Ohio Electric Utility Institute Y2K

On behalf of the Ohio Electric Utility Institute, thank you for the opportunity to provide an update on the progress your state’s investor-owned electric utilities are making on the Year 2000 project.

Our companies – American Electric Power, Cinergy, Dayton Power & Light, FirstEnergy and Allegheny Power – serve more than 4.6 million customers in Ohio – nearly 90 percent of the state.

And each of us has been working hard to ensure that the electrical system in Ohio is ready for the new millennium.

Around the world, companies and industries are in various stages of this process and using different strategies to communicate their progress.

In fact, the Chinese airline industry is so confident that they will be Year 2000 compliant, they’re sending all their top executives up in airplanes when the calendar changes.

In that spirit, I can tell you that all of Ohio’s electric company executives plan to have their lights on at midnight.
Which brings me to the real question on everyone’s mind when it comes to the Year 2000: Will we have power?

While I would like to give you an unequivocal "yes," for a variety of reasons, I can’t. But I can give you an unequivocal "should be no problem."

Obviously, dealing with emergencies is nothing new to our industry.

Service can be interrupted on any given day for any number of reasons. And, when that happens, it’s our job to find the problem, fix it, and get the power back on as quickly as possible. We’ve been doing it a long time and we’re very proud of our history of providing service to customers.

I guess you could say that we’re in the contingency business every day.

We recognize the importance of providing electricity to our customers 24 hours a days, seven days a week. And we understand the impact our business has on other businesses and industries, on public safety and security, and on personal convenience.

So, for a variety of reasons, addressing the Year 2000 issue has been our high priority for the last three years.

Maybe a few statistics will give you an idea of what’s involved in a project like this:

Together, our five electric companies have more than 1,000 employees working full or part time on the Year 2000 issue. These include computer programmers, generating plant operators, accountants, engineers, lawyers, auditors and outside contractors.
We expect to spend $213 million to make our companies Year 2000 ready.

When our individual programs are completed, we will have reviewed millions of lines of code and will have made thousands of repairs and replacements to system software, hardware and embedded chips.

Clearly, we are committed to making a seamless transition into the Year 2000.

I offer just one caveat. And it’s one you’ve probably heard from others as well.

We are closely linked with other industries – such as coal suppliers, telecommunications and banking – as well as other investor-owned electric companies, municipal systems and rural electric cooperatives. As a result, we can’t guarantee that other companies’ Year 2000 problems might not adversely affect our ability to serve.

But we are taking every step necessary to protect against service interruptions.

Our Year 2000 efforts are focused on four areas that are essential to our operations:

safety issues – such as security systems, and equipment and system maintenance;
customer services – including power generation and delivery, metering and remittance;
regulatory obligations – ranging from environmental control systems to government reporting; and
shareholder services – including the issuance of dividend checks and reporting of account activity.

Here’s where we are today:

We’ve completed our inventory of systems and applications;
We’ve identified where Year 2000 problems exist;
We’ve determined whether it’s more cost-effective to repair or replace those systems; and
We’re nearly finished making the necessary repairs and replacements to those systems.

The final step – testing – will ensure that the equipment will continue working properly after the new year.

Testing generally involves setting the date ahead to January 1, 2000 or beyond and running the equipment to rule out – or in some cases root out – any problems.

Our testing is more than two thirds complete, with a goal of finishing the job by June 30.

So far, the news has been encouraging. Successful testing has been completed at several of our plants, including the state’s largest, AEP’s Gavin Plant.

And these tests have not revealed any material Year 2000 problems that would impact operations.

Our transmission and distribution systems have undergone similar assessment and testing and, as with our generation facilities, we’ve found no problems that would impact operations.

A very important aspect of our Year 2000 readiness program is contingency planning. Specifically, these plans outline our strategies for working through any Year 2000 problems that may occur, both inside and outside our companies.

For example, we will be prepared with backup telecommunications systems in the event that we experience any phone service interruptions.

In addition, we have voluntarily agreed to significantly increase our generating reserves above what we expect our demand to be during the rollover period.

We will be participating in two nationwide drills sponsored by the North American Electric Reliability Council – one in the spring and one in the fall – to help ensure that the reliability of our systems are maintained and we can communicate their status accurately to our ECAR region.

And we all have plans in place to operate our critical systems manually, if need be.

By June 30, we’ll have our electric network contingency plans completed, and will begin implementing those strategies, where necessary.

In addition to our internal efforts, our progress on the Year 2000 issue has been monitored closely by both the Public Utilities Commission of Ohio and NERC – the reliability council – among others.

In fact, like all the nation’s investor-owned electric companies, we report monthly to NERC on the status of this project.

Gerry Cauley, NERC’s Y2K Coordinator, will give you an update on the industry’s progress across the country a little later in today’s forum.

The Year 2000 problem is one we’ve been working on for a long time. It’s one we’ve anticipated and planned for. And it’s one that we fully intend to be prepared for.

The bottom line is this: We’ve been in the electric business for nearly 100 years. Though we rely on computers, like many businesses do, we haven’t forgotten how to do it the old-fashioned way.

If being Year 2000 ready means having additional staff available to flip a switch or monitor an operation, then that’s what we’ll do.

I’m confident that our industry is doing everything possible to avoid any impact from the Year 2000 issue on electric service in Ohio. The citizens of Ohio have counted on us for many years to provide them with the electricity they need – and despite everything else going on in our industry today – they can depend on us to tackle this challenge also.

Thank you.

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Mr. Alexander is executive vice president and general counsel for FirstEnergy Corp, and vice chairman of the Ohio Electric Utility Institute.