Introduction

The energy industry continues to experience significant restructuring activities
which are primarily changing the way energy delivery businesses (i.e., pipes
and wires companies) are regulated and managed. Given the strategic uncertainty
created by restructuring, utility companies are unsure about what role they
will want to play in the new markets — whether they want to be an energy
supplier or in retail, whether the want to operate regionally or nationally.
Consequently, they are also unsure what capital investments they should be making.

The restructuring process itself is in a state of uncertainty. Two key issues
that remain unresolved are how a fully competitive marketplace will be implemented,
and the timeframe under which restructuring will take place. However, one thing
has become clear — the energy delivery business will have to cut costs.

The recent events in the California energy market have many states rethinking
and delaying their restructuring activities. However, the regulators are implementing
performance-based rate-making/regulation (PBR) as a substitute for a competitive
market. Research conducted by the META Group indicates that 75 percent of states
will develop such regulatory approaches by 2003. Initially, PBR will focus on
forcing cost-cutting measures through the implementation of price caps and revenue
caps. The groundwork has been laid, moreover, for the regulatory agencies to
focus on evaluating customer service and service reliability. Energy delivery
operations applications must be capable of efficiently acquiring, managing,
and analyzing this data.

The ongoing restructuring and regulating activities, whether cost-control or
performance measurement, require the energy delivery businesses to make IT investments
in order to respond. These challenges can be met by improving efficiencies through
IT and e-enabled means within the core energy delivery business. Efficiency
can be improved in three major ways:
• Procuring commercially available applications
• Enhancing customer self-service
• Distribution resource management

It should also be recognized that industry restructuring has forced utilities
to enter into many contingent processes that have enabled electronic relationships.
For example, systems are being set up for dealing with the power exchanges,
independent system operators, and energy service providers. These relationships
are constantly being redefined, and this paper does not specifically address
them. The focus is rather on those processes likely to endure across the various
proposed business models.

Cost-Cutting through Procurement of
Commercially Available Applications

It’s no secret that when utilities are forced into cost-cutting measures that
the first strategy they consider is personnel reduction. The procurement and
proper implementation of commercially available operations applications has
the potential to allow for significant reductions in IT and operational staff.
These actions, however, must be approached nontraditionally. Traditionally,
computer applications were built to displace people. But today and in the future,
these applications must instead be built to empower people.
Applications to support the pipes and wires business have historically consisted
of in-house development and using semi- to highly-customized vendor software.
These applications have either not
been integrated or were only loosely integrated via point-to-point interfaces
or a batch file transfer process. This structure requires a large IT support
staff for the applications and the associated interfaces, and consequently,
a larger operations staff is also required because of these inefficiencies (Figure
1). At one utility, the staff required to support their previous applications,
which were developed internally, has been reduced dramatically by implementing
a commercially available distribution work management system and tightly integrating
this implementation with a mobile workforce management solution. IT staff will
be reduced from 21 positions to five, and Operations staff will be reduced by
25 percent when the implementation is completed.

Figure 1 – Relative staffing levels based on commercial application
implementation/integration levels

Commercial best-of-breed operations applications are becoming available and
replacing the custom legacy systems. The core applications are work management,
mobile workforce management, outage management, and geographical information
systems. However, the most common means of integration still relies on point-to-point
interfaces and the batch file transfer process.
More utilities are investigating using enterprise application integration, also
known as a message broker middleware architecture approach for application integration.
As commercial application implementation and integration continues in the core
application areas of energy delivery, Figure 1 indicates a greater percentage
reduction in IT staff than in operations staff, primarily for two reasons. First,
the software vendor, through annual service agreements, is now providing application
support/ maintenance which is approximately 15 to 20 percent of the software
licensing costs (20 percent x $1,000,000 averaging licensing cost = $200,000
per year). Second, in-house legacy systems often required one to three full-time
technicians to maintain the system in the production environment [two people
x ($85/hour average burdened rate) x (2000 hours/year) = $340,000/year]. This
represents about a 40 percent savings in ongoing IT administration/ maintenance
costs, but does not include the resources needed to make upgrades to the system.

Additionally, the procurement of commercial applications typically leads to
less software customization. Whereas internally developed software is generally
susceptible to near-continuous customization, the costs of having external customization
performed are often better understood to be prohibitive.

With commercial applications, an administrator typically has responsibility
for multiple systems, enforcing a greater degree of business-process standardization
across the energy delivery organization and providing a better understanding
of the associated costs. A lot of efficiencies can be gained through using common
processes and technology solutions that functionally support T&D operations
across their service territory.

Best-of-breed commercial applications have, embedded in the software, the best-of-the-best
practices used by many utilities — providing enormous benefits to companies
that use them. These benefits would usually either not be available through
applications developed in-house, or would come at a much greater expense. Although
some utilities may argue that their software is a competitive advantage and
acquiring commercial software levels the competitive playing field, a stronger
case can be made that how a utility uses data and information provides the real
competitive advantage. In today’s marketplace, information is the currency of
competition.

Cost-Cutting through Enhancing Customer Self-Service

Providing higher levels of customer self-service is required to aggressively
cut costs and achieve greater levels of customer satisfaction. Each direct customer
interaction with a utility employee is an expensive transaction. The IT solution
to this problem must allow customers to go directly to the data without dealing
with a utility representative. It has to provide them with the flexibility to
access the data on their own time and from wherever they want. Enabling customers
to “service themselves” will reduce the workload of energy delivery operations,
making them more efficient and less costly.

As utilities continue to grow through mergers and acquisitions and the pace
of restructuring varies significantly among states, utilities will have to deal
with a mixed-market situation, in which some states are deregulated and others
are not. This too implies that the solution should allow for more external usage.

In what form must the technology solution be in order to meet these requirements?
The solutions must be Web-enabled, with modular integration points. Recognizing
that the Internet has changed the fundamental structure of communication, the
utility needs to look specifically for integrated, wholly Web-based solutions
with strong business-to-business and business-to-customer self-service features.
Because today’s utilities often support more than a million customers over service
territories encompassing hundreds of thousands of square miles, exploiting the
power of the Internet as a self-service vehicle can be just as convenient for
them, as well.

One example is the ability for the customer to make appointment-based service
requests without calling a customer service representative. Approximately 80
to 90 percent of the work requested by customers (short duration, no formal
planning, and no material requirements other than truck stock) can be addressed
through self-service, if the utility has implemented a commercial mobile workforce
management system that provides Web-based access.

Historically, customers have had to go through a CSR to determine whether sufficient
resource availability (primarily, field service representatives) existed to
meet the customer’s requested service appointment date and time. The CSR did
not have up-to-date information about field-service representative availability
— typically only an estimate, based on the number of FSRs expected to be
working in a specific geographic location at the time. More recent mobile workforce
management applications provide the capability for the customer to initiate
a service request and select a convenient, available appointment date and time
based on real-time resource availability — and without the intervention
of a CSR. Customers can then track the status of their service request and reschedule
or cancel, if necessary. This capability is available 24 hours a day.

As markets become competitive, another Web-based function that would be useful
for utilities is to keep large commercial and industrial customers informed.
Large customers need access to detailed records of their energy usage and analytical
tools to help them better understand how their usage patterns and electric rates
interact to affect their electricity bills. Failure to provide this information
can be a strong detriment to customer loyalty.

Statically, historical load information is available through periodic meter
readings. Automated meter reading (AMR) can provide real-time load and usage
data to customers through a Web interface. Using commercially available analytical
tools, this service can provide your customers with important information, such
as usage history, average load profiles, load duration curves, etc., and the
ability to postulate different electricity costs based on different pricing
schemes and varying the utility’s electric usage profile.

A third example that emphasizes the need for modular integration is found in
work scheduling. As commercial best-of-breed operations applications are being
embraced, substantially overlapping scheduling functionality exists with the
distribution work management, mobile workforce management, and outage management
system applications. It’s important for utilities to understand that multiple
systems can impair an organization’s efficiency in resource management. Scheduling
work in multiple systems can result in over- or under-committing resources —
particularly work crews.

Also, as utilities reshape their businesses in response to restructuring activities,
they may increasingly interact with third parties, through the acceptance of
work and providing service for others. Figure 2 illustrates how a utility might
respond. In this scenario, the Distribution Work Management System supports
the core Distribution Work Management processes. Field completion is also supported
with a mobile workforce management application. Work initiated in either the
Customer Information System or the Outage Management System is submitted the
Distribution Work Management System and essentially passes directly to Work
Scheduling for resource commitment and completion time. The Distribution Work
Management System becomes the system of reference for managing all resources
(i.e., labor, materials, and equipment).

Figure 2 – Utility modular scheduling scenario

See Larger Image

Two other uses can be made of the utility’s work scheduling. First, utilities
typically contract 50 percent or more of their work to third parties. Third
parties can be given access to work schedules via a Web interface, which provides
the utility with better control over contracted activities. The second use involves
the utility providing scheduling services to local third-party HVAC, plumbing,
companies. The utility has the option of providing the scheduling services and
making the results known to the third parties through either a Web interface
or by making the work scheduling available similar to that of contracted work.
The utility could also extend its mobile workforce management solution to them,
as well. These examples clearly point to the need for modular integration in
work scheduling as well as other processes.

Emerging Opportunities in
Distribution Resource Management

Distribution resource management is a phrase that is being used by the META
Group and other vendors to describe an integrated suite of applications, similar
to enterprise resource management or enterprise asset management systems, but
designed specifically for the distribution lines of business. The core systems
typically include work management, mobile workforce management, GIS, and outage/distribution
management. It may include other systems, such as network planning/analysis
and automated meter reading. It also includes the integration framework for
these systems as well as back- and front office connectivity. Figure 3 shows
an example of Service Interruption/Restoration. This figure shows how incorporating
AMR with outage management and other Distribution Resource Management applications
can deliver a more complete, timely, and accurate picture of the energy delivery
network. Historically, although SCADA systems provide real-time outage information
at the distribution substation level, many utilities still rely heavily on customer
calls and visual inspections by field personnel to determine the extent and
cause of the outage. The integration of AMR with Outage Management extends the
outage detection capability to the customer premise level. The number of discrete
detection points can be more than 500 times that of the locations typically
monitored by SCADA. For the customer, there are several advantages:

• The utility may know about service interruptions before the affected
customer, and may restore power without the customer ever knowing it was interrupted.
• The utility can confirm that service has been restored without customer
contact. Service crews can focus on other interruptions instead of confirming
restoration.
• Outage locations can be identified more quickly, resulting in shorter
outages.

Figure 3 – Service interruption/restoration DRM example

AMR is more than just a pipe dream for two reasons: advancements in AMR technology
have made it practical, and, although there is significant initial capital investment
in deploying AMR, third parties have already made the investment and are offering
AMR services in exchange for transaction fees and data brokering arrangements.

Conclusion

As restructuring continues, energy delivery businesses must reduce costs, but
they can’t lose site of the need to invest in e-enabled means and IT support.
Significant cost-cutting from IT and operations staff reductions is possible
as utilities begin to implement and integrate commercially available operations
applications and replace their old in-house applications.

Utilities must also concentrate on providing customer self-service — not
only as an option, but as a truly necessary function. Utilities will need to
look specifically for integrated, wholly Web-based solutions with strong B2B
and B2C self- service features.
Distribution Resource Management is evolving. Automated Meter Reading, working
in concert with Outage Management and other DRM applications, can deliver a
more complete, timely, and accurate picture of the energy delivery network.

Finally, it should be recognized that the restructuring events have forced utilities
to enter into many contingent processes and enabling electronic relationships.
Although this work can’t be ignored, it must not blind utilities from focusing
on those processes that are needed to create business value across the various
business models.