Isolation of Wire-line Communications
in an Unregulated Power Market

INDEX
INTRODUCTION
NEW AGE POWER MARKET
IMPORTANT COST DECISIONS
PROTECTION PHILOSOPHIES
THE COST OF NOT PROTECTING
INESCAPABLE CONCLUSIONS

INTRODUCTION

In a deregulated power market, the successful power companies will not only have effective power system operation and maintenance organizations, but also very reliable wire-line communication networks when fiber may not be cost effective. Very reliable wire-line communications networks, require a properly protected network using isolation as a means of protection against the effects of a Ground Potential Rise (GPR).

The Federal Energy Regulatory Commission (FERC) oversees the transmission and wholesale sale of electric energy in interstate commerce. On April 24, 1996, the FERC required electric utilities to unbundle transmission services and make their transmission lines available to other electrical suppliers. It required unbundling in its Order No. 888, "Promoting Wholesale Competition Through Open Access Nondiscriminatory Transmission Services by Public Utilities; Recovery of Stranded Costs by Public Utilities and Transmitting Utilities."

FERC believes that unbundling and open access will make the electric industry more competitive and save electricity consumers $3.8 to $5.4 billion per year. Unbundling utility services will change who sets the price of electricity. No longer will a regulatory agency determine prices based on the cost of production; now the price will be set in the open market, based on supply and demand.

Thus, the stage has been set. Now we must shift our strategies to a very competitive marketplace, where the bottom line will determine our survival. How can we enter the 21st Century with a competitive edge?

NEW AGE POWER MARKET

We are entering a new age, the age of a new deregulated power market. It is the age of uncontrolled electric power market pricing, which will allow power companies to charge whatever they want and equally allow consumers to buy from whomever they want.

The new challenges electric companies will face in the next few years, whether they be transmission or generation companies, will be very different from the challenges of the past. Companies must begin preparations now to meet these changes if they wish to remain effective players in the new deregulated power market.

Consider the basics. All administration, maintenance, and operation costs are passed on to the consumer through electric rates. Obviously, that fact is not going to change with deregulation or the introduction of the power industry to free market economics. In a deregulated power market, all of these costs will still be passed on to the consumer through his electric rates just like they were in the regulated power market.

Then what is going to change? The answer is short and simple, "The consumer will be free to chose the supplier!" In a regulated power market the consumers were captive and could not change power companies if they did not like their rates or service. In a free market, keeping consumers will be the first priority and the key to corporate survival.

IMPORTANT COST DECISIONS

In the past, many decisions, that resulted in additions to the bottom line, were hardly noticed. Even if they were noticed, there was not much fretting, because the costs would be rolled into the rate base and would likely not show up in more than the second decimal place of the wholesale or retail electric rate. In addition, the consumers were not able to change suppliers.

In this new marketplace, some power companies will fail and then be absorbed by other power companies, because of swings in their electric rates. It is going to be a new age, an age in which managers and stockholders know that all costs, no matter how small, are important. They are so very important, because all of the little costs add up to real and significant additions to the bottom line, which can cause consumers to choose alternative suppliers.

This obviously means that tougher days lay ahead for all working in the electric power industry. In the upcoming world of free market competition, everyone will be held much more personally accountable.

There are many different kinds of problems that may jeopardize the integrity of wire-line communications. However, let us examine the effect to your company of one of the most overlooked problems, the problem of the infrequent GPR. The GPR may only last for a fraction of a second, but can damage or destroy wire-line communications equipment at substations, powerplants, and switchyards. In addition, this GPR can damage your system equipment associated with the communications equipment.

Like all things, protection of communications facilities costs money, and the cost of protection must be compared to the costs, as well as the legal consequences, of doing nothing. However, with rare exception, the cost for protection is a small fraction of the costs that may be incurred from doing nothing.

There are three major costs which need to be considered when evaluating the need to isolate communications equipment from GPR. The first is the direct cost of having to replace destroyed or damaged equipment. The second is the direct cost of increased power operations and lost revenue from the failure of real-time communications with critical metering and switching equipment. The third is the indirect cost of dissatisfied large consumers being lost to the competition and suing for damages when they leave, because of broken contracts resulting from power outages. The incidental protection that isolation equipment also offers to personnel safety and the costs that could be incurred from GPR induced injuries and fatalities are not considered herein.

PROTECTION PHILOSOPHIES

There are detailed and well established guidelines that discuss the technicalities of calculating GPR as well as how to adequately protect against its effects. Thus, a discussion about the same here will not be attempted.

What will be discussed are two opposing protection philosophies that exist in the present regulated power market, which will have to be carefully reexamined in the context of the new deregulated power market.

The first philosophy is the "Let it fail, because the probability of failure is small" or the "Let it fail" philosophy. The second philosophy is the "Protect it, because although the probability is small, the cost of failure is too high", or the "Protect it" philosophy.

The successful electric power company in the new age will be the company that adopts the "Protect it" philosophy in cases where the benefits of protection exceed the cost of protection. The unsuccessful power companies will be those who maintain the "Let it fail" philosophy without evaluating the risks and costs of not adequately protecting their vital lines of communication.

There are a small number of power companies, some are very large and quite well known, who have adopted the "Let it fail" philosophy. The time to reevaluate this philosophy is now, before the free market forces demonstrate what this philosophy can do to critically important electric rates.

Operations and maintenance costs in the new free market will be much more highly scrutinized than they ever were in the past. The cost of failing to provide needed communications protection cannot and will not be tolerated by power companies who wish to remain competitive.

THE COST OF NOT PROTECTING

Let us examine three real world examples from various utility companies that show how the failure to protect communications equipment from a GPR can increase operation and maintenance costs, reduce revenues, and thus result in an increase to the bottom line. The first two examples have to do with providing electric service to large commercial consumers, and the last example has to do with economy interchange of power between generating companies.

In the first example, a large commercial consumer who purchases from 6 to 10 million dollars worth of power monthly has a new smart meter that is read by the supplier through a modem connection. A GPR at the consumer's switchyard could destroy the communications equipment at the consumer's site. In addition, this GPR may damage the smart meter, causing a total loss of metering information.

Of course, the supplier will not suffer a total loss of the value of the power provided to the consumer up to that time, but the supplier will spend a lot of time negotiating a settlement with the consumer and will suffer the loss of the interest on the disputed bill for the period it takes to settle. Typically, in such a case, the supplier would have to settle for a significantly lower payment from the consumer than it would have received, if the meter information had not been lost. The total billing loss may reach upwards of ten percent or up to one million dollars. In addition, the electric company would suffer a loss of interest on the billing amount of up to several thousand dollars per day for the period of the billing dispute.

In the second example, a large commercial consumer has a manufacturing facility that requires highly reliable service and has specifications for fault clearing times in its power sales contract. The fault clearing specifications, if violated, could typically generate penalties to the supplier from $100,000 to $1,000,000 for each event.

The supplier has a telephone communications link between the breaker equipment at each end of the transmission line, which guarantees that the reaction time of the breakers will be fast enough to clear the fault within the contract specifications. However, without the necessary isolation equipment, communications between the two breakers may be lost during a GPR and fail to operate, in addition to probable equipment damage. In this example, the fault would not be cleared within the sales contract specifications and the supplier could typically be hit with a penalty of from $100,000 to $1,000,000.

In the third example, a large generation company makes economy interchanges with a neighboring generation company. In an economy interchange, two generation companies decide which one will supply the next increment of power that either company needs, based on each company's incremental cost. The company that can generate the power more cheaply will increase its generation and the companies will split the savings. For large generating companies, economy interchanges can cut operating costs by millions of dollars per day.

A necessary requirement for economy interchanges is real-time remote metering of all interties with neighboring generating companies. This is required, in order to determine the direction and magnitude of power flow attributable to each generating company. In almost all cases, the metering information at key intertie points is transmitted to each generating company's central dispatching office by redundant wire-line and wireless communications services. The problem is, redundancy does not always guarantee reliability in the event of a GPR. Without the necessary isolation equipment, a GPR will likely destroy the wire-line communications equipment at a critical intertie metering facility. In addition it may damage the metering equipment as well, which then makes the wireless redundant communications system useless.

Without the main information source, there is nothing to transmit on the redundant communications system. In this case, the generating companies do not know who is supplying power to whom in real time. Thus, they cannot make effective economy interchange decisions until the communications and metering equipment is repaired or replaced.

The increased cost of generation for both generating companies could be in the millions of dollars. Too often, companies fail to adequately protect wire-line communications from a GPR because they have redundant wireless communications to fall back on, but failure to protect wire-line communications equipment from a GPR can jeopardize the redundant wireless system as well.

INESCAPABLE CONCLUSIONS

In a deregulated power market, costs will be scrutinized like never before. It is one thing to gamble that the cost of replacing communications equipment damaged by GPR will be lower than the cost of protecting that equipment. However, it is a whole different matter to gamble that the increased costs for system operations, due to the loss of real time information, will be less than the cost of communications protection. It is quite evident that the electric companies utilizing isolation equipment on their wire-line communication facilities will be better prepared to compete head-on in the new age of the deregulated power market.

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