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PRELIMINARY MARKET ASSESSMENT & OUTLOOK :

Real-time Automation & Controls in the North American Electric Utility Marketplace (2003-2007)

Michael A. Marullo, Director

Strategic Market R&D

InfoNetrix LLC

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Presentation Topics

Market Intelligence ‘101’ Marketplace Characteristics Principal Market Focus: RTAC Prevailing Market Conditions Future Market Outlook Market Dynamics 7 Signs of Market Evolution Supplier Dynamics Other Observations & Conclusions

Market Intelligence ‘101’ Marketplace Characteristics Principal Market Focus: RTAC Prevailing Market Conditions Future Market Outlook Market Dynamics 7 Signs of Market Evolution Supplier Dynamics Other Observations & Conclusions

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Market Intelligence ‘101’

InfoNetrix Market Horizons™ Reports

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Market Planning & Positioning Launch a new product or product line Learn what prospective buyers want, need & expect Expand or change your geographical presence

Competitive Analysis Identify new, existing or emerging competition Evaluate sales/marketing channel alternatives Understand market leadership, shares & penetration

Business Planning & Diversification Initiate an acquisition, merger or divestiture Understand market changes and change with them Identify new markets, applications & solution sets

Market Planning & Positioning Launch a new product or product line Learn what prospective buyers want, need & expect Expand or change your geographical presence

Competitive Analysis Identify new, existing or emerging competition Evaluate sales/marketing channel alternatives Understand market leadership, shares & penetration

Business Planning & Diversification Initiate an acquisition, merger or divestiture Understand market changes and change with them Identify new markets, applications & solution sets

Using Strategic Market Data

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2003 Market Study Parameters

Electric Utilities in U.S. & Canada Transmission & Distribution Management Solutions

EMS (i.e., Network Security Applications) TMS (Transmission SCADA/AGC) GMS (Merchant Power & Divested Gen Assets) DMS (Including Distribution Automation T&D Substation Automation Field Data Devices (RTUs & ‘RTU-like’ Devices)

Base Year: 2002 (constant US dollars) 5-Year Outlook Period: 2003-2007 Calendar Year Bookings Confidentiality!

Electric Utilities in U.S. & Canada Transmission & Distribution Management Solutions

EMS (i.e., Network Security Applications) TMS (Transmission SCADA/AGC) GMS (Merchant Power & Divested Gen Assets) DMS (Including Distribution Automation T&D Substation Automation Field Data Devices (RTUs & ‘RTU-like’ Devices)

Base Year: 2002 (constant US dollars) 5-Year Outlook Period: 2003-2007 Calendar Year Bookings Confidentiality!

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RTAC Market Horizons™ Report

REPORTREPORT

1: Executive Summary1: Executive Summary

2: Marketplace Characteristics2: Marketplace Characteristics

3: Drivers, Issues & Trends3: Drivers, Issues & Trends

4: Future Market Outlook4: Future Market Outlook

5: Supplier Environment5: Supplier Environment

REPORTREPORT

1: Executive Summary1: Executive Summary

2: Marketplace Characteristics2: Marketplace Characteristics

3: Drivers, Issues & Trends3: Drivers, Issues & Trends

4: Future Market Outlook4: Future Market Outlook

5: Supplier Environment5: Supplier Environment

APPENDICESAPPENDICESA: Abbreviations

B: Glossaries

C: Relevant Organizations, Publications & Events

D: Supplier Listings

E: Application Descriptions

F: Utility Restructuring

G: Electric Competition in the States: A Summary

H: Standards References

APPENDICESAPPENDICESA: Abbreviations

B: Glossaries

C: Relevant Organizations, Publications & Events

D: Supplier Listings

E: Application Descriptions

F: Utility Restructuring

G: Electric Competition in the States: A Summary

H: Standards References

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Marketplace Characteristics

Marketplace Structure & Composition

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are needed to see this picture.

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Marketplace Characteristics

1 10 100 1000 10000FPA REC SM MUNI MUNI LG PROV LG IOU C&I

~3,500+ Electric Utilities (USA & Canada)

CCAANNAADDAA

UUSSAA

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Marketplace Characteristics

Deregulation Status Deregulation Status (2000)(2000)

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Principal Market Focus

Real-time Automation & Controls (RTAC)

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GMSGMSEMSEMS

TMSTMS

FIELD DATADEVICES

(FDDs)

RTACSYSTEMS

DISTRIBUTIONSYSTEMS

TRANSMISSIONSYSTEMS

SSASSA

TMSRTUs

Transmission RTUs

RTAC Market Organization

EMS/GMS RTUs

RTAC

Remote Terminal Units (RTUs)

Distribution RTUs

Substation Controllers (SSCs)

DMSDMS

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RTAC Market Snapshot

Transmission-level Systems EMS - Heavily tied to ISO/RTO plans & progress GMS - No major changes from 2002 forecast TMS - Expected short-term spending jump; then flattening out TMS - Most likely will track TMS profile (above)

Distribution-level Systems DMS - Sustained growth after blackout hysteria subsides DA - Good growth, especially among smaller utilities Substation Automation - Ramping up demand over 5 years

Field Data Devices (RTUs, SSCs & RTU-like devices) New generation of IEDs & SSCs continued to hammer RTUs Continued downward ASP pressure for entire outlook period Increasing demand for standard, cheap ‘commodity’ devices Communications flexibility surpassing basic I/O issues

Transmission-level Systems EMS - Heavily tied to ISO/RTO plans & progress GMS - No major changes from 2002 forecast TMS - Expected short-term spending jump; then flattening out TMS - Most likely will track TMS profile (above)

Distribution-level Systems DMS - Sustained growth after blackout hysteria subsides DA - Good growth, especially among smaller utilities Substation Automation - Ramping up demand over 5 years

Field Data Devices (RTUs, SSCs & RTU-like devices) New generation of IEDs & SSCs continued to hammer RTUs Continued downward ASP pressure for entire outlook period Increasing demand for standard, cheap ‘commodity’ devices Communications flexibility surpassing basic I/O issues

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Prevailing Market Conditions

110965 • 071377 • 070296 • 081096 • 062598

081403081403

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Prevailing Market Conditions

NOV 09, 1965 ≤13 Hours NY, CT, MA, RI, PA, NJ + ON (Canada)

JUL 13, 1977 ≤26 Hours NYC

JUL 02, 1996 Minutes to Hrs AZ, CA, CO, ID, MT, NE, NV, NM, OR, SD, TX, UT, WA, WY AB, BC (Canada) Baja California Norte (Mexico)

AUG 10, 1996 ≤9 Hours AZ, CA, CO, ID, MT, NE, NV, NM, OR, SD, TX, UT, WA, WY AB, BC (Canada) Baja California Norte (Mexico)

JUN 25, 1998 ~19 Hours MN, MT, ND, WI ON, MB, SK (Canada)

NOV 09, 1965 ≤13 Hours NY, CT, MA, RI, PA, NJ + ON (Canada)

JUL 13, 1977 ≤26 Hours NYC

JUL 02, 1996 Minutes to Hrs AZ, CA, CO, ID, MT, NE, NV, NM, OR, SD, TX, UT, WA, WY AB, BC (Canada) Baja California Norte (Mexico)

AUG 10, 1996 ≤9 Hours AZ, CA, CO, ID, MT, NE, NV, NM, OR, SD, TX, UT, WA, WY AB, BC (Canada) Baja California Norte (Mexico)

JUN 25, 1998 ~19 Hours MN, MT, ND, WI ON, MB, SK (Canada)

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Prevailing Market Conditions

A dark night to remember…

It shouldn't happen every evening, but a crisis like the lights going out has its good points. In the first place it deflates human smugness about our miraculous technology, which, at least in the area of power distribution and control, now stands revealed as utterly flawed. I have never regarded as trustworthy many of the appurtenances of modern America; automatic elevators, for example, have always chilled me with their smooth mindlessness -- and it is somehow delicious to contemplate the fact that all our beautiful brains and all those wonderful plans and all that marvelous equipment have combined to produce a system that is unreliable.

A dark night to remember…

It shouldn't happen every evening, but a crisis like the lights going out has its good points. In the first place it deflates human smugness about our miraculous technology, which, at least in the area of power distribution and control, now stands revealed as utterly flawed. I have never regarded as trustworthy many of the appurtenances of modern America; automatic elevators, for example, have always chilled me with their smooth mindlessness -- and it is somehow delicious to contemplate the fact that all our beautiful brains and all those wonderful plans and all that marvelous equipment have combined to produce a system that is unreliable.

THE VIEW FROM HERE by Loudon Wainright;

Life Magazine, Vol. 59 No. 2 (19 November 1965)

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Prevailing Market Conditions

August 14, 2003, 11:15PM EST

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Prevailing Market Conditions

Potential business benefits achievable

Pro

xim

ity t

o c

ore

busi

ness

PC Maintenance

Remote Metering

Internet

Systems integration

SCADASCADA

External ApplicationDevelopment Call Center

Operation

Asset Management

SOURCE: DATAMONITORSOURCE: DATAMONITOR

Impact & Importance of SCADA Among Utilities

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Prevailing Market Conditions

Political Hyperbole…Political Hyperbole… “The cascading nature of this blackout offers an object lesson of how

the electricity grid requires regional coordination and planning, a challenge the nation is still striving to meet”

- FERC Chairman Patrick H. Wood III

“It appears that the cascading power outages throughout the Northeast only reinforce our need to focus on reliability and transmission infrastructure development rather than creation of a new national market system. The power grid system was built to provide electricity to local customers, and a national market system is not feasible without significant infrastructure additions.”

- Senator Richard C. Shelby (R-AL)

“… a final bill will include a provision to delay implementation of any FERC plan on regional transmission organizations until 2005” - An assurance reportedly given to Shelby by Pete V. Domenici (R-NM), Senate Energy & Natural Resources Committee Chairman. (House leaders have not agreed to this, aides said.)

Political Hyperbole…Political Hyperbole… “The cascading nature of this blackout offers an object lesson of how

the electricity grid requires regional coordination and planning, a challenge the nation is still striving to meet”

- FERC Chairman Patrick H. Wood III

“It appears that the cascading power outages throughout the Northeast only reinforce our need to focus on reliability and transmission infrastructure development rather than creation of a new national market system. The power grid system was built to provide electricity to local customers, and a national market system is not feasible without significant infrastructure additions.”

- Senator Richard C. Shelby (R-AL)

“… a final bill will include a provision to delay implementation of any FERC plan on regional transmission organizations until 2005” - An assurance reportedly given to Shelby by Pete V. Domenici (R-NM), Senate Energy & Natural Resources Committee Chairman. (House leaders have not agreed to this, aides said.)

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Future Market Outlook

Preliminary Market Assessment (Sept ‘03)

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5-Year Market Perspective (2002 Report)

0

50

100

150

200

250

300

350

400

450

2002 2003 2004 2005 2006 2007

T&D Systems Field Devices

$Mil

$258.7

??

?

?$262.6 (Est.)

Down by 10-12%

from 2002 Forecast

Down by 10-12%

from 2002 Forecast

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Preliminary 2003 Market Assessment

$0.0

$20.0

$40.0

$60.0

$80.0

$100.0

$120.0

2002 2003

EMS/GMS TMS DMS

$0.0

$20.0

$40.0

$60.0

$80.0

$100.0

$120.0

2002 2003

EMS/GMS TMS DMS$Millions$Millions

Mitigating Factors:Mitigating Factors:

• Economic UncertaintyEconomic Uncertainty

• Political Turmoil (+ Iraq)Political Turmoil (+ Iraq)

• Downward ASP PressureDownward ASP Pressure

• Stalled Energy LegislationStalled Energy Legislation

• Security ConcernsSecurity Concerns

• ISO/RTO/SMD DelaysISO/RTO/SMD Delays

Mitigating Factors:Mitigating Factors:

• Economic UncertaintyEconomic Uncertainty

• Political Turmoil (+ Iraq)Political Turmoil (+ Iraq)

• Downward ASP PressureDownward ASP Pressure

• Stalled Energy LegislationStalled Energy Legislation

• Security ConcernsSecurity Concerns

• ISO/RTO/SMD DelaysISO/RTO/SMD Delays

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RTAC Systems Market (2002 Report)

RTAC market includes…

Energy Management Systems

(EMS) - Network Security &

Market Systems Interface

Generation Management

Systems (GMS) - EMS w/o

transmission applications

Transmission Management

Systems (TMS) - SCADA/AGC &

Substation Automation (SSA)

Distribution Management

Systems (DMS) - SCADA,

Distribution Automation (DA) &

SSA

RTAC market includes…

Energy Management Systems

(EMS) - Network Security &

Market Systems Interface

Generation Management

Systems (GMS) - EMS w/o

transmission applications

Transmission Management

Systems (TMS) - SCADA/AGC &

Substation Automation (SSA)

Distribution Management

Systems (DMS) - SCADA,

Distribution Automation (DA) &

SSA

$0.0

$20.0

$40.0

$60.0

$80.0

$100.0

$120.0

$140.0

2001 2002 2003 2004 2005 2006

EMS/GMS TMS DMS

$0.0

$20.0

$40.0

$60.0

$80.0

$100.0

$120.0

$140.0

2001 2002 2003 2004 2005 2006

EMS/GMS TMS DMS

CAGR = 9.3% ($)CAGR = 9.3% ($)

$Millions$Millions

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Q1 & Q3-2003 Projects (3-30 Months)

1

10

100

1000

10000

100000

No of Projects Total $Value

Q1 SystemsQ1 RTUQ1 CommsQ1 ConsultingQ2 SystemsQ2 RTUQ2 CommsQ2 Consulting

Q1 Q2

Q1 Q2

386 Projects @ $137.7 Million386 Projects @ $137.7 Million

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Market Dynamics

Market Drivers, Issues & Trends

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Market Dynamics

Principal Market Drivers Politics & Fear! Security (NERC-1200) Do more with less mantra Demand for Interconnectivity

Host level• Mainly ICCP

Network Level• DNP

• Modbus

• IEC 60870

• CEIDS (Feeder level)

Regulatory Bodies FERC (USA) Provincial (Canada)

Return to financial stability

Principal Market Drivers Politics & Fear! Security (NERC-1200) Do more with less mantra Demand for Interconnectivity

Host level• Mainly ICCP

Network Level• DNP

• Modbus

• IEC 60870

• CEIDS (Feeder level)

Regulatory Bodies FERC (USA) Provincial (Canada)

Return to financial stability

Key Issues & Trends Security & Reliability Continued Uncertainties

Market Economic Investment Recovery

Holistic Solution Sets Simple Intuitive Inexpensive (with ROI)

PBR & Accountability Return to Stable Operations

Commercially Technically Physically

Key Issues & Trends Security & Reliability Continued Uncertainties

Market Economic Investment Recovery

Holistic Solution Sets Simple Intuitive Inexpensive (with ROI)

PBR & Accountability Return to Stable Operations

Commercially Technically Physically

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Market Dynamics

Challenges Suppliers

Security Survival in a down market Cost reduction strategy Transition from leased comm

lines to newer tech Downward price pressure

Utilities Security Mandates Cope with reduced staff &

resources Assimilate acquisitions Return to core business and

core values Preparation for next round of

restructuring Blackout prevention/recovery

Challenges Suppliers

Security Survival in a down market Cost reduction strategy Transition from leased comm

lines to newer tech Downward price pressure

Utilities Security Mandates Cope with reduced staff &

resources Assimilate acquisitions Return to core business and

core values Preparation for next round of

restructuring Blackout prevention/recovery

Critical Success Factors Price & ROI Open standards & open

integration at all levels Reliability & Reputation for:

Quality service & support Proper applications and

skillful execution Delivery of tangible value

Ability to augment good products with good services

Viable migration path to next generation technologies and applications

Emphasis on Business Case

Critical Success Factors Price & ROI Open standards & open

integration at all levels Reliability & Reputation for:

Quality service & support Proper applications and

skillful execution Delivery of tangible value

Ability to augment good products with good services

Viable migration path to next generation technologies and applications

Emphasis on Business Case

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Market Dynamics

1. Regulatory Policy & Governance

2. Economics & Investment

3. Technology/Integration/Standardization

4. Data Integrity & System Security

5. Web & Wireless Solutions

6. Enterprise Asset Management (EAM)

7. Customer Care & Satisfaction

1. Regulatory Policy & Governance

2. Economics & Investment

3. Technology/Integration/Standardization

4. Data Integrity & System Security

5. Web & Wireless Solutions

6. Enterprise Asset Management (EAM)

7. Customer Care & Satisfaction

SIGNSSIGNS™™

of Market Evolution

TheThe

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1. Regulatory Policy & Governance

2002-2003: Solid but Modest Recovery Looming security issues (NERC-1200) FERC moves still fail to assure solid

investment incentives; SMD delayed Utilities returning to core business Blackout shining a light on need for

investments; TDMS gaining ground 2004-2007: Good to Excellent Growth

Traditional solutions to transmission constraints won’t pass muster

Wall St. likes return to core business Investment funds available for ROI Economic recovery appears good PBR continues to gain momentum

2002-2003: Solid but Modest Recovery Looming security issues (NERC-1200) FERC moves still fail to assure solid

investment incentives; SMD delayed Utilities returning to core business Blackout shining a light on need for

investments; TDMS gaining ground 2004-2007: Good to Excellent Growth

Traditional solutions to transmission constraints won’t pass muster

Wall St. likes return to core business Investment funds available for ROI Economic recovery appears good PBR continues to gain momentum

SIGNSSIGNS™™

of Market Evolution

TheThe

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2. Economics & Investment Issues

Transmission

Short-term (1-2 yr) spending increases

Knee-jerk reaction to blackout

Flattening out after 2004

Distribution

More emphasis on customer service

Some RECs may cash out

Return to Core Utility Market

Improving investment outlook

Increasing management mind-share

Reduced staff = more outsourcing

Transmission

Short-term (1-2 yr) spending increases

Knee-jerk reaction to blackout

Flattening out after 2004

Distribution

More emphasis on customer service

Some RECs may cash out

Return to Core Utility Market

Improving investment outlook

Increasing management mind-share

Reduced staff = more outsourcing

SIGNSSIGNS™™

of Market Evolution

TheThe

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3. Technology, Integration & Standardization

Technology Windows still #1, BUT Linux on the rise Outsourced design, integration & support Next generation RTU/SSC designs in 2003 RCM/CBM slowed (temporarily?)

Integration Enterprise Application Integration (EAI)

making inroads… slowly

Enterprise Asset Management (EAM) still a

mystery to most… yet all agree it’s vital!Standardization

DNP (still) rules and…

UCA is (still) UCA , but:

IEC 60870 gaining momentum

Technology Windows still #1, BUT Linux on the rise Outsourced design, integration & support Next generation RTU/SSC designs in 2003 RCM/CBM slowed (temporarily?)

Integration Enterprise Application Integration (EAI)

making inroads… slowly

Enterprise Asset Management (EAM) still a

mystery to most… yet all agree it’s vital!Standardization

DNP (still) rules and…

UCA is (still) UCA , but:

IEC 60870 gaining momentum

SIGNSSIGNS™™

of Market Evolution

TheThe

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4. System Integrity & Data Security

System Integrity

Web & Wireless• Data access/distribution questions loom

• RCM/CBM negatively impacted

• Web-based control a non-issue (for now)

Corporate I/T networks for real-time?

• Rationalization of R/T with I/T still a

mixed bag; no clear directions yet

Data Security Issues

Access by non-ops personnel

Corporate I/T prioritization

System Integrity

Web & Wireless• Data access/distribution questions loom

• RCM/CBM negatively impacted

• Web-based control a non-issue (for now)

Corporate I/T networks for real-time?

• Rationalization of R/T with I/T still a

mixed bag; no clear directions yet

Data Security Issues

Access by non-ops personnel

Corporate I/T prioritization

SIGNSSIGNS™™

of Market Evolution

TheThe

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5. Web & Wireless Solutions

Web Data access/distribution questions loom

RCM/CBM heavily impacted

Web-based control a non-issue (for now)

Rationalization of R/T with I/T still a

mixed bag; no clear directions yet

Wireless

Coverage improvements driving use

Definitely impacted by security issues

Problem resolution will come

Web Data access/distribution questions loom

RCM/CBM heavily impacted

Web-based control a non-issue (for now)

Rationalization of R/T with I/T still a

mixed bag; no clear directions yet

Wireless

Coverage improvements driving use

Definitely impacted by security issues

Problem resolution will come

SIGNSSIGNS™™

of Market Evolution

TheThe

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6. Enterprise Asset Management

It’s all the buzz!!!

Everybody says it’s hot, BUT

Hardly anyone seems to

know what it is, AND

Of those who think they do…

They all have different ideas

Soooo

Stay tuned for further

developments!

It’s all the buzz!!!

Everybody says it’s hot, BUT

Hardly anyone seems to

know what it is, AND

Of those who think they do…

They all have different ideas

Soooo

Stay tuned for further

developments!

SIGNSSIGNS™™

of Market Evolution

TheThe

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7. Customer Care & Satisfaction

OMS - continuing good

growth

PBR - Still gaining ground

CIS/CRM - Redefinition phase

OMS - continuing good

growth

PBR - Still gaining ground

CIS/CRM - Redefinition phaseSIGNSSIGNS™™

of Market Evolution

TheThe

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Competitive Environment

Supplier Dynamics

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Suppliers To Watch

Rising OSI - Open Systems International OpenSoft (Pi Historian) Reliatronics (embedded RTUs) Survalent Technology (Canada) Telemetric (radio-modem)

Falling Hathaway/Systems Northwest (Danaher) LogicaCMG (UK) SchlumbergerSema (Convergent Group)

Changing ATS - now Microsol (Ireland) Metso - Now Telvent (Spain)

Re-entry Invensys

Rising OSI - Open Systems International OpenSoft (Pi Historian) Reliatronics (embedded RTUs) Survalent Technology (Canada) Telemetric (radio-modem)

Falling Hathaway/Systems Northwest (Danaher) LogicaCMG (UK) SchlumbergerSema (Convergent Group)

Changing ATS - now Microsol (Ireland) Metso - Now Telvent (Spain)

Re-entry Invensys

(Or, were they pushed?)QuickTime™ and aGIF decompressor

are needed to see this picture.

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How well you focus…

…will determine your reality

Albuquerque, NM • Birmingham, AL • Houston, TX • Jacksonville, FL • Menlo Park, CA

New Orleans, LA • Phoenix, AZ • Pittsburgh, PA • Portland, ME • Sacramento, CA

San Francisco, CA • Midlands (UK)

N E W O R L E A N S • S A C R A M E N T O

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PRELIMINARY MARKET ASSESSMENT & OUTLOOK :

Real-time Automation & Controls in the North American Electric Utility Marketplace (2003-2007)

Enjoy the Conference!