Energy Insights Examines the Energy Bill and its Impact on IT

FRAMINGHAM, MA – AUGUST 3, 2005 – Energy Insights' latest newsletter, In the Know, dissects the $14.5 billion energy bill and what it means for IT, in the article entitled, "AT LONG LAST– SENATE AND HOUSE APPROVE ENERGY BILL."

"After years of little or no growth, the U.S. energy industry is at a turning point, and the passage of this energy bill into law will accelerate the new growth trend. Part of that growth will undoubtedly come from new technologies that are required to meet new standards and that are developed and deployed to maximize market potential," predicts Rick Nicholson, VP of Research for Energy Insights.

The House and Senate have approved a $14.5 billion energy bill. President Bush is expected to sign the bill into law quickly. The passage of the bill ends a legislative standoff that has cast a shadow over the Bush administration since its beginning. More importantly, it provides a clear future direction for the industry, something that has been lacking over the past 13 years. There are a number of key provisions in the bill that have the potential to impact IT investments by the energy industry:

— Mandatory reliability standards. The bill calls for a national electric organization to enforce mandatory reliability standards. Since energy companies have a history of reacting to regulatory requirements by spending money up front to ensure compliance and avoid penalties later, we expect this provision to drive increased spending for asset management processes and technologies, better network automation and control systems, and other intelligent grid initiatives. Bolstering this spending is another provision that provides tax incentives to spur investment in transmission assets by providing accelerated depreciation.

— Repeal of the Public Utility Holding Company Act (PUCHA). The energy bill also includes the repeal of the 70-year-old Public Utility Holding Company Act, which has been an impediment to energy company mergers and acquisitions. The repeal of PUHCA will attract new investment capital to the industry and accelerate M&A activity. Since nearly all mergers rely on IT for a significant portion of the planned synergy savings, we expect this provision to put CIOs increasingly in the spotlight in their role as enablers of business and IT cost savings.

— Encouraging construction of gas pipelines. Provisions of the bill provide incentives for adding to the gas infrastructure. New pipelines can be depreciated at 15 versus 20 years, and FERC will now be the lead agency in processing and permitting. We expect this to have an impact on spending on construction project and contract management as well as on asset management areas.

— Time-based rates and smart metering. Eighteen months after the enactment of the bill, electric utilities are required to offer their customers time-based rates (time of use, critical peak pricing, real-time or dynamic pricing, interruptible rates). "The time-based rate schedule shall enable the electric consumer to manage energy use through advanced metering and communications technology." We expect this provision to lead to the installation of smart metering devices – advanced metering systems that support two-way communications – and meter data management systems to handle the significant increase in meter data.

Energy Insights' VP of Research, Rick Nicholson, and Director of Energy Wholesale Strategies, Jill Feblowitz are open for press interviews regarding the energy bill and its impact on IT. To request an interview, please contact Paul St. John, 508-935-4760 or pstjohn@energy-insights.com.

About Energy Insights

Energy Insights, an IDC Company, provides energy industry executives with research-based advisory and consulting services that enable energy companies to maximize the business value of their technology investments, minimize technology risk through accurate planning, benchmark themselves against industry peers, adopt industry best practices for business/technology alignment, make more informed technology decisions and drive technology-enabled business innovation.

Energy Insights provides full coverage of the energy industry value chain from upstream to retail activities. Staffed by senior analysts with significant technology experience in the energy industry, Energy Insights provides a portfolio of offerings that are relevant to both IT and business needs.

Founded in January 2005, Energy Insights is headquartered in Framingham, Mass. Visit http://www.energy-insights.com for more information.

IDC is a subsidiary of IDG, the world's leading IT media, research, and exposition company.

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