Case Study: Optimizing FERC Accounting for Utilities on SAP

In anticipation of its migration to SAP S/4HANA in 2023, Salt River Project engaged HPC America to evaluate its current SAP Financials processes and results, and to identify areas for improvement that would not only deliver immediate benefits, but also streamline the utility’s eventual transition to S/4HANA.

Hear SRP speak about its FERC optimization project at the 2019 SAP for Utilities conference

One particular area for improvement the team identified was around SRP’s FERC data: it was hard to understand and tie back to participation billing, and did not fully support audit and pricing processes. The data required for external audiences did not reconcile to the operational data used to create internal financial statements, and, as experienced by many utilities running the standard FERC module, the differences were difficult, if not impossible, to explain.

After the assessment, SRP engaged HPC to optimize its FERC model with HPC Utility Financials Accelerator (UFA) add-on software. HPC UFA eliminates the FERC module’s limitations, and runs on both SAP ECC and SAP S/4HANA. Five months later, SRP was ready to go live with its new FERC design. The project achieved all intended objectives and more: SRP’s balances by FERC account now match exactly—to the penny—its reports by order number, WBS element, cost element, and cost center, thereby making functionalized data far more intuitive for users to analyze.

Download the full SRP case study, hear SRP speak at the 2019 SAP for Utilities conference, and learn more about HPC America's accounting solutions for utilities on SAP.

Continuous Accounting for Utilities on SAP S/4HANA

For too long, utilities have been beholden to batch accounting processes that delay financial analysis, obscure timely visibility into job spend, and hinder proactive mitigation of variances. The “monthly close” is such a foundational element of the business that it’s hard to imagine not relying on it. 

It doesn’t have to be this way, however, and HPC America’s vision for the future is decidedly different. When utilities move to SAP S/4HANA, they have a tremendous opportunity to get more timely, actionable financial information without waiting for period-end, by taking concrete steps towards “continuous accounting.”

Get the Continuous Accounting white paper (PDF)

Why Continuous Accounting Matters
At HPC, we think of “continuous accounting” as embedded, real-time, or otherwise automated processes that replace traditional period-end batch processes. Continuous accounting processes generate valuable financial data on a more regular and frequent basis than the monthly close alone. A utility with a continuous accounting model would enable its analysts and managers to evaluate and take action on operational performance, spend variances, and other business metrics without having to wait for a period-end report.

For example, collecting functionalized cost data in real time would allow analysts to identify and correct mischarged postings before month-end, thereby making the actual closing process less error-prone. Likewise, loading overheads more often than monthly would provide project managers with fully loaded cost views of their projects mid-month, which would in turn enable them to adjust resources proactively in the current period instead of reacting after the period has been closed.

Six Ways to Continuous Accounting on SAP S/4HANA

(1) Functionalize costs at the point of data entry instead of in a batch process at month-end.
Replace the derivation-based FERC solution that’s delivered with S/4HANA with a real time, line item design. There are a number of ways to do this, depending on how much flexibility and control your utility needs. One is to use HPC’s latest add-on software for utility financials on S/4HANA, HPC DECIPHER, which is certified by SAP as integrated with SAP S/4HANA, and eliminates the FERC module that we created 25 years ago.

(2) Minimize cost flow streams...
by reducing (or eliminating) allocations and settlements that only serve to functionalize costs. Streamlining cost flows is an underappreciated but valuable effort, and every utility moving to S/4HANA should consider it carefully. We have great experience and can help.

(3) Activate Functional Areas...
to leverage the Universal Journal’s power to record and report generation, transmission, and distribution costs right from the general ledger (not just from Controlling or the FERC module). We first did this for We Energies in 2012, then again for Cleco on S/4HANA in 2018, and we’ve just started a new Functional Area project for another utility

(4) Collect job costs daily, if not more frequently.
As mobile devices become ubiquitous throughout the enterprise, labor entry should occur in real time when technicians complete their Plant Maintenance tasks, even before they leave a job site.

(5) Run overheads after every pay period, or even more frequently.
In conjunction with more timely direct labor entry, apply your indirect labor and overheads more often, perhaps even weekly. This will fully load costs for job managers, project managers, and program managers to gain insights into total spend much earlier than waiting for the month-end close.  

(6) Modernize the availability and presentation of financial data.
Use Fiori apps to access a P&L statement at any time of the month, from any device, and use nested, real-time drill-down reports to show how job order costs roll up to the income statement. Get multi-dimensional data on the fly in S/4HANA without the need for ETL processes customary with separate OLAP servers like BW or BOBJ.

How to Get Started
To learn more about how your utility can best get closer to continuous accounting—say, starting with a functionalized income statement mid-month—contact HPC for a discussion, or meet us at the 2019 SAP for Utilities conference in San Diego on October 21-23.

Utilities on SAP: Four Best Practices for Asset Accounting on SAP S/4HANA

During the last 25 years of advising utilities, it was around 2013 that we started to hear customers vent about asset accounting. Some of them used quite strong language, while others were more politic. Over time, we realized that the utilities experiencing the greatest frustration were those that had moved key elements of their financial process outside of their ERP. For them, optimizing SAP Financials to meet today’s more stringent regulatory environment — for example, streamlining their cost flow to improve transparency — was much more challenging because it would entail unwinding complex integration between SAP and another solution. 

Looking ahead, we see at least four best practices around asset accounting that will help utilities get the most out of their investment in SAP S/4HANA by configuring it correctly from the start:

(1) Focus PowerPlan on taxes and retirement unit calculations.

These specialized functions warrant a dedicated tool, and the utilities we’ve worked with largely acknowledge that PowerPlan is a capable one.

(2) Use SAP Controlling (CO) for allocations.

Retaining this function in SAP increases visibility into true costs for comparing job estimates to actuals. The CO module can apply overheads more efficiently than just once a month, even daily if desired. As utilities move towards continuous accounting in the coming years — enabled through mobile devices in the field that capture the cost of work performed — there will be less of need for fully loaded rates. Utilities we’ve worked with that move allocations and settlements outside the ERP often come to regret it because of the added complexity and latency between when direct costs were incurred and when overheads were applied. In contrast, in S/4HANA which brings OLAP and OLTP together, CO can provide more timely and granular data that makes Board reports more meaningful. Utilities will be able to see and correct spending variances earlier.

(3) Use SAP Project Systems and WBS elements for AFUDC.

Utilities turn on interest charges when capital work is in progress, and then turn them off when work is technically complete. Using WBS elements integrated with SAP EAM enables you to see immediately when work status has changed, therefore resulting in a more timely and accurate posting of AFUDC. Calculating AFUDC outside the ERP can often lead to adjustments that would otherwise have been unnecessary, and complicates the process of getting the right charges into the rate base. 

(4) Get visibility into Plant Accounts in your Universal Journal.

Instead of summarizing Plant Account costs to one account - 101, Plant in Service — utilities on SAP S/4HANA have a tremendous opportunity to post all of the rich, line item detail in the Universal Journal. On SAP ECC, this level of detail would be invisible to the FERC module. But on S/4HANA with HPC DECIPHER, our latest add-on solution that is certified by SAP as integrated with S/4HANA, the entire contents of the fixed asset sub-ledger can be laid out as line items in the Universal Journal. DECIPHER will translate your 300-series plant accounts for each capital transaction as PIS to FERC account 101 in the same level of detail as in your fixed asset sub-ledger. DECIPHER can also split plant accounts based on predefined percentages, and then present the data in a separate FERC ledger. As a result, detailed capital costs will be in the same table (ACDOCA) as detailed plant transactions, and they can all be analyzed using the same tool, such as the SAP Analytics Cloud.   

When your utility is evaluating plans for asset accounting on SAP S/4HANA, contact HPC America to talk about strategy for SAP Financials and Work Management for utilities on SAP.

Salt River Project Simplifies FERC on SAP ECC and Improves Readiness for SAP S/4HANA

Salt River Project (SRP) is a community-based not-for-profit utility that provides reliable, affordable water and power to more than two million people in central Arizona. SRP has provided these essential resources for more than a century to meet the needs of customers and help the region grow. SRP has been on SAP since 2013, and currently runs SAP ECC 6.0 on Suite on HANA and BW on HANA.

In anticipation of its migration to SAP S/4HANA in 2023, Salt River Project engaged HPC America in to evaluate its current SAP Financials processes and results, and to identify areas for improvement that would not only deliver immediate benefits, but also streamline the utility’s eventual transition to S/4HANA.

After the assessment, SRP engaged HPC to optimize its FERC model with HPC Utility Financials Accelerator (UFA) add-on software. HPC UFA eliminates the FERC module’s limitations, and runs on both SAP ECC and SAP S/4HANA.

Five months later, SRP was ready to go live with its new FERC design. The project achieved all intended objectives and more: SRP’s balances by FERC account now match exactly—to the penny—its reports by order number, WBS element, cost element, and cost center, thereby making functionalized data far more intuitive for users to analyze.

Download the full case study to read all the benefits SRP now enjoys.

HPC DECIPHER® 1.0 Achieves SAP-Certified Integration with SAP S/4HANA®

We’re pleased to announce that our software solution HPC DECIPHER® 1.0 has achieved SAP certification as integrated with SAP S/4HANA®. The integration helps utility companies to realize greater accounting transparency, speed up the monthly close and, ultimately, strengthen rate-case positions with the most defensible cost of service data.

HPC DECIPHER builds on HPC America’s nearly 25 years of experience advising utilities on SAP solutions. It leverages the Universal Journal in SAP S/4HANA for modern, line-item-based regulatory financials . HPC DECIPHER eliminates time consuming batch processes, and includes real-time translation, powerful allocations, insightful cost flow forensics, and other useful utility accounting functionality.

The SAP® Integration and Certification Center (SAP ICC) has certified that HPC DECIPHER version 1.0 integrates with SAP S/4HANA 1610 using standard integration technologies. SAP S/4HANA is the next-generation business suite, built for the SAP HANA® platform, with on-premise and cloud deployment options. It is designed to act as the digital core, helping customers drive digital transformation across their entire organizations, taking advantage of the award-winning, role-based user experience of SAP Fiori®.

“We are delighted that HPC DECIPHER has achieved certified integration with SAP S/4HANA,” said Jerry Cavalieri, CEO of HPC America. “The ability of DECIPHER to interoperate with SAP S/4HANA gives utility company controllers, rates, and IT professionals an even stronger business case to upgrade to SAP S/4HANA.”

Learn more about HPC DECIPHER at the 2018 SAP for Utilities conference in San Antonio, Texas from October 15-17, 2018.

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HPC DECIPHER is a registered trademark of HPC America.

SAP, SAP S/4HANA, SAP HANA, SAP Fiori and other SAP products and services mentioned herein as well as their respective logos are trademarks or registered trademarks of SAP SE (or an SAP affiliate company) in Germany and other countries. See http://www.sap.com/corporate-en/legal/copyright/index.epx for additional trademark information and notices. All other product and service names mentioned are the trademarks of their respective companies.

Free Webinar: FERC Reporting Options for Utilities on SAP S/4HANA

Utility companies running SAP have a number of different FERC reporting options on SAP
S/4HANA. On September, 6, 2017 at 11:00am Pacific, HPC America’s free Webinar for utility company Finance, Accounting, Rates, and IT professionals will answer the following questions:

What FERC reporting functionality is possible on S/4HANA…

• as delivered?
• with configuration changes alone?
• with a partner’s software solution such as HPC DECIPHER?

Utility companies attending the Webinar will gain a clear understanding of the capabilities and limitations of these three approaches to regulatory accounting on S/4HANA, and have an opportunity to learn from HPC America’s 20+ years of experience supporting utilities on SAP. Register for the event now.

2017 SAP for Utilities Conference topics: FERC and C4C

At next month's 2017 SAP for Utilities conference, HPC America will discuss two topics of considerable interest to utility customers:

Real-Time FERC on SAP S/4HANA. Utilities have a number of options for regulatory accounting on S/4HANA. The delivered solution still relies on the legacy FI-RRU (a.k.a., the "FERC module") which uses a derivation-based model to generate regulatory data in batches at period-end. In contrast, S/4HANA is ideally suited to a transaction-based ("real-time") FERC model with line-item granularity. It doesn't, however, deliver such a design out-of-the-box. (Request our FAQ for more info.) At the conference, you can learn from HPC America's 20+ years of subject matter expertise how your utility can realize transaction-based FERC on S/4 either through configuration and/or code block changes, or with our latest add-on solution, HPC DECIPHER, which runs natively on S/4HANA and delivers the most comprehensive functionality for real-time translation, allocations, adjustments, cost flow forensics, and more. Before the conference, you can request our FAQ about FERC on S/4HANA.

SAP Hybris Cloud for Customer. We're currently leading the first Cloud for Service deployment at a utility company in the United States, and will share our SAP C4C implementation and integration experience with conference attendees. SAP C4C is incredibly important for a number of reasons, not the least of which is the replacement of transaction CIC0 Customer Interaction Center (CIC) in the legacy IS-U/CCS with the C4C Utilities Contact Center (UCC) connected to the IS-U in the ERP. See a live demo of our system at the conference, and learn from the technical challenges we've surmounted by working closely with SAP Support.

To schedule a meeting with HPC at the 2017 SAP for Utilities conference, please contact us directly.

New White Paper About FERC Reporting Options on SAP S/4HANA

HPC America’s FERC Reporting Option Matrix for SAP S/4HANA outlines three alternative regulatory accounting designs for utilities on SAP. It covers one derivation-based FERC reporting model, and two different transaction-based FERC models. Request your copy now.

This detailed white paper is based on HPC America’s 20+ years of experience developing regulatory accounting solutions for utilities on SAP. It summarizes how three different approaches to FERC accounting function on S/4HANA, including their respective technical requirements, reporting capabilities, and data granularity to support rate case preparation and regulatory inquiries. It also addresses FERC-GAAP reconciliation, financial statement drill-down, FERC adjustments, FERC budgeting, and other topics relevant to utility accounting stakeholders running SAP S/4HANA.

Utility finance, account, rates, and IT professionals may request their copy of the white paper online.

#SAP4UTL Take-Aways About FERC Reporting on SAP S/4HANA

Like some of you attending the 2016 SAP for Utilities conference earlier this week, we had the opportunity to learn and talk about different approaches to regulatory accounting on SAP S/4HANA. FERC reporting has historically been an obscure topic, but it’s getting more airtime as utilities consider carefully the business case for, and impact of, moving to S/4HANA or S/4HANA Finance ("Simple Finance").

In the course of discussing FERC processes and results with #SAP4UTL conference attendees, we validated that HPC’s new design for real-time reporting on S/4HANA will in fact meet the needs of utilities adopting SAP’s in-memory platform. The software solution we introduced at the conference, HPC DECIPHER, has a light architecture: it runs natively on the Universal Journal, and doesn’t entail the use of a second HANA system running in parallel (or any additional hardware for that matter). As well, HPC DECIPHER does not require SLT replication of master data or coding block changes.

Bigger picture, we determined that HPC DECIPHER reinforces — even clinches — the business case for SAP S/4HANA in several ways. 

By making the most of SAP’s new technology, HPC DECIPHER translates GAAP to Regulatory accounts in real-time, directly in your S/4HANA server; eliminates GAAP-FERC reconciliation issues; functionalizes operational costs with the most granular level of detail; allocates common costs by utility code or line of business; generates full Financial Statements with drill down to all regulatory line items; enables easy, controlled reversal and reposting of regulatory data; identifies all cost flows traced from start to finish—and in reverse—with drill-down to details; and translates the fixed asset sub-ledger to regulatory accounts (e.g., the 300 series for FERC) directly in S/4HANA, thereby creating the potential to reduce the use of some costly third-party fixed asset solutions. And HPC DECIPHER does all of this, and more, without the legacy FERC module.

So, if you, too, discussed real-time FERC reporting on S/4HANA at the SAP for Utilities conference, and are now asking questions about regulatory reporting on S/4HANA, please contact HPC to chat about HPC DECIPHER — or to simply pick our brains. As you may already know, we’ve specialized in FERC reporting for utilities on SAP for a long time, since the very beginning, and our unmatched expertise will benefit most utilities transitioning to SAP S/4HANA.

SAP S/4HANA Add-On: HPC DECIPHER for Real-Time Regulatory Financials

HPC America is pleased to announce its latest innovation for utilities on SAP^® S/4HANA: HPC DECIPHER for real-time regulatory financials.

HPC DECIPHER is an ABAP-based software application that runs natively on the SAP Universal Journal. It provides the most comprehensive translation, allocation, adjustment, reporting, and forensics for utilities on SAP S/4HANA or S/4HANA Finance. HPC DECIPHER delivers greater accounting transparency, stronger rate case positions, and improved back-office efficiency.

Key Benefits for Utilities on SAP S/4HANA

• Translates GAAP to Regulatory accounts in real-time, directly in S/4HANA or S/4HANA Finance
• Portions line items to multiple regulatory accounts
• Allocates common costs, such as those from shared services, by utility code
• Generates full Financial Statements with drill down to all regulatory line items
• Eliminates the need for lump-sum journal entries that lose valuable transaction details
• Enables easy, controlled reversal and reposting of regulatory data
• Improves responsiveness to regulatory inquiries, and strengthens rate case positions
• Establishes one version of the truth between GAAP and Regulatory views

Read the full product description of HPC DECIPHER.

Learn More at the SAP for Utilities Conference #SAP4UTL

Utilities can learn more about FERC reporting on SAP S/4HANA and the benefits HPC DECIPHER delivers at the SAP for Utilities conference in Huntington Beach, CA, October 10-11, 2016. Meet HPC America at booth #39 to discuss SAP S/4HANA adoption strategies and alternative approaches to regulatory accounting for utilities on SAP S/4HANA. Schedule a meeting with HPC now.

Utility Accounting Controllers Love

In anticipation of the SAP for Utilities conference coming up in two weeks, HPC has been thinking about what makes for truly exceptional utility accounting. After serving utilities on SAP for more than 20 years, we've learned that customers value—dare we say love—the following:

• A complete and accurate functionalized view of their financials
• No reconciliation issues between GAAP and FERC/NARUC/AWWA
• Meaningful data every day, not just at month-end
• Cost flows that are easy to understand and explain
• Financials straight from the ERP, without dependency on (waiting for) third-party solutions
• Field Ops free to focus on their work, not arcane regulatory accounting
• Highly defensible rate case data

To learn more about how HPC delivers utility accounting that Controllers love, look for us at the SAP for Utilities conference (booth #39) or schedule a meeting with us in advance. During the conference, we’ll not only discuss optimization of SAP Financials, Regulatory Reporting, and Work Management on ECC 6.0 systems, but also SAP S/4HANA adoption strategies and HPC's latest innovation for real-time regulatory financials on S/4.

SAP for Utilities 2016 Conference

This coming October, HPC America will exhibit at the 2016 SAP for Utilities conference, where

we'll be speaking with utility finance, accounting, rates, and work management professionals about the challenges they face and the benefits that HPC has delivered to utility customers over the last 20+ years.

HPC is an SAP Financials, Regulatory Reporting, and Work Management expert dedicated to utilities since 1994. Our latest innovation for SAP S/4HANA delivers next-generation utility accounting: transaction-based regulatory reporting, automated line-item adjustments, unmatched cost flow transparency, one version of truth between GAAP and FERC/NARUC, and, ultimately, stronger rate case positions.

Learn more about HPC's solutions, services, and SAP-related resources for utilities, and contact us to schedule a meeting prior to the SAP for Utilities conference.

SAP S/4HANA Readiness - 6 Tips for Utilities on SAP

Today, many utilities are looking into SAP S/4HANA carefully, trying to understand their options and the implications of different approaches to the new, in-memory platform. Concurrent with this research, customers ask us if they should take on new ERP projects while waiting on S/4: “What should we do, if anything, before we’re ready to move to S/4HANA? What are some specific S/4HANA readiness steps?”

While it’s tempting to stay in a holding pattern, we see a number of ways that utilities can prepare for S/4HANA and gain immediate benefits to their existing SAP ERP. Request your copy of our latest CXO Guide to get six S/4AHANA readiness tips that have value even if you don’t move to S/4 for several years—nothing is throwaway work.

Business case for SAP® S/4HANA for utilities on SAP

At HPC America, we've been championing SAP ERP modernization for many years, primarily in terms of Financials and the regulatory reporting obligations with which U.S. utility companies must comply.

 

Now that SAP S/4HANA is available, the business case for updating your ERP is even stronger—especially if you've been tolerating sub-optional performance from your ECC 6.0 system and old business processes.

We see at least six reasons to move to S/4HANA. To learn more, request your copy of HPC's CXO Guide to SAP for Utilities, Building the Business Case for SAP S/4HANA.