sábado, noviembre 26, 2016

Conventional Wisdom May Steer Power and Utility Companies Toward the Wrong Future

Significant New Challenges Could Be in Store According to a New Deloitte

Research Report
Sep 14, 2005, 01:00 ET from Deloitte & Touche USA LLP

 WASHINGTON, Sept. 14 /PRNewswire/ -- Most of America's leading power and
 utility CEOs and CFOs think business will not change much over the next five
 years. However, a study released today by Deloitte Research -- including
 interviews with regulatory, financial, and policy experts -- shows significant
 new challenges could be in store between now and 2010.
     These are the highlights of the Deloitte Research report: Which Way to
 Value?  The U.S. Power and Utility Sector, 2005-2010.
     In the report Deloitte Research groups the contrasting views on what the
 next five years may hold into three broad scenarios: "Continuity," "Tough
 Times," and "Rising Expectations." The "Continuity" scenario is based on the
 majority view among industry executives.
     "We believe that while minority views may represent less-likely scenarios,
 they should not be ignored," says Greg Aliff, vice chairman and national
 managing partner, energy and resources, Deloitte & Touche USA LLP. "The report
 notes that when companies base their strategies on the conventional wisdom,
 they may leave themselves vulnerable if the contrarians turn out to be
     The study documents support for certain views that go against the
 industry's prevailing assumptions. Some examples of cases where the majority
 view deserves another look:
     -- Climate change. Most executives interviewed believe the industry will
        not face carbon limits within five years. But some executives
        interviewed disagree, including CEOs of major utilities, and the
        perception that new mandates could be in place before 2010 is shared by
        some state regulators, environmentalists, and shareholder groups.
     -- Rate regulation. Most of the executives interviewed believe state
        regulators will support utility rate increases associated with new
        facilities investments. But some executives interviewed think
        commissions will be hard to convince, and that view is seconded by some
        state regulators and financial players.
     -- Back to basics. Most of the executives interviewed expect capital
        markets to applaud the "back to basics" strategy of focusing on
        reliable returns from the regulated core business. But some executives
        interviewed think investors may soon demand more growth than the back-
        to-basics model permits, and some in the financial sector concur.
     -- Natural gas. Many executives interviewed predict gas will stay viable
        as a generation fuel, with liquefied natural gas (LNG) from abroad
        augmenting output from North American wells. Not so, according to other
        executives interviewed, as well as some regulators, consumer advocates,
        and national security analysts, who worry about problems such as
        opposition to new LNG terminals and the emergence of a new "gas OPEC."
     What will happen to U.S. utility companies if one of the minority views
 turns out to be correct? By asking "what if?" and then acting on the insights
 that result, executives can adapt and augment their current strategies in ways
 that better prepare their companies for the opportunities and threats that may
     The report discusses how power and utility companies can redefine their
 strategies and potentially increase returns from assets, and grow their
 companies through mergers and acquisitions, despite uncertainty over which
 scenario the next five years will most closely resemble.
     The study was conducted by Deloitte Research, part of Deloitte Services
 LP.  Using as a starting point the findings from a late-2004 survey conducted
 by GF Energy, Deloitte Research interviewed 20 leading senior industry
 executives as well as another 20 people with other perspectives, including
 regulators, investment bankers, environmentalists, consumer advocates, and
 think tank scholars.
     Copies of the report may be obtained by sending an email request to
 publicationcenter@deloitte.com. Please reference item number 5092.
     About Deloitte
     Deloitte refers to one or more of Deloitte Touche Tohmatsu, a Swiss
 Verein, its member firms and their respective subsidiaries and affiliates.  As
 a Swiss Verein (association), neither Deloitte Touche Tohmatsu nor any of its
 member firms has any liability for each other's acts or omissions. Each of the
 member firms is a separate and independent legal entity operating under the
 names "Deloitte", "Deloitte & Touche", "Deloitte Touche Tohmatsu" or other
 related names. Services are provided by the member firms or their subsidiaries
 or affiliates and not by the Deloitte Touche Tohmatsu Verein.
     Deloitte & Touche USA LLP is the US member firm of Deloitte Touche
 Tohmatsu.  In the US, services are provided by the subsidiaries of Deloitte &
 Touche USA LLP (Deloitte & Touche LLP, Deloitte Consulting LLP, Deloitte
 Financial Advisory Services LLP, Deloitte Tax LLP and their subsidiaries), and
 not by Deloitte & Touche USA LLP.

SOURCE  Deloitte & Touche USA LLP


Strategic Perspectives on Utility Enterprise Solutions

Bt Warren B. Causey. President & CEO, Warren B. Causey, Ltd., reposted from Energy Central Posted on December 14, 2005.

As deregulation and competition loomed on the horizon in the late 1990s, utilities realized that they did not have many of the major software systems they would need to face a more competitive, more business-oriented (rather than government-structured) future. They began installing those systems at a fairly rapid pace in the late 1990s, a pace accelerated by the Y2K scare.
However, as a result of terrorism, the collapse of deregulation in California and the Enron-inspired corporate scandals, that pace of system upgrades and installation slowed sharply. As a result, faced with skyrocketing fuel costs and pressures in many different directions, utilities today still are faced with an eclectic collection of enterprise software systems, many of which communicate poorly with other systems, if at all. They also are just beginning to install business intelligence systems that would enable them to operate as true enterprises, as do companies in many other industries.
From the results of a recent survey conducted by Energy Central, it is apparent that many utilities still have a long way to go to have their systems operate on an enterprise basis. We asked our survey respondents if their systems gave them an enterprise view of company operations. Only slightly more than 50% of investor-owned utility respondents answered yes. Municipal and Co-op utilities did a bit better at about 60% and 68%, respectively. Federal/state/district respondents were much less sanguine, with only about 25% responding yes.
One of the reasons many utilities do not have an enterprise view is that they have not settled on an integration method for their systems. Integration ranges from “little integration, still mostly manual interfacing” which ranges from 18% to 50% at different utility types to EAI (15% to 47%) to SOA (12-13% to about 32%).
When asked about the major technological issues facing their utilities, nearly 30% of all respondents named integration as the No. 1 problem. Other issues included timeliness of data (13.5%), cyber security (9.6%), data reliability (7.7%), lack of implementation (3.8%) and others.
Political pressure and uncertainty about regulation and legislation was named as the No. 1 problem utilities face in that area. When it comes to economic and business issues, the cost of fuel was the No. 1 problem by a wide margin in the survey.
Estimating market spending for any industry over time is difficult and probably more so in the utility industry because of its diverse nature. Nonetheless, we did ask respondents in our survey to estimate their spending on the six major enterprise technologies covered in this report. According to their responses, adjusted for utility size and distribution, these executives are projecting they will spend a total of about $3 billion on ERP, EAM, GIS, WMS, OMS and BI over the next three years. IOUs managers say they will spend the most, at about $1.7 billion of the total. Municipals project say they will spend about $320 million, co-ops about $200 million and federal/state/district utilities about $693 million over the period.
Two important points should be borne in mind with regard to spending estimates:
  • Estimates by different organizations based on different criteria and methodologies, including different software sets, will vary widely.
  • While utility personnel attempt to be as accurate as possible with regard to spending estimates, they are only estimates, and experience indicates that they tend to be overly optimistic in making these estimates. Normal bureaucratic delays, delays in implementation and other factors tend to reduce actual spending from projected amounts, usually between 40% and 50%.
There has been tremendous upheaval in the vendor community providing enterprise software over the last three years. Consolidation has taken a toll and, in several cases, produced stronger, if fewer, competitors. Major changes over the period include:
  • J.D. Edwards and PeopleSoft are both now a part of Oracle, which made Oracle a much more significant player in the utility enterprise software field.
  • Indus acquired CIS vendor SCT Utilities and several smaller companies rounding out that company’s enterprise offerings as a major EAM vendor.
  • SAP acquired several smaller companies and introduced its Netweaver SOA architecture enabling the German giant to offer its software to smaller companies and offer individual modules to companies who didn’t want the whole ERP package, but did want certain functionality.
  • LogicaCMG also acquired some other companies expanding its suite so it too can claim to be a full-service enterprise vendor.
  • SPL Worldgroup, previously a CIS vendor, bought CES International and was sold to GFI ventures and married with the former Synergen, so that SPL now is a major enterprise vendor.
  • Severn-Trent split off its Worksuite products, making them a free-standing company (the future of which is now in question) and the European parent seemingly turned most of its attention elsewhere.
  • Lawson, which previously was known for its financial suite, at least in this industry, made smaller acquisitions and expanded its enterprise offerings.
  • Synergen, as mentioned above, was merged into SPL and disappeared as a separate company, although SPL now is operating it as a SPL Enterprise Asset and Work Management (SPL EAM) subsidiary, with its own president.
Clearly, the market for, and implementation of, utility enterprise solutions is a dynamic and evolving market. As these various solutions and applications continue to be implemented at more sites and – importantly – integrated with other applications on a more frequent basis, utilities will begin to realize a more significant and consistent payback for these technology investments.
Editor’s Note: This article is based on the findings and analysis reported in the Enterprise Solutions Report, published in November 2005. The Report can be ordered by going to www.energycentral.com and clicking on the “Knowledge” tab.


Deloitte Research made a Scenarios Study and found that the "Continuity" scenario is what is expected by most companies in the next 5 years. However, Deloitte also found out that the next five years might turn out very different from the strategic plans of many companies (read utilities). The result is a very different perspective on the interdependencies of markets and Enterprise Solutions.
On one, or both, of the other two scenarios ("Tough Times" or "Rising Expectations"), instead of Utilities Enterprise Solutions, a Retailers Enterprise Solutions arrives, which will make much more business for IT suppliers than expected under the Continuity Scenario. The main reason is that current business models are at the end of there useful life, while new technology is available to be transformed into competing innovative business models, leading to true deregulation of electric markets.
With the presentation " Ruminations on Demand Response - a view from Chicago," Bob Lieberman has given a new hope to residential real-time pricing based on the existence of a risk premium, part of which responsive customers can pocket. Bob adds that conventional wisdom regarding that real-time pricing of residential customers won’t work was proven wrong. Lieberman identifies 4 problems to be overcome develop the market: 1) Short term thinking; 2) Who's job is it?; 3) Overcoming the "DR is about protection system "mindset; and, 4) Explaining to customers what we are talking about and what's in it for them.
By taking a close look to "An Alternative Business Case for Demand Response," my comments to Why We're Selling Advanced Metering All Wrong... And How to Sell It Right and the discussions on "Energy Bill 2005 - A Waste of Time?" and "2006: New Challenges and Opportunities in the Brazilian Electric Energy Arena" all 4 problems can be addressed by competitive retail marketers, with innovative business designs under their own Retailers Enterprise Solutions. The result will be a new paradigm of the electricity industry for the new global economy, where increased efficiency will result. Every customer will be able to chosse value added from electricity and the mayority of customers will have lower prices, after a while.
© José Antonio Vanderhorst-Silverio, PhD. 2005.
Interdependent Consultant on Electricity