Nevada Power 10Q...what do you folks think?

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I got this from the Nevada Power 10Q. Would appreciate what you think about it. I'm not impressed, but I could be wrong. Is it fair to judge a company's progress by the % of money they have spent of their budget? This company has spent only $957,000 of a budget estimated to be between $7 - 15 million so far. Should they have a firmer number for the budget by now? The high number is more than double the low end of the estimate. Remediation and testing only at 10% complete. Do they even have a chance of finishing this "race"?

>> The Company's Year 2000 readiness activities are tracked through monthly reporting to the North American Electric Reliability Council (NERC). Overall status for the Company as of September 30, 1998 shows identification of potential problems at 95% complete, assessment at 50% complete and remediation/testing at 10% complete. This status is within the NERC guidelines and the Company's Year 2000 Project Schedule which calls for the Company to achieve Year 2000 readiness by the end of June, 1999. One generation plant will be remediated and tested in September of 1999 to conform with its annual scheduled outage, however, this plant is similar to others in the Company's system which will have been remediated and tested by the end of June 1999. No material difficulties are anticipated at that time.

Even though the Company is confident that its critical systems will be fully remediated by year-end 1999, the Company is engaged in early stages of contingency planning. Contingency planning will likely be partially affected by the responses received from business partners and suppliers received in upcoming months. The contingency plan is expected to be finalized by the second quarter of 1999. The Company is also working with utility and non-utility suppliers, generation and transmission operators and regional organizations to develop external contingency plans, where appropriate. Due to the need to assess the readiness of business partners, suppliers, and interconnected operators, the risk factors which will form the basis for the Company's contingency plan are not fully known at this time and the reasonably worst case scenario is also unknown, at this time. Due to the speculative nature of contingency planning, it is uncertain whether such plans actually will be sufficient to reduce the risk of material impacts on our operations due to Year 2000 problems. However, if the Company or significant business partners or suppliers fail to achieve Year 2000 readiness with respect to critical systems, there could be a materially adverse impact on the utility's financial position, results of operations and cash flows.

The estimated total cumulative cost to the Company of addressing Year 2000 readiness is in the range of $7 to $15 million, including operating and capital expenditures. To date, approximately $925,000 in operating expenses and approximately $32,000 in capital additions have been incurred.

-- Anonymous, November 23, 1998

Answers

Bill, I do believe it's fair to judge progress by the amount spent thus far compared to estimates of needed expenditures. The costs, spent and projected, are a valuable tool and not to be dismissed. One thing that is missing from this 10Q is a start date (or year) for their year 2000 project. I would hazard a guess that it was left out because their performance to date suggests they began not all that long ago. They are not finished with either their inventory or assessment, and only mention critical systems compliancy by year-end 1999. You asked if they have a chance of finishing this race. I assume you mean critical systems readiness, because from my view full compliance is completely out of the question. Actually, I wouldn't say the odds for critical systems compliance are all that good, but nothing can be deduced absolutely. I'd keep buying those candles if I were you. This is not a long shot you want to bet your safety on.

-- Anonymous, November 23, 1998

I was at the October Public Utilities Meeting in Las Vegas. The Nevada Power representative stated that Nevada Power began their Y2K program on '92. If what they're saying is true, they appeared to be on top of the Y2K issue and it seems realistic that they will finish in '99.

As for their only being 10% done with testing: the representative stated that this was misleading, because as they were accessing the components, they were being tested. Specifically, what he meant by that, I don't know.

What disturbed me about the meeting was that they did not have any answers about contigency planning, stand-along operation, suppliers, etc. It was as if they didn't realize that they are part of, and in fact, dependent on all of the power stations on their grid to operate.

They do have 6 weeks worth of coal stockpiled. They conceded that this will not do them any good if the daily energy supplies cannot be delivered. In fact, they stated that they will not be able to supply any power to anyone if their supply line is cut off.

The representative could not answer as to exactly what their daily needs were, however. They also didn't know if it was possible to operate independently from the grid even if they have enough supplies. They also had not confirmed whether their suppliers are compliant.

They were looking into these issues.

Most of the answers they gave that day to the utilities, businesses and consumers were very general. This did not seem to bother Nevada Power. They said that individuals could get answers to more specific questions by contacting their Y2K team. I did so. I have yet to have one question answered.

Greg

-- Anonymous, December 07, 1998


Wow. They said they started in 1992. They need to get some kind of an award for earliest utility start date I've heard of! (Earlier than most other sector corporations, too!) Not to mention accomplishing less in those *six* years than others who claim they started in 1997. And they were so humble about getting such an early start--so far out ahead of the pack-- that they didn't see fit to mention a start date in their 10Q. Ummhmm.... If I'd been in that public meeting I would have been asking if their Y2K IT project staff consisted of only one part-time employee. To me, that would maybe be a half-way plausible explanation for not finishing inventory and assessment in six years time. Actually, I probably would have been laughing too hard to get the question out...

As for the NP rep saying that the 10% remediation/testing was misleading because they were testing components as they were assessing them....I am shaking my head in amazement. Ten to one this rep was from their accounting division or something and hasn't a clue. Of course they may be testing components during assessment -- to discover if those components have dating problems. That's what assessment is, determining what needs to be replaced/upgraded. This is completely separate from integration/validation testing after the problem components have been replaced/fixed, which is what the "remediation/testing" phase stated to be at 10% refers to. In my opinion, either this rep was sent out to answer questions in almost complete ignorance of the utility's IT status, or his pants were on fire. If most utilties had been working on this issue since 1992, we'd be hearing about scores of "FINISHED!" announcements. Greg was right to be disturbed by their lack of answers in other areas, also. I understand public relations statements leaning toward the side of optimism and reassurance, but 1992 and the rest of the non-answers? They leave me rolling my eyes and muttering, "pitiful, pitiful"...

-- Anonymous, December 07, 1998


Bonnie,

Another explanation is that they started fixing their COBOL six years ago. In 92, not too many people new the problem included embedded systems, supply chain management, etc. I know that Sacramento Municipal started addressing their COBOL issues AROUND 95, but the entire scope of the problem wasn't common knowledge until 97.

-- Anonymous, December 08, 1998


Bonnie,

I saw a post by Bill relating to Nevada Power's start date. He says it was '94. This may be correct. '92 was the date that I recalled them saying, but it was from memory. Sorry for the confusion.

While we're on the subject: The head of the Nevada Power Y2K team e-mailed me that there were actually six representatives at that meeting. Makes me wonder; when the "official" representative could not answer my questions, I asked if anyone in the room knew.......Nobody came forward. I hope the other five weren't the technical crew.

Greg

-- Anonymous, December 08, 1998



Greg, thank you for the update on the starting time for NP. Even if 1994 is the accurate date, it's still ahead of the vast majority of reported project starting times. And six representatives at the meeting, none of whom could/would answer some of your questions? That's a pretty sad situation.

Mark, I agree that quite a few companies began work on their mainframe and software remediation before they became aware of the embedded systems problem. (And several have reported that this was the case.) The reason I have doubts about this for Nevada Power is that they did not choose to differentiate progress levels for IT and Non IT systems in their 10Q. One consistent feature of Year 2000 statements (or any filing to the SEC for that matter) seems to be that companies are very willing to state any news of a positive nature. What stockholder doesn't want to hear the good news? Other companies who began early on with their IT systems versus Non IT (embedded) systems made a point of saying how much farther along they were with those IT systems. A point of pride, if you will -- as though they were saying, "we may still be working on embedded systems but we're done (or nearly done) with IT remediation." NP reported their "overall status" at 10% for remediation/testing. If they had been working for four years on their IT systems, I don't think it's a stretch to think that the percentage of remediation in that area should have been much higher than 10%. Shall we pick an arbitrary number such as a low 50% done after four years work? Even if they were at 0% remediation/testing for Non IT systems, the "overall status" of a combined 50% done IT and 0% Non ITremediation would have been higher than just 10%. No matter how I look at the figures, I come back to a belief that NP doesn't have much to show for four years work. Believe me, I wish I thought the situation was different. I'd like to be the bearer of good news just as much as anyone else.

-- Anonymous, December 08, 1998


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