Helping North American Utilities Transform the Way They Do Business

Utilities are facing a host of challenges ranging from environmental concerns, aging infrastructure and systems, to Smart Grid technology and related program decisions. The future utility will be required to find effective solutions to these challenges, while continuing to meet the increasing expectations of newly empowered consumers. This brings an opportunity to create stronger, more profitable relationships with customers, and to do so more cost effectively.

Since our formation in 1996 as the subsidiary of UK-based United Utilities Plc., Vertex Business Services has grown to serve over 70 North American utilities and retail energy clients, who in turn serve over 23 million end-use customers. Our broad portfolio of Business Process Outsourcing (BPO) and Information Technology (IT) solutions enables our clients to more effectively manage operational costs, improve efficiencies, develop front-line employees, and achieve superior customer experience.

Improving Utility Collection Performances

Utilities can greatly benefit from the debt management practices and experience of industries such as banking and retail that have developed a more sophisticated skill set. Benefits can come from adoption of proven methodologies for managing accounts receivable and managing outsourced agency collections business processes, as well as from the use of appropriate software for these processes. There is also benefit to using analytical tools to evaluate the process of collections and optimizing processes based on metrics collected.

Improve your collection rates and lower outstanding accounts receivable through Vertex’s proven collection services. Our rich heritage results in our ability to implement best practices and provide quality reporting strategies, ironclad credit and collection processes, and innovative training programs.

Handling Demand Response and Efficiency In the Call Center

In the next five to 10 years, utilities will be forced to change more than at any time in their previous history. These changes will be profound, widespread and will affect not only utilities themselves, but virtually all parts of our modern electrified culture. One of the most dramatic changes will be in the traditional relationship between utilities and their customers, especially at the residential level. Passive electricity "rate payers" are about to become very active participants in the relationship with their utility.

Turning Information Into Power

Around the world, utilities are under pressure. Citizens demand energy and water that don’t undermine environmental quality. Regulators seek action on smart grids and smart metering initiatives that add intelligence to infrastructure. Customers seek choice and convenience – but without additional costs.

Around the globe, utilities are re-examining every aspect of their business.

Oracle can help. We offer utility experts, mission-critical software applications, a rock-solid operational software suite, and world-leading middleware and technology that can help address these challenges. The result: flexible, innovative solutions that increase efficiency, improve stakeholder satisfaction, futureproof your organization – and turn information into power.

Utilities can begin with one best-of breed solution that addresses a specific pain point. Alternatively, you can implement several pre-integrated applications to ease the development and administration of cross-departmental business processes. Our complete applications and technology footprint can be standardized to focus on accountability and reduce the resources spent on vendor relations.

Oracle Is A Leader In Utilities: 20 of the Top 20 Global Utilities Get Results With Oracle

Oracle provides utilities with the world’s most complete set of software choices. We help you address emerging customer needs, speed delivery of utility-specific services, increase administrative efficiency, and turn business data into business intelligence.

Oracle Utilities offers the world’s most complete suite of end-to-end information technology solutions for the gas, water, and electric utilities that underpin communities around the world. Our revolutionary approach to providing utilities with the applications and expertise they need brings together:

  • Oracle Utilities solutions, utility-specific revenue and operations management applications:
    • Customer Care and Billing
    • Mobile Workforce Management
    • Network Management System
    • Work and Asset Management
    • Meter Data Management (Standard and Enterprise Editions)
    • Load Analysis
    • Load Profiling and Settlement
    • Portfolio Management
    • Quotation Management
    • Business Intelligence
  • Oracle’s ERP, database and infrastructure software:
    • Oracle E-Business Suite and other ERP applications
    • Times Ten for real-time data management
    • Data hubs for customer and product master data management
    • Analytics that provide insight and customer intelligence
    • ContentDB, SpatialDB and RecordsDB for content management
    • Secure Enterprise Search for enterprise-wide search needs
  • Siebel CRM for larger competitive utilities’ call centers, customer order management, specialized contacts and strategic sales:
    • Comprehensive transactional, analytical and engagement CRM capabilities
    • Tailored industry solutions
    • Role-based customer intelligence and pre-built
  • Oracle’s AutoVue Enterprise Visualization Solutions:
    • Make business and technical documents easily accessible by all enterprise users
    • Expedite document reviews with built-in digital annotations and markups
    • Boost the value of your enterprise system with integrated Enterprise Visualization
  • Oracle’s Primavera Solutions:
    • Effectively manage and control the most complex projects and project portfolio
    • Deliver projects across generation, transmission and distribution, and new clean-energy ventures
    • Optimize a diminishing but highly skilled workforce

Stand-alone, each of these products meets utilities’ unique customer and service needs. Together, they enable multi-departmental business processes. The result is an unparalleled set of technologies that address utilities’ most pressing current and emerging issues.

The Vision

Cross-organizational business processes and best practices are key to addressing today’s complex challenges. Oracle Utilities provides the path via which utilities may:

  • Address the "green agenda:"
    • Help reduce pollution
    • Increase efficiency
    • Complete software suite to enable the smart grid
  • Advance customer care with:
    • Real-time 360-degree views of customer information
    • Tools to help customers save time and money
    • Introduce or retire products and services quickly, in response to emerging customer needs
  • Enhance revenue and operations management:
    • Avoid revenue leakage across end-to-end transactions
    • Increase the visibility and auditability of key business processes
    • Manage assets strategically
    • Bill for services and collect revenue cost-effectively
    • Increase field crew and network efficiency
    • Track and improve performance against goals
    • Achieve competitive advantage with a leading-edge infrastructure that helps utilities respond quickly to change
  • Reduce total cost of ownership through access to a single global vendor with:
    • Proven best-in-class utility management solutions
    • Comprehensive, world-class capabilities in applications and technology infrastructure
    • A global 24/7 distribution and support network with 7,000 service personnel
    • Over 14,000 software developers
    • Over 19,000 partners

Strategic Technology For Every Utility

Only Oracle powers the information-driven enterprise by offering a complete, integrated solution for every segment of the utilities industry – from generation and transmission to distribution and retail services. And when you run Oracle applications on Oracle technology, you speed implementation, optimize performance, and maximize ROI.

When it comes to handling innovations like daily or interval meter reading, installing, maintaining, and replacing plant and linear assets, providing accurate bills and supporting your contact center and more, Oracle Utilities is the solution of choice. Utilities succeed with Oracle. Oracle helps electric, gas, water and waste management meet today’s imperatives to do the following:

  • Help customers conserve energy and reduce carbon footprints
  • Keep energy affordable
  • Strengthen and secure communities’ economic foundation

Meeting the Challenges of the Future, Today

Utilities today need a suite of software applications and technology to serve as a robust springboard from which to meet the challenges of the future.

Oracle offers that suite.

Oracle Utilities solutions enable you to meet tomorrow’s customer needs while addressing the varying concerns of financial stakeholders, employees, communities, and governments. We work with you to address emerging issues and changing business conditions. We help you to evolve to take advantage of new technology directions and to incorporate innovation into ongoing activity.

Partnering with Oracle helps you to futureproof your utility.

Enabling Successful Business Outcomes Through Value-Based Client Relationships

Utilities are facing a host of challenges ranging from environmental concerns, aging infrastructure and systems, to Smart Grid technology and related program decisions. The future utility will be required to find effective solutions to these challenges, while continuing to meet the increasing expectations of newly empowered consumers. Cost management in addressing these challenges is important, but delivery of value is what truly balances efficiency with customer satisfaction.

Our Commitment

Vertex clients trust us to deliver on our promises and commitments, and they partner with us to generate new ideas that will secure their competitive advantage, while also delivering stakeholder benefits. Our innovative same-side-of-the-table approach allows us to transform the efficiency and effectiveness of your business operations, enabling you to lower your risk profile and enhance your reputation in the eyes of customers, investors and regulatory bodies. Working as partners, we provide unique insights that will generate actionable ideas and help you achieve new levels of operational excellence.

With a long heritage in the utility industry, Vertex possesses an in-depth knowledge and understanding of the issues and challenges facing utility businesses today. We actively develop insights and innovative ideas that allow us to work with our utility clients to transform their businesses, and we can enhance your future performance in terms of greater efficiencies, higher customer satisfaction, increased revenue and improved profitability.

Achievement of desired business outcomes is best achieved with a strategic, structured approach that leverages continuous improvement throughout. Vertex takes a four-level approach, which starts with asking the right questions. Levels 1 and 2 identify business challenges and the corresponding outcomes your utility hopes to achieve. Need to improve customer satisfaction? If so, is moving from the 2nd to 1st quartile the right target? Pinpointing the key business challenges that are limiting or impeding your success is critical. These may include a need to reduce bad debt, reduce costs, minimize billing errors, or improve CSR productivity. Whatever challenges you face, collaboration with our experts will ensure your utility is on the right track to meet or exceed your targets.

Once the challenges and outcomes have been identified and validated, Vertex partners with clients to develop effective solutions. The solutions implemented in Level 3 consist of unique value propositions that, when combined effectively, achieve the desired business outcome for the business challenge being addressed. Vertex’s proprietary “Value Creation Model” enables us to develop and implement solutions that provide measurable business results and ongoing quality assurance.

Inherent to the success of this model is the Vertex Transition Methodology, which has resulted in 200 successful transitions over a twelve-year period. Due diligence yields a clear understanding of how the business operates. Mobilizing activities lay the foundation for the transition, and a baseline for the transition plan is established. The plans developed during the planning stage are implemented, followed by a stabilization period from the business transfer to when things are fully operational.

Another key element of this model lies in Vertex’s transformation capabilities, and what we refer to as our “6D” transformation methodology. Dream, Define, Design, Develop, Deliver, Drive – our Lean Six Sigma methods guarantee successful deployment of continuous process improvement results. In addition to Lean Six Sigma, the Vertex Transformation Methodology includes change management, people and performance management, and project management.

In Level 4 of the Vertex solution approach, Vertex measures the effectiveness of a solution by determining if it achieved the desired business outcome. We utilize a Balanced Scorecard approach to ensure that the business outcome positively impacts all of the key elements of a client’s business: Customer, Employee, Operational, and Financial. As desired business outcomes evolve, Vertex will remain committed to adapting our solutions in partnership with our clients to meet these changing needs.

Transforming Your Organization

If you’re ready to transform to an outcomes- based business, Vertex has the capability to help. Our service lines include: Consulting and Transformation, IT Applications Services and Products, Debt Management, and Meter-to-Cash Outsourcing.

Our transformation approach blends innovation and business process improvement, focusing on achieving your strategic objectives via our proven expertise and insights. We bring business transformation that secures greater efficiencies, improved effectiveness and enhanced services for your organization. All the while we never forget that our employees represent your brand.

We’ll work collaboratively with you, rapidly implementing services and delivering on continuous improvement to meet your goals. We’ll build on your business needs, sharing ideas and jointly developing options for change – working together to deliver real value.

Empower Your Customers To Reduce Energy Demand

The Energy Information Administration (EIA) forecasts a continuing gap between total domestic energy production and consumption through 2030. This delta will not be closed by supply alone; customer behavior changes are needed to reduce total consumption and peak load. Electric and gas utilities face tremendous challenges meeting energy supply and demand needs and will play a pivotal role in determining practical solutions. With the right approach, utilities will deliver on the promise of energy efficiency and demand response.

Energy market projections are highly speculative as the market is characterized by high price volatility and rapid market transformation. Adding to the uncertainty is the voluntary nature of demand response and energy efficiency programs, and the critical importance of customer behavior change. Utilities are spending billions of dollars, making program penetration essential – and customer education paramount. At an end-point cost of up to $300, a five percent penetration is not the answer. Vertex can help mitigate these risks through highly effective management of customer care, CIS integration, pilot programs, and analytics. Vertex’s core “meter-to-cash” capabilities have undergone a major revolution in response to the new world of AMI, energy efficiency, and demand response. A robust set of new services will allow utilities to transform how they do business.

Smart meters put new demands on CIS platforms and traditional business processes – innovative rates, distributed generation, demand response and new customer programs all require creative change. Vertex is currently helping utilities develop and manage customer programs to fully exploit smart meter deployments and provide customer care to customers migrating to time-based rates. We deliver customer management services to drive penetration and designed to meet the unique customer care needs generated by smart meter installations, energy efficiency and demand response programs to empower customers to manage their energy use and reduce consumption, and cost-effective customer care and billing solutions to support smart meters.

Water utilities are not immune to the need for conservation. In the past 30 years, the U.S. population has grown over 50% while the total water use has tripled. On average, Americans use approximately 75 to 80 gallons of water per person per day. Vertex can help water utilities address the unique conservation challenges they face, including customer care and program support, MDMS solutions to organize data for forecasting, code enforcement, business and customer insight, and other services.

Case Study – Hydro One

Hydro One is an Ontario, Canada based utility that is one of the five largest transmission utilities in North America. As the stewards of critical provincial assets, Hydro One works with its industry partners to ensure that electricity can be delivered safely, reliably, and affordably to its customers. Vertex has been providing Meter-to-Cash outsourcing services to Hydro One since 2002.

Applying the Vertex 4-level solutions approach enabled desired business outcomes:

Level 1: Identify Business Challenges

In 2006 Hydro One approached Vertex and indicated that one of their corporate goals was to dramatically improve customer satisfaction as a result of the Hydro One customer satisfaction survey. At that point, Hydro One customer satisfaction scores on agent-handled calls had hovered in the 75-76% range for several years. Up to that time, the relationship with Vertex had focused on significant reductions to cost with no erosion to service offered to customers. Now, Hydro One was looking to Vertex to help lead the drive to improve the customer experience.

Level 2: Identify Desired Outcomes

In 2007 Vertex and Hydro One entered into collaborative discussions to evaluate and analyze the historical customer satisfaction scores, and to work jointly to develop a plan to radically modify the customer experience and improve customer satisfaction. Those discussions led down several paths, and the parties mutually agreed to target the following areas for change:

  • The Vertex/Hydro One Quality program
  • A cultural adjustment that would reflect the change in focus
  • Technology that could help support Hydro One’s goals
  • End-to-end process review

Level 3: Develop & Implement Solution

Vertex has worked closely with Hydro One to help them deliver on their goal of significant improvements to customer satisfaction. Changes were applied to process, call scripts, quality measures and performance scoring at all levels in the organization, including incentive compensation and recognition programs.

Level 4: Measure Solution Results

  • Customer satisfaction scores on agent-handled calls increased from 76% in 2006 to 86% in 2008
  • Quality monitoring program changes yielded a 10% increase in first-call resolution
  • Introduced bi-weekly Process/Quality forums
  • Monthly reviews with the client to reinforce success and progress toward targets

Thinking Smart

For more than 30 years, Newton- Evans Research Company has been studying the initial development and the embryonic and emergent stages of what the world now collectively terms the smart, or intelligent, grid. In so doing, our team has examined the technology behind the smart grid, the adoption and utilization rates of this technology bundle and the related market segments for more than a dozen or so major components of today’s – and tomorrow’s – intelligent grid.

This white paper contains information on eight of these key components of the smart grid: control systems, smart grid applications, substation automation programs, substation IEDs and devices, advanced metering infrastructure (AMI) and automated meter-reading devices (AMR), protection and control, distribution network automation and telecommunications infrastructure.

Keep in mind that there is a lot more to the smart grid equation than simply installing advanced metering devices and systems. A large AMI program may not even be the correct starting point for hundreds of the world’s utilities. Perhaps it should be a near-term upgrade to control center operations or to electronic device integration of the key substations, or an initial effort to deploy feeder automation or even a complete production and control (P&C) migration to digital relaying technology.

There simply is not a straightforward roadmap to show utilities how to develop a smart grid that is truly in that utility’s unique best interests. Rather, each utility must endeavor to take a step back and evaluate, analyze and plan for its smart grid future based on its (and its various stakeholders’) mission, its role, its financial and human resource limitations and its current investment in modern grid infrastructure and automation systems and equipment.

There are multiple aspects of smart grid development, some of which involve administrative as well as operational components of an electric power utility, and include IT involvement as well as operations and engineering; administrative management of customer information systems (CIS) and geographic information systems (GIS) as well as control center and dispatching operation of distribution and outage management systems (DMS and OMS); substation automation as well as true field automation; third-party services as well as in-house commitment; and of course, smart metering at all levels.

Space Station

I have often compared the evolution of the smart grid to the iterative process of building the international space station: a long-term strategy, a flexible planning environment, responsive changes incorporated into the plan as technology develops and matures, properly phased. What function we might need is really that of a skilled smart grid architect to oversee the increasingly complex duties of an effective systems planning organization within the utility organization.

All of these soon-to-be-interrelated activities need to be viewed in light of the value they add to operational effectiveness and operating efficiencies as well as the effect of their involvement with one another. If the utility has not yet done so, it must strive to adopt a systems-wide approach to problem solving for any one grid-related investment strategy. Decisions made for one aspect of control and automation will have an impact on other components, based on the accumulated 40 years of utility operational insights gained in the digital age.

No utility can today afford to play whack-a-mole with its approach to the intelligent grid and related investments, isolating and solving one problem while inadvertently creating another larger or more costly problem elsewhere because of limited visibility and “quick fix” decision making.

As these smart grid building blocks are put into service, as they become integrated and are made accessible remotely, the overall smart grid necessarily becomes more complex, more communications-centric and more reliant on sensor-based field developments.

In some sense, it reminds one of building the space station. It takes time. The process is iterative. One component follows another, with planning on a system-wide basis. There are no quick solutions. Everything must be very systematically approached from the outset.

Buckets of Spending

We often tackle questions about the buckets of spending for smart grid implementations. This is the trigger for the supply side of the smart grid equation. Suppliers are capable of developing, and will make the required R&D investment in, any aspect of transmission and distribution network product development – if favorable market conditions exist or if market outlooks can be supported with field research. Hundreds of major electric power utilities from around the world have already contributed substantially to our ongoing studies of smart grid components.

In looking at the operational/engineering components of smart grid developments, centering on the physical grid itself (whether a transmission grid, a distribution grid or both), one must include what today comprises P&C, feeder and switch automation, control center-based systems, substation measurement and automation systems, and other significant distribution automation activities.

On the IT and administrative side of smart grid development, one has to include the upgrades that will definitely be required in the near- or mid-term, including CIS, GIS, OMS and wide area communications infrastructure required as the foundation for automatic metering. Based on our internal estimates and those of others, spending for grid automation is pegged for 2008 at or slightly above $1 billion nationwide and will approach $3.5 billion globally. When (if) we add in annual spending for CIS, GIS, meter data management and communications infrastructure developments, several additional billions of dollars become part of the overall smart grid pie.

In a new question included in the 2008 Newton-Evans survey of control center managers, these officials were asked to check the two most important components of near-term (2008-2010) work on the intelligent grid. A total of 136 North American utilities and nearly 100 international utilities provided their comments by indicating their two most important efforts during the planning horizon.

On a summary basis, AMI led in mentions from 48 percent of the group. EMS/ SCADA investments in upgrades, new applications, interfaces et al was next, mentioned by 42 percent of the group. Distribution automation was cited by 35 percent as well.

Spending Outlook

The financial environment and economic outlook do not bode well for many segments of the national and global economies. One question we have continuously been asked well into this year is whether the electric power industry will suffer the fate of other industries and significantly scale back planned spending on T&D automation because of possible revenue erosion given the slowdown and fallout from this year’s difficult industrial and commercial environments.

Let’s first take a summary look at each of the five major components of T&D automation because these all are part and parcel of the operations/engineering view of the smart grid of the future.

Control Systems Outlook: Driven by SCADA-like systems and including energy management systems and distribution management software, this segment of the market is hovering around the $500 million mark on a global scale – excluding the values of turn-key control center projects (engineering, procurement and construction (EPC) of new control center facilities and communications infrastructure). We see neither growth nor erosion in this market for the near-term, with some up-tick in spending for new applications software and better visualization tools to compensate for the “aging” of installed systems. While not a control center-based system, outage management is a closely aligned technology development, and will continue to take hold in the global market. Sales of OMS software and platforms are already approaching the $100 million mark led by the likes of Oracle Utilities, Intergraph and MilSoft.

Substation Automation and Integration Programs: The market for substation IEDs, for new communications implementations and for integration efforts has grown to nearly $500 million. Multiyear programs aimed at upgrading, integrating and automating the existing global base of about a quarter million or so transmission and primary distribution substations have been underway for some time. Some programs have been launched in 2008 that will continue into 2011. We see a continuation of the growth in spending for critical substation A&I programs, albeit 2009 will likely see the slowest rate of growth in several years (less than 3 percent) if the current economic malaise holds up through the year. Continuing emphasis will be on HV transmission substations as the first priority for upgrades and addition of more intelligent electronic devices.

AMI/AMR: This is the lynchpin for the smart grid in the eyes of many industry observers, utility officials and perhaps most importantly, regulators at the state and federal levels of the U.S., Canada, Australia and throughout Western Europe. With nearly 1.5 billion electricity meters installed around the world, and about 93 percent being electro-mechanical, interest in smart metering can also be found in dozens of other countries, including Indonesia, Russia, Honduras, Malaysia, Australia, and Thailand. Another form of smart meters, the prepayment meter, is taking hold in some of the developing nations of the world. The combined resources of Itron, coupled with its Actaris acquisition, make this U.S. firm the global share leader in sales and installations of AMI and AMR systems and meters.

Protection and Control: The global market for protective relays, the foundation for P&C has climbed well above $1.5 billion. Will 2009 see a drop in spending for protective relays? Not likely, as these devices continue to expand in capabilities, and undertake additional functions (sequence of event recording, fault recording and analysis, and even acting as a remote terminal unit). To the surprise of many, there is still a substantial amount (perhaps as much as $125 million) being spent annually for electro-mechanical relays nearly 20 years into the digital relay era. The North American leader in protective relay sales to utilities is SEL, while GE Multilin continues to hold a leading share in industrial markets.

Distribution Automation: Today, when we discuss distribution automation, the topic can encompass any and all aspects of a distribution network automation scheme, from the control center-based SCADA and distribution management system on out to the substation, where RTUs, PLCs, power meters, digital relays, bay controllers and a myriad of communicating devices now help operate, monitor and control power flow and measurement in the medium voltage ranges.

Nonetheless, it is beyond the substation fence, reaching further down into the primary and secondary network, where we find reclosers, capacitors, pole top RTUs, automated overhead switches, automated feeders, line reclosers and associated smart controls. These are the new smart devices that comprise the basic building blocks for distribution automation. The objective will be achieved with the ability to detect and isolate faults at the feeder level, and enable ever faster service restoration. With spending approaching $1 billion worldwide, DA implementations will continue to expand over the coming decade, nearing $2.6 billion in annual spending by 2018.

Summary

The T&D automation market and the smart grid market will not go away this year, nor will it shrink. When telecommunications infrastructure developments are included, about $5 billion will have been spent in 2008 for global T&D automation programs. When AMI programs are adding into the mix, the total exceeds $7 billion. T&D automation spending growth will likely be subdued, perhaps into 2010. However, the overall market for T&D automation is likely to be propped up to remain at or near current levels of spending for 2009 and into 2010, benefiting from the continued regulatory-driven momentum for AMI/ AMR, renewable portfolio standards and demand response initiatives. By 2011, we should once again see healthier capital expenditure budgets, prompting overall T&D automation spending to reach about $6 billion annually. Over the 2008-2018 periods, we anticipate more than $75 billion in cumulative smart grid expenditures.

Expenditure Outlook

Newton-Evans staff has examined the current outlook for smart grid-related expenditures and has made a serious attempt to avoid double counting potential revenues from all of the components of information systems spending and the emerging smart grid sector of utility investment.

While the enterprise-wide IT portions (blue and red segments) of Figure 1 include all major components of IT (hardware, software, services and staffing), the “pure” smart grid components tend to be primarily in hardware, in our view. Significant overlap with both administrative and operational IT supporting infrastructure is a vital component for all smart grid programs underway at this time.

Between “traditional IT” and the evolving smart grid components, nearly $25 billion will likely be spent this year by the world’s electric utilities. Nearly one-third of all 2009 information technology investments will be “smart grid” related.

By 2013, the total value of the various pie segments is expected to increase substantially, with “smart grid” spending possibly exceeding $12 billion. While this amount is generally understood to be conservative, and somewhat lower than smart grid spending totals forecasted by other firms, we will stand by our forecasts, based on 31 years of research history with electric power industry automation and IT topics.

Some industry sources may include the total value of T&D capital spending in their smart grid outlook.

But that portion of the market is already approaching $100 billion globally, and will likely top $120 billion by 2013. Much of that market would go on whether or not a smart grid is involved. Clearly, all new procurements of infrastructure equipment will be made with an eye to including as much smart content as is available from the manufacturers and integrators.

What we are limiting our definition to is edge investment, the components of the 21st century digital transport and delivery systems being added on or incorporated into the building blocks (power transformers lines, switchgear, etc.) of electric power transmission and delivery.

Customer Relationships and the Economy

A little over a year ago, the challenges facing the global energy and utilities market were driving a significant wedge between utilities and their customers. In Western European markets, price increases across gas, electricity and water, combined with increased corporate earnings, left many utilities in the uncomfortable position of being seen as profiteering from customers unable to change suppliers for significant benefit.

Headline-makers had a field day, with gross simplification of the many utilities’ business models. They made claims about “obscene profits,” while citing the “long-suffering” consumer position [1]. Now, more than a year later, gas and electricity prices are falling, but the severity and pace of the wider economic downturn has given no time for utilities to re-position themselves with customers. Brand and relationship-enhancing programs such as smart metering and energy efficiency are still largely in their infancy.

The evolving relationship with the customer base, where customer expectations are resulting in a more participatory, multi-channel engagement, comes at a time when the evolution of smart networks and metering solutions are on the cusp of driving down cost to serve and improving service levels and options. Significant benefits accrue from consumption measurement and management capabilities. Benefits also result from the opportunity to transform the consumer relationship by pushing into new areas such as home device management, more personalised tariffs and easier debt arrangements. The position for utilities, therefore, should be favourable – finally being seen as working on a more participatory relationship with their customers.

For consumers, the consequences of recession include an increased pressure on household spending. In competitive markets, there could be increased churn as the ever-changing “best-buys” attract customers. For utilities, increased churn rates are obviously bad news – the cost of new customer acquisition often wipes out profit associated with consumption by that customer for months, even years. Moreover, while utilities are working on marketing the best deals to acquire and retain customers – and on piloting smart technologies in the home – consumers’ familiarity with new technologies and their allegiance to some brands presents an opportunity for third parties to gain greater hold on the customer relationship.

Take the case of smart metering, for example, where many utilities are engaging upon pilot and larger rollouts. This is an area of innovation that should deliver benefits to both consumers and utilities. The assured business benefits to the utility companies come not only from applying the technology to lower operational costs, but also from enhancing their brand and customer service reputation. To the customer, smart technologies offer consumption details in an understandable form and give the promise of accurate commodity billing.

The risk is that the potentially lucrative relationship between customer and utility is currently damaged to a point where telecommunications providers, retailers or technology companies could step in with attractive, multi-service offerings. That could relegate the utility to simple supply activities, unable to gain a significant hold in home engagement. Certainly, utilities will still witness savings from automated meter reading and improved billing accuracy, but this commoditisation path for the utility company will limit profitable growth and push them further away from customers. Combine this with increased churn, and suddenly the benefits of smart technology deployment could be wiped out for the utility company.

This is not just an issue associated with smart technologies – the entire customer relationship journey with a utility is under threat from non-utility entrants (See Figure 1). Consider the area of consumer marketing and sign-up. Third parties that simply market other companies’ services have already taken a position in this part of the customer journey by providing Internet sites that allow tariff comparison and online switching of suppliers. The brand awareness of the comparison sites has already begun to gain the trust of the customer and the utility brand becomes more remote – the start of an uneasy decline. Additionally, in receiving fees for bringing customers to utilities, these companies thrive on churn – driving up utility cost and driving an even greater gap into the consumer-utility relationship.

Further credence to the challenges comes in the areas around presentation of information to customers. Any utility information channel will demand attention to “stickiness” when using technology such as the Internet for displaying utility bills and consumption data. This information has to be pushed to consumers in an attractive, understandable, and above all, personal format. Does the traditional utility information quality and flow have enough appeal for the average consumer to repeatedly view over time? It could be argued that third parties have the ability to blend in more diverse information to improve stickiness on, for example, handheld devices that give the consumer other benefits such as telephony, traffic and weather updates.

Customer Experience Risks

Traditionally, utilities are seen as relatively “recession proof,” operating on longer- term cycles than financial and retail markets. It is this long-term view that, coupled with an already disjointed customer relationship, poses a significant risk to utilities in the next two years. Customers will react in the competitive markets to the feeling of being “cornered” in an environment where few utilities truly differentiate themselves on customer service, product, tariff or brand. Research suggests that consumers are driving change in the relationship with their utilities, and it is this change that opens up opportunity for others (“Plugging in the Consumer”, IBM Institute for Business Value, 2007).

Reaction may not come soon; rarely do new entrants come into a recessionary market. But the potential for non-utilities to begin exploiting the gap between customer and utility should be cause for concern.

The parallel of these changes and risks was seen in the telco landline market over the last two decades. Several of the big, former-monopoly landline carriers are now perceived as commodity bandwidth providers, with declining core customer numbers and often-difficult regulatory challenges. Newer, more agile companies have stepped into the role of “owning” the consumer relationship and are tailoring the commodities into appealing packages. The underlying services may still come from the former-monopoly, but the customer relationship is now skewing toward the new entrant.

There are strategies that can be proactively deployed, individually or in combination, that improve the resilience of a utility through a recession, and that indeed redraw the client relationship to the point where profitability can increase without attracting the appearance of excess. These strategies resist the potential demise of the utilities to commodity providers, allowing for a value-add future based on their pervasive presence in the home.

The five steps outlined below revolve around the need to focus on the fundamentals, namely customer relationships and cash:

  1. Know Your Customer. Like most companies, utilities can benefit greatly by knowing more about customers. By engaging upon a strategy of ongoing information collection, customer segmentation and profitability analysis, plans can be put in place to detect and react to customer attrition risks. This includes early identification of changes to a customer’s circumstances, such as the ability to settle debt, allowing the utility to work proactively with the customer to address the issue. An active relationship style will show consumers that utilities care and understand, increasing brand loyalty, and hence, lowering the cost to serve.
  2. Free Up Locked Cash. Although recession-resistant in the short-term, identifying organic sources of improved cash flow can be an important source of funding for utilities that need to invest in improving customer relationships and capabilities. Industry benchmarks indicate that most utilities have opportunities to plug leaks in their working capital processes, with the potential of tapping into a significant and accessible source of free cash flow. For example, consider the traditionally neglected, under-invested area of consumer debt. With the economic downturn, debt levels are likely to rise, and, if unchecked, costs and cash flow will be adversely impacted.

    Focus areas for addressing the issue and freeing up locked cash include:

    • Using process management techniques such as activity-based management or Lean Six Sigma to identify opportunities for performance improvement across the billing, collections and credit-management processes;
    • Focusing on developing the skills and operational structures required to better integrate the meter to cash functions; and
    • Optimizing the use of utility-specific debt tools that work with the core systems.

Additionally, gaining insights through precision analytics to better manage debt functions – similar to best practices in banking and telecommunications – needs to be accelerated.

  1. Focus on the Future. Cost cutting is inevitable by many companies in this economic environment. It is important to understand the medium-to-long-term impact of any cuts on the customer relationship to determine if they could hurt profitability by increasing churn and related cost-to-serve metrics. Thus, utilities must achieve a clear understanding of their baseline performance, and have a predictive decision-making capability that delivers accurate, real-time insights so they can be confident that any actions taken will yield the best results.
  2. Innovate. Utilities traditionally work on longer investment cycles than many other businesses. When compared to consumer-facing industries, that can result in consumer perception that they are lacking innovation. Many consumers readily accept new offerings from retailers, telcos and technology firms, and the promise of a smart home will clearly be of strong commercial interest to these individuals. That’s why utilities must act now to show how they are changing, innovating for the future and putting control into the hands of the consumer. Smart metering programs will help the utilities reposition themselves as innovators. The key will be to use technology in a manner that bonds the customer better with the utility.
  3. Agility is King. Longer investment cycles in the utility sector, combined with the massive scale of operations and investment, often restrict a utilities’ ability to be agile in their business models. The long-term future of many utilities will depend upon being able to react to new consumer, technology and regulatory demands within short timescales. Innovation is only innovative for a short time – businesses need to be ready to embrace and exploit innovation with new business models.

Take Action Now

Many will argue that the current utility programs of change, such as core system replacement, smart metering and improving customer offerings, will be enough to sustain and even enhance the customer relationship. The real benefit, however, will be from building upon the change, moving into new products, delivering personalized services and tariffs, and demonstrating an understanding of individual consumer needs.

Still, utilities may struggle to capture discretionary spending from customers ahead of telcos, retailers, financial firms and others. Simply put, action needs to be taken now to prevent the loss of long-term customer relationships. For utilities, doing more of the same in this dynamic and changing market may simply not be good enough!

References:

  1. Multiple references, especially in the British press, including this one from Energy Saving Trust: http://www.energysavingtrust.org.uk/Resources/Daily-news/Gas-and-Electricity/Probe-demanded-into-energy-rip-off/(energysavingtrust)/20792

Be a People Person

I have to admit it. Despite all the exciting new technologies out there, I am finding myself to be a people person when it comes to building smarter grids and more intelligent utilities. Granted, technology is rapidly developing and the utility industry is finding itself in the middle of more and more automation. However, people – from linemen to consumers – will remain critical components for delivering information-enabled energy.

In the many conversations I have with utilities and other industry thought leaders, we often start out talking about smart technology, but eventually our chats settle on people. People can ultimately make or break even the most promising technologies – from personnel and consumers adopting and using the technology to executives driving technology investments. So, in a world buzzing with new technologies, it is important to reacquaint ourselves with people. This article traces some of my conversations about what an intelligent utility is, how people fit in – both on the consumer and utility personnel side – and what the utility industry can do to better involve people. As is my usual style, I will serve up these critical subjects with a side of humor and perspectives outside the utility industry. So be prepared to learn more about yoga, Nashville, crystal balls and the telecom industry, too.

What Is An Intelligent Utility ?

Before understanding the importance of people, let’s take a moment to understand where people fit into smart grids and intelligent utilities. Utilities are no longer exempt from change. From economic stimulus plans to carbon controls, to the impending electric vehicle flood, we must face the fact that the utility industry will undergo significant changes in the coming years, months and even minutes. Now, it is not so much a question of what changes will happen, but how – and how well – will the utility industry adapt to these changes?

A frequent answer to this question has been a “smart grid,” but most smart grid discussions inevitably lead to these questions:

  • How do we get to a smart grid?
  • When do we know when we are there?
  • What is a smart grid anyway?

These are not easy questions. Many groups define the smart grid, but how can you tell when a utility has one? Better understanding this challenge requires an unusual, but useful comparison: Nashville and Nirodha – a state of mind in yoga. Let’s say you are traveling to Nashville. You would see landmarks that you could only find in Nashville, such as the Grand Ole Opry, B.B. King’s Blues Club and the Bell- South Tower. Smart grid landmarks, however, are harder to come by. Utilities can install smart meters and other smart sensors on their grid, but having these technologies does not necessarily mean they have arrived at a smart grid. To add to the confusion, other smart grid components, such as demand response, distribution automation and more advanced metering, have already been around for years.

Although such technologies can support a smarter grid, the smart grid is more than just acquiring certain technology landmarks. So, although it is a nice place, you shouldn’t just think Nashville when you think smart grid. Think Nirodha. For those of you who aren’t yoga enthusiasts, Nirodha is a state of mind in yoga in which you become more focused and aware of an object. In the case of a utility, the object is primarily the transmission and distribution network. As a utility becomes more aware and ultimately more knowledgeable about its network, it can make better decisions about its operation.

Furthermore, as a company builds more knowledge about its grid, it develops not only a smarter grid, but also a more intelligent utility. An intelligent utility overlays information on energy that goes beyond the transmission and distribution network all the way from generation to end users, maximizing its reliability, affordability and sustainability. Essentially, utilities are delivering information-enabled energy. And technology is just one piece for delivering this sort of energy. Here is a quick run-down of the key components in an intelligent utility:

  • Process & technology: Utility objectives and their impact on business process change and smart technology deployment;
  • Economic models: The challenges and opportunities of new paradigms. So this is not just the changes involved with upgrading a technology – like a customer information or geographic information system – but the changes from initiatives like electrifying transportation and microgrids that could radically alter utility companies and the roles of generators and consumers;
  • Finance: Investment trends associated with smart technologies;
  • Public policy: The impact of politics on energy – including efforts by regulators and legislators. These groups ultimately set up the framework that determines whether and how intelligent initiatives move forward; and
  • People: The knowledge, skills and abilities required for both the workforce and consumers in an information-enabled environment.

Involving Workforce

The rest of this article will take a little bit closer look at the last component – people. As we move toward information-enabled energy, the utility workforce will undergo some significant changes – from new job titles, to new knowledge, skills and abilities (KSAs), to new people joining utility companies from other industries.

Ryan Cook, vice president of the employment services division at Energy Central, has pointed out that “In today’s utilities, employee KSAs are based primarily on providing electrical power as a product. These KSAs support the rules-based, process-oriented, functionally structured, and cost-focused business needs of today’s utility. In the future, however, there will be a massive paradigm shift from providing just a product to providing customers with customizable services and solutions for their unique energy needs. The result will be a shift toward KSAs that support a more agile, innovative, collaborative, cross-functional, service-oriented utility of the future. Employees will need to deal with constantly evolving technology.”

So, digitizing the grid will change personnel needs. We know that much, but the big unknown is how exactly will those needs change? And where is a good crystal ball when you need one? Since my snow globe wasn’t working, I thought about other industries that have gone through a digital revolution, which brought me to the telecom and cable industry. I learned much from Alan Babcock, president of Broadband Training Associates. As this industry digitized its grid over the last 13 years and began to focus more on services as opposed to products, it saw significant workforce changes – touching everyone from field crews, to executives, to marketing folks – that could happen to the utility industry as well.

Out In the Field

Before digitizing the telecom and cable industry, many field crews were still pencil and paper, and some still are today. But digitization changes weren’t just about figuring out how to use a truck-mounted laptop. The workforce has a whole new job to do today. In particular, they now have to troubleshoot new problems on multiple services in the network and become experts at devices on an end user’s premise.

Before digitization, field crews dealt with one service – like video in the cable industry – but now they have to balance multiple services in the same network, including voice, data and video. The decisions you make for one service will ultimately impact the others. So, with multiple services, it changes how you do regular maintenance, how you troubleshoot networks, and how you take the network down to make repairs. On top of that, technicians may not be able to take down certain parts of the network because of service level agreements with customers.

Besides dealing with multiple services, field crews have to better understand the devices that extend into customer premises – including modems for Internet or set-top boxes for cable. It can be embarrassing for a telecom or cable company when the consumer knows more about consumer devices than the technician.

Back In the Office

Digitizing the network not only changed KSAs for field crews, but has changed things in the back office of telecom and cable companies as well. These changes occurred in the areas of marketing, customer service, planning and IT.

  • Marketing to customers: Digitization provides cable and telecom companies with increased visibility into the customer premises. This is not only helpful with determining whether customers have service, but also understanding their entertainment preferences. These companies now better understand what entertainment you watch and when you watch it. Ultimately, they have a lot of information at their disposal to be able to better market to you. Telecom companies, however, weren’t traditionally in the entertainment industry, so better marketing to consumers required a new group of employees from outside telecom.
  • Customer service: Customer service has changed in many ways with the digitization of the telecom and cable industry. With a smarter grid, the utility industry often focuses on benefits that it will bring to the customer representatives in terms of access to more information, but there are other benefits to consider as well. An interesting twist in the telecom and cable industry is that as the network gets more complex, a customer service agent’s job gets somewhat simpler. Essentially, customer service representatives have to recall fewer technical details about the network than they did before. It is not as important that they understand how the networks function because they have better visibility into the premise and have more intelligent systems to walk them through trouble-shooting problems.
  • Capital and strategic planning: Digitization has changed the planning time horizon and knowledge requirements for telecom and cable executives. They must factor in the dizzying technology advancements in the industry; think about the rapid movement from 2G to 3G to 4G networks and beyond. The five-year plan now has to be the three-year plan. From a planning standpoint, they also need to better understand the networks in order to figure out how to best utilize and benefit from services that are enabled by those networks.
  • Designing and maintaining IT systems: Aside from learning how to design and maintain new technologies and systems, the technology personnel in telecom and the cable industry have learned some important lessons as they digitize the networks. The first is to more carefully consider the usefulness of new technologies. If a new technology comes along, it doesn’t mean that it has to be used. If a new technology does make sense to use, technology personnel need to consider the human aspects involved with making that change, including change management and making sure the technology is ready when people actually begin using it.

Involving Customers

Not only will the intelligent utility impact its own personnel, but it will impact consumers as well. In particular, utilities will have to help consumers to understand the value of changes and get them to participate in intelligent initiatives.

As I am sure many of you have realized from conversations with friends and family, many people do not understand smart grid benefits or even how the grid really works. Although more people are starting to realize the value, a key challenge is how to get consumers to grasp these concepts and support a smarter grid and more intelligent utility. Utilities have to figure out how to make these things real for people – and are finding many ways to do that. As one utility executive pointed out, “A technology center served to convince our community stakeholders and our PUC that this appears to be a worthwhile journey. The awareness to the consumer was a tremendous value. They were able to start thinking of the value of what we’re trying to build rather than what we’re trying to build.”

Many intelligent initiatives, from demand response to real-time pricing, focus on the end user and require some level of consumer effort. Consumer participation is key for success, but utilities are finding it challenging to get participation. Solutions range from more automation in controlling household appliances and HVAC systems to competition between neighbors regarding energy consumption, but there is still much work to be done in this area, depending on consumer demographics.

Be A People Person

It is easy to get caught up in the technology hype, but as the examples above demonstrate, it is important to keep people in the equation when looking at smart initiatives. People play a key role in determining their success or failure. By preparing for the people factor and considering them in smart initiatives, utilities can better ensure the adoption and success of new technologies and processes.

Con Edison

Consolidated Edison Co. of New York (Con Edison) is a regulated utility serving 3.2 million electric customers in New York City and Westchester County. The company recognized that it could realize significant cost savings if more customers would adopt electronic billing, where bills are delivered electronically without a paper version. Eliminating the printing, postage, labor and equipment costs associated with paper billing can result in significant cost savings.

In addition to operational cost savings, further positive results could be gained from driving e-bill adoption, including improved customer relationships and fewer billing-related service calls. According to a Harris Interactive study conducted for CheckFree Research Services, customers who receive e-bills at a biller organization’s website show higher satisfaction levels, with 25 percent of them reporting an improved relationship with their biller as a result of receiving e-bills.

The challenge was how to attract more customers to the low-cost, high-impact online channel for billing activities and shut off their paper bills. To convince customers to change their behavior, Con Edison had to find a way to cost-effectively generate widespread awareness of electronic billing and explain how benefits, such as saving time, reducing clutter and helping the environment, outweigh concerns customers may have about giving up their paper bills.

THE ADVANTAGES OF ELECTRONIC BILLING

Together, Con Edison and CheckFree developed a comprehensive marketing campaign designed to communicate the advantages of electronic billing to as many customers as possible. As a critical first step, Con Edison gained cross-organizational alignment regarding the campaign strategy. Drawing from a longstanding commitment to the environment, the company made a strategic decision to implement an ongoing campaign that conveyed a “Go green with e-bills” message across numerous channels in order to maximize reach within its customer base. Research has shown that when attempting to change consumer behavior, a comprehensive, consistent and widespread marketing campaign is far more effective than “one-off” campaigns utilizing minimal tactics.

In May 2007, Con Edison launched the integrated marketing campaign capitalizing on the wave of consumer awareness on environmental issues. Con Edison promoted paperless billing and electronic payment through a variety of methods and channels, including:

  • Customer Emails;
  • Direct-mail postcards;
  • On-hold messaging;
  • Radio advertising;
  • Invoice messaging;
  • Press releases;
  • Con Edison website messaging;
  • My CheckFree website messaging;
  • Customer newsletters; and
  • Internal employee newsletters.

Each communication featured the company’s environmental incentive – for every customer choosing the paper-saving option of viewing and paying their bills online, Con Edison would donate $1 to a local, nonprofit tree-planting fund to help the environment in New York.

To aid in driving awareness, Con Edison made a deliberate decision to create an extended campaign designed to consistently reinforce the safety, security, simplicity and environmental benefits of electronic billing. Based on the success of the marketing activities seen thus far, Con Edison plans to include the “Go green with e-bills” theme in every consumer communication going forward.

THE RESULTS

Con Edison showed persistence and enthusiasm in pursuing a multichannel marketing campaign, and it was well worth the effort. In the first seven months after the campaign was launched, Con Edison generated impressive results, including the following:

  • More than 42,000 e-bills activated;
  • A 57 percent increase in e-bill activations over the same time period in 2006; and
  • A 19 percent increase in online e-bill payments over the same time period in 2006.

Con Edison also has benefited from the positive press and goodwill it’s created in the community. By providing its customers with a better, more environmentally friendly choice for paying and receiving their utility bills, Con Edison is minimizing costs, maintaining operational control, optimizing growth for its business and turning customer interactions into profitable relationships.

Technology with vision for Today’s Utilities

Around the world, utilities are under pressure. Citizens demand that utilities provide energy and water without undermining environmental quality. Customers seek choice and convenience, and regulators respond with new market structures. Financial stakeholders look for operational efficiency at a time when aging workforces and infrastructures need replacement.

Pressures like these are forcing utilities to re-examine every aspect of the utility business, from supply to consumption. And no utility can handle those changes alone.

Oracle has positioned itself to become utilities’ software partner of choice in the quest to respond positively and completely to these pressures. To do so, Oracle brings together a worldwide team of utility experts, software applications that address mission-critical utility needs, a rock-solid suite of corporate operational software and world-leading middleware and technology.

The result: Flexible, innovative solutions that increase efficiency, improve stakeholder satisfaction and future-proof the organization.

Oracle has reshaped the utilities IT marketplace. During the past year, by acquiring two world leaders in utility-specific applications – SPL WorldGroup and Lodestar – Oracle has created Oracle Utilities, a new brand that establishes a unique portfolio of proven software, integrating industry-specific applications with the capabilities of Oracle Applications, Oracle Fusion Middleware and Oracle Database.

Oracle Utilities offers the world’s most complete suite of end-to-end information technology solutions for the gas, water and electric utilities that communities around the world depend on. Our revolutionary approach to providing utilities with the applications and expertise they need brings together:

  • Oracle Utilities solutions, utility-specific revenue and operations management applications:
    • Customer Care and Billing
    • Mobile Workforce Management
    • Network Management System
    • Work and Asset Management
    • Meter Data Management
    • Load Analysis
    • Load Profiling and Settlement
    • Portfolio Management
    • Quotations Management
    • Business Intelligence

These solutions are available stand-alone, or as an integrated suite.

  • Oracle’s ERP, database and infrastructure software:
    • Oracle E-Business Suite and other ERP applications
    • TimesTen and Sleepycat for real-time data management
    • Data hubs for customer and product master data management
    • Analytics that provide insight and customer intelligence
    • ContentDB, SpatialDB and RecordsDB for content management
    • Secure Enterprise Search for enterprise-wide search needs
  • Siebel CRM for larger competitive utilities’ call centers, specialized contacts and sales:
    • Most comprehensive solution for Sales, Service and Marketing
    • Complete out-of-the box solution that’s easy to tailor to your needs
    • Results such as percentage increase in sales pipeline, user adoption, opportunity-to-win ratios and doubled revenue growth

Stand-alone, each of these products meets utilities’ unique customer and service needs. Together, they enable multi-departmental business processes. The result is an unparalleled set of technologies that address utilities’ most pressing current and emerging issues.

THE VISION

Cross-organizational business processes and best practices are key to addressing today’s complex challenges. Oracle Utilities provides the path via which utilities may:

  • Advance customer care with:
    • Real-time 360-degree views of customer information
    • Tools to help customers save time and money
    • Ability to introduce or retire products and services quickly in response to emerging customer needs
  • Enhance revenue and operations management:
    • Avoid revenue leakage across end-to-end transactions
    • Increase the visibility and auditability of key business processes
    • Manage assets strategically
    • Bill for services and collect revenue cost-effectively
    • Increase field crew and network efficiency
    • Track and improve performance against goals
    • Achieve competitive advantage with a leading-edge infrastructure that helps utilities respond quickly to change
  • Reduce total cost of ownership through access to a single global vendor with:
    • Proven best-in-class utility management solutions
    • Comprehensive, world-class capabilities in applications and technology infrastructure
    • A global 24/7 distribution and support network with 7,000 service personnel
    • Over 14,000 software developers
    • Over 19,000 partners
  • Address the “Green Agenda”:
    • Help reduce pollution
    • Increase efficiency

STRATEGIC TECHNOLOGY FOR THE EMERGING UTILITY

Today’s utility is beset by urgent issues – environmental concerns, rising costs, aging workforces, changing markets, regulatory demands and rising stakeholder expectations.

Oracle Utilities can help meet these challenges by providing the leading mission-critical utilities suite in the marketplace today. Oracle integrates industry-specific customer care and billing, network management, work and asset management, mobile workforce management and meter data management applications with the capabilities of Oracle’s industry-leading enterprise applications, business intelligence tools, middleware and database technologies. We enable customers to adapt more nimbly to market deregulation, help them meet ever-evolving customer demands, enhance operational excellence and deliver on commitments to environmental conservation.

Oracle Utilities’ flexible, standards-based applications and architecture help utilities innovate. They lead toward coherent technology solutions. Oracle helps utilities keep pace with change without losing focus on the energy, water and waste services fundamental to local and global human and economic welfare.

Only Oracle powers the information-driven enterprise by offering a complete, integrated solution for every segment of the utilities industry – from generation and transmission to distribution and retail services. And when you run Oracle applications on Oracle technology, you speed implementation, optimize performance and maximize ROI.

Utilities today need a suite of software applications and technology to serve as a robust springboard from which to meet the challenges of the future.

Oracle offers that suite.

Oracle Utilities solutions enable you to meet tomorrow’s customer needs while addressing the varying concerns of financial stakeholders, employees, communities and governments. We work with you to address emerging issues and changing business conditions. We help you to evolve to take advantage of new technology directions and to incorporate innovation into ongoing activity.

Partnering with Oracle helps you to future-proof your utility.

CONTACT US

For more information, call +1.800.275.4775 to speak to an Oracle representative, or visit oracle.com/industries/utilities.

Copyright © 2008, Oracle. All rights reserved. Published in the U.S.A. This document is provided for information purposes only and the contents hereof are subject to change without notice. This document is not warranted to be error-free, nor subject to any other warranties or conditions, whether expressed orally or implied in law, including implied warranties and conditions of merchantability or fitness for a particular purpose. We specifically disclaim any liability with respect to this document and no contractual obligations are formed either directly or indirectly by this document. This document may not be reproduced or transmitted in any form or by any means, electronic or mechanical, for any purpose, without our prior written permission.

Oracle is a registered trademark of Oracle Corporation and/or its affiliates. Other names may be trademarks of their respective owners.

Pepco Holdings, Inc.

The United States and the world are facing two preeminent energy challenges: the rising cost of energy and the impact of increasing energy use on the environment. As a regulated public utility and one of the largest energy delivery companies in the Mid-Atlantic region, Pepco Holdings Inc. (PHI) recognized that it was uniquely positioned to play a leadership role in helping meet both of these challenges.

PHI calls the plan it developed to meet these challenges the Blueprint for the Future (Blueprint). The plan builds on work already begun through PHI’s Utility of the Future initiative, as well as other programs. The Blueprint focuses on implementing advanced technologies and energy efficiency programs to improve service to its customers and enable them to manage their energy use and costs. By providing tools for nearly 2 million customers across three states and the district of Columbia to better control their electricity use, PHI believes it can make a major contribution to meeting the nation’s energy and environmental challenges, and at the same time help customers keep their electric and natural gas bills as low as possible.

The PHI Blueprint is designed to give customers what they want: reasonable and stable energy costs, responsive customer service, power reliability and environmental stewardship.

PHI is deploying a number of innovative technologies. Some, such as its automated distribution system, help to improve reliability and workforce productivity. Other systems, including an advanced metering infrastructure (AMI), will enable customers to monitor and control their electricity use, reduce their energy costs and gain access to innovative rate options.

PHI’s Blueprint is both ambitious and complex. Over the next five years PHI will be deploying new technologies, modifying and/or creating numerous information systems, redefining customer and operating work processes, restructuring organizations, and managing relationships with customers and regulators in four jurisdictions. PHI intends to do all of this while continuing to provide safe and reliable energy service to its customers.

To assist in developing and executing this plan, PHI reached out to peer utilities and vendors. One significant “partner” group is the Global Intelligent Utility network Coalition (GIUNC), established by IBM, which currently includes CenterPoint Energy (Texas), Country Energy (new South Wales, Australia) and PHI.

Leveraging these resources and others, PHI managers spent much of 2007 compiling detailed plans for realizing the Blueprint. Several aspects of these planning efforts are described below.

VISION AND DESIGN

In 2007, multiple initiatives were launched to flesh out the many aspects of the Blueprint. As Figure 1 illustrates, all of the initiatives were related and designed to generate a deployment plan based on a comprehensive review of the business and technical aspects of the project.

At this early stage, PHI does not yet have all the answers. Indeed, prematurely committing to specific technologies or designs for work that will not be completed for five years can raise the risk of obsolescence and lost investment. The deployment plan and system map, discussed in more detail below, are intended to serve as a guide. They will be updated and modified as decision points are reached and new information becomes available.

BUSINESS CASE VALIDATION

One of the first tasks was to review and define in detail the business case analyses for the project components. Both benefit assumptions and implementation costs were tested. Reference information (benchmarks) for this review came from a variety of sources: IBM experience in projects of similar scope and type; PHI materials and analysis; experiences reported by other GIUNC members; and other utilities and other publicly available sources. This information was compiled, and a present value analysis was conducted on discounted cash flow and rate of return, as shown in Figure 2.

In addition to an “operational benefits” analysis, PHI and the Brattle Group developed value assessments associated with demand response offerings such as critical peak pricing. With demand response, peak consumption can be reduced and capacity cost avoided. This means lower total energy prices for customers and less new capacity additions in the market. As Figure 2 shows, in even the worst-case scenario for demand response savings, operational and customer benefits will offset the cost of PHI’s AMI investment.

The information from these various cases has since been integrated into a single program management tool. Additional capabilities for optimizing results based on value, cost and schedule were developed. Finally, dynamic relationships between variables were modeled and added to the tool, recognizing that assumptions don’t always remain constant as plans are changed. One example of this would be the likely increase in call center cost per meter when deployment accelerates and customer inquiries increase.

HIGH-LEVEL COMMUNICATIONS ARCHITECTURE DESIGN

To define and develop the communications architecture, PHI deployed a structured approach built around IBM’s proprietary optimal comparative communications architecture methodology (OCCAM). This methodology established the communications requirements for AMI, data architecture and other technologies considered in the Blueprint. Next, an evaluation of existing communications infrastructure and capabilities was conducted, which could be leveraged in support of the new technologies. Then, alternative solutions to “close the gap” were reviewed. Finally, all of this information was incorporated in an analytical tool that matched the most appropriate communication technology within a specified geographic area and business need.

SYSTEM MAP AND INFORMATION MODEL

Defining the data framework and the approach to overall data integration elements across the program areas is essential if companies are to effectively and efficiently implement AMI systems and realize their identified benefits.

To help PHI understand what changes are needed to get from their current state to a shared vision of the future, the project team reviewed and documented the “current state” of the systems impacted by their plans. Then, subject matter experts with expertise in meters, billing, outage, system design, work and workforce management, and business data analysis were engaged to expand on the data architecture information, including information on systems, functions and the process flows that tie them all together. Finally, the information gathered was used to develop a shared vision of how PHI processes, functions, systems and data will fit together in the future.

By comparing the design of as-is systems with the to-be architecture of information management and information flows, PHI identified information gaps and developed a set of next steps. One key step establishes an “enterprise architecture” model for development. The first objective would be to establish and enforce governance policies. With these in place, PHI will define, draft and ratify detailed enterprise architecture and enforce priorities, standards, procedures and processes.

PHASE 2 DEPLOYMENT PLAN

Based on the planning conducted over the last half of the year, a high-level project plan for Phase 2 deployment was compiled. The focus was mainly on Blueprint initiatives, while considering dependencies and constraints reported in other transformation initiatives. PHI subject matter experts, project team leads and experience gathered from other utilities were all leveraged to develop the Blueprint deployment plan.

The deployment plan includes multiple types of tasks; processes; and organization, technical and project management office-related activities, and covers a period of five to six years. Initiatives will be deployed in multiple releases, phased across jurisdictions (Delaware, District of Columbia, Maryland, New Jersey) and coordinated between meter installation and communications infrastructure buildout schedules.

The plan incorporates several initiatives, including process design, system development, communications infrastructure and AMI, and various customer initiatives. Because these initiatives are interrelated and complex, some programmatic initiatives are also called for, including change management, benefits realization and program management. From this deployment plan, more detailed project plans and dependencies are being developed to provide PHI with an end-to-end view of implementation.

As part of the planning effort, key risk areas for the Blueprint program were also defined, as shown in Figure 3. Input from interviews and knowledge leveraged from similar projects were included to ensure a comprehensive understanding of program risks and to begin developing mitigation strategies.

CONCLUSION

As PHI moves forward with implementation of its AMI systems, new issues and challenges are certain to arise, and programmatic elements are being established to respond. A program management office has been established and continues to drive more detail into plans while tracking and reporting progress against active elements. AMI process development is providing the details for business requirements, and system architecture discussions are resolving interface issues.

Deployment is still in its early stages, and much work lies ahead. However, with the effort grounded in a clear vision, the journey ahead looks promising.

Business Intelligence: The ‘Better Light Bulb’ for Improved Decision Making

Although some utilities have improved organizational agility by providing high-level executives with real-time visibility into operations, if they’re to be truly effective, these businesses must do more than simply implement CEO-level dashboards. They must provide this kind of visibility to every employee who needs it. To achieve this, utilities need to be able to collect data from many disparate sources and present it in a way that allows people company-wide to access the right information at the right time in the form of easy-to-use and actionable business intelligence (BI).

The following statement from the Gartner EXP CIO report “Creating Enterprise Leverage: The 2007 CIO Agenda,” led by Mark McDonald and Tina Nunno (February 2007).

Success in 2007 requires making the enterprise different to attract and retain customers. In response, many CIOs are looking for new sources of enterprise leverage, including technical excellence, agility, information and innovation.

This statement holds true. But converting data into useful information for employees in different levels and roles creates a new challenge. Technological advances that produce exponentially increasing volumes of data, coupled with historical data silos, have made it extremely difficult for utilities professionals to access, process and analyze data in a way that allows them to make effective decisions. What’s needed: BI technology tools that are not only available to the C-level executive or the accounting department, but to everyone – civil and electrical engineers, technicians, planners, customer service representatives, safety officers and others.

BI solutions also need to handle data in a way that mirrors the way people work. Such solutions should be capable of supporting the full spectrum of use – from individuals’ personal content to information created by team members for use by the team and formal IT-created structured and controlled content for use enterprise-wide.

The good news is that BI has become more accessible, easier to use and more affordable so that people throughout the enterprise – not just accountants or senior executives – can gain insight into the business and make better informed decisions.

RIGHT-TIME PERFORMANCE MANAGEMENT

“The Gartner Magic Quadrant for Business Intelligence Platforms, 2008,” by James Richardson, Kurt Schlegel, Bill Hostmann and Neil McMurchy (February 2008), has this to say about the value of BI:

CIOs are coming under increasing pressure to invest in technologies that drive business transformation and strategic change. BI can deliver on this promise if deployed successfully, because it could improve decision making and operational efficiency, which in turn drive the top line and the bottom line.

Greg Todd, Accenture Information Management Services global lead for resources at Accenture, advises that monthly, or even weekly, reports just aren’t enough for utilities to remain agile. Says Todd, “The utilities industry is dynamic. Everything from plant status and market demand to generation capacity and asset condition needs near real-time performance management to provide the insight for people enterprise-wide to make the right decisions in a timely fashion – not days or weeks after the event.”

By having access to near real-time performance monitoring across the enterprise, utilities executives, managers, engineers and front-line operations personnel can rapidly analyze information and make decisions to improve performance. This in turn allows them more agility to respond to today’s regulatory, competitive and economic imperatives.

For example, Edipower, one of Italy’s leading energy providers, has implemented an infrastructure that will grow as its business grows and support the BI technology it needs to guarantee power plant availability as market conditions and regulations dictate. According to Massimo Pernigotti, CIO of Edison, consolidating the family of companies’ technology platforms and centralizing its data network allowed the utility to fully integrate its financial and production data analyses. Says Pernigotti, “Using the new application, staff can prepare scorecards and business intelligence summaries that plant managers can then access from portable devices, ensuring near real-time performance management.”

To achieve this level of performance management, utilities professionals need easy access to both structured and unstructured data from multiple sources, as illustrated in Figure 1. This data can be “owned” by many different departments and span multiple locations. It can come from operational control systems, meter data systems, customer information systems, financial systems and human resources and enterprise resource planning (ERP) systems, to name a few sources. New and more widely available BI tools allow engineers and others to quickly view near real-time information and use it to create key performance indicators (KPIs) that can be used to monitor and manage the operational health of an organization.

KPIs commonly include things like effective forced outage factors (EFOFs), average customer downtime, average customer call resolution time, fuel cost per megawatt hour (MWh), heat rates, capacity utilization, profit margin, total sales and many other critical indicators. Traditionally, this data would be reported in dozens of documents that took days or weeks to compile while problems continued to progress. Using BI, however, these KPIs can be calculated in minutes.

With context-sensitive BI, safety professionals have the visibility to monitor safety incidents and environmental impacts. In addition, engineers can analyze an asset’s performance and energy consumption – and solve problems before they become critical.

One of the largest U.S.-based electric power companies recently completed a corporate acquisition and divestiture. As part of its reorganization, the company sought a way to reduce capital expenditures for producing power as well as an effective way to capture and transfer knowledge in light of an aging workforce. By adopting a new BI platform and monitoring a comprehensive set of custom KPIs in near real time, the company was able to give employees access to its generation performance metrics, which in turn led to improved generation demand-and-surplus forecasts. As a result, the company was able to better utilize its existing power plants and reduce capital expenditures for building new ones.

BI tools are also merging with collaboration tools to provide right-time information about business performance that employees at every organizational level can access and which can be shared across corporate boundaries and continents. This will truly change the way people work. Indeed, the right solution combines BI and collaboration, which not only improves business insight, but also enables staff to work together in real time to make sound decisions more quickly and easily and to proactively solve problems.

With these collaboration capabilities increasingly built into today’s BI solutions, firms can create virtual teams that interact using audio and video over large geographical distances. When coupled with real-time monitoring and alerting, this virtual collaboration enables employees – and companies – to make more informed decisions and subsequently become more agile.

Andre Blumberg, group information technology manager for Hong Kong’s CLP Group, believes that user friendliness and user empowerment are key success factors for BI adoption. Says Blumberg, “Enabling users to create reports and perform slice-and-dice analysis in a familiar Windows user interface is important to successfully leveraging BI capabilities.”

As more utilities implement KPI dashboards and scorecards as performance management tools, they open the door for next-generation technologies that feature dynamic mashups and equipment animations, and create a 24×7 collaborative environment to help managers, engineers and operations personnel detect and analyze problems faster and more effectively in a familiar and secure environment. The environment will be common across roles and cost much less than other solutions with similar capabilities. All this allows utilities operations personnel to “see the needle in the haystack” and make quicker and better decisions that drive operational efficiency and improve the bottom line. Collaboration enables personnel to engage in key issues in a timely fashion via this new desktop environment. In addition, utilities can gain preemptive knowledge of operational problems and act before the problems become critical.

BETTER DECISIONS IMPROVE BUSINESS INSIGHT

Everyone in the organization can benefit from understanding what drives a utility, the key metrics for success and how the company is performing against those metrics (see Figure 2). By definition, BI encompasses everyone, so logically everyone should be able to use it.

According to Rick Nicholson, vice president of research for Energy Insights, an IDC company, the nature of BI recently changed dramatically. For many years, BI was a reporting solution and capability used primarily by a small number of business analysts. “Today, BI solutions have become more accessible, easier to use and more affordable, and they’re being deployed to managers, supervisors, line-of-business staff and external stakeholders,” says Nicholson. “We expect the use of business intelligence in the utility industry to continue to increase due to factors such as new report and compliance requirements, changes in trading markets, new customer programs such as energy efficiency and demand response, and intelligent grid initiatives.”

Accenture’s Todd believes that traditional BI focuses on analyzing the past, whereas real-time BI today can provide an immediate chance to affect the future. Says Todd, “Smart users of BI today take the growing volume of corporate operational data and the constant fl ow of raw information and turn it into usable and business-relevant insight – in near real time – and even seek to manage future events using analytics.” (See Figure 2.)

Most importantly, today’s BI gives utility information workers a way of understanding what’s going on in the business that’s both practical and actionable. Dr. J. Patrick Kennedy, the founder and CEO of performance management vendor OSIsoft, says that the transaction-level detail provided from enterprise software often offers a good long-term history, but it does not answer many of the important operations questions. Further, this type of software typically represents a “pull” rather than a “push” technology.

Says Kennedy, “People think in terms of context, trends, interactions, risk and reward – to answer these questions effectively requires actionable information to help them make the right decisions. Integrating systems enables these decisions by providing users with a dynamic BI application within a familiar platform.”

WHAT GOOD BI SYSTEMS LOOK LIKE

Here are some critical characteristics to look for in an enterprise-class BI solution:

  • The BI solution should integrate with the existing IT infrastructure and not require major infrastructure changes or replacement of legacy software applications.
  • The technology should mirror day-today business processes already in place (rather than expect users to adapt to it).
  • The application should be easy to use without extensive IT support.
  • The BI solution should connect seamlessly to multiple data sources rather than require workers to toggle in and out of a broad range of proprietary applications.
  • An effective BI solution will provide the ability to forecast, plan, budget and create scorecards and consolidated financial reports in a single, integrated product.
  • The BI solution should support navigation directly from each KPI to the underlying data supporting that KPI.
  • Analysis and reporting capabilities should be flexible and allow for everything from collecting complex data from unique sources to heavy-duty analytics and enterprise-wide production reporting.
  • The BI solution should support security by role, location and more. If access to certain data needs to be restricted, access management should be automated.

The true measure of BI success is that users actually use it. For this to happen, BI must be easy to learn and use. It should provide the right information in the right amount of detail to the right people. And it must present this information in easily customized scorecards, dashboards and wikis, and be available to anyone. If utilities can achieve this, they’ll be able to make better decisions much more quickly.

SEEING THE LIGHT

BI is about empowering people to make decisions based on relevant and current information so that they can focus on the right problems and pay attention to the right customers. By using BI to monitor performance and analyze both financial and operational data, organizations can perform real-time collaboration and make truly transformational decisions. Given the dynamic nature of the utilities industry, BI is a critical tool for making organizations more flexible and agile – and for enabling them to easily anticipate and manage change.