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Service Delivery Optimization:Integrating the Enterprise from the Asset to the Customer
Henry Bailey
Utility Industry Principal, SAP America
© SAP AG 2005, Title of Presentation / Speaker Name / 3
Industry Trends - Increasing Energy Prices and Volatility
Electricity = average retail price (cents per kilowatt hour)Gas = wellhead prices (dollars per 1,000 cubic feet)Oil = domestic first purchase price (dollars per barrel/10)Source: Energy Information Administration (EIA)
US Energy Prices 1980-2004
0
1
2
3
4
5
6
7
8
9
1980
1982
1984
1986
1988
1990
1992
1994
1996
1998
2000
2002 Ja
nMarMay Ju
lSep
ElectricityGasOil
© SAP AG 2005, Title of Presentation / Speaker Name / 4
Industry Trends - Slow Improvement in Financial Health
US Electric & Gas UtilitiesQuarterly Financials ($M)
$0
$20,000
$40,000
$60,000
$80,000
$100,000
$120,000
$140,000
1Q02 2Q02 3Q02 4Q02 1Q03 2Q03 3Q03 4Q03 1Q04 2Q04 3Q04
ProfitsRevenues
Sources: BEA, EIA, IDC
© SAP AG 2005, Title of Presentation / Speaker Name / 5
Industry Trends - The Top 10
#1 – US Utility M&A Activity Will Accelerate, Putting CIOs in the Spotlight
#2 - Utilities Will Get Serious About Business Process Outsourcing
#3 – Capital Will Flow to Alternative/Renewable Technologies
#4 – Upstream Will Invest in Digital Oilfield Initiatives
#5 – Wholesale Will See a Recovery of Energy Trading
#6 – Delivery Will Remain Focused on Operational Efficiency and Compliance
#7 – Retail Investments in US Will Focus on BPO for Customer Care and Billing
#8 - Intelligent Grid Hype Will Increase, But Reality Will Be Years Away
#9 - Energy/Telecom Convergence Will Re-emerge, But With Limited Success
#10 – US Energy IT Spending Will Exceed $22 Billion in 2005
Source: “Top 10 Predictions for the Energy Industry in 2005”, Energy Insights, an IDC Company, January 2005
© SAP AG 2005, Title of Presentation / Speaker Name / 7
KPIs for Operational ExcellenceProcess
SAIDI, SAIFI, MAIFI, CAIDI
Maximum system demand
Annual system load factor
System losses
Unmetered energy
% Corrective / preventive maintenance
% Maintenance hours reported
% Rush work orders
% Repeitive equipment failures
Employee
Injuries per 200k maintenance hours
% safe work order completed
Days lost to industrial disputes
Days sick leave
Days lost to workers compensation
Lost time injury frequency rate
Lost time injury severity rate
% O&M Spent on Training
Financial
O&M spend/customer, Kwh or Mbtu, mile/pipe - wire
Maintenance cost / UOP
Direct labor costs
Contractor & service costs
Capital expenditures related to:new customers, refurbishment, augmentation
Return on assets
© SAP AG 2005, Title of Presentation / Speaker Name / 8
Operational Excellence
Operational Excellence: The simultaneous achievement of top performance in Safety, Cost and Production
Safety(Employee)
Cost(Financials)
Production(Process)
OPERATIONAL EXCELLENCE
Required for long term success of a Best-Run Utility
© SAP AG 2005, Title of Presentation / Speaker Name / 10
Foundation for Best Practice
An IT foundation strategy should:Standardize processes and organizations for single or multiple sites and support the streamlining of procedures. Facilitate the redesign of functional area processesAlign business processes with the Enterprise Software Application Enable Best Practices of functional areas to be integrated around a single, proven integrated software application that includes following processes: ▪ Engineering ▪ Regulatory Compliance▪ Work Management ▪ Personnel Safety▪ Supply Chain ▪ Financials & HR▪ Document Management
Reduce IT costs associated with the enhancement and maintenance of legacy applications and retire multiple software applications
Source: Executive from large utility that is undergoing a merger
© SAP AG 2005, Title of Presentation / Speaker Name / 14
Summary
The Energy Industry is undergoing the next evolution of changeBest Practices start with a strong community around sharing industry knowledge and benchmarking KPIsIT solutions can enable Best Practices by capturing the right data at the right time at the right placeIntegrated, real-time information from the asset to the customer is a critical requirement for a Best-Run Utility