By law, the Tennessee Valley Authority can’t sell the 165 billion kilowatt-hours of electricity it generates each year beyond a designated seven-state area. But competitors can come into those states and take business away from the government-owned company.

To fight back, the nation’s largest wholesale producer of electricity is launching a bold new e-commerce strategy that combines private and public business-to-business marketplaces with a unified supply chain asset-management system that was installed in a multiyear project.

The Knoxville, Tenn.-based TVA plans to use a private marketplace that went live in June to service the 158 local power companies that distribute its electricity, while pushing internal procurement activities and purchases made on behalf of the distributors through a public exchange that it joined late last month.

The backbone of the plan is the reworked supply chain system, and the stakes are high. “We have to find every efficiency in our business in order to stay alive,” said Diane Bunch, senior vice-president of information services. “We can’t [just] try e-commerce. We have to make it work.”

According to Gary Ownsby, the TVA’s e-commerce procurement project manager, the installation of Atlanta-based Indus International Inc.’s PassPort software has given the authority a common set of supply chain processes. The installation was completed last month, giving every TVA facility a view of product inventories throughout the company.

PassPort also lets the TVA “punch out” information from its back-office system to a business-to-business marketplace using XML protocols and a real-time Web interface, said Ownsby. Once a purchase order is executed in the marketplace, the data is routed back to the TVA system.

When Pantellos Group LP, the TVA’s chosen public exchange, upgrades its MarketSite software from Pleasanton, Calif.-based Commerce One Inc. next month, Ownsby added, the electricity generator will be able to directly send data between that marketplace and its private one. That could be used for things such as comparing buy and sell prices on the two exchanges, he said.

Ultimately, the TVA plans to receive orders for poles, transformers and wiring from power distributors through its private marketplace and then fulfil the orders using the accrued buying power that The Woodlands, Tex.-based Pantellos is expected to provide.

In a project related to the PassPort one, the Unix-based supply chain system has been tied to an Oracle Corp. work management system using MQSeries messaging middleware.

“When we get a work order at one of our plants, [the Indus software] will check our inventory companywide to see if we have the right materials,” Bunch said. “And if we don’t, it will then punch out [a purchase order] to the marketplace.”

Thus far, very few companies have managed to figure out a role for both public and private on-line exchanges, let alone make them work in harmony, said Dean Nelson, a consultant at Deloitte & Touche LLP in Wilton, Conn. The TVA “is definitely one of the first to put that kind of architecture together,” Nelson said. And like the TVA officials, he noted that supply chain improvements are key to such projects.

Elcom Inc. in Norwood, Mass., designed the TVA’s private marketplace using its Pecos software and is hosting the exchange. The only applications distributors need to use the marketplace are an Excel spreadsheet and a Web browser, Ownsby said.

The TVA didn’t customize PassPort or Pecos in any way, he added. “That runs the cost of the software up, as well as the cost of revisions. When we went shopping, we decided it had to work out of the box.”

An Open-Source Portal on the Front End…

With major IT projects involving new marketplaces, a unified supply chain system and middleware messaging software in its budget, the TVA didn’t have a lot of money left to spend on a Web page.

So the company built its own business-to-business portal using open-source technology to keep costs low.

Buying more expensive off-the-shelf portal software was “the one thing we could put off,” said Doug Wielfaert, the TVA’s manager of Internet services. And as it turns out, he added, you can build a perfectly decent start-up business-to-business portal based on open-source products.

The TVA used an Apache Web server that’s linked to its Unix business systems. To create common gateway interfaces, it chose Mason HQ, a Perl-based development and delivery engine that handles functions such as data caching, debugging and templating.

Separate passwords are currently needed for the customer service, on-line billing and private marketplace features offered on the portal. But Wielfaert said the TVA is looking to bolt on a security product to create a single sign-on and access policy manager.

…And a New Data Warehouse on the Back End

The TVA’s next step, one that will affect many of its 13,000 employees, is to build a Web-enabled data warehouse for the huge amounts of information created by its systems.

The authority’s wide-area network is processing 21TB of data a month, an 82 per cent increase from last summer due largely to increased business use of the Internet. Currently, information gets stored in separate departmental silos.

“Like it or not, our application strategy has been best-of-breed, and it’s getting to the point where we need to pull all that different data together,” said Diane Bunch, the TVA’s senior vice-president of information services.

The data warehouse will be built on IBM Corp.’s DB2 database running on a mainframe, with IBM’s Shark disk arrays handling storage. Information will be pulled from various systems, stored centrally and made available for analysis through a series of smaller warehouses and data marts.

Bunch said the first phase of the project, involving the TVA’s financial and performance management systems, is due to be completed by next June, although the amount of data that will be stored hasn’t been finalized.

Bunch is also using the data warehouse project as an opportunity to borrow a concept from the TVA’s nuclear plants, which have to document every system and action.

As part of building the warehouse, Bunch said, she wants to make sure the TVA has a firm grasp of all the interfaces between its systems. Not knowing that information “would never happen in our nuclear facilities, and our goal is that it won’t happen anymore with our information systems,” she said.