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Richard: Technology Driving Industry Transformation

September 14, 1998
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Richard: Technology Driving Industry Transformation

From electronic trading of gas to marketing to thousands of small end users, to expediting the regulatory process, information technology is allowing the energy industry to do things it couldn't have before.

Oliver G. "Rick" Richard, CEO of Columbia Energy Group, said soon "time margin" will become nearly as critical a yardstick as profit margin for measuring company performance. By time margin Richard means how quickly companies can perform various functions relative to the industry. Richard recalled the debate that preceded the unbundling of interstate pipelines. Skeptics said it couldn't be done because there was no way to handle the nominations and allocations of multiple shippers.

"But generally we can now see what a great success story that has been, that the federal government has taken a leadership role in unbundling pipelines and all the efficiencies. If you take a range of numbers at least put out by one CEO in our business, there has been at least $100 to $300 billion of costs that were taken out of the system. It's a tremendous thing that's happened in the last few years, a lot of which now goes to the battle of how can you complete those transactions even faster, both at wholesale and retail."

Richard, who spoke last week in Houston at an INGAA Foundation conference on information technology, said he believes the Internet will become a principal tool of commerce. Columbia already has 29 Web sites set up to market its deregulated products state by state once the opportunity becomes available. That's in addition to the company's corporate Web site and sites for each of its five local distribution companies. Information technology, particularly the Internet, is key to unbundling, both from a gas supplier and an end user perspective, Richard said.

"We need to provide a system that's so easy that consumers can choose and suppliers can choose without viewing the process as a burden, and information technology can easily make it easy as read, point and click, and that's what our ultimate goal is."

The Internet can make it easier for customers weighing offerings of different gas suppliers to compare information. An example Richard gave is an Ohio Public Utility Commission Web site that gives an apples-to-apples comparison of various gas supplier offerings.

"To make it easier for our suppliers to learn about participating in our choice programs, our local distribution companies in Ohio and Pennsylvania and Maryland have a Web site, and Columbia of Virginia is working on it right now where marketers - not the customer - but marketers can come in and learn more about the choice, sign up to participate as a customer choice program marketer, and then they can upload and download their customer files."

As evidence of how technology has impacted energy trading, Richard pointed to electronic trading systems QuickTrade and Altra's Streamline and a recent report that projected more than $4.9 billion worth of physical gas will be traded on the systems this year. "Most gas volumes pass through about five hands between the producer and final destination. QuickTrade and Streamline, the top two electronic trading systems, now account for approximately 10% of all the daily deals."

On the Columbia Gas Transmission system, Richard said automated operations of compressor stations have been upgraded to allow for real-time communication with graphical representation of information.

On the regulatory side, the FERC has embraced information technology development in concert with its FERC First reengineering program. A year ago the Commission hired Kathleen M. Hirning as a technology consultant. In February she became the FERC's first chief information officer. Hirning is now working to bring electronic filing capability to the FERC. At a conference last November, the Commission heard an industry chorus that said, "Do it. Do it now. Do it as quickly as you can do it," Hirning said. To allow FERC's constituents to eventually make filings electronically, Hirning is streamlining and centralizing technology and document handling functions within the FERC.

"What I discovered as far as technology is, although there was a computer department, each of these [FERC] departments had their own individual computer department. And although there were similarities between how each department processed their filings and issues, they were all done separately and differently. There were a lot of good ideas about where the Commission should go, what the Commission should do, but it was all very fragmented because there were different ideas in different locations of the Commission." Hirning predicted within about a year preparations will begin for a rulemaking on electronic filing. Joe Fisher, Houston

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