Allentown is Pennsylvania's third-largest city with a 100,000-plus population and has often been identified as the bellwether city of the nation. Corporate home to a nationally recognized leader in the energy industry, PPL Corporation (PPL), and to such essential city services as hospitals, police forces, and grocery stores, let's use Allentown's predictive standing to conduct a quick barometer reading on the distributed energy (DE) and overall energy industry. How do utilities regard the expansion of DE? And how are DE traditional users who require absolute reliability of service, such as hospitals, faring?

"The birth of PPL can be reliably dated to June 4, 1920. On that late spring day in the Lehigh Valley, eight utilities serving central eastern Pennsylvania were merged into a single corporate entity that has continued under the same name to this day," recites the 75th anniversary book authored by Bill Beck and dedicated to PPL's history. This utility's corporate headquarters is located in an art nouveau skyscraper in downtown Allentown that at 23 stories was the tallest building between New York City and Pittsburgh when it was built in 1928 and that was featured in 1930s Encyclopedia Britannica.

A dramatic metaphor for the history of America's energy industry, on one side of PPL's Ninth Street address is this grand 1928 structure that houses its traditional "regulated" utility operations, and across the street is an ultra-modern newly constructed building already winning national awards for its innovations, the home of PPL's "unregulated" energy activities. Liberty Property Trust, one of the nation's largest commercial landlords/operators with 54 million square feet of owned and operated commercial/industrial real estate investment trusts, constructed this new building, The Plaza at PPL Center, in 2003.

"This building is a manifestation of PPL's exception to the rule. They are wiling to see the dramatic changes in their industry as a challenge, not as a threat to their core business as a utility. Their forward thinking exceeds that which we see in the general business marketplace but is in keeping with their role as a leader in the energy industry," stresses John Gattuso, senior vice president for Urban and National Development with Liberty Property Trust, who personally oversaw construction of this cutting-edge landmark.

"PPL without question has established a new benchmark in office buildings. Though increasingly deployed in government and nonprofit buildings, the forward-looking approaches of offsite energy generation, sustainable design, and leading-edge construction technology applied on this type of scale in a commercial office space is unusual." Continues Gattuso, "This innovative building wouldn't have been possible without the steady commitment of PPL who in my estimation has recognized we are entering an age of tremendous advancement in building technologies, how those technologies are employed in connection with new buildings, and how those buildings are actually constructed. Again, I am struck by how PPL has embraced the changes in their industry as a positive, not as a negative, to their traditional core business."

DE Perspectives From a Utility Point of View

"PPL's history really reflects the overall history of this industry," muses Doug Krall, manager of regulatory strategy for PPL Electric Utilities, a 31-year veteran of PPL and the utility industry. "We as the regulated guys are very concerned about reliability of service in a different way than the unregulated guys across the street but at the same time have been very involved with the deregulation of our industry.

"Our company was a founding member of the PJM Interconnection LLC [Valley Forge, PA], the oldest regional power grid in the nation. This provided a good foundation upon which Pennsylvania has been able to build a solid deregulation model. In contrast, California, for example, didn't have that type of history to reference when it embarked on deregulation, and it shows in some of the challenges they have had to contend with, challenges we have been able to largely avoid so far.

"As professionals on the regulated side of the industry, DE is not a small issue for us. It is integral to the huge issue of bringing customers reliable energy," emphasizes Krall. He likens DE to his company's early days when "little tiny power companies dotted the landscape of our region through the end of the 1800s. The formation of PPL combined these little companies into one larger company. We are moving to a model as a utility that will have to embrace some of the aspects of our past.

"As a regulated entity, we have to be aware of the effect of customer choice and DE and its effects on our business operations." At its most basic, "our linemen need to know when a business or institution employs DE. Your responsibility jumps a quantum level when you connect to the grid. This is the price of entry, and you have to be prepared to adopt the high level of standards that goes along with it.

"Utilities are sometimes accused of creating barriers to entry to DE, but our view is that the operators of DE need to understand that connecting to an electric grid that is pretty sophisticated and whose users all expect service of high reliability safely delivered and safely managed [is a challenge]. Obviously, understanding the rules of the road for all DE users is critical," stresses Krall. "But once the operational implications are understood by users and utilities both, DE really does not need to be adversarial or be seen as having a negative effect on the industry. In fact, this is the real long-term promise of deregulation of power. We took a real leap of faith in deregulation. As the expression goes, the 'devil is in the details,' a lot of details. If we had tried to solve all those details upfront before we rolled out deregulation, we may have never moved ahead. Deregulation opened up new opportunities for everyone involved, users, providers, everyone.

"Now maybe our positive views of DE," Krall admits, "arise from the relatively smooth rollout of deregulation we experienced in the state in which our corporate headquarters resides. Pennsylvania was one of the first states to move ahead on deregulation. Deregulation does not happen where prices are low - the prices were high enough here that deregulation held promise to offer better pricing, the fundamental economic driver for deregulation. In addition, Pennsylvania's deregulation was characterized by high degrees of vision exhibited by all the players involved from our then-governor Tom Ridge to large customers and electric utilities, working together in a truly collaborative manner," summarizes Krall.

The growth of DE, however, is not simply rooted in customer choice and deregulation. Reliability concerns have often been at the heart of business decisions around DE. "There are three types of service disruption or unreliability from our perspective," Krall points out. "If you have onsite generation, you are protected from any of those events."

Three Types of Service Disruption

Krall goes on to describe the three types of service disruption that users might experience:

• Distribution. "The customer sees it. That is the line in front of your house and involves the distribution of service - trees falling down, storms, and other acts of nature."
• Transmission. "The customer does not see it. The blackouts of August 14, 2003, fall under this type surrounding the transmission of energy. I predict there will be significant changes in the industry as the result of the 2003 blackouts in the same way Three Mile Island and blackouts in the 1960s had a profound affect on how our industry functions."
• Generation. "The customer becomes aware of a disruption periodically, typically in summer when they are appealed to conserve, in extreme cases resulting in rolling blackouts. This revolves around the generation of power."

Hospital Grapples With Increased DE Requirements

Only blocks away from Krall's PPL office sits Bob Gemmell, the maintenance electrician at Allentown's Sacred Heart Hospital, with a quarter of a century at that institution. Sacred Heart is located deep in Allentown's center and has a long and, rich tradition of high-caliber care delivered to city residents. "I've seen huge changes in our requirements for electricity here at the hospital in my 20-plus years here: increased dependence on computers, comfort and operational amenities, and huge increases in electrical devices in patient areas. In the old wards there wasn't much need for electricity. That has definitely changed!" Gemmell emphasizes. "Also, people expect supplemental backup power to include not only life-safety aspects but also comfort or operational expanses like chillers. Air conditioning in the summer is no longer an option but a requirement." The list of "essential" services that must be backed up and supported has gotten dramatically longer during Gemmell's many years of dedicated services at Sacred Heart.

Current DE at this center city health care center includes "two separate feeds from PPL to the hospital. If we lose one feed after any four-second delay - this delay, by the way, is extremely important to make sure your generator doesn't start unless necessary - power automatically switches to the second power feed from PPL. After that, if the second feed fails, we have six units total that start four seconds after any secondary line failure. In the sequence of planned events, that four seconds is really important. The emergency power focuses on life-saving services, but you lose certain conveniences during power interruption." Gemmell, whose obvious dedication to his job shines through, adds, "One thing I will say is the caliber of power from our backup systems [DE] is of much higher quality than in the past. With the new electronic governors that manage the control of speed, we benefit from a more continuous, more even quality of power than from previous generators. That's a definite plus." Gemmel continues, "In my years of planning, installing, expanding, and testing our backup energy systems, some factors have been consistent. One, when we invest in additional backup, is based on current load and requirements plus future needs. Currently we have six total generators. Five are Kohlers: [two] 200-kilowatt, 176-kilowatt, 85-kilowatt, 75-kilowatt; and one is Caterpillar: 200-kilowatt. Two, in our business, you can count on having to change backup configuration constantly. Every three to five years, driven by infrastructure changes here at the hospital, we have made significant changes in our backup capacity and where that capacity is directed. Originally, each one of those generators was installed for a specific purpose that has become more general, supporting all medical office buildings, emergency lighting, receptacles, and related equipment, over time. For example, our 200- and 175-kilowatt [generators] were designated just for the ORs [operating rooms] in the mid-1970s. Our most recent addition was the 200-kilowatt Caterpillar in 1998. Three, in addition to ever-increasing definitions of what constitutes essential services, you have to ensure you have enough load on each generator for it to run efficiently - in my estimation a diesel engine needs a minimum of 50% load to run efficiently; otherwise you risk wet stacking the exhaust with unburned carbons. That's another reason why a family of differesized generators that can flexibly be employed to provide essential backup has worked well for us. Ironically, just yesterday our engineer requested a copy of my last monthly generator test. Every month we test as required by the state Joint Commission for Accreditation of Hospital Organizations. Looks like we are facing yet another expansion of our backup capacity!" laughs Gemmel. "By the way, I can't say enough positive things about the service that PPL provides," Gemmell concludes. "In my quarter of a century of service to the hospital, their service has been excellent with very few power outages in the time I've been here."

Allentown Police Grapple With 9/11 Consequences to DE Emergency Planning

PPL's service collaborators include the Allentown Police Department headed by Chief of Police Joseph Blackburn. "We always had a backup generator for our communications center," points out department representative Captain Joe Hanna. "In the aftermath of 9/11 we have also chosen an alternate and undisclosed location for our communications center in case of any terrorist threat. Also, we are looking into additional repeaters, and we've been in contact with PPL to work with them directly in the case of a terrorist attack. Repeaters essentially expand the transmission range from our squad cars to the communications center so that anywhere an officer may go in the city they can stay in contact. We maintain separate generators for these repeaters. The signal from the center bounces off the PPL tower and then is transmitted to our cars. Without the repeaters you'd have much more limited range; with them you can get to a car almost anywhere in our region greatly maximizing the caliber of service we can provide to our taxpayers."

Grocery Chain Counts on High-Caliber DE Support on Wheels

"We have a backup [100-kilowatt, 480-volt Onan] generator that takes care of lighting and computer systems. In store refrigerators and freezers due to exceptional insulation, it can maintain necessary temperatures from hours to days in the case of power interruption as long as we seal them up. If we see that a power interruption is going to last longer than a few hours, we rely on our company's fleet of refrigeration trucks that do a great job of maintaining freezing and refrigerated temperatures. One store was out for a couple of days, and they had 10 trucks going. But again, that event was caused by natural disaster," points out Kier.

Customer Choice and the Long-Term Promise of DE: Not Just Plain Vanilla Energy Anymore

"If you have onsite generation like Allentown hospitals, police, and food providers," expands PPL's Krall, "you are protected from any type of power interruption event, but what if you go ahead and operate your DE all the time? We have been discussing this and so has the state of Pennsylvania. >As long as we have deregulated the energy business, some have suggested why not go all the way and connect all energy generators, including DE, into an energy pool with everyone selling their surplus into the power grid and drawing down on those energy surpluses when needed. I think the real message of customer choice is that it creates an environment where functionally different choices can be made not just plain vanilla energy for everyone, allowing consumers, for example, to choose environmentally friendly sources of power generation. The real promise of deregulation lies in making possible the fundamental altering of options that are available. DE has existed for a long time, but the idea of DE contributing to the supply for all users is relatively new. Obviously, the environmental impact of lots of little generators may be a cause for concern," admits Krall.

"As an energy utility, we were fully vertically integrated up until the mandates of 1978's Federal Public Utility [Policy] Regulatory Act arose out of the Arab embargo and energy independence was suddenly put on the front burner. This environment created a class of non-utility generators. One-hundred-megawatt culm [anthracite coal waste] burners were an early form of DE in our region built by various power equipment suppliers with subsidies, a number of them in our Pennsylvania coal regions. Typically they burned waste or captured landfill methane. For example, local to our headquarters, there are acres of greenhouses that use the waste heat from power plants burning culm waste." Today, PPL's traditional utility activities have been enormously expanded to include a number of innovative, deregulated power generation activities and are housed across from Krall in the modern emblem of where the energy industry is going. Pete Cleff, manager of energy operations for PPL EnergyPLUS, was PPL's project manager for this innovative building. Just as for Krall deregulation, customer choice, and DE hold enormous creative power generation promise for the industry, the bleeding-edge energy conservation and captured characteristics of this building point to enormous power conservation change on the horizon.

"This is a 'Green Building,'" points out Cleff . "Following very stringent designations for what makes a building 'green,' this structure is 'extremely green!' First, in its use of daylight, we have wall-to-wall glass. Natural light is good for indoor quality of life and dramatically lowers need for electric lights. We've installed daylight responsive lighting controls that measure the amount of external lighing coming in and adjust internal lighting accordingly. Today's technology is outstanding, and this glass insulates well while also blocking out ultraviolet. Second, we have a vegetative roof that provides excellent insulation; keeps the roof surface at a relatively constant temp, which lengthens the life of the roof compared to standard roofs that experience significant temperature fluctuations; and reduces stormwater runoff. The building also has an innovative and extremely efficient HVAC system.

"These features make enormous sense from an energy usage perspective," Cleff points out. "Our overall reduction in electrical usage is 25 to 40% lower than would be typical if we had employed traditional office building construction. Not only are we an energy utility, but we are also a tenant, and energy is a cost to us. Our bottom line was a desired payback of less than five years and we are on track to achieving that. Also, this building reflects PPL's core values - how can we protect the environment both internal for employees and external for the community? Doing our business ethically, responsibly, and while also making money, it can be a win-win."

Healthy buildings mean healthy employees. Humidity and fresh air controls maximize internal air quality. We avoided nasty stuff in any of the solvents or construction materials. Additionally, the construction stresses conservation of materials and resources. Seventy-five percent of the construction debris was recycled and 20% of the material has high recycled content. Also, water efficiency has been stressed, and low water use fixtures save upwards of 500,000 gallons annually. Finally, we paid attention to how the building contributes to the overall health of the city. There is a plaza out in front to create space for the community. We did not use any mirrored glass - opening the ground floor visually up t We are part of the community," stresses Cleff.

Changes Beyond Deregulation and Customer Choice Dictating DE and Energy Industry Realities

Let's go back across the street now and visit with Don Jamison, manager of corporate facilities and PPL's resident expert on the history of its corporate headquarters. Though cutting-edge in its own right when it opened on "July 16, 1928, this building has been modified and gutted many a time to bring itself up to current energy and operational standards," explains Jamison. "It was designed by Harvey Corvett, the skyscraper design pioneer responsible for Rockefeller Center; with onsite design provided by Wallace K. Harrison, responsible himself for the United Nations and Lincoln Center; and outside  relief created by Ukrainian sculptor Alexander Archipenko. The building and its holiday lighting [PPL alternately shades and illuminates windows in the holiday season creating a huge candle motif that can be seen holiday evenings throughout the region] are an icon in the Lehigh Valley. It stands as a cornerstone for downtown Allentown." Despite its iconic standing, the structure has undergone "several major modifications," notes Jamison, reflecting the changes the industry itself has undergone over the years. "We added a centralized chilled water plant connecting all three buildings, replaced our cooling towers at the same time, and have over the years created an energy-conserving automated system throughout. We have coils under the sidewalks that extract and capitalize on heat that would be otherwise wasted. Heat pumps both monitor the temperature of the fluid and release it when the outside temperatures fall, keeping snow and ice off it into the cold sidewalk. Sensors out there that you can see if you know what you are looking for trigger the operation of this system. More than once we have stripped floors and walls to the metal and studs to reconfigure the building for maximized energy conservation." With Jamison as a resident archivist, PPL seems posed for a lifetime of improvements and upgrades to this historic landmark mirroring the continuous changes of the industry it serves. But "if we take a long view of all aspects of the energy industry," concludes Krall, "we need to be mindful of the changes beyond deregulation and customer choice that are dictating our realities.

"The overarching effects of the blackouts of August 14, 2003, are as resonant for the utility industry in the way 9/11 has been for the public at large. Up to this point," explains Krall, "the electric industry has followed self-policing and self-regulation. Post August 14, 2003, the question stands - who is going to be the regulator?

"How the world has changed. We are truly a 24-hour world, in contrast to the world at the time of the blackout of 1965 that generated the voluntary regulation we still use today. Back then the impact was different Today, everything is connected and energy is the connector. The image that stands out for me from the recent blackout was of cities that were completely black except for the islands of light where someone had distributed energy. You don't get a more powerful image of DE than that. "We as a utility have become aware that because of 9/11 customers have increasing concerns surrounding reliability of service. Some want and need to be able to operate though anything: The financial industry wants independent storage in geographically diverse locations; operations like hospitals, law enforcement, and food suppliers must have constant uninterrupted service.

"We also have to be realistic that we can't be perfect, no matter how well we plan. Things will happen. No one is probably willing to pay for the true cost of perfect reliability. Even with redundant supply, no one is protected if the problem arises from transmissions as it did during the August blackout. But as a utility that plans on being in business over the long haul, we have to pay attention to all of these realities, all of these concerns," concludes Krall. And in this industry DE holds answers and much promise, not just in Allentown but for the country it reflects.

SIOBAHN BENNETT is a frequent contributor to Forester publications on business and

DE - July/August 2004