Building the Business Case on Advanced Metering Infrastructure (AMI) Fabio Dominguez Elster Electricity, LLC Marketing Manager August 16, 2006

Transcription

1 Building the Business Case on Advanced Metering Infrastructure (AMI) Fabio Dominguez Elster Electricity, LLC Marketing Manager August 16, 2006

2 Should we invest in an AMI system? Is there a business case?

3 Utilities Have a Lot of Demands -Invest in Automation -Monitor events Meet Regulations -Provide Tariff Options -Provide More Services Retain Big Customers Improve Revenues Utility s CEO -Attract More Customers -Reduce Costs (fuel) -Reduce Losses -Change Tariffs Improve Customer Service -Improve Responsiveness on emergencies Improve Cash Flow -Improve Connection / Disconnection time -Be Close to customer / CIS systems -Automate Services -Shorten Billing Periods -Implement Pre-Pay -Better Terms with vendors -Financial Restructuring

4 AMI enters the picture Connect advanced meters to utility business services Two-way communications Meter data management (MDM) Demand response, real time pricing, TOU residential, interval data, load management

5 A meter is no longer just the cash register Electronic meter features More accurate Interface with more communication options Provide anti-tampering tools, outage counts, reverse energy, meter alarms Provide Instrumentation and power quality and load profile information Support remote disconnection Remote programmable Provide more information about the end customer

6 AMI System Cust. Information System Billing / Settlement Systems Work Order Management & Inventory Engineering and Operations Outage Management System Load Research Marketing Services Utility Enterprise LAN/WAN Information Interfaces Schedules Account Changes Meter Changes Connect / Disconnects Meter Readings Outage / Restoration Data Tamper Data Service Voltage Data Collection Systems MAS Communications Servers Telephone, Cellular, BPL Other future WAN Options Metering & Communications for Electricity, Water & Gas Residential / C&I Fixed Networks

7 How do we build the Business Case? Traditional analysis balances Costs vs. Benefits (net present value) Alternative business case takes into account: Additional benefits New opportunities and risks

8 Going high tech may find some resistance Example: Bar code scanners at the supermarket For many years there was resistance to implement this The additional cost of equipment didn t justify the savings of checkout costs This did not take into account the benefits of automating inventory control and other benefits

9 Return on Investment and Implementation Framework $ $ $ $ High New Products/Services Customer Retention Cost Reduction Low Cost Reduction Shorter Payback Narrow (10-20%) Mobile Handheld 3-7 Year Payback Longer Payback Broadscale (70+%) Fixed Network Mobile Handheld $2 - $10 Million $50 - $100 Million

10 Building the Business Case Traditional analysis using Net Present Value Consider service connect/disconnect switch Consider two-way metering (remote programming, new tariffs, on-request reading, etc.) AMI not AMR Financing options Contrast utility ownership with financed or outsourced options Contrast pilot case with partial and with full implementation Inclusive Benefits include all departments and not only metering Consider tampering reduction, maintenance, emergency response New businesses, new opportunities Consider new sources of revenues Risks What is the cost of doing business as usual? Assess risk of not having this technology in the next future Risk of not having the capability of responding to outages, market prices pikes, new government regulations, etc.

11 Revenue Cycle and Operational Improvements Resulting from Metering Automation Implementations Operational Improvement Reduce cost of meter reading, direct labor and overhead Improve outage management process Estimated net savings per meter/year $6-14 $1-3 Benefits Reduce meter reading direct labor and overhead expense Reduce average outage time Avoid crews sent to verify that power has been restored Reduce uncollectable accounts Improve customer service and accounting processes Reduce energy theft Total ongoing savings per meter per year Offer summary billing Improve billing cycle efficiency Total 1-time savings per meter $ $2-4 $5-15 $ $5-10 $2-5 $7-15 Improve monitoring of at risk accounts Reduce customer disputes Reduce number of customer calls / disputes Improve information access/efficiency of service representatives Detect tamper and prevent theft Increase cash flow and reduce billing costs by providing single bill to aggregated accounts Reduce working capital requirements Note: Savings will vary substantially by utility size and type. Segments of high cost-to-read meters may offer 1.5x - 3x these savings.

12 Potential New Products and Services Residential Application Description Flexible pricing Demand and Time-of-use pricing Real-time pricing Load profiles More accurate matching of cost/price Reduce subsidies within rate classes AMI services Meter reading for other utilities Energy management Fuel source management Home automation Home security Wireless security alarm back-up Other monitoring Power quality data Outage monitoring Monitor usage when owner is away Discover new applications Find that key application that will be a major revenue generator for the utility (e.g., customer database marketing)

13 Potential New Products and Services Commercial and Industrial Customers Application Power billing Statistical load research Interruptible/RTP System engineering/ operations Marketing information Deregulation Description Complex billing rates Coincident demand for multiple delivery points Time-of-use rate structures Aggregate billing for national accounts Real-time pricing Interruptible/buy through options Unbundled services/retail wheeling Gas transportation Cost of service studies Load forecasting Rate design Support marketing 1-, 3-, and 5-day rolling forecasts Load control Interruptible rates Real time pricing Power factor monitoring and improvement Minimize system losses Substantiation/feeder/phase load balancing Power quality Customer segmentation, acquisition and retention programs ISO/PX Metering Direct access customers

14 Real World Examples

15 Making the Financial Analysis Traditional Approach

16 Financial Analysis

17 Take into Account Additional Benefits Improved cash flow flow Reduction in in past past due due accounts Reduction in in estimated bills bills Fewer billing mistakes Reduction in in theft theft Improved revenues due due to to better accuracy Reduction of of outage and and maintenance repairs Better control of of vegetation management

18 Assess Potential New Businesses Prepay Sub-metering in industrial parks, shopping malls or buildings Demand control Load studies, energy audits Partner with water and gas companies to provide reading and billing services Sales of appliances and their warranty Partner with telephone, BPL, WiMax or WiFi companies for WAN usage

19 Real-World Proof Elster Electricity, LLC 19 September 8, 2006 Chicago - USA Project Scale Pilot 2,500 meters Challenges High customer turnover High collections activity Security and safety issues for crews Benefits Average amount owed down 41% Charge-off per account down 46% $/account with 60-day arrears down 9% No revenue lost to unknown ownership after final account read No safety incidents occurred

20 Real-World Proof Elster Electricity, LLC 20 September 8, 2006 Arizona - USA Project Scale 25,000 disconnect meters installed; 20,000 on order Remotely serviced 1,000 disconnects/reconnects in one week Challenges Staffing: Spikes in account closures coinciding with month-end/end-of-lease and holidays Security: Neighborhoods with gangs, drugs, dogs, fences Benefits Significant cost savings Improved customer service Leveled work load and staffing Reduced liability and risk of accidents

21 Real-World Proof Elster Electricity, LLC 21 September 8, 2006 Alaska USA Project Scale Pilot 700 meters; Service Territory 7500 meters Pennwell Corporation s 2006 Metering Project of the Year Award Challenges Distance: Member villages miles from home office Severe weather: High snow drifts; Temps from -40 F to +90 F Inaccessibility: Two flights to get repair people to field; must carry all supplies and equipment Extended delinquencies: Employees unwilling to disconnect friends or relatives; contract workers handle disconnects once/year Benefits Ease of deployment and robust communications Remote capability to read meters, diagnose problems, automate billing, disconnect and reconnect Eliminates $86,000 annually in meter reads alone

22 Next Steps to Implement an AMI Elster Electricity, LLC 22 September 8, Identify your most transient areas and highest risk accounts 2. Calculate savings estimates using your numbers 3. Install AMI meters on a pilot basis (disconnect meters will provide the largest savings) 4. Monitor and accrue benefits Save money Improve cash flow Improve customer relationships Improve security and safety for staff and customers Reduce risks and liability

23 Questions? Thank you! Fabio Dominguez Elster Electricity, LLC