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Consumer FAQ: Understanding electric power generation

Where does the electricity you use come from? The answer to this question, the first of many you must ask to get a completely clear picture of the risk that your electric power will fail in 2000, is where we must begin.

All electricity, except power extracted from sunlight by photo-voltaic cells, starts in a generator. Generators rely on heat, from burning fossil fuels, like coal and natural gas, and nuclear reactors, or water-power to turn a turbine that produces the charged particles we know as electricity. It doesn't store well, so the power you use to run your computer, television or a light has to be made almost at the instant it is consumed. Generators must be operating reliably for all the other layers of the infrastructure to perform, and for that light to go on.

The critical questions about generation and Y2K are:

Y2K's impact on fuel availability

Y2K's impact on generation controls

Y2K's impact on safety systems

The location of generation in relation to consumers.

When designing a power system, engineers strive for reliability and availability based on an understanding of the "capacity factor," which describes the actual amount of power all the generation plants can produce, and "load factor," the additional generating capacity needed to serve peak demand. Over the past two decades, the industry has increased the average load factor, because it lowers the price of power to the consumer (the plants are operating more efficiently, so prices fall).

The implication for Y2K is that the typical utility has built in additional capacity that it can do without, increasing the reliability of the entire system. Utilities strive to mix a variety of sources, so the typical utility will be drawing power from several, perhaps many, generation plants to ensure higher reliability. If one plant fails, others are more able to provide for customer demand, though they may need to charge higher prices or decrease their profit margin, reducing the dividend to shareholders.

As a Y2K researcher, you'll need to discover as much information as you can about the company, so that you can put detailed questions to the company about its year 2000 readiness.

In addition to your utility, you will need to explore the Y2K readiness of its suppliers. For purposes of this discussion, we'll focus on the generation layer of the power infrastructure. That means that if a supplier relies on fuel sources, fuel delivery systems or control and safety systems that have Y2K problems, your utility has a significant third-party problem that they must manage and answer for in their Y2K disclosures.

SH: Fuel issues

Half of the power generation capacity in the US is powered by fossil fuels, according to the Standard Handbook For Electrical Engineers. Oil, gas and coal are burned to create steam, which turns the turbines in a generator. Fossil fuel carries the greatest risk for interruption from Y2K-related problems, because it may not be produced near the generation plant, and it can be stored onsite in relatively limited quantities. So, if a power company is reliant on coal or oil delivered by railroads with Y2K problems, this needs to be addressed.

Hydroelectric and nuclear power are the most reliable forms of electric generation, because the fuel can be stored at the generator in substantial quantity. Obviously, a dam holding a massive amount of water is a reliable source of generating power, so the utility needn't worry that Y2K will interfere with supplies.

Nuclear plants, which are responsible for approximately 20 percent of US power production, can generate for a long time without refueling. "With fossil fuels or with hydro, the amount of the energy source (fuel) supplied to the power plant is proportional to the power demanded at that time," writes George Miley in the Standard Handbook For Electrical Engineers. "With nuclear power, however, the fuel for a substantial amount of energy output is physically located in the converter at any time." \

Y2K will have little, if any, impact on hydroelectric and nuclear fuel availability.

There are several other types of power generators, such as industrial cogeneration plants that use heat from industrial facilities to produce electricity, and wind or solar generation. These types of generation plants don't account for much of the power in the US and Canada. Wind and solar energy will keep flowing through the skies, regardless of what happens with Y2K.

Cogeneration facilities will produce power as long as the company's main business is in operation. If your utility relies heavily on cogeneration, you will need to check the Y2K readiness of the company that creates the heat used to make power. A steel factory, for example, may have a Y2K problem with the systems that control the furnaces - if they shut down, there's no heat to generate electricity. You won't know until you check the Y2K disclosure by the factory.

SH: Where the power is

Your utility's Y2K disclosure will not provide any useful information about the specific dependencies it has on types of fuel the company counts on. These disclosures are designed not to say much about the details of the problem, rather they intend to fulfill regulatory requirements. If you've been reading quarterly reports, specifically the Year 2000 sections, you need to go deeper.

Turn to the company's annual report. It describes the entire business They are available for free at Free Edgar, a site that collects Securities and Exchange Commission (SEC) filings (www.freeedgar.com). Look for the "10-K" document, which is the SEC designation for annual reports.

The annual report lays out most of the information you'll need, because it describes the business to a potential investor. Annual reports don't follow a completely standardized format, but almost all utilities will describe their assets and the sources of the power they sell in the "Business" or "Management's Discussion of Financial Condition and Results of Operation" section.

For instance, Duke Power Corp., the largest energy company in the US, states in plain numbers how its power generation breaks down in 1997: Coal, 59.3 percent; Nuclear, 38.8 percent; Oil and Gas, .4 percent; Hydroelectric, 1.5 percent.

At New England Electric System, coal accounts for 39 percent of 1997 generation. The next largest source is gas at 28 percent. Nuclear, oil and hydroelectric power plants in the US each make up seven percent of the company's total capacity; hydroelectric facilities in Quebec delivers another six percent. Cogeneration plants make up the last six percent of NEES' power production.

By contrast, Puget Sound Energy Inc., a western utility, is much more reliant on hydroelectric generation -46.3 percent of its electricity comes from water power. Puget Sound Energy also breaks down its energy sources by whether it owns the generations facilities or buys power from another company. The report tells us that "During 1997, the Company's total electric energy production was supplied 23% by its own resources, 29% through long-term contracts with several of the Washington Public Utility Districts ("PUDs") that own hydroelectric projects on the Columbia River, 24% from other firm purchases and 24% from non-firm purchases."

Now, you get down to the real work, because the annual report will describe the business relationships that the utility depends on in excruciating detail. For instance, the Puget Sound Energy 10-K describes 34 different contracts and business relationships involving power suppliers, partial ownership arrangements, and buy-back agreements with cogeneration plants (which buy power at peak times and, at others, sell extra power back to the utility).

Rather than explore every nook and cranny of the power supply your utility relies on, identify the main sources and focus on those first. If you can show that your utility can cover its January peak power usage through those main sources of electricity, then you can probably leave the rest unresearched.

SH: Control Systems

Generation facilities are packed with technology, and some of it is not ready for Y2K. According to the North American Electric Reliability Council:

"The threat is most severe in power plants with Digital Control Systems (DSCs). Many older plants operating with analog controls may be less problematic. Numerous control and protection systems with the DCS use time-dependent algorithms, which may result in generating unit trips when encountering a Y2K anomaly."

The report minimizes concerns about these systems, concluding that "a small percentage of components tested indicate problems with Y2K date manipulations." Errors are said to have minimal impact on power reliability.

In their SEC Y2K disclosures, companies will explain their Y2K remediation progress in very broad terms. Assessment and remediation is described as a percentage of the total project, without explaining which systems have been repaired. Generally, however, safety systems are considered first.

Nuclear plants, which are audited by the Nuclear Regulatory Commission (NRC) (http://www.nrc.gov/NRC/Y2K/), provide some of the best sources of information about control systems, because the agency has documented progress on a system-by-system basis. For example, the NRC reviewed Y2K progress at the Seabrook Nuclear Plant in New Hampshire and the Tennessee Valley Authority's Watts Bar Nuclear Plant. In both cases, systems were prioritized according to these criterion:

bulletSafety Implication - Important to safety of personnel and the public, safety-related controls, performs design basis calculation on nuclear safety- related structures, systems and components, process monitoring used as the basis for operational actions which prevent the release of radioactive material to the environment, and safety-related direct impact.

Plant TripAffects the plant's ability to stay on-line.

Generation ReductionImpacts level of power generation.

Regulatory RequirementRequired by regulators, pertains to a license commitment.

Business CriticalImportant to continuity of business, major impact on service to customers, could result in lost productivity to the majority of employees.

Minimum ImpactMinimal impact to business, services not affected, loss of productivity to some employees.

No impactNon-essential, no impact to business operations, no lost productivity.

Based on the practices described in the Standard Handbook For Electrical Engineers, any generation plant will use roughly the same set of priorities to determine which system to address first, second, and so forth. In practice, business-critical systems are remediated first or simultaneously to safety- and plant trip-related systems, because the ability to bill for power is equally important to the survival of the company.

At Seabrook, for instance, safety- and plant trip-related systems account for only one percent of all systems, and remediation plans are in place for all; much of the work is completed. Business-critical systems represent 47 percent of the technology inventory, while "minimum impact" and "no impact" systems add up to 38 percent.

It is not necessary to ask about a particular product made by a manufacturer; just focus on the taxonomy described above. By studying the NRC audits, you will find the basis for asking about generation and control systems, and the assessment and remediation priorities your utility may have assigned to them. Use this language to identify the systems you'd like to have the utility address in its response to your questions.

SH: Where's your power?

Finally, after identifying the location of, and progress at, the generation plants your utility depends on for electricity, turn for a moment to where these plants are in relation to you and other customers. We'll cover the distribution network in another FAQ, but you still need to think for a moment about how your utility has organized its infrastructure to provide power to different kinds of customers.

Go back to the annual report and find the passages that describe the distribution of customers. Look for information about the largest commercial customer. Duke Energy, for instance, describes its largest commercial customer as the textile industry, which account for 10 percent of total electric revenues. Puget Sound Energy has a single customer that pays for 2.1 percent of the company's revenues (the report does not identify this customer, but it is likely an aluminum manufacturer based on the Northwest). These customers will take priority, and the utility will likely have placed some critical infrastructure near them.

Because the electric grid is highly redundant, there are many paths from generation plants to customers. However, facilities at or near the largest customers' sites, may be given priority if power generation capacity is reduced. As part of its contingency planning, the utility should have developed a strategy to ensure reliable supplies to these large customers, and individual consumers who represent the largest group of customers have a right to know how those plans might impact the availability of power to households.

-- Brooklyn (MSIS@cyberdude.com), December 03, 1999