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.

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.

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.

SAP World Tour - It's all about mobility, BI, and SOA

Last week, we attended a local event on the SAP World Tour. Key topics included the future of in-memory computing, computing in the cloud, and mobility. The clear message was that the future is all about the iPad, iPhone, Blackberry, and Android. It's NOT about the desktop. We should expect specific apps that distill SAP software down to core information relevant to each person who needs it, whenever they need it, along with the ability to act on it. Another big takeaway was that during the next decade, we’ll see technology to enable managers to collaborate better with one other both inside and outside their companies. The new middle manager will work with customers and suppliers in real-time, with technologies that remove any semblance of corporate walls.

This is consistent with another key theme we noted at the SAP for Utilities event last month: utility customers will ultimately receive better customer service through more effective use of BI, SOA, and mobile technology.

We expect to see more granular, powerful functionality based on user roles in the future. This will be driven by leveraging Business Objects, by new analytical tools that make captured information readily available and actionable, and by increasing use of mobile devices. Service Oriented Architecture (SOA) will facilitate third-party application integration with SAP while maintaining high security and enabling bi-directional flows of information that previously were not possible without far greater effort and expense.

Given these advancements, the right information will find the right users based on specified rules and real-time analysis of operations. Customers and field crews will be the most obvious beneficiaries of these developments . Work orders, for example, will change in real time based on actual need and geographic proximity, such that the four-hour appointment window disappears. Customers will get what they need faster and with less hassle, and utilities will make even better use of their resources.

SAP's Linear Asset Management and Operation Account Assignments

At last month's SAP for Utilities event we learned more about two specific enhancements in SAP Business Suite 7 that are particularly interesting to utilities. Linear Asset Management (LAM) for Plant Maintenance enables very granular documentation of assets like power lines and water pipes, such that maintenance (and associated costs) can be tracked to specific portions of the asset instead of the whole entity—for example, a segment of line between two mile markers, or a distinct vertical location on a length of pipe.

With Operation Account Assignments (OAM), utilities will gain useful functionality to assign multiple operational accounts to one work order. Tasks will be allocated to the right accounts, resulting in fewer order numbers, greater flexibility, and detailed information for Finance—without increasing complexity for the field. In fact, when properly implemented, we anticipate that crews will have an even easier time, as they won't have to think about accounting.

FERC's rational response to violations

In today's issue of APPA's Public Power Daily there's a brief article by Robert Varela on FERC's "rational responses" to violations and fines, in order not to jeopardize smaller utilities. This is consistent with our own experience with FERC on behalf of clients. We've also seen a similarly constructive attitude from RUS, which offers a bi-annual educational conference on accounting for utilities. Everyone seems to recognize that complying with FERC and other regulatory reporting requirements can be a challenge for resource-constrained utilities; the financial data needed either isn't readily available, or it's there but not in the right format. Stay tuned in the coming weeks for a special report on best practices for FERC and NERC compliance. Or take a look at our enterprise solution, which was recently certified by SAP.

GIS and SAP for Utilities

One of the presentations at SAP for Utilities that we enjoyed greatly was Elizabeth Mueller's on "GeoSynergy." The City of San Diego uses Geographic Information Systems (GIS) to improve customer service and increase operational efficiency.

By integrating GIS into its SAP EAM infrastructure, San Diego is better able to anticipate potential maintenance issues even before customers call to report problems. And when people do call in—for example, to report a street light outage—the City can pinpoint the specific lamp that's broken based on the customer's address, determine if it belongs to the City, and then repair it and close out the work order promptly. Huge ROI here.

GIS also helps field teams to work more efficiently by presenting the relative location of different work orders spatially; instead of relying on a basic list of addresses, crews can see their target sites overlaid on detailed maps, thereby making it easier to understand where to go next to make the best use of the day. We'd expect to see more utilities integrate GIS with their SAP systems to capitalize on opportunities like these, as the business case for them seem highly compelling.