New Jersey, Conectiv (Atlantic Electric and Delmarva) 10Q 2000 report - Bad news

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Information about Conectiv has appeared under the "Howard Belasco" question, but I felt that readers might not see it if they didn't read that specific question. It's important for those people whose power is supplied by Conectiv to know the status as reported in the latest SEC 10Q filing. This 2000 report is, in my opinion, truly a "read it and weep" document. With only about 250 WORKING days left till 2000, Conectiv is already out of time as I see it. Judge for yourselves:

YEAR 2000 - ---------

The Year 2000 issue is the result of computer programs and embedded systems using a two-digit format, as opposed to four digits, to indicate the year. Computer and embedded systems with this characteristic may be unable to interpret dates beyond the year 1999, which could cause a system failure or other computer errors, leading to disruption of operations. A project team, originally started in 1996 by ACE, is assisting line management in addressing the issue of computer programs and embedded systems not properly recognizing the Year 2000. A Conectiv corporate officer, reporting directly to the Chief Executive Officer, is coordinating all Year 2000 activities. There are substantial challenges in identifying and correcting the many computer and embedded systems critical to generating and delivering power, delivering natural gas and providing other services to customers.

The project team is using a phased approach to managing its activities. The first phase is, inventory and assessment of all systems, equipment, and processes. Each identified item is given a criticality rating of high, medium or low. Those items rated as high or medium are believed to put Conectiv's business operations and customers at substantial risk and are then subject to the second phase of the project. The second phase is determining and implementing corrective action for the systems, equipment and processes, and concludes with a test of the unit being remediated. The third phase is system testing and compliance certification. Additionally, the project team will be updating existing outage contingency plans to address Year 2000 issues over the next 12 months.

The following chart sets forth the current completion percentage of the Year 2000 Project by major business group, and for the information technology systems used in managing Conectiv's business. Conectiv expects significant progress in remediation and testing over the next two quarters based on work that is in process and material that is being ordered.

Inventory and Corrective Testing and Business Group Assessment Action Compliance - --------------------------- ------------- ------------ ----------- Business systems 95% 70% 60% Power production 90% 0% 0% Electricity distribution 90% 5% 5% Energy and other services 75%-95% 0%-80% 0%-80%

-23- Conectiv is also contacting critical vendors and service providers to review remediation of their Year 2000 issues. Many aspects of the Conectiv's businesses are dependent on third parties. For example, fuel suppliers must be able to provide coal or gas to allow Conectiv's subsidiaries to generate power.

Distribution of electricity is dependent on the overall reliability of the electric grid. ACE and DPL are cooperating with the North American Electric Reliability Council and the PJM Interconnection in Year 2000 remediation efforts, and is accelerating its Year 2000 Project timeline to be generally in-line with the recommendations of those groups.

Conectiv has incurred approximately $3 million in costs for the Year 2000 Project. Current estimates of the costs for the Year 2000 Project range from $10 million to $15 million. These estimates could change significantly as the Year 2000 Project progresses.

Since the project team is still in the process of assessing and correcting impacted systems, equipment and processes, Conectiv cannot currently determine whether the Year 2000 issue might cause disruptions to its operations and have impacts on related costs and revenues. Conectiv assesses the status of the Year 2000 Project on at least a monthly basis to determine the likelihood of business disruptions. Any substantial disruption to the Conectiv's operations could significantly impact its customers and could generate legal claims against Conectiv. Conectiv's results of operations and financial position would likely suffer an adverse impact if other entities, such as suppliers, customers and service providers do not effectively address their Year 2000 issues.

-- Anonymous, November 17, 1998

Answers

My apologies that the chart in the above 10Q did not translate well to this forum when I copied it. To access the document for yourselves, go to: http://www.sec.gov/edaux/formlynx.htm

Put 10Q in the drop down form request box and type conectiv in the other box. When the links appear, click on the latest one and scroll down to about page 22.

-- Anonymous, November 17, 1998


Conectiva's 10Q is alarming to say the least. Yet I still have some questions maybe some of you can answer? Is 410 days enough time for this company to fix itself and be up and running by jan 1,2000? If not can they still run in a semi-repaired situation? Can they run their power generation facilities on manual? Or should I just plan on buying a generator,battery back up system?

-- Anonymous, November 17, 1998

Glenn, if you take out weekends, holidays, and vacations (not to mention sick time and personal days) there is less than 250 actual working days until Jan. 1, 2000. I honestly do not think that even Conectiv could answer whether they will be able to run in a semi-repaired condition, or on manual operations. The only way to KNOW that there will be no problems is for a utility or business to be completely remediated and tested, with all their suppliers remediated and tested as well. Otherwise, it's a finger-crossing gamble with the odds not on your side.

From an IT perspective, Conectiv cannot complete their remediation in time. What the consequences will be won't become apparent until 2000. I don't believe in gambling on whether or not I'll have electricity at the millennium turnover. I'd buy that generator (or wood stove) if I were you.

-- Anonymous, November 17, 1998


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