I apologize for the length of this post. Its the first substanial info my electric utility has divulged (via 10Q). It has not been reported on in the local media. I find the numbers shocking. My wife has talked to one of the project managers. The Y2K effort supposedly started in 1995 and has 300 people working on it. This is a major utility for the Northeast and supplies Philadelphia and environs. ============================================================

The Project The Project is divided into four major sections - Information Technology Systems (IT Systems), Embedded Technology (devices used to control, monitor or assist the operation of equipment, machinery or plant), Supply Chain(third-party suppliers and customers), and Contingency Planning. The general phases common to all sections are: (1) inventorying Year 2000 items; (2)assigning priorities to identified items; (3) assessing the Year 2000 readiness of items determined to be material to the Company; (4) converting material items that are determined not to be Year 2000 ready; (5) testing material items; and (6) designing and implementing contingency plans for each critical Company process. Material items are those believed by the Company to have a risk involving the safety of individuals, may cause damage to property or the environment, or affect revenues.

The IT Systems section includes both the conversion of applications software that is not Year 2000 ready and the replacement of software when available from the supplier. The Company estimates that the software conversion phase was approximately 48% complete at September 30, 1998, and the remaining conversions are on schedule to be tested and completed by June 1, 1999. The Company estimates that replacements and upgrades will be completed on schedule by June 1, 1999, although some vendor software replacements and upgrades are behind schedule. Contingency planning for IT Systems is scheduled to be completed by June 1, 1999. The Project has identified 343 critical IT Systems. The current readiness status of those systems is set forth below:

Number of Systems Progress Status - ----------------- ------------------------------------------------- 26 Systems Year 2000 Ready 87 Systems In Testing 191 Systems In Active Code Modification, Or Package Upgrading 39 Systems Scheduled to Start after September 30, 1998 The Embedded Technology section consists of hardware and systems software other than IT Systems. The Company estimates that the Embedded Technology section was approximately 61% complete at September 30, 1998, and the remaining conversions are on schedule to be tested and completed by June 1, 1999. Contingency planning for Embedded Technology is scheduled to be completed by June 1, 1999. The Project has identified 119 critical Embedded Technology systems. The current readiness status of those systems is set forth below:

Number of Systems Progress Status - ----------------- ------------------- 25 Systems Year 2000 Ready 94 Systems In Active Upgrading

The Supply Chain section includes the process of identifying and prioritizing critical suppliers and critical customers with common equipment at the direct interface level, and communicating with them about their plans and progress in addressing the Y2K Issue. The Company initiated formal communications with all of its critical suppliers and critical customers to determine the extent to which the Company may be vulnerable to their Year 2000 issues. The process of evaluating these critical suppliers and critical customers has commenced and is scheduled to be completed by June 1, 1999.

Costs The estimated total cost of the Project is $75.4 million, the majority of which will be incurred during testing. This estimate includes the Company's share of Year 2000 costs for jointly owned facilities. The total amount expended on the Project through September 30, 1998 was $7.3 million. The Company expects to fund the Project from operating cash flows. The Company's current cost estimate for the Project is set forth below:

$ Millions 1998 1999 2000 Total ----- ----- ----- ----- O&M 22.3 37.5 9.3 69.1 Capital 1.4 4.9 - 6.3 ----- ----- ----- ----- Total 23.7 42.4 9.3 75.4

Risks The Company's failure to become Year 2000 ready could result in an interruption in or a failure of certain normal business activities or operations. In addition, there can be no assurance that the systems of other companies on which the Company's systems rely or with which they communicate will be timely converted, or that a failure to convert by another company, or a conversion that is incompatible with the Company's systems, will not have a material adverse effect on the Company. Such failures could materially and adversely affect the Company's results of operations, liquidity and financial condition. The Company is currently developing contingency plans to address how to respond to events that may disrupt normal operations including activities with PJM Interconnection, L.L.C.

The costs of the Project and the date on which the Company plans to complete the Year 2000 modifications are based on estimates, which were derived utilizing numerous assumptions of future events including the continued availability of certain resources, third-party modification plans and other factors. However, there can be no assurance that these estimates will be achieved. Actual results could differ materially from the projections. Specific factors that might cause a material change include, but are not limited to, the availability and cost of personnel trained in this area, the ability to locate and correct all relevant computer programs and microprocessors, and similar uncertainties. The Project is expected to significantly reduce the Company's level of uncertainty about the Y2K Issue. The Company believes that the completion of the Project as scheduled reduces the possibility of significant interruptions of normal operations.

-- Anonymous, November 04, 1998

Answers

Hi R.D. A couple of months ago the Philadelphia Inquirer ran the story I've pasted below. It would appear from the information you posted that the Public Utilities Commission was right to be concerned. Saying that "it is imperative that these utilities expedite their efforts" is nice, but if there's simply not enough time to get the job done, "expediting" or no, you're still left with a possible lights out scenario. I have family living just outside Philly. They're getting prepared and I hope you are too!

*PUC fears Y2K could put out the lights in the state in 2000*

Utilities said last year there would not be any computer havoc. Now, the commission isn't so sure.

By Peter Durantine ASSOCIATED PRESS

HARRISBURG -- It looks as if Pennsylvania's lights could still go out in 2000.

Utility executives told the Public Utility Commission last year that they would have no problem operating via computer, despite a glitch, known as "Year 2000" or "Y2K," that threatens to cause computing havoc. But a recent survey by the PUC raises doubt.

Yesterday, PUC Chairman John M. Quain called for an investigation by the Office of Administrative Law Judge.

"It is apparent that too many utilities are ill-prepared to face [ 20000 ] ," Quain wrote in a ruling unanimously approved by the commission. "It is imperative that these utilities expedite their efforts in achieving compliance with the Year 2000 problem."

Last September, Quain and representatives of several utilities told the Senate Consumer Protection and Professional Licensure Committee that they anticipated few problems in getting the vital computer programs corrected before the end of the century.

Quain based his remarks on a 1997 PUC survey. In a follow-up survey in April, only 21 percent of the electric companies, 6 percent of the telecommunications companies, and 21 percent of the water companies responded to requests about their progress on fixing the Y2K problem.

The administrative law judge will determine which utilities under PUC's jurisdiction fixed the problem, identify those that have not, and recommend how utilities can meet compliance by March 31, 1999.

The utilities are working on the problem, said Jim Cunningham, president of the Pennsylvania Electric Association.

"I can assure you our companies have been working diligently on this for several years," Cunningham said. "It is something that the Pennsylvania utilities are taking seriously."

Steve Samara, vice president of the Pennsylvania Telephone Association, agreed there was cause to be concerned, but said the 38 local phone companies the association serves were on top of the problem.

"I think it's fair to keep raising the question, because if any one slips up, it will be the customer who will be hurt and the company that will be hurt," Samara said.

Most computers built in the last 30 years were designed with a six-digit dating system to save storage space and expense. They recognize only two digits for each year, so come Jan. 1, 2000, computers may think the year is 1900.

Correcting the problem is costly, time-consuming and labor-intensive. The Pennsylvania state government, cited by the National Journal as a leader in fixing Y2K, is spending an estimated $39 million to correct more than 45,000 programs. Larry Olson, deputy secretary in the Ridge administration's Office for Information Technology, said more than half of those programs already have been fixed and the rest should be done by Dec. 31.

"It's not a technical problem, it's a business and leadership problem," Olson said.

Despite assurances from Ridge administration officials that all the state's computers will be ready this December, a legislative committee is nonetheless considering bills to give the state immunity from lawsuits involving the Y2K problem.

At a hearing of the House Judiciary Committee yesterday, a Pittsburgh lawyer who specializes in Y2K legal problems said legislation was unnecessary because the law already grants the state immunity.

"The Commonwealth of Pennsylvania, as the sovereign, has immunity from lawsuits unless it specifically waives its immunity from lawsuits," said Heather Heidelbaugh.

------------------------------------------------------------------------ )1998 Philadelphia Newspapers Inc.

-- Anonymous, November 04, 1998

Dear RD:

The problem with the above report is that it does not give any (none,NADA, zip) intermediate milestones on which to measure progress. They say they are on schedule to thier July 1999 milestone, but what does that mean really? The thing that really bothers me is the legalize that they use to say what can go wrong......it appears to me that they are just in a CYA mode, which is too bad as it clouds the issue as to where they are really at regarding Y2K progress.

As to thier suppliers, they say they are in the process of evaluating them etc. and will be finished by July 1999, what weasel words! The PUC needs to demand that the utility furnish them a detail plan and schedule and forecast completion dates on near-term and intermediate activities.

Bill Watt

-- Anonymous, November 05, 1998