From: Tammy Clinton [tclinton@hi-availability.com] Sent: Monday, October 21, 2002 12:23 PM To: rule-comments@sec.gov Subject: File No S7-32-02 Dear Secretary Katz: In response to your draft white paper (Sound Practices to Strengthen the Resilience of the U.S. Financial System), I'd like to call your attention to a critical issue that I believe needs to be included in your paper: electric power. The draft paper devotes extensive space, as it should, to the need for core firms to install back-up computing equipment and facilities. Unfortunately, the paper overlooks the fact that each computer in these facilities uses electrons directly as a raw material - and the primary source of these electrons is the nation's deteriorating power transmission and distribution grid network. While businesses make up for the grid's inadequacies by using power conditioning and back-up power solutions (like those referenced in your white paper), the technologies that they rely on were actually formulated in the days of punch cards and batch processing. In fact, the "7 x 24 x forever capabilities" of today's digital equipment far surpass the ability of these devices to continuously supply computer-grade power. When one considers these shortcomings, which are exacerbated by the almost total interdependence of each of the three U.S. grid systems (i.e., East, West and Texas), it becomes clear that electricity is the Achilles heel of the Digital Age, and an issue that is not adequately addressed by your white paper. For this reason, we must question the paper's basic assumption that back-up solutions equal resilience. In reality, the continuity of such solutions is dubious at best. Current research and testing reveals that back-up power devices (the core of any back-up infrastructure) frequently fail. According to a risk analysis study conducted by MTechnology Inc., even robust back-up systems incorporating multiple devices (e.g., dual power feeds from the electricity grid, batteries, diesel generators, UPS devices, etc.) run a 67 percent chance of failure over their lifetimes. And when they do fail, it can take as much as sixteen hours or more to get the host facility up and running again. Of equal significance, conventional "utility grid plus back-up" systems aren't designed to operate through long power utility outages. This is because even the latest technologies are meant to run for only a relatively short period of time - a day at most. A long-duration, September 11th-type event is simply beyond most businesses' ability to cope, making the concept of "back-up" merely ephemeral. So what can key financial system firms do to ensure power integrity in the event of power failure? The answer is elegantly simple: bring the power generation onsite. Onsite power, also known as distributed generation, allows businesses to retire their "utility grid plus back-up" systems and create their own power directly at the point-of-use. The systems can be engineered to generate high-availability, computer grade electricity through an array of carefully configured generators - including gas-reciprocating engines, fuel cells and turbines - linked with rotary UPS systems and flywheels. Dual fuel engines can be used and ample fuel stored onsite to protect against pipeline and other transportation interruptions. The First National Bank of Omaha (the nation's largest privately owned bank and seventh largest credit card transaction processor) installed such a system in 1999 as the primary critical power source for its new 200,000-square foot Technology Center. The system in Omaha generates 100 percent of the "critical load" electricity for the bank's computers and storage devices, which are used to process millions of credit card and banking transactions every day. The system has been running without interruption for more than three years and has provided electricity through numerous grid outages and other utility problems. (For your information, we have embedded a case study describing the bank's system.) We urge you to consider the issue of onsite, distributed power as part of your white paper's recommendations. After all, addressing power's role in resiliency - not just the role of back-up technologies - is the only way to achieve true resource dispersal for the U.S. financial system. The bottom line is that you can't have proper dispersal with a common utility-grid based power source; if the source goes down, all redundant facilities and sites are affected. Just as you need multiple sources of computing, you need multiple sources of power. We would be honored to help you learn more about the issue, simply contact us at (203) 790-8996 or amannion@surepowersystem.com. Sincerely, Art Mannion Executive Vice President Sure Power Corporation 30 Main Street, Suite 405 Danbury, CT 06810 P: (203) 790-8996 F: (203) 743-2182 amannion@surepowersystem.com www.surepowersystem.com * * * * * * * * * * * * * * CASE STUDY High Quality, Highly Available Power Three Years Later, SurePower System Still Living Up to "Always On" Mantra When the First National Bank of Omaha (FNBO) switched on their new high- availability power system from Sure Power Corporation in May of 1999, they were counting on its unique high-tech design to protect against the vagaries of inconsistent public power. Power outages and fluctuations are not exceedingly common in Omaha, but a bank like FNBO can't take the risks associated with the utility grid - even if just for a few moments every other month. Reliable electricity, after all, is an essential ingredient to FNBO's bailiwick: credit card processing. And not just reliable electricity, high quality electricity. Subtle voltage fluctuations are common occurrences in power feeds off the public utility grid. Light fixtures and every day appliances can tolerate electrical instability. But the individual and cumulative effects to precision computer equipment can be devastating to a highly automated financial data center. FNBO's processing operation isn't a half-dozen computers arranged haphazardly on a table in a spare room somewhere in the basement. The company's state-of- the-art financial data center is contained in a purpose-built facility designed to withstand the spectrum of harsh Nebraska weather, including tornadoes, hail, thunderstorms, blizzards, ice, scorching heat, and bitter cold. Contained within its sturdy walls, the data center is equipped with tens of millions of dollars' worth of top-line systems built around an IBM mainframe, Tandem data servers, DASD storage systems, tape silos and virtual tape drives, Compaq computer terminals, and an assortment of electronic equipment dedicated to supporting FNBO's credit business. The place is abuzz with the latest and greatest technology has to offer. As one of the nation's top-ten processors of VISA and MasterCard purchases, FNBO handles hundreds of millions of dollars a day in credit card transactions - 24 hours a day, 7 days a week, 365 days a year. Downtime is money lost. Uptime is money in the bank. Period. In the computer industry, uptime is known as availability, and the standard for computer equipment availability is 99.9999 percent. "Six nines." Nothing less will do. Availability is a measurement of the probability that a failure will take place, not a measurement of a power failure's duration. A commercial equipment maker can't sell anything that doesn't measure up. Five nines won't cut it. Four nines is out of the question. For a data center, six nines is not only an insurance policy; it's a selling point. But there's a fly in the availability ointment. As soon as a piece of equipment, no matter how finely engineered, is plugged into the wall, its reliability is compromised. The tens of millions of dollars FNBO has invested in its data center immediately becomes dependent upon the public utility. Six nines? Computer-grade? Don't bet your reputation on it. Public utilities - even when supplemented by on-site back-up generators - rarely exceed three nines. Considering the fact that financial losses incurred during power outages are estimated to cost as much as $6 million per hour, operations like FNBO cannot afford anything but the highest quality, most reliable power source available. The science of probabilistic risk assessment shows that the FNBO faces a potential of at least $96 million in lost revenue exposure. Not to mention legal costs and the loss of customers and reputation. In short, weather, consumer demand, human error, and equipment failure all conspire against the delivery of electricity. Tens of millions of dollars of potential downtime are at the mercy of the public grid. The Best Power's National Power Laboratory estimates that the typical computer center experiences 289 power disturbances per year. A disturbance is defined as a power surge or drop outside the manufacturer's voltage limits. These outages, spikes, and dips cost U.S. business almost $29 billion annually. The SurePower System has been demonstrated to be 1,000 times less likely to cause a disturbance than the grid, even with a backup system. Recognizing the value of such a system - especially after suffering the effects of power outages and fluctuations - the FNBO set out to fill the reliability gap by investing in the high-quality, highly available power provided by Sure Power. The Results? In three years, FNBO's director of property management, Dennis Hughes, estimates there have been 20 to 25 power outages in the Omaha area where the bank is located. "One of the two grid sides [that non-critical part of the bank still connected to the public grid] has gone down eight times, but not the SurePower System," Hughes reports of the period since installation. "It has performed as advertised. Turn the system's fuel cells on and watch them go." The system's array of fuel cells is linked by Sure Power proprietary technology with rotary UPS and flywheels, meticulously engineered to provide the highest levels of availability. The fuel cells operate by taking in natural gas from the local utility, combining hydrogen from the natural gas with oxygen from the air. Inside each fuel cell, a chemical reaction is generated, creating heat and pure water - and a continuous stream of stable electricity. The system's byproduct heat is used by FNBO in the winter to warm the building and also to keep sidewalks free of snow and ice through a series of underground coils. The SurePower System is configured so that no single component can cause failure. Individual fuel cells can be taken down for periodic upkeep without having to shut down the entire system and without any effect on the system's reliability. Thirty-six months into the bank's investment, and the computer-grade feed of electricity from the SurePower System has continued unabated. Providing 100 percent of the bank's data center "critical load" power needs, feeding the banks computers and data storage systems, Hughes says that, even during scheduled maintenance, the system operates without affecting the promised six nines of availability. That's important because data centers are at no greater risk than when generators, battery banks, or UPSs are being serviced. Maintenance of traditional on-site power sources and backup systems provide a window of risk that can cripple operations if things go wrong. And after just a second of unexpected downtime, file restoration and equipment troubleshooting can take 16 or more hours to correct. The reliability built into the SurePower System virtually eliminates that threat. In fact, a risk analysis conducted by MTECHNOLOGY Inc. and Professor Michael Golay of the Massachusetts Institute of Technology revealed that FNBO's SurePower System operates at closer to seven nines of availability. In his report Micropower: The Next Electrical Era, Seth Dunn, research associate with the Worldwatch Institute, reports that the FNBO is at the vanguard of a movement recognizing that the rapid evolution to 24x7, computer dependent operations requires a power source surpassing what is available through public utilities. Systems, such as those available from Sure Power, are cleaner, more efficient, and offer the power quality and reliability demanded by commercial operations. "The kind of highly reliable power needed for today's economy can only be based on a new generation of micropower devices now coming on the market," says Dunn. As such, FNBO's prescient switch to Sure Power's system is resonating with FNBO's customers and potential customers. "We've attracted a lot of interest in our onsite power system," Hughes says. "People from across the nation and 'across the pond' have come in to see our system. "It's been a marketing asset for the bank," he continues. Hughes reports that the economics of the system are attractive as well. Amortized over twenty years, including some unexpected maintenance costs early on due to the poorer than expected quality of natural gas provided by the local utility, the system is operating at "slightly better" than break-even. That means FNBO is not only realizing power availability and quality that far exceeds anything available off the public grid, but it is costing the bank less than it would for the privilege of operating on an unreliable source. As for the gas quality, FNBO and the local utility have worked together to solve that problem. "The reliability of the six nines' computer-grade electricity that Sure Power delivers isn't a luxury for us at First National Bank of Omaha, it's a critical difference over existing power arrangements that will substantially increase our computer uptime. The result is a tremendous leap in our competitive advantage. With Sure Power, First National can raise our customers' service expectations while generating higher revenues," Hughes states, underscoring the simple monetary and complementary benefits of the SurePower System. * * * * * * * * * * * * * * * * * * * *