The story of Bluewater Power Distribution Corporation closely parallels the deregulation of North America’s utilities. Industry colleagues have often inquired as to how Bluewater Power has flourished over the past decade in a rapidly evolving marketplace. Our answer: Enterprise software has played a major role.
Bluewater Power was formed in late 2000 upon completion of a merger of six local utilities. Today, the Canadian corporation distributes electricity to 35,000 customers in southwestern Ontario including residential customers, large industries, international companies, financial institutions and commercial establishments. Our distribution system network consists of more than 344.2 miles of overhead plant and 125.9 miles of underground plant, covering a service area of 68.78 square miles. Bluewater Power employs more than 90 full-time people and is headquartered in Sarnia, Ontario, located about 65 miles northeast of Detroit.
At about the same time as our merger, Ontario’s energy market was preparing to deregulate and that ushered in a host of new mandates. Under the deregulation rules, utilities in the province were obligated to provide unbundled bills and exchange customer electronic business transactions with energy retailers. Deregulation meant retailers could sign up customers with electricity contracts, requiring utilities to be able to bill customers regardless of whether they had a retail contract or not.
Further, the new rules opened up the cost of power on the wholesale side, requiring utilities to conduct wholesale settlements with the Independent Electricity System Operator (IESO), the organization responsible for managing Ontario’s bulk electricity power system and operating the wholesale market.
Until the merger and deregulation, the newly privatized corporation ran its business on a highly customized legacy system that housed numerous mission-critical software applications including customer data, human resources and financials. Given the new multi-tier cost-of-power model, our information technology (IT) team quickly realized that the legacy system would not be able to handle the new requirements. A request for proposal (RFP) was issued with half a dozen utility-specific and enterprise resource planning (ERP) software vendors responding.
ERP Critical for Success
The IT team had a number of important requirements for the new software platform. First, we needed a solution that could support Ontario’s local market, meet regulatory demands and easily adapt to future regulatory changes. Secondly, we are a very small team – just five people in total – so we needed a solution that was easy to use and required little support. In addition, we were adamant about implementing an ERP solution – specifically, a single product that would improve the strategic alignment and efficiencies of Bluewater Power’s financial, human capital and operational processes.
We also needed retail and wholesale settlement functionality to accommodate the new deregulated electricity market. With the enhanced enterprise productivity and insight that an ERP system promised, we felt we would be better able to adapt quickly and cost-effectively to changing business and market requirements.
After a thorough analysis of a number of software solutions, we selected the SAP ERP application and the SAP for Utilities solution portfolio, including billing and financial management applications. Since Bluewater Power went live with those solutions in 2002, the software has provided numerous immediate and longer term benefits. Better control of data translates into increased confidence in regulatory compliance and financial information and provides more visibility and greater cost control across operations. It has also improved statistical tracking and offered tighter controls to ensure correct time and materials along our entire supply chain.
Given that SAP was typically known to be a large business product, we were surprised by the scope, flexibility and scalability. Not only does it meet our present needs – including providing automated support for customer transactions and settlement processes without requiring additional middleware products – but it can accommodate future conditions in the rapidly changing energy market while allowing Bluewater Power to easily grow in response to our Board of Directors’ mandate.
Within the stated timeline of six months, an integrated platform with all necessary utilities processes bundled together was delivered. The IT team leveraged utility-based templates and best practices as well as the Accelerated SAP (ASAP) implementation methodology, which streamlined the implementation by providing templates, methods, tools, and accelerators that have been built on the success of thousands of previous implementations. A cross-functional team dedicated to the project was housed in a separate work space to ensure all business requirements were met by the deadline.
A train-the-trainer approach and a superuser model ensured a smooth transition from the legacy system. Gartner estimates that every hour of needed IT professional training is worth an average of 5.75 hours to the enterprise, and every hour of needed end-user training is worth an average of five hours to the enterprise. Consequently, the training program focused on establishing customer self-sufficiency through easily maintainable methods, materials and tools, with a view of the long-term sustainability of our ERP solution.
While the implementation was not without its challenges, we had minimal disruption to our business during the implementation. In fact, we were able to generate bills and continue offering quality service without customers noticing that we were in the midst of transforming our business.
Faster response improves customer satisfaction
With the system in place, Bluewater Power has been able to respond quickly to frequent, urgent regulatory changes in a cost-effective, prudent manner – without disrupting business or cash flow. This provides Bluewater Power with a sharper competitive advantage over its competitors. In addition, improved statistical tracking means Bluewater Power now has visibility into consumer trends, allowing us to further enhance customer satisfaction and to plan and execute our growth strategy effectively.
The ERP system has also allowed Bluewater Power to handle all activities related to settlement, a central component of the deregulated energy market in Ontario. In 2006, we deployed the SAP Energy Data Management solution component, which provides Bluewater Power with a central repository for both register- and interval-based meter-reading values, independent of the measurement unit. This has improved the accuracy and granularity of data by eliminating the use of a niche solution to handle interval-based only data separately.
As a result, we have cut the time it takes to complete wholesale settlements and complex bill generation in half. Further, we have greater insight across operations, thereby reducing inventory by up to 15 percent and decreasing write-offs by up to 15 percent. We have also reduced the time to count inventory by 30 percent.
Grid maintenance and operations have also improved, and the implementation helps us to more effectively maintain and manage the entire distribution grid infrastructure. Moreover, this allows Bluewater Power to streamline procurement and construction processes and plan for managed work-order activities. And, technicians have the functionality they need to handle repairs, maintenance, inspection, measurement, and customer service – all within a single solution platform.
Preparing for Industry Changes
Today, the electricity industry continues to evolve with conservation, renewable energy, smart metering and the smart grid becoming the new challenges and opportunities for utilities. Once again, Bluewater Power is making plans to extend its capabilities even further through a technology upgrade.
For example, in 2010, smart meters will become mandatory for all residential customers in Ontario. In fact, it will be the biggest change after deregulation of the market. It will also be a stepping stone into a smart grid and offer good opportunities for conservation and for flexibility on the customer end. Internally, however, smart meters will fundamentally change how Bluewater Power interacts with its customers and how the utility is structured in terms of staffing.
Specifically, our system will enable our customer service representatives to more efficiently handle the increased call volume anticipated with time-of-use billing. Additional functionality will streamline customer interaction and allow for better customer access to information. In short, we will be able to easily grow and adapt to changing regulatory requirements while managing the deployment of smart meters to customers.
Business intelligence will also improve. With a clear picture of day-to-day, real-time business functions and transactions, the utility will know at all times what its outstanding bills are, where it is in the billing cycle in terms of leads, evaluate trends and address concerns. This will add tremendous value to Bluewater Power’s customer interaction centre, where employees will be able to retrieve information on customer accounts, respond to queries and address smart meter concerns more quickly. Not only will this enable Bluewater Power to improve customer service and interaction, but it is also expected to yield greater operational efficiencies.
Bluewater Power is also further upgrading its SAP solution suite. This technology upgrade will allow Bluewater Power to more easily integrate to the province’s centralized meter data management repository (MDMR) responsible for time-of-use billing. Furthermore, it will address advanced metering infrastructure (AMI) business processes as well as help us comply with the International Financial Reporting Standards (IFRS) that will become mandatory in Canada in 2011.
Bluewater Power remains committed to using technology to make continuous improvements that align its configuration more closely with best business practices. The utility will continue to leverage and build on its flexible platform to satisfy its growth objectives, including mergers or acquisitions, expansion of services, and vertical extension.
Words of Advice
We have had a very successful ERP implementation, one that has lasted a decade and is now ready to take on the future. We have learned many lessons along the way.
First, know your existing business requirements and find a solution that will meet them. But, perhaps more importantly, find a trusted and reputable business partner that is committed to developing its products and services in concert with changing business needs. Choose one that is committed to remaining advanced as well as dedicated to developing and maturing their products as global trends emerge yet is still capable of configuring their systems at the local level. Engage a partner that is going to be around for the long term. In this way, a utility can ensure its business systems will meet regulatory change today and adapt to the new business opportunities of tomorrow.
Although Bluewater Power may be a small utility compared to many of our North American counterparts, we have found that partnering with a reputable vendor has also given us presence as a mid-sized utility and repeatedly earns us credibility when interacting with larger utilities – an unexpected bonus.
About the Author
Keith Broad is Director of Information Technology at Bluewater Power Distribution Corporation, based in Sarnia, Ontario, Canada.
