With little more than 10 months to go, the question on everyone's mind is whether or not the lights will stay on come Jan. 1, 2000. But, as I found out at a recent industry conference, we'll get to know the answer to that question much sooner than New Year's Day. On Sept. 8 and 9, the entire North American electrical system will operate as if it were running in the year 2000.

That test will be the culmination of years of hard digging to unearth the menace to the nation's electrical supply posed by the changeover of electronic clocks to 01/01/00. "If there's power on

Sept. 8 and 9, it's likely you'll have power come January," says Dave Swanson of the

Edison Electric Institute

, the industry's trade association.

Swanson can afford to be a little lighthearted, thanks to the industry's all-out effort to meet a self-imposed June deadline for its Y2K readiness. According to a recent report from the

North American Electric Reliability Council

(NERC), there are few critical problems in the over 5,000 entities involved in electrification. "The types of impacts found so far include incorrect dates in event logs and displays, but

these do not appear to affect the ability to keep generators and power-delivery facilities in service and electricity supplied to customers," reads the report prepared for the

Department of Energy

.

According to EEI's Swanson, over 98% of utility organizations in the U.S. and Canada are active in the NERC preparedness program and most are ahead of schedule. "Over 40% of plants have already set their clocks forward and operated in the next century," says Swanson.

Only as Good as Your Weakest Link

The reason the upcoming tests -- a limited test in April precedes the early September one -- are so important rests in the national electric grid. The North American power system consists of three regions: the "Eastern interconnection," which covers the eastern two-thirds of the U.S.; the "Western interconnection," which connects states from the Rocky Mountains to the Pacific Ocean; and the "ERCOT interconnection," which covers most of Texas.

All three interconnections are highly connected electrical networks. As such, a major outage at one of the utilities in the interconnection could have repercussions far from home. Two recent examples provide evidence of the potential shock waves:

  • As chronicled last year, the June power price spikes were the result of a convergence of numerous factors including major generation outages in Illinois and Ohio. The outages of plants operated by Unicom (UCM) and AEP (AEP) - Get Report caused a power shortage throughout the upper Midwest -- which reverberated throughout the Eastern interconnection.
  • Damage to a San Francisco area PG&E (PCG) - Get Report substation in November caused capacity problems along the entire Pacific Coast. Power was lost in a significant portion of northern California, and the effects of the outages were felt as far north as Portland and as far south as Mexico.
  • While EEI's Swanson does not think the Y2K phenomenon could cause system-wide outages, he leaves open the possibility for limited problems. "The failure of one subsystem in San Francisco did cause the failure of others," he acknowledges. "However, the way the grid is designed you can usually divert demand from one substation to another when an outage occurs."

The NERC analysis focuses on the importance of the interconnects in assuring Y2K readiness. As one utility insider admits, "We can do everything possible to be ready for 2000. But, if the utility next door isn't ready, it could be lights out for us both."

What About the Munis and Co-ops?

Concerns are obviously centered on the smaller municipalities and cooperatives in the power chain. Nevertheless, they say they are up to the challenge. "In spot checks, we have found no 'show-stoppers,'" says Eleanor Miller of the

National Rural Electric Cooperative Association

. She says 94% of all co-ops will be Y2K-ready by June.

According to the

American Public Power Association

(APPA), municipal power systems are in equally good shape. "The average Y2K readiness date is June 1999 for our medium and larger systems," says spokeswoman Madalyn Cafruny, "while 87% of the smaller public power systems report that attaining Y2K readiness will not be a problem."

And yet problems among the remaining 13% of small municipal systems and 6% of the cooperatives cannot be ruled out. Says Mike McClure, coordinator for

Southern's

(SO) - Get Report

Y2K project, "Anytime you deal with a broad group of companies -- munis, co-ops and even smaller IOUs -- you wonder if they are addressing the appropriate issues."

Concerned Enlightenment

While the disaster scenarios seem overdone, at least one industry observer thinks the hype has served a valuable purpose. "It's been overhyped, but it's created a big concern," says Michael Hyland, who heads APPA's Y2K preparations. "That's not so bad. It got everyone on board, focused and working together to solve the problems quickly."

While confident, no utility insider is willing to say Jan. 1 will come without a glitch. "Will all the issues be resolved and all problems be anticipated and fixed in time?" questions a reflective Michael Goodroe, general manager of Georgia's

Sawnee Electric Membership Cooperative

. "No one can stand here and claim that. No one."

What do you think? Shoot me an

email, and we'll post your thoughts in an upcoming column. If the power's flowing, that is.

Christopher S. Edmonds is the president of Resource Dynamics, a private financial consulting firm based in Atlanta. At the time of publication, Edmonds holds a position in Southern Company. Under no circumstances does the information in this column represent a recommendation to buy or sell stocks. While he cannot provide investment advice or recommendations, he welcomes your feedback at invest@cjnetworks.com.