Atmos Energy 1999 Annual Report Download - page 30

Atmos
Energy
Corporation
26
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—completed;
•Prioritization of Year 2000 issues—completed;
•Estimation of total Year 2000-related costs—completed;
•Implementation of Year 2000 solutions—completed;
•Testing of Year 2000 solutions—completed;
•Certification of Year 2000 readiness by third party vendors and
suppliers—completed;
•Monitoring of all systems for changes in current systems that
would require changes in Year 2000 plan—completed;
•Development of Year 2000 contingency plans—completed;
•Final Year 2000 tests—began October 1, 1999, and ongoing,
including the Clean Management Program.
The Company has also conducted an inventory and review of
mission critical computer systems provided by outside vendors and
has contacted all major vendors to coordinate their Year 2000 readi-
ness schedules with those of the Company. The Company has
required vendors who provide mission critical goods or services to
submit to the Company their readiness plans and to certify readiness
in order to continue to do business with the Company. As discussed
above, the Company has also tested vendor products that provide
mission critical goods or services to ensure their Year 2000 readiness.
In addition, the Company has identified its key suppliers, including
gas suppliers and gas pipelines, and has communicated with them,
including conducting on-site visits, for the purpose of evaluating the
status of their solutions to their respective Year 2000 issues.
Costs to Address Year 2000 Issues As of September 30, 1999, the
Company had incurred a total of over $900,000 in direct fees and
expenses in connection with its Year 2000 efforts. The Company
expects to spend approximately $1.0 million in direct fees and
expenses on its Year 2000 efforts by December 31, 1999. In addition,
as part of its normal systems upgrade in the ordinary course of busi-
ness, the Company has replaced its customer information system,
accounting and financial reporting system, and human resources sys-
tem. Although these systems are Year 2000 ready, the replacement of
these systems was not accelerated to 1999 solely in an attempt to
address Year 2000 issues.
Risks of Year 2000 Issues and Contingency Plans As required by
the United States Securities and Exchange Commission (“SEC”), the
Company has identified what it believes are its “most reasonably likely
worst case Year 2000 scenarios.” These scenarios are (i) the temporary
interference with the Company’s ability to receive gas from upstream
suppliers and deliver gas to customers; (ii) the temporary interference
with the Company’s ability to communicate with customers regarding
any problems with service they may encounter; and (iii) the temporary
inability to send invoices to and receive payments from customers.
The “most reasonably likely worst case scenario” associated with
the Year 2000 issues would be the Company’s temporary inability to
continue to transport and distribute gas to its customers without inter-
ruption. In the event the Company and/or its suppliers and vendors
were unable to remediate critical Year 2000 issues prior to January 1,
2000, the ability of the Company to deliver gas to its customers with-
out interruption could be impacted. In order to address this scenario,
the Company has developed contingency plans to continue to deliver
gas primarily through manual intervention and other procedures
should it become necessary to do so. Such procedures include back-up
power supply for its critical distribution and storage operations, manu-
al operation of the Company’s gas distribution and storage systems,
and, if necessary, curtailment of supply. The Company’s storage capac-
ity would be used to supplement system supply in the event its suppli-
ers or gas pipelines are unable to make deliveries.
With respect to communications with customers, which is heavily
reliant on services provided by third parties, the Company has evaluat-
ed Year 2000 readiness by such third parties and has continued to
refine its contingency plans to address any worst case scenarios.
Concerning the billing and payment systems, as previously discussed,
the Company has replaced its customer information system, account-
ing and financial reporting system, and human resources system with
systems that are Year 2000 ready, which should substantially diminish
the risk of Year 2000 issues. Nevertheless, the Company has devel-
oped contingency plans and has continued to refine such plans in case
the billing and payment systems prove not to be Year 2000 ready.
Despite the Company’s efforts, there can be no assurance that all
material risks associated with Year 2000 issues relating to systems and
embedded technology within its control will have been adequately
identified and corrected before the end of 1999. However, as the
result of its Year 2000 plan and the replacement of the customer
information system, accounting and financial reporting system, and
human resources system in 1999, the Company does not believe that