EDI fit to survive in competitive retail energy markets

Dana Bacciocco, Associate Editor

While electronic data interchange (EDI) primarily evolved outside the energy industry, it remains an information sharing staple in competitive retail electric and natural gas markets.

EDI as traditionally known will continue to exist for a potentially long time; reason why is that it works-although maybe not as well or as inexpensively as users want it to, according to Peter Tebbenhoff, global energy manager at TIBCO.

“Certainly with the emergence of standards around XML, UML, and SOAP, one has the ability to create much more robust standard frameworks, not nearly as rigid as EDI,” said Tebbenhoff.

But EDI should not disappear quickly.

“EDI has been adopted as practically a ‘standard standard’ for it’s ability to work in different industries and transfer significant amounts of data in a very structured manner,” said Nate Owen, president and CEO of Energy Services Group.

Although energy markets began to unbundle five years ago, moving power from generator to meter still required cooperation and structured communication among parties involved in the process. This was a dilemma for the new energy market.

Different states have addressed data exchange protocols differently, a reflection of the unique operating rules found within their respective regions or power pools. A critical consideration from the start has been the sheer amount of data that must be transmitted to service millions of customers. EDI’s scalability and organized structure was appealing. Pennsylvania led the development of EDI protocols, alongside collaborative groups in Massachusetts, and California. There is considerably more work to do in developing the data exchange protocols for competitive markets.

EDI inroads led to an infrastructure that could support communications between market participants in competitive natural gas and electricity services. However, EDI uniformity varied by power pool and region.

“When Massachusetts, California and Pennsylvania were deregulating all at the same time, they each worked, for the most part in isolation, developing their own standards. All three states participated in the Utility Industry Group (UIG) Deregulation Task Team, however, they still ended up with three very different sets of standards,” said Kim Wall, director of market development at Energy Services Group.

“Since that time, many of the new states have been building on what was learned before them,” said Wall. “When the Coalition for Uniform Business Rules (CUBR) developed a set of standard electronic transactions, new states used them as a starting point for their own development.”

According to Wall, six states (Del., Md., N.J., Ohio, Pa., Va.) and the District of Columbia recently formed FREDI-First Regional EDI Working Group-aiming to combine the standards of all members, and highlighting differences between states. As the group matures, the hope is for each member state to have FREDI approve changes to standards before implementation. FREDI has full support of commission staff in each state, said Wall.

Scaling away

EDI does have its problems; the value added network (VAN) transmission mechanism-with its specialized hardware and usage fees, is one of the more onerous problems. Unfortunately, EDI can not be scrapped for something like XML since EDI’s implementation has been so widespread throughout competitive markets and embraced by regulatory agencies, said Owen.

For the sheer volume of data flowing in a competitive market, EDI is still the most efficient method of transfer. XML carries the baggage of limited scalability and the need for a descriptive data dictionary to accompany each data transmission.

“That said, EDI is in transition-one of the more important transitions it has gone through recently is EDI on the Internet,” said Owen. Gas Industry Standards Board, Electronic Delivery Mechanism (GISB EDM) protocol is essentially that. Pennsylvania was the first state to mandate the protocol-which eschewed the VAN in favor of the Internet’s HTTP-hypertext transfer protocol.

While EDI keeps its place in high-volume data transfer among market participants, Owen said that XML is growing as the protocol of choice for internal systems. Energy companies use a variety of functional systems; and vendors are building XML adapters to bridge disparate internal systems.

Drivers’ seat

Driving data exchange standardization for retail energy are the needs of energy suppliers and multi-state utilities. “Setting up business systems in the energy market is difficult to begin with, but setting up different systems for each market or even each state, becomes too costly to do business. Energy suppliers gain the most benefit from statewide or regional standards, with multi-state utilities not far behind,” said Wall.

While internal IT systems embrace XML, other external connections, like those following the trend in collaboration, online trading, CRM, and e-procurement, are marching to different drums.

Some trading exchanges, like ICE, Altra, and TradeSpark, are not exactly clamoring for standards, said Tebbenhoff. It might be a fear of commoditization of their venues. In the area of trading, vendors seem to be pushing for standardization. Electronic procurement marketplaces, like Pantellos, are being driven toward standards by consortia of users.

There seems to be agreement that where energy market structures and business processes are changing, and efficiency is the name of the game, there is a customer, somewhere, driving that change.

Owen can be reached at 800-773-3298 or via e-mail at Nowen@EnergyServicesGroup.net

Wall can be reached at 610-799-2740 or via e-mail at Kwall@EnergyServicesGroup.net

Tebbenhoff can be reached at 603-471-0116 or via e-mail at petert@tibco.com.

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