SAP FERC Enhancement Project

This summer, we conducted a top-level assessment of a utility's SAP IS-U/FERC module configuration and business processes, and identified a number of enhancements that would benefit the company—both in its daily operations and for its future plans to join the state ISO.

Next week, we begin the full-scale implementation to realize the following four goals:

1. A streamlined FERC process that can be run monthly.


2. An efficient and accurate process for handling actual labor charges, secondary cost element credits on cost centers, and related secondary cost element debits on non-capital PM/Internal Orders, such that payroll taxes and benefits currently included in fully loaded labor rates are calculated correctly and applied through overhead processes.


3. A consolidated process to manage Fleet costs and equipment charges, such that line item detail for maintenance of equipment does not appear in distribution/transmission O&M FERC accounts.


4. An efficient and automated way to determine appropriate allocations to FERC accounts without having to mimic the flow-of-cost trace outside of SAP.

This work will utilize key functionality of HPC's SAP-certified software solution Utility Financials Accelerator (UFA) that is not included in the standard FERC module, in order to increase the project's efficiency; reduce ongoing trace workload and errors; improve the speed and accuracy of new order creation; automate translation of natural accounts to regulatory categories; and facilitate better ongoing table maintenance.

Stay tuned for additional insights and results as the project unfolds in the coming months.

Part 1: Capital Expenditures and the FERC Module

This is the first of a three-part posting about tracing capital expenditures and the SAP IS-U/FERC module (which as you may know, HPC America originally developed in 1994). We recently helped a customer troubleshoot some mystery data, and thought our approach would be worth sharing.

When utilities build a new generation plant, overhaul an existing one, or make some other type of capital improvement, the associated work orders are of course capitalized in SAP. The IS-U/FERC module uses a special account to trace all the labor, materials, outside contracts, and employee expenses to a single expense account&mdashwhat we'll refer to here as the Holding Account. Then, to capitalize (i.e., reverse) the costs in the Holding Account, the order(s) are settled, meaning the expense is credited and the capital account on the balance sheet is debited. This happens once at the end of each month.

The order settlement action creates an offset to the Holding Account used by the trace for capital orders. So, in theory, the Holding Account has a zero balance at the close of each month. When that is not the case, it's a sign that something is wrong. Stay tuned for Part 2 for advice on handling such a scenario.

So why doesn't the FERC module just trace to the capital account in the first place and forget about having to clear the Holding Account? Well, the FERC module is not allowed to capitalize costs. Only the Controlling module (CO) can do this. By having only one source for capitalizing costs, the FERC ledger will show the same net income as the natural account ledger used for Generally Accepted Accounting Principles (GAAP) reporting.

As such, the true purpose of the Holding Account is to ensure the total expense dollars are EXACTLY the same between the natural and regulatory (FERC or RUS) chart of accounts. The Holding Account is comprised of two sources: traced costs to regulatory indicator 'CAPT' (usually debits); and direct post costs (usually credits) for all capital orders that settle externally to the balance sheet to either Construction in Progress (CIP) or Plant in Service (PIS). These two sources - trace and direct - happen at different times, hence the difference in the account is always the result of these two processes.

Next time: a real-world example.

IS-U/FERC -- Without a trace!

If you're like many utilities running the SAP IS-U/FERC solution, you may be able to turn it off. Say what? That's right, turn it off and get even better data than you're getting now.

When you change the FERC setting in FERC_C8, you'll see options to treat secondary costs as primary. Changing CO activity types (normally secondary cost elements) to primary for FERC reporting allows you to support FERC account balances with labor documents from CO — where often the employee name, hours worked, and PM order number are found. Imagine that; for the first time, a financial analyst will see each utility employee charge to an actual FERC account.

HPC uses this design for customers very successfully. In concert with our SAP-certified solution HPC Utility Financials Accelerator, we update V_FERC_C8 in transaction SM31. Make all the secondary cost transactions primary (ECC 6.0 has radio buttons for this) except for settlement, which stays as a secondary cost. Then assign each cost center to a regulatory indicator. Finally, update the trace translation (FERC_C3) to include secondary cost elements converted to FERC accounts.

Depending on how you have configured FI, CO, and FERC, the FERC trace will run faster, provide more accurate labor costs and assessment detail, and provide enhanced drill-down using FERD or FEOD transactions. If you have SAP HR/Payroll and PM installed, you may see the work center of the employee, the time confirmation, and the notification in PM. You can't do that by using the FERC module with the traditional trace of FI documents only.

So why didn't we think of this 20 years ago? Well, for one thing, CO is not the general ledger. It was thought that FERC balances have to be supported by FI documents only. In reality, provided the FERC balances equal the natural accounts, it really doesn't matter whether FI or CO documents are used to support FERC. So, free yourself from the limitation of FI only, and unleash a new era of improved FERC reporting in SAP.

It's time to turn off the trace! If you do, users can enjoy one version of the truth whether running order reports in CO or looking at the final objects in FERC_D1 (the FERC module drill-down tool.)

SAP for Utilities: Best practices, real-world results, and industry insights

On any given day in the office, we're talking with customers, business partners, and our internal team about how to best address the SAP-related issues that utilities face — from accounting and billing complexities, to the challenges of reporting to external auditors and government regulators. As you can imagine, after more than 15 years of developing and managing SAP solutions for utility companies across the country, including the original IS-U/FERC module in 1994, we've got a lot of substantive stuff to discuss.

Unfortunately, many of these great ideas aren't as well documented as they could be; once the conference call or hallway conversation is over, they're gone, back in our collective heads.

No more. We're going to blog about our work, experience, and insights. We'll strive to make this space on the Web informative and useful for specific individuals at utilities running (or considering) SAP: executive management, plus accounting, finance, and IT professionals. Most posts will be written by HPC America's CEO, Jerry Cavalieri, with periodic contributions from our team of SAP senior solutions architects. And maybe even a guest or two from one of our utility customers.

So, thank you for reading and checking back every week or so. Please don't hesitate to contact us if you have any suggestions or questions.