over
the long term this decision may put them at a disadvantage 22R. The NII and the Internet, as well
as any energy system infrastructure, will continue to be a
heterogeneous mix of media and protocols. Hence, interoperability
will be possible through the use of open access and standards for
gateways and interfaces, not through an end-to-end homogeneity
based on a single protocol.
Recommendations and Issues to be
Resolved
The question could be asked, Is there a compelling application
for the NII that is serving as a driving force for a rapid
deployment? And are the applications that could be suggested as an
answer to this question contributing to the competitiveness of the
United States? Why not put more emphasis on providing energy
information services, since this is a ready NII application? Why
not partner electric utilities with other service providers? There
may not be sufficient revenues to deploy the NII without
participation by the electric utilities
12R.
Technology Needs
In early 1994, the National Research Council was directed to
examine the status of the High Performance Computing and
Communications Initiative (HPCCI), the main vehicle for public
research in information technologies. Two of the recommendations
from the report of the committee that conducted that review are
relevant here 23R.
•
Recommendation 7. "Develop a research program to
address the research challenges underlying our ability to build
very large, reliable, high-performance, distributed information
systems based on the existing HPCCI foundation" (p. 10).
The three areas identified by the committee where new emphasis
is critical to supporting the research needs associated with the
information infrastructure are "scalability, physical distribution
and the problems it raises, and interoperative applications."
•
Recommendation 8. "Ensure that research programs
focusing on the National Challenges contribute to the development
of information infrastructure technologies as well as to the
development of new applications and paradigms" (p. 10).
It is clear from the discussion of technologies that these
recommendations are relevant. For example, the development of an
open nonproprietary premises gateway may prove to be the single
most important advancement for both the energy services and the NII
information services. It will enable new and innovative supporting
hardware, software, systems, and services that will not only drive
the energy supply and consumption applications arena but also feed
the further development of the NII.
The electric utilities will need to deploy telecommunications
infrastructure to support the energy management services, but they
should also provide generic NII and Internet access. The
technologies involved must be capable of interoperating with and
using the services of the other service providers.
Page 131
Appropriate security mechanisms are required for the delivery of
adaptive energy services and for interutility as well as
utility-to-consumer business activities. An issue that needs to be
addressed is the need for consumer privacy. Industry, commercial
concerns, and homeowners will all want to control who collects and
who has access to the information collected regarding their use of
electricity.
Regulatory and Legislative Issues
Deregulation in progress or being considered in both the
electric utility and the telecommunications arenas will affect how
the utilities will or will not be involved in the NII. The 103rd
Congress considered telecommunications reform legislation but
failed to pass the proposed bills. The 104th Congress is likewise
considering such reform. The question of how that should be
structured should be framed with the ultimate interests of the
public as the strongest driver. Is the "two-wire" model the
appropriate scenario, and is it truly competitive? Although it is
agreed that everyone should be able to compete, the problem lies
with the details of how and when that can be accomplished.
Another factor not often discussed is the cost of deploying the
NII. If the cost for deploying to one residence is about $1,000,
deployment to 100 million homes would cost $100
billion—clearly not pocket change. The consequences of the
two-wire model effectively double this cost. What markets will be
there to recover such costs? Can the United States afford to spend
twice as much as is needed?
There is general agreement between both political parties that
the electric utilities should be allowed to enter the marketplace
the same as any other "entity." As such the utilities could go
head-to-head with the other service providers. But is this the best
approach for all parties? The Anderson study 18R has a theme of dissuading the
utilities from building the networks themselves—the two-way
broadband communications that are projected to create benefits of
$700 million a year. Instead, Anderson suggests that the electric
utilities should partner with the cable TV companies and invest in
upgrading the conventional video networks. This may make sense if
the utilities are to own equity in the resulting network. This
would allow the utilities to finance the investment through ratable
contributions since the justification is energy management
applications.
The electric utilities, however, also have the opportunity to
partner with the local telephone companies. These companies are
struggling under the burden of regulation that prevents them from
entering two competitive information services—video and long
distance. Should another entity such as the electric utility build
and manage the infrastructure, the telephone companies would be in
a more advantageous position for competition.
Regardless of how the legislation proceeds, the electric
utilities should be positioning themselves for the future. Someone
who has considerable experience in dealing with telecommunications
issues has this to say about what utilities should be doing today
24R:
•
Start building "common
infrastructure"—switched broadband telecommunications networks
that the utility will use itself to deliver energy information
services to consumers.
•
Work with regulators, where applicable, to ensure
that they accept such facilities in the utility's electric rate
bases. This should be premised on the utility's undertaking to
deliver energy information services via its infrastructure to all
its electric customers in a negotiated time frame.
•
Lease "excess capacity" to cable operators,
telephone companies, and others on a nondiscriminatory
basis—subject to regulation-sanctioned protections of
incumbents to guarantee their continuity of service and recovery of
investment.
•
Voluntarily avoid competing with service providers
to encourage amicable differentiation of market segments and to
safeguard an open market in services.
References
[1] "Business Opportunities and Risks for
Electric Utilities in the National Information Infrastructure,"
EPRI TR-104539, Electric Power Research Institute, October
1994.
[2] "The Energy Daily," Vol. 23, No. 61,
p. 1, Thursday, March 30, 1995.
[3] Statistical Abstract of the United
States—1993, pp. 561, 563, 589, 728.
Page 132
[4] Pocketbook of Electric Utility
Industry Statistics, Edison Electric Institute, p. 119.
[5] "Orders Instituting Rulemaking and
Investigation of the Commission's Proposed Policy Governing
Restructuring of California's Electric Services Industry and
Reforming Regulation," California Public Utilities Commission,
R.94-04-031 and I.94-04-032, April 20, 1994.
[6] "Positioning the Electric Utility to
Build Information Infrastructure," DOE/ER-0638, November 1994.
[7] The PowerView System: Two-Way
Communications for Electric Utility Applications, Edison
Electric Institute, 1994.
[8] Cohen, Robert. 1992. The Impact of
Broadband Communications on the U.S. Economy and on
Competitiveness. Economic Strategy Institute, p. 1.
[9] Cronin, Francis, et al.,
Telecommunications Network Modernization and the California
Economy. DRI/McGraw Hill, May 1993.
[10] Cronin, Francis, et al.,
Pennsylvania Telecommunications Infrastructure Study, Vol. V,
pp. XIII–28, 29, DRI/McGraw Hill, May 1993.
[11] Cronin, Francis, et al.,
"Telecommunications Technology, Sectoral Prices, and International
Competitiveness," Telecommunications Policy,
September/October 1992.
[12] The Role of Electric Companies in
the Information Economy, Mesa Research, Redondo Beach, Calif.,
August 1994.
[13] Glasgow's Fully Interactive
Communications & Control System, Glasgow Electric Plant
Board, Glasgow, Ky.
[14] "News from AT&T," press release,
January 23, 1995.
[15] "Surfing the Energy Channel,"
Frontlines, Bruce W. Radford, ed., May 15, 1995.
[16] Press release from TECO Energy and
IBM, April 1995; contact Mike Mahoney, TECO; and John Boudreaux,
IBM.
[17] Press release, January 23, 1995;
contact Steve Becker, Cox Communications; Doug Durran, Continental
Cablevision; Joe Waz, Comcast Corporation; and Lela Cocoros,
Tele-Communications Inc.
[18] The Role of Broadband
Communications in the Utility of the Future, Anderson
Consulting, San Francisco, Calif., 1994.
[19] Kagan, Paul, Marketing New
Media, December 14, 1992, p. 4.
[20] "Supply and Demand of Electric Power
and the NII," The Information Infrastructure: Reaching Society's
Goals, Report of the Information Infrastructure Task Force
Committee on Applications and Technology, NIST Special
Publication 868, U.S. Government Printing Office, September
1994.
[21] San Diego: City of the Future, The
Role of Telecommunications, International Center for
Communications, San Diego State University, March 1994.
[22] Aiken, R.J., and J.S. Cavallini,
"Standards: Too Much of a Good Thing?," Connexions: The
Interoperability Report 8(8), and ACM StandardView 2(2),
1994.
[23] Computer Science and
Telecommunications Board, National Research Council, Evolving
the High Performance Computing and Communications Initiative to
Support the Nation's Information Infrastructure. National
Academy Press, Washington, D.C., 1995.
[24] Private communication, Steven R.
Rivkin, Washington, D.C.
