TransAlta Corporation

Next time you paste some figures into a spreadsheet, be afraid. Be very afraid. Someone at TransAlta Corporation managed to lose $24m (Canadian) through a “clerical error” in pasting into an Excel spreadsheet. The spreadsheet in question was used to submit bids to the New York Independent System Operator (New York ISO) for May 2003 transmission congestion contracts (TCCs). It’s not really important to understand what TCCs are: the crux of the problem is that you put bids in at the end of one month that affect the prices you pay during the next. Once submitted, the bids can’t be retracted. Because of the spreadsheet error, TransAlta ended up with more TCCs than they wanted, and at higher prices than they intended. They didn’t spot the error until they were notified that their bids had been successful.

There are at least two operational failures evident in this story.

First, the whole thing was an accident waiting to happen if pasting numbers into the spreadsheet was part of the normal process of preparing these bids. Manual pasting is notoriously prone to errors. If data has to be transferred between spreadsheets, automatic links (used with appropriate precautions) or automated copying and pasting via macros (ditto) are much safer. If the pasting was unusual, then extra care should have been taken and more thorough testing should have been performed.

Which brings us to the second failure. How come the error wasn’t found before the bids were submitted? The answer has got to be that there was inadequate review and testing. I suspect that there weren’t formal tests, and that the reviewing was not systematic. It isn’t difficult to devise effective reviewing procedures that should pick up this sort of problem (we are told that the error was caused by mismatching bids and prices, which implies that the error was due to misaligning the pasted region).

See the transcript of the investor conference at which the error was explained for more details.