05.04.07Warren Causey, Vice President, Sierra Energy Group, a division of Energy Central

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Chief Information Officers are very near the center of all challenges, triumphs and failures of modern business. As automation has permeated most aspects of life over the last 25 years or so, CIOs who manage those systems have taken on an increasingly more important role. Utilities were perhaps among the last to recognize the need to elevate the CIO into the top-level decision-making process; however, today most understand this vital role.

What CIOs are experiencing and what they are thinking and planning provides an important insight into the future of one of society’s largest and most important industry groups: the utilities that provide the electricity, natural gas, water and other services vital to modern life. This insight is critical in developing an understanding of the future of utilities and of our broader society.

With excerpts from Sierra Energy Group’s 2007 edition of its annual CIO Report, this article takes a closer look at some of the issues that today’s utility CIOs are grappling with. Included are some of the survey and interview results from the 60+ utility IT executives who participated in the study.

CIOs tell Sierra Energy Group that what they see on the horizon is more integration and movement toward intelligent grids (IG) and intelligent enterprises (IE). These terms have been around for quite awhile now, but for the first time in a number of years, utility CIOs finally have a bit of breathing space to begin seriously considering the practical implications of the technological philosophy. “One of my major objectives and goals for the year [2007] is to develop an integration plan between the energy operations and IT,” says Marie Zanavich, CIO at United Illuminating, New Haven, Conn.

“That’s sort of the cornerstone of my work here at Austin Energy,” says Andres Carvallo, CIO of a large municipal utility in Texas. “We have been building all the components of a smart grid or what I would really call a smart utility. It’s more than just the smart grid part of it and goes beyond the transmission-distribution side, but also all the way behind the meter side of it, so we have been working on that and are fairly advanced.”

Many definitions of IG and IE are floating around, but most of them involve increasing automation of the grid so that it becomes, in many ways, self-operating — and to some extent, self-healing. Then, as Zanavich and Carvallo indicate, the goal is to have operation of the grid itself become an integral part of the overall automated utility business, something that it definitely is not at most utilities today.

One of the issues encountered in moving forward with the IE or IG concepts is that of organizational boundaries, which in turn lead to silos of data, computing, and the accompanying data management problems. Historically, engineers and operators kept the grid operating and the business side collected and accounted for the revenue.

As an example of the on-going cultural divide, we asked our respondents if SCADA/DA was a part of the IT Group. As can be seen in the following chart, at far more than half of all utilities, SCADA/DA still is maintained and operated in the “operations” silo.

To operate an effective, profitable business, executives must understand what is going on throughout the business. In utilities, this means automation must provide needed information from both the operational side and the business side. As executives learn more about what is going on, they can continue to make better decisions, and all the while technology can continue to advance to do more of the work that is currently done manually. The goal is out there for IG and IE; CIOs have recognized it, yet the implementation likely will be sometime coming. It is an evolutionary process.

Another indication that this process will gradually happen over many years is that only a relatively small percentage of utilities have even developed a plan for IG integrated with IE. However, it also can be taken as encouraging that nearly 30 percent of them have taken these preliminary steps toward designing for the future, as indicated in this chart from our survey:

Continuing to Deal With the World as It Is

Despite the temptation to look ahead to a time when many problems may well be solved by smarter grids and enterprise business systems, utilities still must deal with the issues and problems of today. As anyone who has been paying attention knows these are varied and serious, ranging from the difficulties arranging mergers in the new environment through federal and state mandates for expensive AMI/AMR projects, to ongoing security concerns to better quantify IT contributions, to preparation for the imminent retirements of aging workforces. Smarter enterprises and grids could solve many of these issues, but when?

SOA—Hype or Reality?

In moving toward IG and IE, one of the major concerns utilities face is that many of their systems, both on the business side and on the operational side continue to be stand-alone and poorly integrated, if integrated at all. However, considerable improvement is apparent over the last few years — especially at the larger utilities. This remains a major issue at many utilities.

During 2005 and 2006, much publicity centered around service-oriented architecture (“SOA”) as a potential panacea for these problems. Many technological innovations that burst upon the scene with a lot of fanfare never realize their promised potential. Other “hot ideas” become the mainstays of future platforms and techniques. We decided to ask our CIOs this year about SOA. The question was phrased this way: A lot of people now are saying that SOA is more hype than reality. In your opinion is that true?

Overall, CIOs are somewhat evenly divided with a majority leaning toward the “hype” by a 58.5 to 41.5 percent margin.

AMR/AMI

Whenever government and regulators get involved in any business operation, the natural market forces are skewed — usually at tremendous cost to taxpayers. Automatic meter reading/automated metering infrastructure is a prime example. AMR was invented at a utility nearly 20 years ago. Through the years, it has gradually evolved and many utilities, large and small, have embraced the technology, so that today more than 25 percent of all residential meters and a much higher percentage of commercial and industrial meters are automated.

The Aging Workforce

Anyone who has been cognizant over the last few years must know that all U.S. industries, and particularly those heavily dependent upon field forces, such as utilities, face a significant problem with aging baby boomers. There just won’t be enough warm bodies to replace the multitudes who will be retiring in the next five to 10 years.

The major issue with the aging workforce in utilities is whether all of the measures to deal with the tidal wave of retirements are enough and whether these measures will be taken in time. We asked our CIOs about the timing issue with these results:

As can be seen above, only about four in 10 CIOs believe their utility will be ready—at least on the automation side—when the big wave hits in a few years.

Since CIOs at many utilities now have access to the boardroom and help make the major decisions for their overall utilities, we asked them to list their top corporate priorities, as seen from their viewpoint. That question resulted in the following chart. In this case, the rankings were of relative importance on a five-point scale, with “most important” being a five.

Clearly, utility CIOs are confronted with a complex mix of business and technical challenges. With a continually stronger voice in the board room, today’s utility CIOs are now positioned to meet these challenges and drive business value for their organizations.

*Note: The 2007 CIO Report: The Pursuit of the Intelligent Enterprise is available from Energy Central.

Warren Causey can be reached at wcausey@energycentral.com;
Mike Smith can be reached at msmith@energycentral.com.

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