STATE OF MICHIGAN BEFORE THE MICHIGAN PUBLIC SERVICE COMMISSION * * * * *

Transcription

1 STATE OF MICHIGAN BEFORE THE MICHIGAN PUBLIC SERVICE COMMISSION * * * * * In the matter of the application of ) MICHIGAN GAS UTILITIES CORPORATION ) for authority to increase retail natural gas rates ) Case No. U and for other relief. ) ) DIRECT TESTIMONY AND EXHIBITS OF BRIAN E. KAGE FOR MICHIGAN GAS UTILITIES CORPORATION June 2015

2 STATE OF MICHIGAN BEFORE THE MICHIGAN PUBLIC SERVICE COMMISSION * * * * * In the matter of the application of ) MICHIGAN GAS UTILITIES CORPORATION ) for authority to increase retail natural gas rates ) Case No. U and for other relief. ) ) QUALIFICATIONS OF BRIAN E. KAGE PART I Q. Please state your name, business address and position. A. My name is Brian E. Kage. My business address is Integrys Business Support, LLC ( IBS ), 700 North Adams Street, P.O. Box 19001, Green Bay, WI I am the General Manager of Strategy and Business Performance of Integrys Energy Group, Inc. ( Integrys ). Both IBS and Michigan Gas Utilities Corporation ( MGUC ) are wholly-owned subsidiaries of Integrys Q. For whom are you providing testimony? A. I am providing testimony on behalf of MGUC Q. Please describe briefly your educational, professional, and utility background. A. I graduated from Texas Christian University with a Bachelor of Business Administration in Finance. I began my career with Integrys in January 2007 as Value Manager in the Corporate Development area. In April 2008, I assumed my current position as General Manager of Strategy and Business Performance in the Customer Relations department. Prior to working for Integrys, I worked for Accenture and Black & Veatch where I provided services for North American and International - 2 -

3 1 2 utilities in the areas of Customer Operations & Application Strategy, Merger & Acquisitions Value Capture, and CIS implementations Q. Have you previously testified before any regulatory agency? A. Yes, I have. In addition to testimony I provided to the Michigan Public Service Commission ( MPSC") in MGUC s most recent rate case in Case No. U-17273, I testified before this Commission on behalf of Upper Peninsula Power Company ( UPPCO ) and Wisconsin Public Service Corporation ( WPS Corp ), and I testified before the Public Service Commission of Wisconsin on behalf of WPS Corp. I also testified before the Minnesota Public Utilities Commission on behalf of Minnesota Energy Resources Corporation ( MERC )

4 BRIAN E. KAGE DIRECT TESTIMONY PART II Q. What is the purpose of your pre-filed direct testimony? A. The purpose of my pre-filed direct testimony is to provide information related to the revised cost estimate for the Integrys Customer Experience ( ICE ) project Q. Are you sponsoring any exhibit schedules in connection with your testimony? A. Yes, I am. In connection with Exhibit A-3, I am sponsoring Schedule C29, entitled WPS Customer Benefits, ICE 2016 Project, and Confidential Schedule C30, entitled Electric Utility Billing and Customer Information Systems commissioned by Integrys and authored by Navigant Consulting Q. Were these schedules prepared by you or under Integrys direction and supervision? A. Yes, they were Q. Please describe the ICE project. A. The ICE project will implement a standard process model along with a consolidated customer information systems ( CIS ), IVR/Telephony and Web platform for all Integrys regulated utilities. The ICE project will replace and standardize the CIS used by all Integrys subsidiaries, including MGUC. The project is necessary because the Integrys utilities operate on three separate process and technology platforms creating operating inefficiencies, limiting our process and capability improvement and providing an inconsistent customer experience Q. Will the ICE project result in benefits for MGUC s customers? A. Yes, it will. The ICE project will provide numerous functional and technological - 4 -

5 benefits that will translate into first quartile performance in cost management (cost per customer), customer satisfaction, and service quality for the Billing, Collections, Call Center, and Self Service functions. It will also improve MGUC s billing, asset management and customer data security functions. These benefits are summarized in Exhibit A-3, Schedule C Q. Has the overall ICE project cost increased? A. Yes, it has. Since the filing of WPS Corp s rate case with the MPSC in Case No. U , the overall project cost estimate on a corporate basis has increased from $88.2 million to $118.4 million. The total capital cost to be allocated to MGUC is estimated at $8.4 million. The primary reasons for this cost increase are: 1. The technical upgrade to the Open-CIS platform from v3.0 to v4.0 was much greater in scope and depth than originally anticipated. The original assumption was that the technology upgrade for Open-CIS was going to be a simple port from DCOM-COM technology to.net technology where the actual upgrade that was delivered upgraded the system to enhance the usability, security and performance of the Open-CIS system. The full cost impact to the project cost of this architecture upgrade was not realized until near the end of the build phase. 2. The additional cost associated with the revised deployment plan (as described below) to deploy the MGUC, UPPCO, MERC and WPS Corp utilities in the 4th quarter, 2015; and The Peoples Gas Light and Coke Company ( PGL ) and North Shore Gas Company ( NSG ) in The additional duration of project labor charges contributed to the increased cost estimate. Q. How does the current project ICE cost estimate of $118 million compare to industry costs or other similar projects? A. The revised ICE cost estimate of $54/customer (i.e. $118 million/2.2 million total Integrys utility customers) on a per customer basis is lower than comparable industry costs, as shown in recent industry study performed by the Navigant Research. See Confidential Exhibit A-3, Schedule C30, page Additionally, the Navigant Research cites that a major utility is in the process of - 5 -

6 implementing a CIS for its electric and gas customers for an expected cost per customer higher than ICE s cost per customer. See Confidential Exhibit A-3, Schedule C30, page 6. This is yet another indication that the overall ICE costs of $54 per customer compare favorably to similar projects in the industry. 5 6 Q Is this project still feasible given the increased project cost estimate? A. Yes, it is. Project ICE will provide significant tangible and intangible benefits to MGUC. Benefits include ongoing cost savings as a result of reduced invoices as MGUC will utilize the Open c technology platform as well as internal staff to perform most Back Office Billing, Payment Processing and Collections that MGUC currently contracts with Vertex Business Services to perform Another important benefit of project ICE is that it will provide overall standardization of internal delivery processes and system technology platforms which will improve customer satisfaction, increase productivity, and increase efficiency by lowering overall operating costs. Project ICE will improve and enhance the features of Billing, Collections, Call Center, and Self-Service related offerings by ensuring that these functions are staffed appropriately to continue to leverage the opportunities of a large corporation, while maintaining the high level of service of a local utility The Navigant Research report cites an average cost per meter for an update of this nature for mid-size utilities. See Confidential Exhibit A-3, Schedule C30, page 6. Applying these costs cited in the research, the cost for MGUC to implement the ICE project would be approximately $11.8 million - $16.9 million as opposed to the MGUC allocated capital cost of $8.4 million

7 Q. Has the ICE deployment plan been revised? A. Yes, it has. The ICE deployment plan has been revised in order to reduce the overall risk of the deployment and its impact on MGUC customers. The deployment plan has been recently revised as follows: Deploy the MGUC, UPPCO, MERC and WPS Corp utilities in the fourth quarter, 2015 Deploy the PGL & NSG utilities in This revised deployment will reduce the deployment risk by providing a more elongated schedule to complete the System Integration and Operational Readiness Testing. We are committed to closely managing our customer s experience throughout the deployment period and will ensure that customer related issues are addressed, escalated, and receive the necessary attention Q. In light of the approvals granted in Case No. U and the impending merger of Wisconsin Energy Corporation ( WEC ) and Integrys to be completed in 2015, do you anticipate that the substance of your testimony or sponsored exhibits will need to be modified to reflect the change in MGUC s control from Integrys to WEC? A. No, I do not at this time. With the merger of Integrys into WEC and WEC taking control of MGUC, with the exceptions of IBS changing its name to WEC Business Support LLC., ( WBS ), we expect business as usual, with no significant immediate changes Q. Does this complete your pre-filed direct testimony? A. Yes, it does

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9 Case No. U Exhibit A-3 Schedule C29 Page 1 of 8 INTEGRYS CUSTOMER EXPERIENCE (ICE) UPDATE ICE 2016 Project

10 ICE 2016 PROJECT OBJECTIVES To provide an enhanced, predictable and consistent customer experience for all Integrys utilities through efficient customer operations performance...supported by a standard, consolidated customer operations model and technology platform Case No. U Exhibit A-3 Schedule C29 Page 2 of 8 2

11 BUT MOST IMPORTANTLY, HOW WILL TRANSFORMATION FEEL TO OUR CUSTOMERS AND EMPLOYEES Standardized business processes across all utilities Fewer manual tasks and workarounds One Team, One Standard, First Quartile One common customer experience Improved employee engagement and performance Case No. U Exhibit A-3 Schedule C29 Page 3 of 8 Improved collections Advanced IVR and Web service capabilities Better planning, forecasting, and multitasking 3

12 ICE 2016 PROJECT UPDATE First implementation for MGUC, MERC, WPS and UPPCO targeted for August 2015 Second implementation for PGL and NSG targeted Q Prioritized work to focus on MGUC, MERC, WPS and UPPCO Functionality delivered in two releases Case No. U Exhibit A-3 Schedule C29 Page 4 of 8 4

13 MGUC CUSTOMER BENEFITS Contact Center/Self Service Release 1 Standard enhanced self service platform for customers Usability improvements with IVR/Phone system and website More efficient web log in for customers First call resolution functionality to monitor and report addressing customer s inquiry and analyze root cause of repeat calls New and improved knowledge management tool for employees Improved quality assurance and agent monitoring process Improved complaint identification and resolution process Release2 A portal will be available for landlords that will allow them to view energy usage at their properties and perform various transactions Improvements to turn on/transfer process on web Case No. U Exhibit A-3 Schedule C29 Page 5 of 8 5

14 MGUC CUSTOMER BENEFITS Billing Release 1 Improved bill formats to help customers better understand their bill and energy usage MGUC contact information, amount due will display at the top of bill New bar graphs will display on bills Two 13 month graphs; current charges and usage Offering a large print bill option to the customers Bills with a credit balance will show no payment due on the stub Improved monthly bill estimating methodology Automating back billing calculation Improve address validation Complete phone number validations Case No. U Exhibit A-3 Schedule C29 Page 6 of 8 6

15 MGUC CUSTOMER BENEFITS Billing Release 1 Addition of near real time notes indicating payment in Open cis, from web and IVR for Quick Payments and authorized pay stations Enables customers to view their electronic payment confirmation on the web and IVR in near real time Enables our contact center agents to view a customer s electronic payment in near real time Reduces the need for the customer to call back to confirm a payment Proactive Budget Bill solicitation and automated enrollment into Budget Billing Budget Billing now available for small commercial customers Large commercial customers Auto download to allow marketers to import gas nominations Improved technology platform and processes for generation of customer bills Case No. U Exhibit A-3 Schedule C29 Page 7 of 8 7

16 MGUC CUSTOMER BENEFITS Credit Release 1 Internal customer match to search for debt Utilizing behavior scoring to determine collection activity Establishing new options and guidelines for payment arrangements Release 2 Improving processes for locating and contacting customers who have finaled their accounts Become a member of National Consumer Telecom & Utilities Exchange (NCTUE) Sending final bill balances to collection agency 30 days sooner Initiating new rules for customer s requesting service to assist with preventing identify theft and fraud Applying deposits to new subset of customers Reporting positive and negative payment history to credit bureau Case No. U Exhibit A-3 Schedule C29 Page 8 of 8 8

17 This document is confidential and will be filed when the Protective Order is issued. Case No.: U Exhibit No.: A-3 Schedule No.: C30 Page: 1 of 1