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On Aug. 14, 2003, the lights went out across a large swath of North America. A power company in Ohio was slack in tree trimming (or "vegetation management," in the words of the official report on the incident), and a local transmission line problem cascaded into a 61,800-megawatt blackout, leaving 50 million people in the dark in eight states and parts of Canada. In some areas, it took four days to restore power, which, according to some estimates, cost the American economy between $4 billion and $10 billion.
The blackout highlighted the vulnerability of the electric grid to massive failures and to potential attacks by terrorists, giving new impetus to calls for more regulatory standards and enforcement in the utilities industry. On Aug. 8, President George W. Bush signed the Energy Policy Act of 2005, which helped change the way the utility industry is regulated. "This bill," said President Bush, "will strengthen our economy, and it will improve our environment, and it's going to make this country more secure."
Focus On: Utilities |
Top Business Challenge: Modernizing the electric grid while complying with new federal regulations for data and plant security.
Solution: Technical and physical security measures.
How IT Can Help: Through firewalls, intrusion detection, advanced metering infrastructure, high-temperature superconductors, flexible alternating current technologies and advanced energy storage.
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It also means more headaches for utility CIOs, who occupy an industry burdened with heavy debt, the fallout of the Enron bankruptcy and fierce pressure to cut costs. "It's a tough time, and CIOs have to do a juggling act," says Andrew Bartels, who covers the sector for Cambridge, Mass.-based Forrester Research Inc. "Some are in a hunkered-down mode, not being very aggressive. Others feel that they're doing everything they can and it's not enough, that the expectations are unrealistic. They're working their tails off, and they have business partners who aren't satisfied."
The North American electrical grid is a $1-trillion network that knits together nearly 3,500 utilities, most of which are publicly owned or cooperative organizations. The 200,000 miles of transmission lines bring power to 283 million people.
Forrester estimates that utility IT spending shrank last year to $10 billion, or 1.8% of revenue, from a peak of $15 billion, or 2.9% of revenue, in 2002 -- a reflection of contracting market capitalization and heavy debt loads. Although share prices have turned around, bottom-line pressure remains strong, and new technology initiatives have largely been limited to supporting business cost cutting, security and regulatory compliance.
"The utilities are being squeezed by raw-material prices, and their prices are often regulated so they can't charge too much more," Bartels says. And in some areas, "they have no choice on what they spend, such as with compliance."
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