Tuesday, November 16, 2010

HPC America Wins Sonoma County Water Agency SAP ECC 6.0 Implementation

SAP implementation news: We recently signed a contract with Sonoma County Water Agency (Water Agency) to implement and host SAP ECC 6.0. HPC America will oversee the project and help the Water Agency to simplify its current business processes and prepare for future projects that require a robust Enterprise Resource Planning (ERP) infrastructure.

The SAP implementation will initially focus on enhancing critical, day-to-day business processes, including a streamlined time card entry for Water Agency employees, cost and overhead allocation to projects and funds, and a new order management system. Contractor billing, accounting for vehicle and equipment usage, and tracking grants the Agency receives will be addressed subsequently.

The SAP software and hosted servers will replace an IBM mainframe computer application. HPC America's hosted services will enable the Water Agency to take advantage of SAP's benefits without requiring an investment in new hardware and IT staff.

More news to follow in the coming weeks.

Tuesday, November 9, 2010

SAP Internal Order (IO) Settlement and the FERC module

We recently had a discussion about Internal Order (IO) settlement and how it impacts the FERC module. In one scenario, a utility uses allocation structures that assign multiple primary cost elements to single secondary settlement accounts. This process results in no alignment of final settled costs in a cost center between the source primary cost elements and the secondary settlement cost elements, which concerns some users. The configuration combines the standard FERC solution results with the final fund ID from the Public Sector (PS) solution.

A question was raised. What would happen if the allocation structures were changed so that all cost elements settle on themselves and eliminate the secondary settlement cost elements? How would that impact the FERC solution?

In this example, the change should not impact FERC. While we do look at the fund assigned to the receiving cost center for each IO, we don't care if the cost elements have changed or are the original ones. When an IO is charged with either primary costs (e.g., materials, contracts, and employee expenses) or secondary costs (e.g., labor and overheads) the FERC solution ignores the settlement transaction in CO altogether. So whether a composite cost element is used for settlement or the original ones are used, settlement is not relevant.

In another scenario, a utility is settling to the original cost elements. There will be more records in the database when crediting the original cost elements. Settlements (and any reversals) will therefore take longer to process. Another drawback to crediting the original cost elements is that it will be harder to find the amount of each cost element capitalized. So if you wanted to see total labor, you would have to look in cost centers excluding the CO settlement transaction—you couldn't simply use the G/L to find total labor, since only the net to expense can be found there. For these two reasons, most utilities use the design in the first scenario, in which one composite cost element is credited for labor, one for materials, etc.

For utilities considering a change in allocation structures, we recommend looking at the budgeting model to see if the budget should be assigned a different set of receiving cost centers from the ones charged for labor. In one scenario we know about, original cost centers receiving the work from the IOs make the CO cost flow very circular. This can confuse users trying to monitor the budget by cost element.

Monday, November 1, 2010

Institutionalize Meter-to-Cash with SAP Meter Data Management and Predictive Analytics

As utilities face an aging workforce — some analysts estimate 50% will be eligible for retirement in the next decade — it becomes even more important to institutionalize the meter-to-cash process. Done right, executive management will commission a cross-departmental team that looks into every piece of equipment and business process, to document what veteran staff know intuitively but haven't written down.

Within the scope of this significant endeavor, we see two SAP tools that can help utilities prepare for the imminent internal and external sea changes:

SAP Meter Data Management can capture AMI reads from various meter vendors (e.g., Itron and Lyndis+Gyr). This will help prepare for future regulatory tariff changes that require more time-of-use (TOU) metering rate schedule offerings to residential, commercial, and industrial customers.

Predictive Analytics (PA) enables a deeper utilization of Financial Supply Chain Management (FSCM). In our post-recession, high unemployment era, there is a real risk of increasing Days Sales Outstanding (DSO) and on-site collection efforts. Waiting until accounts are delinquent will only exacerbate this situation. Predictive Analytics helps illustrate the characteristics of customer accounts needing payment plans or optional payment methods, such as a push to credit card payment.