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Introduction 1Chapter 1

Introduction

The Situation in the Utilities IndustryThe utilities industry is currently evolving from a monopoly in a regulated mar-ket to a competition-based energy and service industry. In political and economicterms, this process is seen as a positive development, and it reflects an interna-tional trend. The goal of incremental deregulation of the utilities market is to openup that market to competition and to allow consumers to reap the benefits ofcompetition. Liberalization laws are advancing deregulation to varying degrees,depending on the political sphere of influence concerned.

In the future, therefore, the customer will be the focal point of the utilities market.Customers will be able to choose from a number of different suppliers because ina deregulated market they can buy their supply services from different compa-nies. Currently, the services associated with a given supply category are generallyprovided by the local utility company. However, deregulation will break open thefollowing value added chain:

generation and production ® transmission ® distribution ® customer service

Fig. 1-1: The Customer-Utility Relationship in a Deregulated Energy Market

The result of this unbundling is that several utility companies and service provid-ers participate in the value-added chain of any given supply category. Therefore,customers can choose from a number of suppliers for each type of service. Be-cause they are no longer dependent on ”their” utility company, such criteria asprice and service become vastly more important.

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The industry is undergoing a movement toward competition between utility com-panies that, thanks to laws that apply to an entire economic zone, will not end atnational borders.

Challenges for Utility CompaniesUtility companies must prepare for increased competition and globalization. Thesame criteria apply as in other competitive markets. To successfully meet this chal-lenge, utilities have to overcome such obstacles as the cumbersome nature of thestructures and organizations that have grown up over decades in a regulatedmarket. Consequently, utilities must become more flexible to adapt quickly to thecoming changes.

In a deregulated market, utilities can expect to be confronted with many new de-mands. They will have to:

❑ Offer customers better service

Service is the interface to the customer. It affects demand for the utility’s prod-ucts and services, and it defines the company’s image in the minds of customers.

❑ Replace customer contracts with new contracts

Liberalization of the utilities market means changes for utility and service con-tracts. Customers can not only choose from a number of suppliers, they canalso choose from a variety of new rates, forms of contracts, and service levels.Therefore, utilities must be able to design flexible-content forms. In addition,utilities must offer products that combine new services with the traditionalsupply services (for example, ”EnergyPlus” – electricity supplied at a favor-able daytime and nighttime double rate if combined with the purchase of nightstorage heating including installation).

❑ Settle accounts for products and services and exchange data with other utilities

If a customer has contracts with more than one utility, those utilities have toexchange data with each other. Examples of such data include contract data,meter reading data, billing results, and move-in and move-out for a customer.

❑ Support new billing scenarios

In a liberalized energy market, a utility company deals not only with conven-tional billing of supply categories, it also deals with additional scenarios:

❍ In unbundled billing, one company bills for the basic services for a supplycategory provided by various companies – generation, transmission, dis-tribution, and customer service – in a single bill.

❍ In convergent billing, one company bills for the supply services and othersales, such as services provided by various companies for a number ofsupply categories, in a single bill.

Customers give preference to companies that offer end-to-end service – those pro-viding not only their own products and services, but also administrative and bill-ing services for other companies.

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Fig. 1-2: Convergent Billing and Other Billing Scenarios

❑ Forecast customers’ consumption patterns as accurately as possible

Precise forecasting of customers’ consumption patterns is a critical successfactor for utility companies in a deregulated energy market.Accurate forecasting is an essential element of suitably balanced procurement.It lowers the price risks in the spot market (in the energy market). For thisreason, the utility agrees on consumption profiles with its customers or de-ploys new meter technologies with time-slice-controlled consumption mea-surements.The new meter technologies, combined with remote meter reading, make con-sumption forecasting easier and new rate models possible. The customer in-formation system manages the consumption profiles and provides consump-tion forecasting.

❑ Provide information technology support for services at the customer siteThis support enables utilities to improve productivity and customer service.In light of the new fields of business and greater customer focus, it is impor-tant to integrate supply services and on-site services in a common system.This requires integrating the customer information system with Service Man-agement for existing installations and with Work Management for work to beperformed.

❑ Deploy new technologiesNew technologies include communication with the customer via front-officefunctions, call center systems, or the Internet. They also include communica-tion with customer installations via new meter technologies, instruments, andmeter-reading technologies.

❑ Analyze the market and strengthen marketing activitiesMarket analysis and marketing are important ingredients in obtaining new,and retaining existing, customers. The customer information system must of-fer marketing and sales functions to do that.

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Demands on a Customer Information SystemThe new tasks associated with a deregulated market have direct consequences forinformation management in utility companies. The increased importance of cus-tomer information, customer service, and billing is paralleled in particular by vastlyincreased demands on the customer information system. A customer informationsystem must:

❑ Satisfy the demands of deregulation

❑ Focus on the customer

❑ Be very flexible

❑ Increase the company’s productivity

❑ Handle mass data

❑ Deregulation

The customer information system must directly reflect changes in the marketbrought about by deregulation. Examples include:

❑ New types of companies

❑ New supply categories (divisions), rate models, and forms of contracts

❑ New billing scenarios

❑ Greater focus on customers, service, and competitiveness

❑ More secure and automated data exchange with other companies

❑ Forecasting of consumption patterns

❑ Marketing and sales promotion activities

Customer Focus

In the future, you will have more direct contact – in person or by phone – withcustomers. Customers expect their questions to be answered quickly and theirrequests for service to be fulfilled immediately. The purpose of a customer infor-mation system is to provide customers with the best possible support. You mustbe able to access all the important data and services. The data must be up to dateand quickly available at all times. The performance capability and ease of use ofsuch front-office functions raises productivity, reduces errors, and improves themotivation of staff members. Users expect intuitive dialog prompts, an optimallydesigned user interface, and dialog prompts geared to business processes.

The integration of the customer information system with computer-telephone in-tegration (CTI) systems supports the rapid switching of incoming calls and imme-diately provides the call center staff with information on the customer. Outgoingmass calls are also supported, and additional touch-tone or intelligent voice re-sponse (IVR) technologies enable customers to take care of basic business process-es themselves on the phone.

Naturally, the customer information system must also allow for other forms ofcontact with customers. These include archiving faxes and letters and connectingto the Internet.

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Flexibility

Many of the billing systems in utility companies are faithful reflections of an orga-nizational form that has grown up over several decades. They also reflect the rangeof services offered by the companies. Consequently, companies often cannot adaptthem quickly enough to meet changing demands. Ideally, a customer informationsystem ought to be able to respond quickly and without risky technical interven-tion to changes in business operations.

Demands for FunctionalityNo other business-process system in a utility company is called upon to satisfysuch exacting demands for functionality as the customer information system. Thishappens for several reasons.

First, the business-related processes of a customer information system are rela-tively industry specific. Consequently, these processes undergo much greaterchanges, particularly in times of deregulation, than industry-neutral accountingprocesses.

In addition, the customer information system not only has to take into account theexisting country-specific conditions, it also has to master the consequences ofderegulation. Indeed it is possible that regulated and deregulated scenarios willcoexist during a lengthy transition period.

An increased focus on competition and on customers forces utility companies tooffer new services and to develop individual strategies. The customer informa-tion system can be expected to make both possible.

Examples of the exacting demands with regard to functionality include:

❑ Varied forms of recording consumption data

❑ Flexibility in the design of contracts and bill forms

❑ The multiplicity of forms and methods of payment and of clearing rules, par-ticularly for convergent billing

❑ The differentiated handling of default of payment and the associated conse-quences

Company OrganizationChanges to the company organization must be immediately reproduced in thecustomer information system. Examples of this include:

❑ The division between a network-, connection-, and meter-oriented distribu-tion company and a customer-oriented energy sales company

❑ The establishment of a front-office or back-office organization

❑ The transition from area-based to process-based staff assignments

❑ The organization of profit centers or business units with their own balancesheets

❑ Billing for services from different utilities via a common or alternate servicecompany

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The unremitting fast pace of development in information technology must not beallowed to pass by the customer information system, thus leading to technologi-cal obsolescence. The system must be able to incorporate new developments withinan overall evolutionary developmental process. A customer information systemmust be open and, as a component part of a business framework, it must commu-nicate with systems from different vendors.

Productivity

Increased productivity means that business processes can be processed faster. Theresult is cost savings and improved service, plus increased customer satisfaction.It is precisely business processes that consist of a number of steps and in whichvarious agencies (other areas of the company, field service employees or otherservice providers) are involved that a modern customer information system canprocess more efficiently.

To do that, the customer information system needs more than the integrated func-tions to process all the individual steps. It must also coordinate the flow of a num-ber of those steps by means of a higher-level, intelligent workflow managementsystem.

Fig. 1-3: Sample Workflow in a Liberalized Energy Market

Some of these business processes occur during the course of normal business.They can happen frequently, or they can occur on a massive scale.

Technology

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Introduction 1

Examples include:

❑ Installing new service connections

❑ Making and terminating utility contracts

❑ Replacing meters and devices

❑ Processing move-in and move-out service requests

❑ Rate changes

❑ Processing of dunning

A workflow management system not only makes greater productivity possible, italso reduces errors. And because it monitors the flow of business processes, nostep is overlooked or unnecessarily delayed.

Many of the business processes in customer service contain subprocesses fromaccounting and logistics. Where systems with entirely different functions, archi-tecture, and information technology are used, many problems occur at the inter-faces.

Mapping business processes is much easier if the customer information, account-ing, and logistics systems are supplied by a single source. The business processescan then be processed with fewer errors, greater ease of use, and faster.

Mass Data

The number of transactions continues to grow, not only for direct customer con-tact, but also for background processing. Because most business processes in autility company are processed through the customer information system or in-volve functions of the customer information system, the system must handle alarge volume of transactions. The system takes care of this mass data processinglargely in the background. Examples include:

❑ Creating meter reading documents

❑ Handling budget billing requests

❑ Billing or invoicing

❑ Dunning

❑ Exchanging data between companies in a deregulated market

Consequently, response time and throughput of the customer information systemhave to meet the very highest demands for both online and background opera-tion. The transaction volume of utility companies with several thousand custom-ers, a variety of supply categories, and possibly monthly billing requires the useof such technologies as parallel executable background tasks and the distributionof the transaction load across several servers in a scalable, client-server architec-ture.

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1 Introduction

IS-U/CCS � The Customer Information System in R/3The consumption billing systems in place today do not satisfy the demands of theenergy market of the future. As a result, those demands are the basis for the spec-ifications for development of the Industry-Specific Component Utilities/CustomerCare & Service (IS-U/CCS) customer information system.

IS-U/CCS is the industry component for the utilities industry in the R/3 System.As a customer information and billing system for utility and service companies,IS-U/CCS is tailored especially to the industry-specific requirements of the utili-ties industry. Through the integration of IS-U/CCS with the industry-neutral com-ponents of the standard R/3 System and through interfaces to external systems,SAP offers utility companies an integrated and enterprisewide total solution forprocessing business information: SAP Utilities.

Fig. 1-4: SAP Utilities Solution Map

RIVA SAP can look back on many years of intensive collaboration with the utilities in-dustry. Over 500 companies in the international utilities industry run R/2 and R/3 Systems. This makes SAP the market leader in business-process informationsystems in the utilities business. SAP also has many years of experience in thearea of customer information systems.

Approximately 80 utility companies in Germany, Austria, Switzerland, and theNetherlands run the RIVA system in R/2, processing more than 25 million billableutility contracts in the following divisions:

❑ Electricity

❑ Gas

❑ Water

❑ Waste water

Strategic EnterpriseManagement

Business Intelligence& Data Warehousing

ManagerialAccounting

FinancialAccounting

RegulatoryReporting/FERC

CustomerService

Human ResourceManagement Procurement Treasury

Fixed AssetManagement Real Estate

Market Research& Analysis

Product/BrandMarketing

Marketing ProgramManagement Sales Channels

SalesManagement

Profiling &Forecasting

TradersWorkbench

RiskManagement

WholesaleBilling

IntercompanyReconciliation

InvoicingReceivablesManagement

Third PartySettlement

Engineering &Construction

ProductionPlant

Maintenance Decommissioning

Engineering &Construction

OperationsManagement

Maintenance &Work Management

Transmission &Distribution Service

Sales Cycle &Billing

ServiceManagement

Meter ReadingManagement

Sales Cycle ServiceAgreement

Special CustomerProcesses

Retail Billing

Connection & InstallationManagement

Pool/

ISO

Generation

Business Support

Transmission & Distribution

Installation Services

Energy Service

Energy Trading

Revenue Management

Enterprise Management

Customer RelationshipManagement

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❑ District heating

❑ Heating costs

❑ Waste disposal

The industry-specific experience that we have gained from devoping RIVA, sup-porting users, and incorporating tested industry concepts have allowed SAP totake an evolutionary development approach to IS-U/CCS.

The alignment of IS-U/CCS to the future demands of the international utilitiesindustry in a deregulated and competitive utilities market environment requiredan in-depth review of the practical experience of operating RIVA and a thoroughanalysis of the market, particularly in those national markets that already haveadvanced deregulation.

Thanks to the architecture of the R/3 System and the technology of the R/3 devel-opment environment, sophisticated software solutions can be incorporated intothe development of IS-U/CCS:

❑ The objects of IS-U/CCS are implemented – in line with the object-orientedsystem development approach – as business objects, that is, as function cap-sules with unique and low-maintenance interfaces. This is the foundation bothfor the modular structure of the system and for communication with other R/3 Systems or external systems.

❑ Modularization, encapsulation, and the integration of IS-U/CCS with the stan-dard R/3 System are essential for mapping cross-application business pro-cesses in business workflows, which are supported by R/3 Workflow Manage-ment.

❑ The communication technologies between different R/3 systems and externalsystems improve support for distributed system scenarios.

❑ Utilization of the three-tier client-server architecture optimizes performance.

The following chapter provides an overview of the functions of IS-U/CCS and itsintegration with the standard R/3 System and external systems.