8760 is Building Bridges
By definition, change is a disruptive force. It is generally
our reaction to change that often distinguishes the leaders from the laggards.
In an industry where change has been traditionally measured in decades,
deregulation is creating immediate opportunities for some utilities to
leapfrog the competition or for leaders to maintain their position. While
deregulation is the force of change in the utility industry, other industries
are already crossing the bridge from the old economy to the new economy.
The Internet has accelerated the rate of change for all
industries. Whether it is on-line buying, stock trading or aggregation
of special interest buying communities, we have seen a fundamental shift
in the power base from the supplier to the customer. This shift is often
referred to as a paradigm shift, where the old rules are no longer applicable
in the new environment. Deregulation is another example of a paradigm shift,
where due to customer choice, the traditional buyer/supplier relationship
is no longer valid as new entries are creating new relationships.
As the utility industry deregulates, new markets are created,
as are new competitors. Competition means that profit margins shrink. Companies
are forced to look to technology for greater efficiency to survive and
profit. In addition, states are demanding technical updating and standard
setting for the utilities serving their constituents.
Utilities are being hit by both paradigms at the same
time. This double whammy of deregulation and the related unbundling of
services has combined with the Internet as a means of introducing new competitors.
The challenge for utilities is to navigate these two separate, but interrelated,
Companies such as Group 8760 (www.8760.com) are successfully
helping utilities cross this bridge. Not only is the company keeping pace
with the changes forced by deregulation, it anticipated the coming need
for Internet infrastructure support and helped write some of the new standards.
"We see ourselves as a bridge. We bring the technology together into an
efficient solution for the utility industry and all of the people they
do business with - venders, customers and suppliers," said Dick Brooks,
a member of the Internet's Engineering Task Force (IETF), the Gas Industry
Standard Board's (GISB) Electronic Deliver Mechanism Subcommittee, and
a member of the ebXML Message Routing and Transport group that sets standards
for the transport of EDI and XML business documents over the Internet.
He is one of the founders of Group 8760 and its Chief Technology Officer.
Founded in 1996, Group 8760 has focused on developing
solutions for the utility industry's immense data transfer needs. With
literally millions of transactions daily, this industry required a more
efficient way to communicate business-to-business. The result is GISBAgent®,
an Internet-based solution based on the Gas Industry Standards Board protocols
now being widely adopted by the electric industry. Brooks adds, "We are
also a bridge for those companies that have a sunk investment in legacy
EDI Value Added Networks (VANs) and those wanting XML. By using the Internet
for the transport of either X12 EDI or XML documents, Group 8760 is uniquely
positioned as we have incorporated both options into our InsideAgent®
Component Architecture and related products."
GISBAgent, based on InsideAgent, is only one of three
GISB certified products. According to the Executive Director of GISB, Rae
McQuade, "Group 8760 played a key role in GISB. Without the support of
companies such as Group 8760, I don't think we would be in existence."
Adds Peter Byrne, Business Process Consultant of GPU Energy
and the chairman of the Utility Industry Group, "We've come to understand
that GISB has been proven to work successfully in the gas industry. The
Internet protocol that GISB uses is better for our needs over the old way
of exchanging data over VANs."
Historically, utility companies had relied on value-added
networks (VANs) to transmit data. While these networks were reliable workhorses,
they were costly. Charging for every transaction and the size of each transaction,
VAN fees can range into the $10,000 - $30,000 per month. In a competitive
environment these fees can inhibit a utility's ability to be profitable.
"In just an average four to five months of VAN charges,
a utility can license GISBAgent software, get a T1 line, and start communicating
over the Internet. Since the connection is over the Internet, a public
network, any transactional costs are nominal compared to the old VAN system.
In addition, the technical transition can be performed, in most cases,
in a fortnight," according to Jim Buccigross, Group 8760 Vice President
for Energy Practice and Chairman of the Executive Committee of GISB.
"GISB chose secure HTTP, or Hypertext Transfer Protocol,
for its ability to transmit and receive EDI over the Internet reliably
and securely. We chose not to implement an e-mail-based program that has
proven to be more vulnerable to attack and does not have real-time acknowledgment.
The GISB implementation of HTTP is a direct transfer that shoots straight
from sender to receiver and incorporates the P.A.I.N principles of Privacy,
Authentication, Integrity and Non-repudiation," said Buccigross. The gas
industry and now the electric industry are discovering the reliability
and capability of the Internet. Tests performed by the Transcapacity Limited
Partnership over an 18-month period revealed 99.4 percent availability
on its VAN and 99.9 percent availability via the Internet.
"The Internet was not invented by business, it was first
and foremost a defense project. It was created to enable government agencies
to communicate even if they were under nuclear attack. It was designed
to be a reliable, self-healing network with the ability to route around
failures to keep communications flowing," said Brooks.
Added Byrne, "The Internet protocol is better for our
In October 1999, the Pennsylvania Public Utilities Commission
mandated that all energy companies participating in the Customer Choice
program be able to transmit customer data via Internet EDI by June 30,
2000. The mandate was issued with the purpose of determining a cost effective
manner for participants to participate in the deregulated utilities market.
In the past few months GPU Energy, UGI Utilities and Penn Power joined
Duquesne Light Company in selecting GISBAgent, as four of the seven electric
distribution companies (EDCs) in Pennsylvania's deregulated market have
become Group 8760 clients. Group 8760 also announced that PG Energy, a
Pennsylvania natural gas utility, and FirstEnergy, PennPower's parent company,
have chosen GISBAgent as their Internet EDI solution. Although Duquesne
Light is among the smallest of Pennsylvania's seven utilities, they were
the first to implement a move over to the Internet. "It has been an extraordinary
event for historically risk-adverse utilities. We had to react quickly
to the opportunity. We are confident our decisions will result in long-term
savings and efficiency," said Chris Navadauskas of Pennsylvania's Duquesne
The pressure to switch to more efficient technology is
increasing as deadlines approach in other states. The New York Public Service
Commission recently issued an order mandating the use of the Internet for
EDI and the eight New York EDC's must file their implementation plans as
of May 30, 2000.
"By the end of 2000, utilities will be entering preliminary
stages of testing," said John D'Aloia. He serves as the power systems operational
specialist for the New York Public Service Commission.
This process of searching for appropriate technologies
and testing for the best solutions will probably be repeated in the next
16 states that deregulate. Another 20 states are close behind in the deregulation
According to Group 8760's Brooks, "We are just beginning
to see the power of the Internet. Our GISBAgent software is often the initial
foray into Internet e-commerce for utilities. It is a relatively low risk
exercise that has a measurable and quick payback. Energy companies may
build on the success of this successful Internet experience and add more
e-commerce functionality such as bill presentment and payment, energy trading
and, eventually, back office functions."
The views expressed in this column are those of the
author and do not necessarily represent those of Energy Central. Energy
Central makes no claim as to the accuracy or veracity of the statements
made herein and is not responsible for any damages or misrepresentations
which may result from their use.