From a business continuity perspective, today's utilities face
a number of risks that could impact customer service, energy delivery,
and financial optimization. Utilities are "rightsizing" to improve
operational efficiencies, and merging with and acquiring other utilities
in an unprecedented fashion. Compounded with the complexities of
today's utilities market is the fact that national utilities have
stringent business processes reliability and availability thresholds
which must be maintained in order to continue to function as a utility
provider.
My experience leads me to group business processes that are significantly
impacted by downtime into four main categories. They are financial
optimization processes (energy dispatch and power/natural gas trading),
power generation, delivery/transmission, and support functions (customer
relationship management, information technology, and back-office
functions). All of these processes have their own specific risks
that must be actively managed to be competitive in today's utilities
market.
Financial Processes
Utilities are like any other business - they exist to generate a
profit. Utilities attempt to buy or generate power at a low cost,
and sell at the highest cost the market or a regulatory agency will
allow. As such, the key processes that allow the utility to make
optimal financial choices include power dispatch, energy trading,
and credit risk management. Within this environment, specific risks
that exist include:
• Downtime in the dispatch process, which would limit the
flexibility of the utility, thereby impacting asset and portfolio
optimization
• The failure of key information technology and communications
assets, particularly between dispatch/energy trading and internal
and external power generation providers, on-line marketplaces, and
other power trading entities. IT and communications downtime could
affect trading and dispatch functions, and subsequently result in
revenue loss from the inability to fulfill contracts, optimally
generate power, or make the best deal possible in the current market
• Potential financial penalties by state and federal regulatory
authorities such as the Federal Energy Regulatory Commission (FERC),
North American Electric Reliability Council (NERC), and state public
utilities commissions, caused by the inability to meet contractual
requirements set forth in specific trades
• Poor credit risk management may lead to unacceptable levels
of risk with certain counter-parties, and vice versa. Poor credit
risk management may limit energy trading actions, thereby adding
undo risk to the organization and limiting profit
Power Generation
The continuity of power generation capability, whether purchased
externally or generated internally, is obviously a primary concern.
Specific issues on both the buy and generation sides are:
• Breakdown in communications between the dispatch group and
the power generation plants, which could affect the ability to make
the best power buy and sell decisions, the level of internal power
generation, or the ability to satisfy native load
• Primary power generation providers may not have stable load
demands that could affect your ability to obtain power during required
periods
• The utility may not have sufficient excess capacity or reserves
in place in the event a primary producer fails, cannot supply power
at the promised level, or goes off-line for some unforeseen reason
• High hazards associated with suppliers who have turbine-generator
power generation operations at a fossil fueled steam electric generating
facility that could effect power availability
• Single source power providers which, should they default
on their ability to provide power as per contracted agreements,
could result in your subsequent default on service contracts should
you not already have pre-designated alternate sources of supply
in place for contingency situations
• The inability to ensure high availability and reliability
of capital equipment such as generators, power lines, substations,
transformers, etc., could result in excessive periods of outage
due to equipment down-time and long lead times and expenditures
for the replacement of such critical production equipment
• Concerns over the inability to access your primary power
generation fuel sources, and no means of ensuring recovery of necessary
sources within prescribed contract requirements which could result
in financial penalty and other revenue loss
Transmission/Delivery
The key risk considerations for transmission and delivery are similar
to those mentioned above, but deserve restating in relation to this
specific business process.
• The fundamental risk here is the inability to provide service
to the utility's customer base which, due to the recent deregulation
of the utilities industry, could result in current customers obtaining
another service provider and the company losing existing market
share
• The inability to ensure high availability and reliability
of capital equipment such as generators, power lines, substations,
transformers, etc., could result in excessive periods of outage
due to equipment down-time and long lead times and expenditures
for the replacement of such critical transmission equipment
• An outage of information technology systems used to monitor
grid transmission could affect the ability to provide effective
and efficient service to your client base
Support Functions
This area encompasses several business processes which are inherent
to the ultimate ability to provide service to your clientele inclusive
of customer relationship management (CRM), information technology
and back-office business functions. Specific areas of risk concern
in support include:
• An inability to respond to customer concerns and needs through
your CRM functions could result in customer frustration and eventual
selection of another power provider
• Any down-time of information technology systems, which increasingly
pervades the utilities industry, would affect your ability to collate
availability information for reporting purposes, and thus, your
ability to provide efficient service to your customers. (IT disaster
recovery has traditionally lagged behind in this industry, which
has been mainly focused upon mainframe recovery.)
• Referred to as "triple bottom line accounting and reporting,"
energy/utility providers are being required to monitor and report
on their impact on the environment, comply with health and safety
regulations, and are being held accountable for social responsibilities
as well as financial reporting standards. Failure to comply with
respective standards could effect the continuity of your critical
business processes.
• The altered risk environment places utilities as high-risk
targets of national or international terrorist activity. Physical
security reviews such as robust plant level security and risk mitigation
strategies to ensure appropriate emergency response actions must
be stepped up.
Surging Forward
In today's business environment, utilities face significant risks
that could impact delivery and business process optimization. Nationwide,
executive managers are assessing risks that could result in business
interruption or financial loss, and implementing appropriate risk
mitigation strategies and enterprise-wide business continuity plans
(which include crisis management and emergency response processes).
With deregulation spreading across the country, customers are demanding
lower power and natural gas costs, reliable power delivery and improved
customer service. Risk management and business continuity planning
processes are more important now than they have ever been.
About the Author
Brian J. Zawada is a member of the GE GAP Services'
Business Continuity Solutions team. He may be reached by calling
216-241-3439 or emailing Brian.Zawada@gegapservices.com
|
