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
email@example.com. Please reference item number 5092.
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
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 companys 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 didnt 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.
Editors 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.