Pacific Gas and Electric Company may be an ancient dinosaur, but one of its problems is too much technology. That is, too many scattered information technology systems that don’t talk to one another. As he rolls out a new customer information system, PG&E Chief Information Officer Roger Gray faces the prospect of stitching together 81 separate business application programs, such as systems for dispatching field technicians, handling customer orders and tackling accounting tasks.
Speaking at a San Francisco conference on Digital Transformation organized by the Wharton e-Business Initiative (WeBI), Gray told audience members that Northern California’s gas and power utility has let itself be overrun by salespeople hawking cool computer gear. “It’s driven by vendors coming in the door and saying, ’Look at this,’” Gray explained. “I call it the ’wow’ factor.”
Gray’s mission, in a nutshell, is to help this industrial age behemoth smartly adapt to the information age. Although PG&E has a long way to go, Gray argued it is using technology in innovative ways. He also offered provocative theories on the future of electrical power and put digital age enthusiasts in their place when it comes to technology’s pecking order.
The web and other computing advances may have impressed the public in recent years, Gray said. But the sign of a truly groundbreaking technology is that people eventually stop noticing it. Electricity was chosen as the most important engineering feat of the last century by a panel including former astronaut Neil Armstrong, Gray proudly pointed out. Electrical currents have provided a foundation for computer advances as well as major conveniences such as lighting, telecommunications and refrigeration.
“Most people take it for granted, but if you really think about the 20th century, electrification was the transformational technology,” Gray said.
PG&E is one of the country’s largest utilities – and one of the most controversial. The San Francisco-based firm boasts four and a half million electricity customers and four million gas customers. Beginning in 2000, PG&E found itself at the center of California’s power crisis. Spiking wholesale energy costs combined with retail rate caps for consumers translated to huge losses for PG&E and its counterpart, Southern California Edison. Thanks to a short supply of electricity, PG&E customers also suffered rolling blackouts. Last April, PG&E filed for bankruptcy and its reorganization plan remains unclear.
PG&E officials pinned the blame on price gouging by energy wholesalers – a position shared by California Gov. Gray Davis. But not everyone sees PG&E as a victim. After all, PG&E’s parent company – PG&E Corp. – raked in $1.1 billion in profits in 2001. Debate also has swirled around the terms of PG&E’s reorganization. The utility has proposed shifting its power generation and transmission assets to new subsidiaries not covered by California regulation, but state officials have an alternative plan that retains oversight of PG&E and calls for PG&E’s parent firm to sell $1.75 billion in stock and contribute $1.6 billion of earnings to pay creditors.
As these legal battles continue, Gray focuses on a different matter: Harnessing information systems to make PG&E hum more smoothly. The 40-year-old was an intriguing choice for CIO when picked for the post about two and a half years ago. Information technology wasn’t Gray’s forte – his background at PG&E was in departments such as finance, operations and energy trading. In fact, Gray brought to the job a certain skepticism about the computing world. As he passed out copies of a slide presentation to the audience, Gray joked he liked the paper format because “it’s reliable.”
Even so, Gray realizes there’s room for technology improvements at the utility. For example, PG&E’s current customer information system is based on 1960s technology. Gray said it lacks flexibility, and is hard to maintain given the ancient computer code it employs – COBOL. “God bless them, a lot of retirees we’ve brought out of retirement support it right now,” Gray said.
Although Gray is replacing the customer information system with one that will connect with the operations department, he dreams of a day he’ll be able to go one step further, and outfit field operations trucks with global positioning systems for even better coordination. Another technology PG&E largely lacks is “smart” sensors and controls installed throughout the electrical distribution grid for more effective system monitoring. “Generally, the utility infrastructure is a passive infrastructure,” Gray said. “If we have an outage, we have no idea where it is until someone calls in.” So far, PG&E has installed sensors on a fraction of its electrical circuits.
PG&E’s use of the web also leaves something to be desired. The new customer information system has a web interface, but it can take an eternity – in the digital age, at least – for the data to pass from PG&E’s massive database to the user’s screen. “We’re trying to get it sub-second (in terms of transaction time),” Gray said. “We’re sub-minute right now. It was sub-days a few weeks ago.”
But it’s not easy for a utility to have the sleekest technology around. Gray said regulated utilities don’t see the reward of a better bottom line when turning to the web as a way of interacting with customers. PG&E may have an online payment system, but it must keep its brick-and-mortar payment centers open to handle customers who pay in cash. “For a utility, the web presence becomes a cost-adder,” Gray said.
PG&E isn’t the only utility a step or two behind the information technology curve. Idaho Power Company relies on proven technology and has no budget for its own IT research and development, said Bryan Kearney, CIO of the electric utility and its parent firm, Idacorp. “We don’t do too much on the bleeding edge,” Kearney said. “I don’t think we belong there.” One example: Idaho Power’s web site doesn’t let customers check their balances online; that feature is coming in the fall.
Idaho Power, which has about 400,000 customers, has other plans to upgrade its technology. Smart circuit monitoring is part of a new outage management system the utility is installing this summer. Kearney is looking into putting the utility’s voice communications online, with voice-over-Internet-protocol technology, as a way to cut both costs and the time it takes to recover from disasters. And he says Idaho Power is increasingly interested in wireless computing devices.
Idaho Power’s push into wireless is part of a wider industry trend. Market research firm META Group predicts more than 50% of all energy utility field staff will use mobile computing by 2005, thanks to trends such as better wireless data network coverage and lower costs.
In an April report, META Group found that overall IT spending by energy companies dropped for the first time in five years in 2001 because energy deregulation efforts slowed and the economy as a whole slumped. IT investments by energy firms aren’t likely to pick up until the 2004-06 period, according to META analyst and report author Rick Nicholson. At that point, a quickening pace of deregulation, economic recovery and the increasing value of information about energy will spur new IT spending. “Over time, energy is becoming a more information-intensive business, with participants on both the supply and demand sides of the equation requiring more detailed and more timely information on usage, availability, quality, prices, etc.,” Nicholson wrote in the report.
Enron, or course, was a pioneer in using information to trade energy as a commodity. But Enron’s bankruptcy aside, META Group expects the energy industry to continue deregulating and to consolidate along the lines of the telecommunications and petroleum industries.
In the near term, two focus areas for energy firm IT departments will be security and operational efficiency, META predicts. PG&E is one utility that has improved its operations through information technology. When customers call in to say they’ve lost power, software automatically tracks the callers’ locations, links that information with maps of PG&E circuits, and triangulates where the problem – say a line severed by a fallen tree – is likely to be. “We can troubleshoot much faster with our outage information system,” Gray said.
PG&E also has used technology to crank up the capacity of a major electricity transmission network. A California-Oregon power line connection was erected in 1967 to carry 1,600 megawatts (one megawatt powers roughly 1,000 homes). But the utility has been able to shove through roughly 1,600 more megawatts reliably thanks to a set of “remedial action schemes.” This system automatically takes certain generators off-line should too much electricity threaten to overload one of the network’s two power lines and automatically shuts off the juice to certain customers in the event of a power shortage.
The web took on new significance at PG&E during California’s rolling blackouts. PG&E was alerting the public about which groups of customers would lose power on different days. But the “outage block” information came in the form of a code hard to find on PG&E bills. Gov. Davis ordered the utility to post maps online so people could discover their “outage block” more easily. This request turned out to highlight the silo nature of PG&E’s systems. The true outage block data resided in an operations systems database, but call center workers used the customer information system to retrieve data from a billing system – which sometimes had inaccurate information. The web site depended on a fourth IT system. Gray realized the scope of the problem when he tried to find his own outage block. “I got four different answers,” he recalls.
But Gray has taken that lesson to heart. About a year ago, he launched an effort to integrate all PG&E’s major IT networks, which include systems for managing engineering, finance, asset management, customer information and human resources. He expects to finish by the end of next year. One of his biggest hurdles turns out to be human, not technical: department managers wary of central control. The requirements of tightly meshed computer systems company-wide can make departmental upgrades more difficult. “Yes, it may cost you more money locally, but collectively it’s more efficient,” Gray said. “That discipline is very hard to achieve.”
But Gray is determined to achieve it as part of his philosophy of making information technology serve PG&E’s overall goals. Too often, he said, PG&E executives and leaders at other firms see the latest tech product as a “toy.” “They aren’t really looking at the strategy of what they want it to do,” Gray said.
Connecting the dots between energy company strategy and IT spending decisions is particularly critical during the current downturn, META’s Nicholson says. PG&E is probably spending more money this year on IT initiatives than ever before, Gray said. But most energy firms are looking to trim fat, and they can lop off vital organs if they are not careful, Nicholson suggests. “IT spending levels and IT investment portfolios must be aligned with the business strategy and environment for each line of business,” he says. “Failure to do so may result in cost cutting that negatively affects executives’ ability to run the business.”
Meanwhile, strategies themselves are starting to shift at energy firms. Massive power plants harnessing hydroelectric power or burning fossil-fuels have dominated energy generation for decades, but numerous efforts are underway across the globe to create juice with smaller devices and more environmentally sound fuels. Alternatives include wind farms, gas-fired microturbines and fuel cells powered by hydrogen gas. Gray knows the industry is shifting, and believes fuel cells in particular are fast approaching thanks to the backing of the auto industry.
He noted that the average home requires about 5 kilowatts of power at most, while a car needs roughly 150 kilowatts. That means people may end up plugging their homes into their cars, rather than the oft-repeated line that electric cars will be plugged into homes for charging. “I think we’re 10 years, max, away from that reality,” he said.
The advent of fuel cells, though, doesn’t mean the end of PG&E. Instead, Gray suggested, the “G” might become more prominent, since natural gas is used to make hydrogen.
Even then, PG&E and other gas providers probably wouldn’t get much credit given our blasé attitude about electricity. “It’s like air,” Gray said. “Electricity is something we don’t appreciate until it’s not there.”
But being effective and unnoticed may be the best way to change the world. High-tech leaders should proclaim their coolness less and make their products work better, Gray suggested. “If technology stays as the glitz and hype, I think it will be in the hobby phase,” he said. “If it fades into the background and just becomes part of the social infrastructure, then it will transform society.”