A
Business-to-Business Framework for Energy Markets
Introduction
The
headlines are full of stories citing the many faults of
deregulation in the energy industry, from Enron to California.
Deregulation, however, has had some noteworthy but less
publicized success stories, such as the Texas deregulated
electricity market’s use of open standards including ebXML.
Because of the success in Texas to develop infrastructure
standards that enable the market to operate in near real-time
efficiency, ebXML is now poised to provide the
business-to-business technical framework for other energy markets
worldwide undergoing deregulation or liberalization.
The
successful implementation of ebXML, an international
business-to-business framework, in Texas (as well as in
Australia) has prompted the development of an international
standard framework for energy markets in the International
Electrotechnical Commission (IEC). IEC is the global organization
that prepares international standards for all electrical,
electronic and related technologies. This article provides an
overview of the ebXML-based IEC framework for deregulated
electricity market communications, a work in progress in IEC’s
Technical Committee 57, Workgroup 16, but begins with the Texas
story.
Background on utility
deregulation
In
order to appreciate the success of deregulation in Texas and the
role of its technical infrastructure standards, one must first
understand the radical changes taking place in deregulated energy
markets. Compare a vertically integrated utility model with a
deregulated (unbundled) model, which helps describe the technical
infrastructure used in Texas to support the deregulated market
model.
One
only needs to examine the dramatic affect on prices of long
distance telephone service to get a sense for the anticipated
benefits of a deregulated energy market. Competition by long
distance telephone carriers ensures that prices reflect the real
value of long distance services. As a result of deregulation,
prices for long distance calls have fallen from levels as high as
US$ 0.35 per minute, or more, to less than 0.05 per minute. Some
regulators within the energy industry believe a similar drop in
consumer prices is possible with electricity and natural gas
markets, if competition and market forces are allowed to take
hold. However, some energy companies and regulators still
disagree that energy prices will result in lower prices. It may
be awhile before sufficient empirical data is available to answer
the question completely.
In
states where energy markets remain regulated it is common to find
vertically integrated utilities, where the utilities provide
one-stop shopping for customers. A customer simply needs to make
one call to the local utility company to sign up for service,
report outages, and pay their monthly bills. The utility company
typically has its own internal departments for generating power,
transporting and distributing power, billing, meter reading and
servicing customer accounts. As one can imagine, all of
these functions are interdependent and information must be passed
between the various departments to ensure the reliable delivery
of power and a seamless experience for the customer. Frequently,
the same IT organization is responsible for ensuring that data
passes between the various departmental systems in an orderly and
timely manner.
In
a deregulated energy market everything changes! The functions in
the energy supply chain (generation, transmission, distribution,
billing, meter reading and customer service) are frequently
unbundled. Instead of separate departments performing the various
functions, deregulation requires separate companies to carry out
these same functions, in many cases opening the door to
competition.
Companies
are free to produce energy and sell it on an open market.
Resellers frequently purchase power and resell it to customers
that were once formerly serviced by the local utility company.
Some functions typically remain regulated even in deregulated
markets, for example, the company that owns the wires used to
carry electricity to residences and commercial properties. All of
the companies engaging in the competitive functions (primarily
generation and energy sales) are given equal (non-discriminatory)
access to these network resources.
The
once relatively simple act of moving data between departmental
systems within a single company becomes a much more complex task
in a deregulated market where separate companies, IT
organizations and systems are required to exchange data across
the entire energy supply chain. Of course, all of these changes
must be accomplished with no negative impact to the reliable
delivery of power, and made as seamless as possible to the
consumer. Deregulation causing customer dissatisfaction or
(worse) consternation, may force public utility commissions to
take action.
As
a result, companies participating in deregulated energy markets
need to carefully design and develop inter-company business
processes and technical standards to support the exchange of
information. For established vertically integrated utilities that
are subject to deregulation, this will likely require replacement
of the old vertically integrated business processes/procedures
with inter-company equivalents. In many cases this process
involves a pioneering effort, treading where the local utility
company and others have never gone before. It can be a daunting
challenge, but imperative in order for deregulation to work in
the energy industry.
Texas – A success story
While
many factors led to the success of the deregulated Texas
electricity market, this article will focus on one success
factor, the solution for inter-company business processes and
data exchange.
When
the Texas market first went into live production in January 2002,
most companies used File Transfer Protocol (FTP) for
communicating critical business transactions. Market participants
needed to send and retrieve all of their business data to and
from a central mailbox on a clearinghouse hub. The Transmission
System Operator for the high voltage electric grid in Texas,
known as the Electric Reliability Council of Texas or ERCOT
operated this hub. As volumes began to increase on the ERCOT hub,
lost and duplicate transactions began to place significant
demands on human resources and the situation rapidly approached
an unmanageable state. In fact, ERCOT’s volumes began to
exceed 15 million transactions per month.
Moreover,
the transactions handled by ERCOT are often mission-critical in
nature. Many of the transactions affect a customer’s change
of supplier, billing and other functions vital to the market. It
became apparent that FTP did not provide the robust reliability
and tracking mechanisms needed by ERCOT to manage the growing
monthly transaction volumes and a replacement for FTP was needed.
The FTP Replacement Project
In
August of 2001 ERCOT initiated a project to replace FTP with a
more reliable and robust business-to-business solution. ERCOT
identified several key requirements, which proved influential in
the decision to use a combination of ebXML and a North American
Energy Standards Board (NAESB) business-to-business solution,
called the Electronic Delivery Mechanism (EDM).
As
often found with Internet-based business-to-business
implementations security and reliability ranked high on the list
of requirements, which included:
Access
control to prevent unauthorized access
Confidentiality
to prevent snooping of sensitive information
Authentication
to ensure the identity of the party sending a transaction
Integrity
to ensure that the business data was not altered in any way
Guaranteed-once-only
delivery to prevent duplicates
Positive
delivery acknowledgements to ensure that transactions are
delivered and provide tracking information for auditing purposes
Open
industry standards to ensure broad vendor support
Maturity
of the chosen solution to minimize risk of cutting edge
technology
Support
from market participants in Texas
Auditability
of the entire business-to-business process
Easy
integration with existing technology infrastructure at ERCOT and
market participant sites (ERCOT sought a “drop in”
replacement for FTP)
ERCOT
hired a consulting firm with extensive expertise in the energy
industry, Systrends Inc., to lead the FTP Replacement project.
After reviewing several business-to-business alternatives,
Systrends recommended a multi-protocol business-to-business
solution using a combination of the ebXML Message Service and
NAESB EDM.
The
NAESB EDM solution had been used through the North American
Natural Gas marketplace since 1997 and had proven to be a robust
solution for “push only” or push-push communications.
Many market participants in Texas had already implemented a NAESB
EDM solution and this became a natural choice for ERCOT. However,
the NAESB EDM solution lacked the ability to support the
push-pull mode currently in use by ERCOT and other market
participants using FTP. ERCOT’s decision was to replace the
push-pull functionality of FTP with an ebXML equivalent. This
allowed ERCOT to support the portion of the market that required
push-push using NAESB EDM and the other portion of the market
that preferred a push-pull solution using ebXML.
The
push-push and push-pull modes of communication define the way
trading partners send and receive data. The push-push mode
requires each trading partner to send data directly to the other
trading partners online server (each party must have a server
online 24x7 to receive data). The push-pull mode indicates that
the receiving party does not operate an online server and cannot
receive incoming data. All data destined for the recipient must
be stored in a mailbox until the recipient is ready to receive
the data. The trading partner whose data is stored in the mailbox
initiates a "retrieve" function to pull data from their
mailbox, usually at specified intervals (e.g. once per day, once
per hour). Many value added networks (VANs) provide mailbox
services to companies using electronic data interchange (EDI) to
exchange business transactions.
ERCOT’s
FTP Replacement project is nearing its final migration and all
market participants are expected to replace their FTP solutions
with ebXML or NAESB EDM by the end of 2003.
European Union Adopts Energy
Deregulation; promotes IEC Standards
The
European Union continues to evolve from a loose conglomeration of
separate countries into a cohesive economy with a single
currency, the Euro, and freer markets, especially in electricity.
The EU countries faced similar issues with deregulation as in
Texas, and like their Texas counterparts, adopted ebXML as part
of their solution.
The
challenges facing the European Union with regard to electric
industry deregulation are not that different from those facing
the United States. In the U.S. individual states maintain
jurisdictional control over certain aspects of electricity
markets, while Federal agencies regulate those aspects of the
market that cross state boundaries (e.g. interstate transmission
grids and pipelines).
In
a manner similar to the natural gas industry in the United
States, companies operating in the European electricity markets
decided to establish their own organizations to develop standards
for the deregulated electricity market. The European Transmission
System Operators (ETSO) focused on developing a set of standards
for scheduling of transmission capacity across the entire EU
electrical grid. The European Federation of Energy Traders (EFET)
established a standard for contract terms and conditions. The
Council of European Electricity Regulators (CEER) provides
consistent rules to help guide the development of a single EU
electricity market.
An
organization long known for its reputation as a standards body,
the International Electrotechnical Commission (IEC), launched an
effort under its Technical Committee 57 to develop a framework
for deregulated electricity market communications within
Workgroup 16 (WG16). This initiative focuses on the development
of a complete technical framework focusing on the entire
functional stack needed for business-level process integration
across enterprises.
The
framework is conceptually similar to the ISO OSI Network model in
which lower layers describe the functions that provide data
transport while the higher layers of the framework describe the
business processes, terminology and semantics.
Each
layer of the IEC WG16 framework uses recognized industry
standards appropriate to each layer. For example, ebXML’s
Message Service provides the functionality needed at the lowest
layer of the framework which needs reliable data exchange. Early
research by the WG16 members into the use of ebXML in the energy
industry led to the discovery of ERCOT’s ebXML
implementation, offering evidence of a working solution in the
Texas market matching the specifications and requirements defined
by WG16.
The
full range of ebXML standards are proving useful to the WG16
framework, including:
Core
Components to define common business elements and semantics
Business
Process Specifications to define the expected behavior of
individual business processes
Collaboration
Protocol Profile and Agreements to describe the operational
rules of engagement between two parties
Registry
and Repository for storing and retrieving information needed to
engage in e-commerce transaction processing
The
UN/CEFACT modeling methodology endorsed by ebXML to graphically
describe business processes used in the deregulated energy
markets.
The
IEC initiative to develop a single framework for deregulated
electricity market communications is still in its early stage of
development. However, significant support is being seen across
the EU from entities such as ETSO, EFET and the European forum
for Energy Business Information eXchange (EBIX). There is still a
significant amount of work remaining, but the IEC WG16 framework
is already having a profound affect on energy market
business-to-business solutions across the European Union.
Dick
Brooks (http://www.tech-comm.com/dbc/) is an international business-to-business and cyber
security expert with extensive experience in the energy industry.
He was one of the original authors of ebXML’s Message
Service Specification and is a long standing member of the North
American Energy Standards Board. He was recently appointed to
serve as a U.S. representative to the IEC WG 16 initiative to
develop a single framework for deregulated electricity market
communications. He can be reached at dick@tech-comm.com.
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