Ok, for those of you who have been anxiously ;-) awaiting my take on the latest NERC report (and current electric industry Y2k readiness in general), I've placed a report online:

The Electric Industry and Y2k - Closing on Deadline

Please note that the document is in Adobe (.pdf) format, and you need to have the Adobe Reader installed as a plugin to your browser. I would appreciate any and all feedback. This document is intended to be a living document, and I will update it as appropriate based on the comments I receive.

-- Anonymous, August 09, 1999

Answers

Rick, Wold it be possible for you to post your article here? My old, low-memory electronic brain doesn't have the oomph to do Adobe. Thanks!

-- Anonymous, August 09, 1999

Ann - I'll see what I can do about a text only version that I could post here. It's a bit long (7 pages) with graphics, etc - that's why it was done in Adobe format. The biggest thing is finding an available few minutes... ;-)

-- Anonymous, August 09, 1999

RICK

Thanks for your great report....I thought NERC, Koskinen and company seemed a bit too optimistic (I've been following y2k closely since May). I am shocked at your figures that a mere 3% (251 of 7941) of the EEI listed companies are represented by NERC. There should be an EEI report....

-- Anonymous, August 09, 1999

Most excellent Rick. Hats off, applause.....

I expect what you outline for the electric utility industry parallels all industries to a significant degree. Actually, the electric utilities are probably much, much better off than most.

Back in the seventies when the economy languished for so very long there was a saying that went; "If your neighbor is out of work it's a recession. If you are out of work it's a depression."

Next year; if your neighbors power goes out, Y2K was bad. If your power goes out then Y2K was real bad.

Combine that with all the other potential failures in other sectors of society and it could get uncomfortable for a lot of us, even if our power does stay on.

I agree 100% our focus needs to get very local from here on out.

-- Anonymous, August 09, 1999

Thanks for the report, Rick. I appreciate your cutting through the smoke and mirrors and getting down to the information we need. I learned, unfortunately, that my NERC region is MAIN - the author of the confidential file we accessed last week.:( (The one that kept listing certain Y2K readiness info as unknown.)

Another thing that bothers me as I read your report, the MAIN report and the NERC report is the reliance of vendor statements. I have heard from several different sources that vendor statements can be highly unreliable or written in such a way that the vendor can loop-hole their way out of any legal problems. As a matter of fact, a friend of mine - a manager at a multi-million dollar foundry was signing Y2K vendor forms and assuring compliance before he even knew what Y2K was all about. A recent (maybe not so recent anymore) article in either PC Magazine or Computer World stated that companies should not count on the vendor statements being reliable.

Well, thanks again for all your great input and the time you take to keep us informed. I'm going out to buy some more candle oil and a couple of more cords of firewood.

Terri Reid

-- Anonymous, August 09, 1999

Ooooooooh, you nasty man. You just want people to be scared spitless, so they'll spend all their money on whatever you're selling. Just like you did when you wanted them to believe another ice age was coming. And just like you'll want them to worry about the sun going supernova next century. Or something like that.

-- Anonymous, August 09, 1999

Lane, you didn't put a smiley after your post. ;-) Someone is bound to misinterpret

-- Anonymous, August 09, 1999

yesssssss!!!!

a lonely voice of truth and reason crying out in the wilderness.

i, of course, was particularly impressed with the third bullet.

now, if only those with ears to hear...

-- Anonymous, August 09, 1999

As a public service for everyone in the forum, especially for those of you who are Adobe-challenged :), here is the text version of Rick's analysis. Insofar as the graphics go, well, hey, I'm in a hurry :) And it ain't easy to translate them, so I just pretty much left things as they were:

On August 3, 1999 the North American Electric Reliability Council (NERC) issued itslatest, and supposedly last, quarterly Y2k report to the Department of Energy. I'm going to resist the temptation to either praise or criticize the latest report, and indeed, the entire task that NERC has undertaken over the past 14 some-odd months. Certainly, the task has been unprecedented in the history of the electric industry. Unfortunately, the overall results remain mixed and inconclusive.

Regardless of how you read the report, the facts remain that:

 Y2k remediation activities are not complete in the electric utility industry.

 The smaller electric companies, represented by American Public Power Association (APPA) and National Rural Electric Cooperatives Association (NRECA), continue to lag the "bulk power distributors" in Y2k preparation.

 The nuclear power industry response to Y2k, as a whole, has been less than adequate. The response of the U.S. Government regulatory agency tasked with nuclear power safety oversight (the U.S. Nuclear Regulatory Commission) has been nothing short of abysmal over the past 12 months.

 The Y2k status of Independent Power Producers (IPP's) is being largely ignored, despite the considerable contribution that IPP's make to the overall stability of the domestic U.S. electric system.

Over the past 18 months, I've had the pleasure (or frustration, in some cases) of working with quite a few electric companies, industry organizations, federal regulatory agencies, and state regulatory agencies. In many cases, the effort put forth has been outstanding. In more than a few cases, however, the efforts have been little more than a public relations shell game. Here are a few examples of companies I've dealt with that lean more toward the second type:

 A large Southeastern U.S. electric cooperative that is reporting "Y2k readiness" had not really even started a Y2k program as recently as 12 months ago.

 Another that reports "readiness" is a majority owner of a multi- unit nuclear facility that had not started any Y2k work as of the first quarter of 1998.

 Still another is a large independent system operator that didn't award a Y2k program management contract until the fourth quarter 1998.

 And lastly, an electric company serving a major metropolitan area, whose Manager of Engineering Projects couldn't convince executive level management, as of 14 months ago, that Y2k was a big issue and therefore couldn't get commitment of a budget for Y2k inventory and analysis. This same company had not even begun looking at their system operations center during the same timeframe, and I know for a certainty that they had platforms, systems, and hardware that flat out would not make the transition to Y2k.

While there's no question that there are many Y2k-stellar performing electric companies (I've had the good fortune to deal with some of them, too), it is difficult for me to believe that my experience with this sampling of companies is unique and an aberration for an entire industry that says it has been working on the problem since 1995.

Here's my bottom line: while many electric companies took Y2k seriously, and I believe that they believe they've put the requisite effort into dealing with the issue, too many electric companies have not taken the issue seriously. There are companies that have simply gone through the motions, assigned "less than the best" personnel to deal with the issue, and have signed off on completion simply to get the industry associations (and pundits such as myself) off their back.

My sense is that a significant minority of the companies showing up on the NERC reporting list as "ready" or "ready with exceptions" is being a little fast and loose with their Y2k readiness statements. This feeling is based on the following factors:

 My direct involvement on the Y2k issue with many electric companies, industry trade organizations, and state level Public Utility Commissions

 Raw statistical analysis of NERC and other industry reporting

 Historic management reporting practices

Since the day that the latest NERC report was issued, I've been asked many times if I believe the proclamations that the North American electric industry is ready to make the century transition. My short answer is that, no, I do not.

A Deregulation Digression

If I am to believe that the entire electric industry on the North American continent has seriously prepared for Y2k, then I am required to believe that the companies I described above finally committed the necessary personnel and funding resources to tackle this major project. I am also required to accept that these companies have worked the project in good faith from end to end in all business units, in less time than it takes a good sized inter-disciplined team to evaluate the impact of a single major IT system replacement. From a management perspective, I would also have to believe that the executives in every electric company, some of who felt that Y2k was a budget eating non-issue to begin with, finally got religion.

The electric industry, in preparation for deregulation and competition, has changed dramatically in the past ten years. Maintenance budgets have been slashed. As an example, in the world of Transmission and Distribution, fix-on-failure has become the maintenance mode for most equipment, rather than periodic maintenance and/or replacement prior to failure. Personnel downsizing has been endemic - the "history" of most electric companies has walked right out the front door. As shown by two summer's worth of power interruptions and disruptions in the mid-West and mid-Atlantic states (and acknowledged at all levels of industry and government), distribution systems are being strained to the breaking point.

And as a recent expatriate from this environment, am I to believe that Y2k has been addressed properly and with the necessary level of attention in every electric organization from the Bay of Fundy to Coronado Island and all points in-between?

I might as well believe in the tooth fairy.

Pick a Number

The August NERC report is as prominent for its omission of information as much as for the conclusions it draws. I'm only going to latch onto one statistic: industry participation.

While NERC and the electric industry contend that the information gathered represents a vast majority of the generation and transmission assets in North America, it is hard to reconcile the numbers and believe that a mere 3% (251 of 7941) of the EEI listed companies represent the only "critical" segment of the electric power industry (see Table 1).

Table 1 - NERC / EEI Comparisons The first column represents the utility type. The second column represents the number of R or RE respondents to NERC in each type The third column represents the total number of companies in each type (USA) from EEI Utility Type NERC 1 EEI 2 Canadian (CA) 14 (n/a) Coop (CO) 28 875 Govt (GO) 13 69 Investor owned (IOU) 94 222 Muni (MU) 37 1885 Non-utility (NU) 57 4247 Power District (PD) 8 73 Power Marketer (PM) 0 570 Grand Totals 251 7941 Notes: NRECA received 90% response rate from Co-ops APPA received 86.3% response rate from Muni's No EPSA data for Non-utility generators or EWG's No report for Power Marketers Now, based on survey responses from the participants in column 2 of the above table, the electric industry as a whole, represented by NERC, has drawn the conclusion that Y2k will be a non-event for most of us (at least power-wise). But let's take a little closer view of some different numbers for one region of the country - my home state, New Jersey.

1 August 1999 NERC Report to DOE, Appendix B 2 http://www.eei.org/issues/comp%5Freg/3electri.htm

According to USDOE, Energy Information Agency statistics 3 , nuclear power provides somewhere around 30 percent of generation capacity required in the state. IPP's (non-regulated power generators) provide another 50 percent 4 . None of the nuclear plants in NJ are yet Y2k ready 5 . No one knows about the IPP's (including NERC, who I have queried on the subject repeatedly). Is New Jersey unique? Yes. But so is every other region in North America; that's my point. And that's why I think it's absolutely ludicrous to make global pronouncements about overall electric industry Y2k readiness. We simply don't know.

JFK, UFO's and Y2k (Apologies to Richard Belzer)

Do I think there's a "conspiracy of silence" to keep the truth from the public? No. Do I think that any of the reporting companies are flat out lying? No. What I think is that some of the major players are, in fact, being fed superficial information from some of their reporting companies who don't take this thing seriously. And so, it comes down again to dilution and distillation of the data stream as that data is being fed up the "chain of command". When the data is analyzed at its final destination point (NERC), it is further homogenized and presented as a picture of the entire industry. I fail to see how anyone in the industry (or outside the industry, for that matter) can draw specific, supportable conclusions from the information provided that apply to every geographic region in North America.

In the final analysis, we are only marginally closer to being able to draw Y2k impact conclusions from all of the industry and government reports. I think we can reasonably expect that, barring an unforeseen cascade type event, the power will remain on for a majority of the North American continent. The question then becomes: What percentage of this vast continent remains at risk for power failure? I can't say, and neither can anyone else, because no regional risk studies have been or will be conducted prior to the actual event. And above all, from an infrastructure standpoint, Y2k has been and will remain a regional and local event. If you're in one of those unlucky regional or local areas, then it will not matter to you whether or not the "majority of the North American continent" is unaffected. If the North American electric industry makes it through Y2k mostly unscathed, it's because the industry as a whole got lucky this time, not because of a dedicated, across the board effort that every single one of the 7,941 individual participants subscribed to. And if one large power company (or a few smaller ones) take a hit on 1/1/2000 or the days following, the entire industry loses. It loses the confidence of a public that has become dependent on an increasingly degraded and brittle electric power infrastructure.

3 http://www.eia.doe.gov/cneaf/electricity/st_profiles/new_jersey/nj.htm l 4 Most recent statistics, as of December 1998: http://www.eia.doe.gov/cneaf/electricity/ipp/t24c.txt 5 http://www.nrc.gov

So Where Do We Go From Here?

In the time remaining prior to 01/01/2000, it is this writers opinion that Y2k readiness assessments must be more regionally focused. These regional assessments, conducted along the boundaries of the NERC regional council areas (depicted in Figure 1, below), could provide a greater level of granularity and local confidence rather than an overall proclamation that the entire continent is Y2k ready.

These assessments must be risk based rather than operationally based. In very simple terms, if the chances of losing power in one of these regions today are one in a thousand, what are the chances of losing power to any local jurisdiction within the region on 1/1/2000 (or the weeks thereafter) for reasons due to or exacerbated by Y2k issues?

Figure 1  NERC Regional Councils

Why is it important that this risk analysis be regionally focused? For the reasons provided earlier in my description of the electric power infrastructure in the state of New Jersey. Each state and region has a unique mix of power generation and transmission assets. Each region experiences widely different climate conditions during December and January  for example, the risk of a severe weather related event concurrent with Y2k is much greater in upstate New York than in Florida.

Only by understanding the local level of potential Y2k risk can businesses and consumers make educated decisions regarding their own preparations for Y2k. At this point, we have only been given broad, continental assurances; we have not been provided with local risk parameters. To engender the confidence of the public that Y2k is truly going to be a non-event for the electric industry, it is critical that the industry takes its risk analysis down to the local level. After all, short of comets crashing to earth or a global nuclear confrontation, everything that affects our daily lives is locally based.

The above recommendation being made, I do not expect that either the electric industry or any government agency will conduct such a risk analysis in the short time remaining between now and 1/1/2000. So, it is incumbent on every business, industry, and individual to conduct a personal risk assessment. A good starting point is to use the document, Beyond Code and Controls - Y2K Risk Analysis in the Electric Industry, available at the euy2k.com website 6 .

It is not the time, contrary to what both NERC and the Presidents Y2K Council seem to suggest, for the electric industry to declare victory over Y2k. Government and industry must continue a diligent effort to minimize Y2k impacts, and not become complacent or rest on perceived laurels. The health, safety, and security of each one of us depend on it.

6 http://www.euy2k.com/riskmgmt.htm

-- Anonymous, August 09, 1999

Rick, Could you justify your statement that the US grid is "brittle"? There has only been 1 major blow to the grid in more than a decade. Other nations have a truly brittle grid where power is off 4 hours each day. Localized outages will always be with us, even after many people and businesses own their own fuel cells and solar panels.

Could you really testify to a Senate panel that the US grid is brittle?

-- Anonymous, August 09, 1999

Ask the residents of Chicago (where the lights were out for up to three days and somewhere around a hundred people died a few weeks ago).

Ask the residents of Southern New Jersey, where a few weeks back the power was out for a few days because so many transformers and substations failed during the recent East Coast heat wave.

Read one or more of the following articles:

Science Daily

San Francisco Chronicle

NRC SECY 97-246 - Grid Stability Issues

When you're done, come on back and we can talk about it. Oh, and you might want to check out some of the studies and documents on NERC's website (www.nerc.com) and the DOE Energy Information Agency (www.eia.doe.gov).

-- Anonymous, August 09, 1999

Ah, jeez, E., I almost forgot:

The San Francisco outage last December where a lousy job of grounding in a substation took out the entire city for a day.

Ok - this is way OT - so it's the last post I make to this particular question.

-- Anonymous, August 09, 1999

Lane, you didn't put a smiley after your post. ;-) Someone is bound to misinterpret. Mea culpa. :-) Since you brought up the subject..... Errors compounded blackout blunder
Backups Should Have Stopped Blackout in Its Circuits: PG&E lapses did more harm than crew, PUC says

-- Anonymous, August 09, 1999

Sometimes, the formatting just gets all screwed up. I guess it's a good thing I don't work for an electrical utility.... :-)

-- Anonymous, August 09, 1999

My thanks to Drew for saving me a bit of work. I have *got* to get me an admin assistant.

-- Anonymous, August 09, 1999

Oh, I was glad to. I had to excerpt some of it for our site anyway, so I just went ahead and finished the job for those with Adobe problems after reading Ann's note. But also, I didn't want anyone with a different view to say "I can't read Adobe, so I can't respond to Rick." I think we should hear rebuttals from the optimists. So far we haven't.

-- Anonymous, August 10, 1999

The systemic environment in which Y2K takes place has a significant influence on its impact.

1) For example, more than 1/2 of our petroleum is imported from third world countries and more comes from the Alaskan pipeline and northern pipelines in winter. Embedded chips and SKADA systems are vulnerable. Texaco says there are more than 10,000 chips on an offshore platform. At a 1% or something failure rate for embedded chips how many would it take to shut down the entire platform system? The Alaskan pipeline pumps heated oil as do northern pipelines, else tar results. Something more or less like the Arab oil embargo of the 70's is likely. This will impact the ability to generate power in many regions, the price of diesel to move rail shipments of coal, etc.

2) The merger of Union Pacific and Southern Pacific two years ago, which proved to have incompatable computer systems, by the end of six months resulted in 5,000 miles of rail freight cars being backed up. In Y2K we have not only software problems but embedded chips which operate all locomotives made in the last 20 years and switches. Coal is delivered by rail, much by Burlington Northern, what of coal supplies to electrical generating plants? Might we have 5,000 miles of coal backed up with what effect?

3) The Comptoller General of the U.S. reports that there are 33 trillion dollars of derivatives owned by just the seven largest U.S. banks, of which 12 1/2 trillion is unhedged. Chairman of the Federal Reserve Bank Alan Greenspan has just reported publically that there are some 80 trillion of derivatives world wide. As I write my daily email about the markets (which costs $3 a day) reports that derivative positions are being unwound massively because of adverse interest rate moves, and the ability of the financial markets to affect an orderly unwinding is seriously in doubt. Before 15 years ago none of this existed -- this is a brand new risk to humanity for the profit of a few. We have no history on the risks involved and no regulation. AS a CPA I can tell you that these risks are not even reported in financial statements. Further, the derivative risk position also involves approx 8,000 tons of gold that has been leased for a period, most from national central banks, and then sold into the markets. The proceeds of sale have been used to speculate. The gold must be rebought and returned. The lease rate was 1% a year but now the rate has risen to 3 1/2%. The Bank of England for unexplained reasons privately sold a measely 25 tons of gold, and the market price moved 10% down. What happens if just 10% of the short position, 800 tons, had to be bought and returned to the national banks? The financial system of the Western World is brittle, to use Rick's term, and unstable. What are the probabilities? Will Y2K provide a nudge that will destabilize the entire financial structure? Only a nudge is needed. What then of the ability of electrical utilities to buy and sell, bill customers and to pay?

4) We have an orgy of debt financing in many countries, upon which employment has come to depend. The last figures ten years ago I saw was that the average U.S. household had $70,000 of debt while the average Swiss household had $700 of debt. We have had a massive credit inflation since 1994 to keep the economy condusive to the reelection of Clinton and to keep peoples' attention off of the scandals. (It's the economy, stupid!) The credit pumping started as a response to the election of a Republican Congress in 1994, preparing for the 1996 election. It has continued. Last fall the expansion of M3 money supply was over a 10% level, now it has dropped to around 5%, itself a destabilizing event. Since the Federal Reserve experiment began in 1913 there has been a 96% devaluation of the dollar. Without Y2K, we are facing a periodic debt blow off with massive levels of bankrupties and unemployment. Under Clinton, the Commerce Department changed the way unemployment figures are reported. Areas of chronic unemployment were removed from the data base. In addition, as of the last report the *assumed* rate of job creation (unreported, unidentified fudge factor) is 165,000 monthly jobs. I think that Y2K won't make much difference in Switzerland because they can go six months without employment and still pay their electrical bill. It is said that if unemployment were reported in the U.S. now as it was prior to Clinton, our unemployment rate would be approaching the European rate, in our case maybe over 9%. The Commerce Department states that some 20% of the U.S. economy is *directly* dependent on foreign trade and the rest of the world is in much worse shape than the english speaking countries, excepting Ireland. How will electrical utilities deal with a situation where maybe unemployment goes to 25% like the Great Depression and people don't pay their bills? O.K., so they cut off delivery, but their revenue base is eroded.

5) Currently, world wide there is Productive Overcapacity in most basic products, according to the CEO of General Electric in every product they make. Overcapacity is destroyed by either war or bankruptcy. It is accompanied by massive deflation in the second event. For the last 400 years of history, massive deflation is typical of the emergence from every war, and we have come out of a 50 years Cold War. However, we see every limp excuse for war being used to resume shooting. This productive overcapacity was financed by debt, not savings. This is the Asian economic flu afflicting the world, and moving unshore into the U.S. with so-called *dumping* at below cost prices. Of course, we are guilty of debt financed over capacity, too. It appears that Asia is using IMF money transfusions not to close excess capacity but to keep pumping out the excess supply of products. Electricity tends to be a local market instead of a world market, so some protection exists for pricing. On the other hand, what about the industrial users and their capacity to buy and to pay bills to maintain the revenue stream of utilities?

I think we can see in some of these facts the reasons for the frantic spin of public news as to the seriousness of the Y2K situation. The spin exists far beyond Y2K, including the investment markets upon which retirement plans depend. The risk problem is not just Y2K, but the basic vulnerability of the entire financial system, to which Y2K may be the catalytic nudge that blows down the whole house of cards.

We are facing a stormy short and intermediate term future. The Great Depression produced systemic and fundamental changes in our government and in the world. The British, French, Portugese, etc. empires collapsed in the Depression and its aftermath over the two decades from 1930 to 1950. Our values changed. Fiat money (with floating values) became the norm for the first time in 5,000 years. Public relief and safety reliance moved from families, the Churches and community to reliance on the welfare oriented, fiat money manipulated, debt financed governments, the first occurance in history of such a reliance. These governments are made possible by a massive interlinking of computers (possible corrupted data transfers?), in which many computers are now relics, particularly in the english speaking and europen regions. Note that more than 50% of the people in the U.S. get some form of government check and they vote. What changes might another shaking of the world produce?

I suggest that the seriousness of Y2K must take into account the systemic role of Y2K in an unstable, historically unproven economic system that I fear is only dimly perceived by any of us, and is not a topic of public debate and information.

Red Hill, CPA

-- Anonymous, August 10, 1999

Drew, thank you so much for taking the time to post Rick's report. Rick, the report was just about what I (unfortunately) expected you to say. Are you SURE that you don't have any smiley-face sentences left in your bag of tricks? Just hoping...

-- Anonymous, August 10, 1999

Red, I'm VERY concerned about the last few words of your post. Do you really mean that the public should not be engaged in learning about what could possibly be THE event of our lives? Without discussion, we would not be able to prepare for it, to call our elected servants on extremely important issues of Y2K, or to find out the truth of where government agencies and corporations are in their preparations. If this is what you mean, then you have sadly ruffled the wrong feathers. Hitler was able to do what he did because everyone knew, and nobody talked. Six million Jews died, and a few who talked about it before Hitler was seriously out of anyone's control were able to assure the security of themselves and/or their children. The rest of the world knew, but did nothing, so my ancestors and probably some of yours died. We have to discuss this, and we need to do what we can to prepare. Please understand that my discussion of the Holocaust with Y2K is not to compare the two, nor to minimize the Holocaust. "The only thing necessary for evil to triumph is for good people to do nothing." I thank God for this forum; it is part of what may save my life in the not-so-distant future.

-- Anonymous, August 10, 1999

Words come back... Red, I want to give you a chance to answer the previous post, but I also want you to understand that I didn't mean to bite your head off. In re-reading your post, I can see another meaning in your last line, i.e. that the economy should be included in the discussion of Y2K, but hasn't been. Please clarify this for me. Thanks.

-- Anonymous, August 10, 1999

Ann, I think Red's conclusion is in the indicative not the imperative.

-- Anonymous, August 10, 1999

Ouch! Thanks, Lane.

-- Anonymous, August 10, 1999

This is a request for clarification about IPP's and percentages of companies mentioned in Rick's paper. (Rick, if you have the time it would be great to hear from you, but others may understand enough to help me out also).

Sorry if these questions are too elementary for those of you who understand the Electric Utilities better than I, but I think Rick's points are incredibly important to this country if I understand them correctly. Also, quite frankly I think we should see the points he makes about the limited scope of NERC's data throughout the mainstream press rather than mainly on his website. If I understand Rick's paper correctly, NERC is dealing with very small statistical percentages to be making statements with what appears to sound like high degrees of certainty.

One of my main questions concerns the Independent Power Producers (IPP's). Rick, if I understand you correctly, you are saying that NERC does not know about the IPP's in New Jersey (or at least they wont tell you what they know), yet IPP's provide approximately 50 percent of the power there. Does NERC "know about" IPP's in other parts of the country, and do IPP's provide similar proportions of power generation in other states?? I certainly get your point about NERC's data not being comprehensive enough to be able to give a good indication of the overall Electric utilities preparation for Y2K issues if the non-regulated (IPP) power generators are not proportionately represented in the data that NERC uses to make it's points.

My next questions are about "TABLE 1 - NERC /EEI Comparisons".

It looks like you are basically saying that NERC has only processed information from 251 of the 7941 electric utility companies listed with Edison Electric Institute (EEI) ?? It seems to me that if this is the case, then NERC is stating "the Y2K state of Electric power availability" based on information that only applies to approximately 3 per-cent of the companies that the public is concerned about. I would feel a lot better if the percentage of the companies involved that NERC is drawing information about, was much higher than 3 percent.

Perhaps I am reading more into what is written in your paper than I should be, based on my relative ignorance of what NERC has actually done and what types of companies are involved in various ways in actually getting electricity to people's residences and businesses.

If I read your table correctly, it looks like NERC only dealt directly with about 2 percent of the Munis (Municipals?) and 3 percent of the Co-ops. Perhaps the notes under the table about NRECA receiving 90% response rate from Co-ops, and APPA receiving 86.3% response rate from Munis is information that could "soften the blow" to my confidence level. What (if anything) are the National Rural Electric Cooperatives Association (NRECA) and American Public Power Association (APPA) saying about these responses ?? Did these trade associations pass their data on to NERC so that when NERC speaks for the industry it has already factored in the data they gathered. Even if this is so, then your point about NERC speaking from a small sampling of information still seems very valid about the low percentages associated with the other categories in the table --- Government (GO: 18%), Investor Owned (IOU: 23%), Non-Utility (NU: 1%), Power District (PD: 11%), and Power Marketers (PM: 0% !).

This information is important to me because: I live in a rural area and use Electricity from the power grid to power my well pump, (I purchase this power through a Co-op). I have become accustomed to being able to drink fresh water (without boiling the stuff from my pond) and also I enjoy the convenience of flushing my indoor toilet - I'd rather not have to build (and frequent) an outhouse in the cold early January temperatures.

-- Anonymous, August 10, 1999

Dennis' questions are italicized

I'll try to hit a few points very quickly (I'm pressed for time today) -

If I understand Rick's paper correctly, NERC is dealing with very small statistical percentages to be making statements with what appears to sound like high degrees of certainty.

The NERC sampling represents, by their own count, about 75% of the generation, transmission, and distribution assets in North America. In other words, of the 7941 companies listed by EEI, only about 250 represent the "big boys". The rest are considered to be, for the most part, minor players in the big picture. But if one of those minor players is your power company, well...

That's why I hate aggregate statistics, and I don't like making broad, sweeping proclamations from a national level rather than a regional / local level.

Does NERC "know about" IPP's in other parts of the country, and do IPP's provide similar proportions of power generation in other states??

The IPP industry, represented by EPSA has, by NERC's own comments, been a somewhat unwilling player in this whole Y2k thing. W/regards to similar proportions in other states, no - as I noted in my analysis, each state and region is different in terms of power mix. You can get some specifics on your region at the Energy Information Agency website (www.eia.doe.gov).

If I read your table correctly, it looks like NERC only dealt directly with about 2 percent of the Munis (Municipals?) and 3 percent of the Co-ops. Perhaps the notes under the table about NRECA receiving 90% response rate from Co-ops, and APPA receiving 86.3% response rate from Munis is information that could "soften the blow" to my confidence level.

Dealt directly with.

APPA and NRECA were tasked by NERC to conduct surveys of their own constituencies and report to NERC. You can get more details at the NERC, APPA, and NRECA websites. APPA had a response rate of ~87% to their survey; NRECA about 90%. So, you could apply those percentages to the EEI numbers for each to get a rough idea of the magnitude of non-response.

-- Anonymous, August 10, 1999

Thanks, Rick for your quick, concise response. I appreciate it. Wow, you cut through the fluff directly to the important parts of my post - I wish I could always have your editing help when trying to write - I'd be able to save a lot of extraneous words!

-- Anonymous, August 10, 1999

Email on environment in which Y2K is taking place and question of public discussion vs spin.

My last sentence of the email this morning was to say we see no discussion in the public press of the issues I am saying are economically important to us and to every industry as Y2K takes place. I apologize for not writing more clearly. Let me provide a few examples. In 1987 both the Wall Street Journal and Forbes Magazine opined that the 30% stock market crash was basically caused by a run on the dollar. There was serious public discussion. Now I have seen little discussion of this type, but perhaps I missed it. Alan Greenspan has pointed to the subject by saying the stock market is a bubble (maybe overvalued according to the Fed Reserve by 40%), but not mentioned the coupon passes that have been a common event to pump up the financial markets and mitigate derivative risks for operators. The Federal Reserve is now approaching one billion with coupon passes to pump up the financial markets where six months ago they were maybe a third of that amount. The last was a couple of weeks ago now. In the last five years we are now apparently reaching for 1999 a quarter trillion dollar negative trade balance, put another way, we are buying a quarter trillion of products on a national credit card, not having to do with the Federal Deficit. How is this to be paid? Another run on the dollar? In 1998 our Federal Debt level increased by over 100 Billion dollars while we are told there is a Federal surplus. This year our Federal Debt is again increasing significantly, while we are told we have a Federal Surplus. As a CPA I can tell you that if any private organization used the Fed Govt's accounting tricks, someone would go to jail. Neither Alan Greenspan, most politicians nor the popular financial press is discussing these facts.

The public is getting the *spin* instead, similar to the Y2K spin. The spin is ubiquitous, not just characteristic of Y2K. Every society historically has reached a point of exhaustion and decline. Are we seeing symptions of exhaustion in the *spin*? Will our careless attention to Y2K compliance be a catalyist for us to reach a national point like the British Empire did subsequent to 1927 when Britain adopted fiat money? These foundational issues underlying Y2K and interacting with the computer malise trouble me.

Red

-- Anonymous, August 10, 1999

A very good article Rick, but I also have a question about the relationship between generation, transmission and distribution.

In my picture it is a whole network of generators, transmission lines and customers where generation and load must be in balance. When a generator stops another generator has to do more. That could be a generator from another region. In my opinion it is to simple to look at only the generators in a region. Look at the transmission of MW and MVAr and look at the readiness of the local distributor.

-- Anonymous, August 12, 1999