Paul, OTOT *** Y2K readiness of Pacific Gas & Electric Co.
I requested information from the company and here's their reply.
PG&E's efforts indicate the are diligently addressing the problem.
The caveats in the 10Q report are standard disclaimers.
Gottfried
Subject: RE: year 2000 readiness
Date: Thu, 12 Nov 1998 08:42:27 -0800
From: "David, John B" <John.david@pge-corp.com>
To: 'Gottfried Mauersberger'" <maugott@pacbell.net>
CC: "Kaplan, David" <david.kaplan@pge-corp.com>
Mr. Mauersberger:
Thank you for interest in PG&E Corporation and its preparedness for the
Year 2000. In response to your questions, I would direct you to a
section of our web site which discusses the company's Y2K program at
pge.com
In addition, PG&E Corporation's latest quarterly filing with the
Securities and Exchange Commission includes disclosure about our Y2K
program, which I have attached below.
Please let us know if we could be of further assistance.
Sincerely,
John B. David
PG&E Corporation
Investor Relations
(415) 267-7080
Fax (415) 267-7265
YEAR 2000:
The Year 2000 issue exists for the Corporation because many software and
embedded systems use only two digits to identify a year in a date field,
and were developed without considering the impact of the upcoming change
in the century. Some of these systems are critical to our operations
and business processes and might fail or function incorrectly if not
repaired or replaced with Year 2000 ready products. By "ready", we mean
that the system is remediated so that it will perform its essential
functions. We define "software" as both computer programming that has
been developed by the Corporation for its own purposes ("in-house
software") and that purchased from vendors ("vendor software").
"Embedded systems" refers to both computing hardware and other
electronic monitoring, communications, and control systems that have
microprocessors within them.
Our Year 2000 project focuses on those systems that are critical to
our business. By "critical" we mean those systems the failure of which
would directly and adversely affect our ability to generate or deliver
our products and services or otherwise affect revenues, safety, or
reliability for such a period of time as to lead to unrecoverable
consequences. For these critical systems, we have adopted a phased
approach to address Year 2000 issues. The primary phases include:
(1) an enterprise-wide inventory, in which systems critical to our
business are identified; (2) assessment, in which critical systems are
evaluated as to their readiness to operate after December 31, 1999;
(3) remediation, in which critical systems that are not Year 2000 ready
are made so, either through modifications or replacement; (4) testing,
in which remediation is validated by checking the ability of the
critical system to operate within the Year 2000 time frame; and
(5) certification, in which systems are formally acknowledged to be Year
2000 ready, and acceptable for production or operation.
Our Year 2000 project is proceeding generally on schedule. For
in-house and vendor software, we have completed the inventory phase and
have identified approximately 1,000 critical systems. Additional
software that requires Year 2000 remediation may be discovered as we
continue with the assessment, remediation, and testing phases. We
estimate that roughly 40 percent of identified, critical, in-house
software has been remediated, with completion of remediation of
remaining in-house software scheduled for the end of 1998. We estimate
that roughly 10 percent of critical vendor software has been remediated
and received. Our corporate milestone for receipt of all remediated
vendor software is March 1999. We plan to finish testing remediated
in-house and vendor software by May 1999 and expect to complete the
certification phase for software by July 1999.
We also have completed the inventory of all embedded systems,
although additional embedded items that require Year 2000 repair or
replacement may be discovered as we continue with the assessment,
remediation, and testing phases. Remediation of all critical embedded
systems is planned to be completed by April 1999. We expect to finish
testing of these remediated systems by August 1999, and plan to complete
the certification phase for embedded systems by October 1999.
We are testing remediated software and embedded systems both for
ability to handle Year 2000 dates, including appropriate leap year
calculations, and to assure that code repair has not affected the base
functionality of the code. Software and embedded systems are tested
individually and where judged appropriate will be tested in an
integrated manner with other systems, with dates and data advanced and
aged to simulate Year 2000 operations. Testing, by its nature, however,
cannot comprehensively address all future combinations of dates and
events. Therefore, some uncertainty will remain after testing is
completed as to the ability of code to process future dates, as well as
the ability of remediated systems to work in an integrated fashion with
other systems.
We also depend upon external parties, including customers, suppliers,
business partners, gas and electric system operators, government
agencies, and financial institutions, to reliably deliver their products
and services. To the extent that any of these parties experience Year
2000 problems in their systems, the demand for and the reliability of
our services may be adversely affected. The primary phases we have
undertaken to deal with external parties are: (1) inventory, in which
critical business relationships are identified; (2) action planning, in
which we develop a series of actions and a time frame for monitoring
expected external party compliance status; (3) assessment, in which the
likelihood of external party Year 2000 readiness is periodically
evaluated; and (4) contingency planning, in which appropriate plans are
made to be ready to deal with the potential failure of an external party
to be Year 2000 ready.
We have completed our inventory of external contacts and have
identified more than 1,000 critical relationships. We soon will
complete the action-planning phase for each of these entities.
Additional critical relationships may be entered into or discovered as
we continue. Assessment of Year 2000 readiness of these external
parties will continue through 1999. We expect to complete contingency
plans for each of these critical business relationships by July 1999.
We plan to develop contingency plans for our critical software or
embedded systems for which we determine Year 2000 repair or replacement
is substantially at risk. For example, if the schedule for repairing or
replacing a non-compliant system lags and cannot be re-scheduled to meet
certain milestones, then we expect to begin an appropriate contingency
planning process. These contingency plans would be implemented as
necessary, if a remediated system does not become available by the date
it is needed. In addition, as described above, we plan to develop
contingency plans for the potential failure of critical external parties
to fully address their Year 2000 issues.
We also recognize that, given the complex interaction of today's
computing and communication systems, we cannot be certain that all of
our efforts to have all critical systems Year 2000 ready will be
successful. Therefore, irrespective of the progress of the Year 2000
project, we are preparing contingency plans for each subsidiary and
essential business function. These plans will take into account the
possibility of multiple system failures, both internal and external, due
to Year 2000 effects.
These subsidiary and essential business function contingency plans
will build on existing emergency and business restoration plans.
Although no definitive list of scenarios for this planning has yet been
developed, the events that we considered for planning purposes include
increased frequency and duration of interruptions of the power,
computing, financial, and communications infrastructure. We expect to
complete first drafts of these subsidiary and essential business
function contingency plans by the beginning of 1999. We anticipate
testing and revision of these plans throughout 1999.
Due to the speculative nature of contingency planning, it is
uncertain whether our contingency plans to address failure of external
parties or internal systems will be sufficient to reduce the risk of
material impacts on our operations due to Year 2000 problems.
The Corporation currently is revising and refining its procedures for
tracking and reporting costs associated with its Year 2000 effort. From
1997 through September 1998, we have spent approximately $80 million to
assess and remediate Year 2000 problems. About $60 million of this cost
was for software systems that we replaced for business purposes
generally unrelated to addressing Year 2000 readiness, but whose
schedule we advanced to meet Year 2000 requirements. The replacement
costs for these accelerated systems were capitalized.
We estimate that our future costs to address Year 2000 issues will be
approximately $180 million. About $50 million of these remaining Year
2000 costs will be capitalized because they relate to the purchase and
installation of systems for general business purposes and the remaining
$130 million will be expensed. As we continue to assess our systems and
as the remediation, testing, and certification phases of our compliance
effort progress, our estimated costs may change. Further, we expect to
incur costs in the year 2000 and beyond to remediate and replace less
critical software and embedded systems. We do not believe that the
incremental cost of addressing Year 2000 issues will have a material
impact on the Corporation's or the Utility's financial position or
results of operation.
The Corporation's current schedule is subject to change, depending on
developments that may arise through further assessment of our systems,
and through the remediation and testing phases of our compliance effort.
Further, our current schedule is partially dependent on the efforts of
third parties, including vendors, suppliers, and customers. Delays by
third parties may cause our schedule to change. There also are risks
associated with loss of or inability to locate critical personnel to
remediate and return to service the identified critical systems. We may
fail to locate all systems critical to our business processes that
require remediation. A combination of businesses and government
entities may fail to be Year 2000 ready, which may lead to a substantial
reduction in a demand for our energy services.
Based on our current schedule for the completion of Year 2000 tasks,
we believe our plan is adequate to secure Year 2000 readiness of our
critical systems. We expect our remediation efforts and those of
external parties to be largely successful. Nevertheless, achieving Year
2000 readiness is subject to various risks and uncertainties, many of
which are noted above. We are not able to predict all the factors that
could cause actual results to differ materially from our current
expectations as to our Year 2000 readiness. If we, or third parties
with whom we have significant business relationships, fail to achieve
Year 2000 readiness with respect to critical systems, there could be a
material adverse impact on the Utility's and the Corporation's financial
position, results of operations, and cash flows.
-----Original Message-----
From: Gottfried Mauersberger
[mailto:maugott@pacbell.net]
Sent: Tuesday, November 10, 1998 9:23 PM
To: invrel@pge-corp.com
Subject: year 2000 readiness
Dear Mr Kaplan, can you please direct me to any reports or press releases discussing PG&E's readiness to deal with Y2K issues, especially where uninterupted service to customers is concerned? As you know, the web is full of rumors and I would like to counter them with facts.
Regards Gottfried Mauersberger
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