If you think the power grid is not vulnerable read this Y2k disclosure from Ameren's latest 10Q. They are Central Illinois Public Service and Union Electric. They will not even be done with the assessment phase until first quarter 1999. Does not leave much time for testing. Planning phase will not be complete until third quarter 1999.
Regards
Stewart V. Nelson
YEAR 2000 ISSUE
The Year 2000 Issue relates to how dates are stored and used in computer systems, applications, and embedded systems. As the century date change occurs,certain date-sensitive systems need to be able to recognize the year as 2000 and not as 1900. This inability to recognize or properly treat the year as 2000 may cause these systems to process critical financial and operational information
incorrectly. The Registrant's primary concern is the potential for any interruption in providing electric and gas service to customers, as well as the potential to be unable to process critical financial and operational information on a timely basis, including billing its customers, if appropriate steps are not taken to address this issue.
Management has developed a Year 2000 plan (Plan)and Ameren's Board of Directors has been briefed about the Year 2000 Issue and how it may affect the Registrant.
The Registrant's Plan to resolve the Year 2000 Issue involves three phases:assessment, planning, and implementation/testing. Implementation of the Plan is directly supervised by each area's responsible Vice President. A Year 2000 Project Director coordinates the implementation of the Plan among functional teams who are addressing issues specific to a particular area, such as nuclear and non-nuclear generation facilities, energy management systems, etc. Ameren has also engaged certain outside consultants, technicians and other external resources to aid in formulating and implementing the Plan.
The Registrant is approximately 95 percent complete with its assessment phase, which included analyzing date-sensitive electronic hardware, software applications and embedded systems and has developed a compliance plan to address issues that were identified. Many of the major corporate computer systems at
Ameren are relatively new and therefore are either Year 2000 compliant or only require minor modifications. Also, several of the operating hardware and embedded systems (i.e. microprocessor chips) use analog technology instead of digital and thus are unaffected by the two-digit date issue. In addition, the
Registrant has contacted hundreds of vendors and suppliers to verify compliance.The assessment phase is expected to be completed by the end of the first quarter 1999.
The Registrant is also approximately 95 percent complete with its planning phase. Items which have been identified for remediation have been prioritized into groups based on their significance to company operations. The implementation/testing phase for all components/applications is approximately 40 percent complete as of September 30, 1998. The Registrant expects to complete remediation of its significant components/applications by the end of the third
quarter 1999.
With respect to third parties, for areas that interface directly with significant vendors, the Registrant has inventoried vendors and major suppliers and is currently assessing their Year 2000 readiness through surveys, websites and personal contact. The Registrant plans to follow up with major suppliers and verify Year 2000 compliance where appropriate. The Registrant has queried its
important suppliers and health insurance providers. To date, the Registrant is not aware of any problems that would materially impact financial condition, results of operations or liquidity. The Registrant has no means of ensuring that these parties will be Year 2000 compliant. The inability of those parties to complete their Year 2000 resolution process could materially impact the Registrant.
The Registrant is also addressing the impact of electric power grid problems that may occur outside of its own electric system. The Registrant has started year 2000 electric power grid impact planning through the system's various electric interconnection affiliations, and is working with the Mid-American Interchange Network (MAIN) to begin planning year 2000 operational preparedness
and restoration scenarios. In addition, the Registrant provides monthly status reports to the North American Electric Reliability Council (NERC) to assist them in assessing year 2000 readiness of the regional electric grid. Through the Electric Power Research Institute (EPRI), an industry-wide effort has been established to deal with year 2000 problems affecting digital systems and
equipment used by the nation's electric power companies. Under this effort,participating utilities are working together to assess specific vendors' system problems and test plans. The assessment will be shared by the industry as a whole to facilitate year 2000 problem solving.
In addressing the Year 2000 Issue, the Registrant will incur internal labor costs as well as external consulting and other expenses related to infrastructure enhancements necessary to prepare for the new century. The Registrant estimates that its external costs (consulting fees and related costs)
for addressing the Year 2000 Issue will range from $10 million to $15 million. As of September 30, 1998, the Registrant has expended approximately $2 million. The Registrant's plans to complete Year 2000 modifications are based on management's best estimates, which are derived utilizing numerous assumptions of future events including the continued availability of certain resources, and
other factors. However, there can be no guarantee that these estimates will be
achieved and actual results could differ materially from those plans. Specific factors that might cause such material differences include, but are not limited to, the availability and cost of personnel trained in this area, the ability to locate and correct all relevant computer codes, and similar uncertainties.
The Registrant believes that, with appropriate modifications to existing computer systems/components, updates by vendors and trading partners, and conversion to new software and hardware in the ordinary course of business, the Year 2000 Issue will not pose significant operational problems for the Registrant. However, if such conversions are not completed in a proper and
timely manner by all affected parties, the Year 2000 Issue could result in material adverse operational and financial consequences to the Registrant, and there can be no assurance that the Registrant's efforts, or those of vendors and trading partners, interconnection affiliates, NERC or EPRI to address the Year 2000 Issue will be successful. The Registrant is in the process of developing
contingency plans to address potential risks, including risks of vendor/trading partners noncompliance, as well as noncompliance of any of the Registrant's material operations. The first operational contingency plan is expected to be completed by year-end. At this time, the Registrant is unable to predict the
ultimate impact of the Year 2000 Issue on the Registrant's financial condition,results of operations or liquidity; however, the impact could be material.
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