How a public power utility forges the path to a digital future
The New York Power Authority (NYPA) wants to be "the world's first fully-digital utility," even with the drawbacks that come from being a public power entity.
The utility industry is overwhemingly more analog than digital so the push to reinvent itself goes against the model it's had for a century. NYPA CIO Robert Piascik knows it and wants to change it.
"I am not restricted to providing change and thought leadership to just IT," said Piascik, in an interview with CIO Dive.
Utility CIOs more generally are naming digital initiatives, closely followed by operational excellence and cost optimization, as top priorities, according to Gartner. More than one-fifth of utility CIOs are in the scaling phase of digital maturity and 16% are refining their progress.
And yet full blown integration is years away. Utility-specific IT requires assistance from regulators and policymakers to shape transformation in IT and goals.
The progress NYPA makes is often dictated by state initiatives. IT alone doesn't include the tools used for generating data to drive the business. Most recently, NYPA began testing hardware for its Advanced Grid Innovation Laboratory for Energy to uncover additional ways to use upstate wind and hydroelectric energy solutions.
The lab came from one of the four "strategic recommendations" of New York Governor Andrew Cuomo's Energy Highway Task Force, according to NYPA.
"Utilities must pay attention to whether a given IT cost is a capital improvement investment, which positions the company to raise its rates to cover the principal investment plus a set rate of return."
Partner and practice lead for energy at ISG
Utilities craft their decisions based on the ways it would increase rates, to cover costs of operational and maintenance expenses or as part of a more forward-looking initiative. "Utilities must pay attention to whether a given IT cost is a capital improvement investment, which positions the company to raise its rates to cover the principal investment plus a set rate of return," Hack Heyward, partner and practice lead for energy at ISG, said in an email to CIO Dive.
This push and pull creates "capital bias," said Heyward, and makes an enticing case for buying software and hardware for capital improvement despite as a service models working as a better alternative.
Regulators recognize capital bias, which has resulted in slower adoption of as a service solution for the utility industry.
NYPA relies on technology to differentiate how tech can enable electrified vehicles, how it looks at censor deployment, or how it monitors equipment used in asset management. IT has played a fundamental role in how NYPA runs its business and how its shaping its digital future.
Utility digital transformation
As NYPA evolves to become a digital utility or "a digital end-to-end utility," it means all facets of its business require digital renovation, said Piascik. The process includes modernizing support for NPYA's fundamental infrastructure, the business applications and the underlying technology for its networks that connect to IoT devices.
But there is progress. The utility industry has graduated from initiation to scaling.
"While utility business models, particularly in energy, are changing, most digital activity appears to be in optimizing existing processes for cost reduction and operational improvements," Ethan Cohen, senior director analyst at Gartner, told CIO Dive.
Digital transformation enables competitive relevancy for any company in any industry. The companies that aren't making headway in developments or partnerships will lose business to competitors.
Creating a strategic digital roadmap is underway for 40% of electric utility, compared to 46% of gas and 55% of water, according to research from Zpryme. Digitizing distribution and network automation is underway for 62% of electric utility, compared to 54% of gas and 29% of water. The traditional analog backbone has slowed progression, and while the cloud will help, it's treated as an operating expenditure in the regulated field of electric utility, according to Gartner.
"Digital is not a standard, it is a descriptor of business transformation through the merging of people, business and things," said Cohen. "Some utilities may be tempted to declare success in digital transformation by optimizing existing processes."
Piascik's role for NYPA's transformation is changing "beyond my job description of IT leader, it's really leadership on a number of dimensions," he said. He came to NYPA with a background in the public and private sector from Connecticut Municipal Electric Cooperative, Pfizer Pharmaceuticals and Prudential Financials.
There is slight nuance in maintaining existing technologies and pursuing agile solutions for utilities because "there is a need to transform while performing and meet the cost and performance expectations of regulators," said Cohen. The split in operations — between optimization and transformation — means utility CIOs need to have a "divergent approach to top technology investments."
Some of those investments take shape by empowering other companies. In April Gov. Cuomo announced a partnership with New York University Tandon School of Engineering Urban Future Lab to "recruit and support startup businesses pursuing electric vehicle and energy storage technologies," according to the announcement. The partnership is another push New York is making to empower clean energy initiatives while modernizing its grid.
External partners in NYPA's ecosystem have aided the utility to progress in vehicle charging stations on the New York freeway, on- and offshore renewable wind capabilities, and flexible energy environments. "I'm not talking about sharing IT or intellectual property," said Piascik, but NYPA is in a community that shares its experiences with one another.
Entities in the public sector often have their ambitions cooled by industry constraints like budget and workforce, but the power industry is committed to pursuing its long list of digital initiatives.
NYPA has to grapple with the limitations it has as a public power entity. Its goals "must be tempered by the reality of the cost of digital, the benefit of digital and resisting the temptation to digitally wash the business versus produce meaningful business, operational and customer results," said Cohen.
Piascik and his IT team are expected to be as responsive as possible to whatever initiatives are asked of NYPA.
"We want to respond to the governor's executive orders where we want to decarbonize and we want to reduce greenhouse gas emissions, we want to enable electric vehicle adoption," said Piascik.
However, "sometimes we get overzealous," he said, and that's "very natural" to do.
That eagerness often helps when the power entity is working to offset its restraints. Piascik tackles NYPA's challenges by focusing on how IT supports NYPA's digital vision. Anything from how the IT team is organized and what technology it buys relates back to the digital goal.
If the end-to-end vision isn't seen by everyone, "you're going to get a very fragmented and potentially dysfunctional organization," said Piascik. The burden is on the leadership to "over communicate" about collaboration and shifting the focus on the customer.
Piascik compared NYPA's goals to those of Amazon and Google, companies that are constantly sending updates to their services, "we're trying the same thing here," he said. NYPA is organizing how it develops and releases products to customers. "It's demonstrating that its the right thing that NYPA needs" because the product development process is speeding up.
Becoming a digital utility takes more than technical resources, it calls for changes in culture, behaviors, processes and governance. NYPA's digital evolution was built on "the blood, sweat and tears of IT folks who have worked long hours," said Piascik.
A lot of people are comfortable with doing transactional activities and are threatened when learning new applications or ways of accessing information, said Piascik.
The process requires educating NYPA's board of trustees, executive management, committee, business unit leaders and employees on how to effectively use technology and become a "digital worker."
The "shift of any utility, and especially NYPA, from a traditional utility to a digital utility, is shifting the mindset of folks who have been here many years," said Piascik, the ones that are "more accustomed to the more traditional generation and transmission type of utility who feel uncomfortable with digital tools."
Article top image credit: Julian Alexander