Atmos Energy 1998 Annual Report Download - page 49

trollers or microchips embedded in non-information technology-
related equipment.
With respect to information technology (“IT”) systems, the
Company has conducted an inventory of and is evaluating and
reviewing its application software on all platforms such as the
mainframe, local area network and personal computers. Concerning
non-IT systems, including embedded technology, the Company
has conducted an inventory of and is reviewing and evaluating all
of its telecommunications, security access and building control
systems, forms, reports and other business processes and activities
as well as the equipment and facilities utilized in the Company’s
gas distribution and storage systems. In addition, several members
of the Year 2000 Project Team have completed training on an
American Gas Association-sponsored database relating to testing
of embedded technology. This database will help expedite the
review and compliance efforts related to embedded technology.
The Company’s Year 2000 plan includes specific timetables
for the following categories of tasks for each of its shared services
units and business units with respect to both IT systems and
embedded technology as follows:
■Identification of Year 2000 issues – substantially completed;
■Prioritization of Year 2000 issues – substantially completed;
■Estimation of total Year 2000-related costs – in process and to
be completed by December 31,1998;
■Implementation of Year 2000 solutions – in process and to be
completed by May 31,1999;
■Testing of Year 2000 solutions – in process and to be completed
by September 30,1999;
■Certification of Year 2000 compliance by third party vendors
and suppliers – in process and to be completed by September
30,1999;
■Monitoring of all systems for changes in current systems that
would require changes in Year 2000 plan – in process and to
be completed by September 30,1999;
■Development of Year 2000 contingency plans – in process and
to be completed by March 31,1999; and
■Final Year 2000 tests – to be conducted starting September 30,1999.
The Company is also currently in the process of conducting
an inventory and review of computer systems provided by out-
side vendors. The Year 2000 Project Team is contacting all vendors
to coordinate their Year 2000 compliance schedules with those of
the Company. The Company is requiring vendors who provide
mission critical goods or services to submit to the Company their
compliance plans and to certify compliance in order to continue
to do business with the Company. As discussed, the Company is
also in the process of testing vendor products that provide mission
critical goods or services to ensure their Year 2000 compliance. In
addition, the Company has identified its key suppliers, including
gas suppliers, and is communicating with them for the purpose of
evaluating the status of their solutions to their respective Year
2000 issues. The expected date of completion of these procedures
is September 30,1999.
Costs to Address Year 2000 Issues As of September 30,1998, the
Company had incurred a total of less than $300,000 in fees and
expenses in connection with its Year 2000 efforts. The Company
currently expects to spend no more than $1.0million directly on
its Year 2000 efforts by December 31,1999. As part of its normal
systems upgrade in the ordinary course of business, the Company
is in the process of replacing its customer information system,
accounting and financial reporting system, and human resources
system with systems that happen to be Year 2000 compliant.
However, the installation of these systems was not accelerated in
an attempt to deal with the Year 2000 issues.
Risks of Year 2000 Issues and Contingency Plans The Company
has identified what it believes are its most significant worst case
Year 2000 scenarios. These scenarios are (i) interference with the
Company’s ability to receive and deliver gas to customers; (ii)
interference with the Company’s ability to communicate with
customers; and (iii) the temporary inability to send invoices to
and receive payments from customers.
The most likely primary business risk associated with the Year
2000 issues is the Company’s ability to continue to transport and
distribute gas to its customers without interruption. In the event
the Company and/or its suppliers and vendors are unable to
remediate the Year 2000 issues prior to January 1,2000, operations
of the Company could be significantly impacted. In order to miti-
gate this risk, the Company is developing a contingency plan to
continue operations through manual intervention and other pro-
cedures should it become necessary to do so. Such procedures are
expected to include back-up power supply for its critical distribu-
tion and storage operations and, if necessary, curtailment of supply.
The Company’s storage capacity could be used to supplement
system supply in the event its suppliers can not make deliveries.
The Company expects to complete its operational contingency
plan by March 31,1999.
With respect to the communications with customers, which is
heavily reliant on services provided by third parties, the Company
is in the process of evaluating Year 2000 compliance by such third
parties and will be developing contingency plans to address any
worst case scenarios that may be determined after such evalua-
tions are complete. Concerning the billing and payment systems, as
previously discussed, the Company is in the process of replacing
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ATMOS ENERGY CORPORATION