April 19, 2024

Two AMI Business Case Tools to Boost Your Utility’s Performance

by By Garrett Johnston, consultant, KEMA
Acritical challenge for maintaining the growth of the automated meter reading/advanced metering infrastructure (AMR/AMI) industry is to supplement recent trends in regulatory incentives with additional utility performance drivers.

The industry must develop additional tools that help to more effectively assess AMR/AMI benefits for standard business case analyses, with or without the need for regulatory or legislative policies like those provided in California and Ontario.

That is why utilities can never have too many tools to fully analyze the high potential value of AMR/AMI investments, given changes in price points and advances in technologies and functionality. Among others, there are two insightful tools – one a metric and one a physical device – that may offer additional benefits to utilities in exceeding financial hurdles and gaining AMR/AMI investment approval.

Those tools: a Balanced Scorecard and an under-the-cover disconnect switch.

How would you like to demonstrate to your utility’s top executives how your metering unit is improving performance every day – not just in your unit – but throughout much of your utility?

The Balanced Scorecard can help illustrate just that. Generally speaking, a Balanced Scorecard is designed to measure how effectively a company’s daily activities support its long-term strategy.

The Balanced Scorecard can demonstrate how utilities can help all stakeholders, from employees to customers to shareholders, despite their divergent needs. The Balanced Scorecard has a four-level hierarchy, each of which measures improvement and provides direct benefits to the metric above it. (See graphic beside for details.)

____________
____________
The Balanced Scorecard?
• Financial
Has our financial performance improved?
AMI Benefit: More efficient distribution operations

• Customer Satisfaction
Do customers recognize that we are delivering more value?
AMI Benefit: Faster response to customer usage inquiries and nested outages

• Internal Processes
Have we improved key business processes so that we can deliver more value to customers?
AMI Benefit: Increased meter reading efficiency and accuracy

• Learning and Growth
Are we maintaining our ability to change and improve?
AMI Benefit: Increased information about customer usage

[1] Managerial Accounting, 11th Ed., Garrison, Noreen and Brewer, p. 58. McGraw-Hill.
____________
____________

Utilities can use a Balanced Scorecard to demonstrate how AMI can improve performance and enhance your utility’s ability to be a “learning” organization.

For example, a utility could develop Scorecard performance metrics in the following areas:

• Customer Satisfaction
• Reliability
• Profitability
• Cost Efficiency
• Revenue Assurance
AMI can provide numerous benefits in these, and many other, areas – all of which can be demonstrated through the Balanced Scorecard. (See graphic below.)

AMI Balanced Scorecard
Here’s how an advanced metering fixed network can improve utility performance, as measured with 5 Balanced Scorecard metrics.

Customer Satisfaction
• Virtually eliminate meter reading errors and estimated bills
• Facilitate customer-specified billing due dates
• Provide advanced service options
• Access on-demand reads or viewing of recent usage data by customer service representatives in response to billing inquiries

Reliability
• Improve outage management – verification and reduced restoration times – through “last-gasp and power-up calls”
• Improve system planning through increased knowledge of daily and/or hourly usage on equipment such as transformers
• Proactive maintenance management and asset management with more refined load data down to the transformer level
• Improve ability to expand remote monitoring of customer power factor

Profitability
• Reduce outstanding collections amounts via remote disconnect/reconnects
• Reduce unbilled consumption via on-demand reads
• Increase the meter read to bill cycle time via on-demand reads
• Improve revenue forecasting – provide mid-cycle revenue estimates, reduced estimated bills, for example
• Improve detection of “nested outages” – that is, a smaller outage within a larger outage – thus reducing outage time and improving efficiency of dispatching work crews

Cost Efficiency
• Improve meter reading efficiency
• Improve load survey information, eliminating need for separate survey meters
• Remote reprogramming of meters to avoid costly field visits
• Reduced maintenance of meter batteries – no batteries to maintain on TOU meters since the network keeps track of time
• Standardize / upgrade meter asset base
• Reduce customer calls from reduction in estimated bills and ability to settle high-bill disputes over the phone
• Reduce reliance on or eliminate existing data acquisition systems

Revenue Assurance
• Offer innovative pricing and demand response options to customers
• Provide real-time energy information for supplemental fees
• Increase portfolio offerings with advanced communications services
• Offer remote reading of other utility meters (e.g., gas, water)

For example, utilities can improve profitability by reducing outstanding collections amounts via remote disconnect/reconnect or unbilled consumption via on-demand reads. (More on remote disconnect below.)

They can also improve customer satisfaction by using AMI-collected data to provide instantaneous responses to high bill inquiries. With a fixed network AMR/AMI communications infrastructure, a customer service representative can quickly obtain a customer’s recent usage and identify days of high usage. Such data often reminds customers of the reasons for recent high usage, such as a party they hosted or a weekend when the children were home from college, potentially eliminating the need to send personnel to re-read or check the meter. This type of quick response also demonstrates to customers that the utility generally knows what it is doing and is aware of what is happening on its system.

AMI as a strategic tool
Nova Scotia and at least one large, eastern IOU use the Balanced Scorecard to measure performance. The objective of the Balanced Scorecard: goal alignment. Nova Scotia first used the Balanced Scorecard to measure new goals that were implemented in 1996. Since then, the Balanced Scorecard has become a mainstay at the utility, states a case study developed by Paul Niven's Scorecard Academy. All of the utility's goals are measured through the step-by-step measures used in the Balanced Scorecard, states the case study.

The Balanced Scorecard can exemplify AMI’s prowess as a strategic tool. AMI can – and should – be used for much more than meter reading. AMI can enhance productivity and operational excellence throughout the utility.

To justify AMI networks, utilities must move beyond simple cost-benefit analysis. They should consider high-level benefits of AMI, such as enhanced customer satisfaction and reliability. AMI computer and communications systems can augment distribution planning, asset management, outage notification, revenue forecasting/ protection and resource tracking, just to name a few.

AMI and the Balanced Scorecard can help utilities eliminate “islands of automation.”
By tying AMI to measures in the Balanced Scorecard or other similar tool, utilities can also derive better inter-departmental cooperation. Many utilities have dispersed systems for various applications, such as:

• Outage management
• Work order management
• GIS/Dispatch
• Business system
• Billing system
• Call center
• IVR
• SCADA

These automated processes often are not integrated, creating a situation where data is potentially duplicated or unsynchronized. But with AMI, meter data management is a critical component to enabling further value in the infrastructure. When preparing to install AMI systems, utilities must outline how that system will communicate with other legacy systems before beginning deployment. Establishing a proper system architecture that defines the linkages to outage management and other systems maximizes the benefits from AMI.

That is the strategy Atlanta-based Southern Co. has followed in preparing to use multiple fixed networks among its various operating subsidiaries. Southern’s vision is to have an open-architecture system that would allow multiple AMR technologies to coexist, with a single interface to enterprise systems for billing, outage management, and other systems.

The integration of the networks would be done through the utility’s CCNet (Customer Communications Network). This approach, according to Southern Co., provides two sets of advantages:

1. It leverages existing assets; and

2. It improves efficiency of the core business.

Specifically, the open nature of the architecture will enable relatively straightforward systems integration and rapid implementation and integration of new technologies (hardware or system software), states Southern Co. The set-up will specifically provide:

• Enterprise-wide access to data via a Web browser;Greater automation scalability;

• More targeted applications of AMR technologies; and

• Ensured maximized value of AMR applications.

In addition, both large investor-owned utilities, such as Chicago-based Exelon, and small customer-owned firms, such as Central EMC in Sanford, N.C., increasingly use AMI systems to help detect nested outages. In addition, industry vendors are developing more advanced software features to enhance the use of outage information that can be derived from AMI networks.

When a utility restores a large outage, it may not be aware of other internal outages nested within the larger outage. While a field crew may have restored service by removing a tree limb from a power line, some customers in that area may have an additional or localized problem that requires further repair.

AMI can help detect those outages by “pinging” or calling all meters to validate service restoration – before the crew leaves the site. This provides a number of benefits:

1. Decreases field crew costs – eliminating re-visits to nested outages increases efficiency of the work crew and decreases the cost of repairing outages.

2. Increases customer satisfaction – turning on the lights faster increases customers’ perception of their utilities. Customers, by and large, understand that storms will cause outages, but they expect power restoration to be as quick as possible and the utility to know when their lights will come back on.

3. Decreases customer service costs – identifying and restoring power to those with nested outages can reduce customer calls to the utility.

4. Minimizes revenue loss – as customers are restored more quickly, the consumption of energy resumes more efficiently

Utilities looking more seriously into remote disconnect/reconnect
Remote disconnect/reconnect, on the other hand, is a specific application that utilities can employ to enhance the business case for AMI. Using this feature of some AMI systems enables utilities to remotely turn-off the flow of energy to customers, thus eliminating the need to send a technician to the premise. This can quickly provide a positive return-on-investment. By remotely turning a customer’s electric service on or off, utilities avoid at least one visit from a field service representative, and often two or more. Utilities estimate it costs between $20 to $50 to send a field representative to a customer location outside the regular meter reading date.

Off-cycle reads are particularly frequent for transient locales such as apartment locations, especially those in college-based towns, or customers who regularly pay late. In college housing, for example, utilities have a high rate of turn-ons/offs because students often move in and out at the beginning and end of each semester.

Remote disconnect/reconnect capabilities can also be helpful for more efficiently dealing with delinquent customers. When a utility disconnects service to a delinquent customer, that customer often pays the bill immediately after power is cut. This necessitates a second trip for the utility to restore power, creating a total cost of $40 to $100. Remote disconnect eliminates those costs. Some case studies have shown that customers – knowing the utility can turn them off instantaneously – are more likely to pay their bills quicker, which enables the utility to reduce its bad debt while increasing cash flow.

SRP eliminates 14,000 field orders with remote disconnect
Since May 2005, SRP has used remote disconnect functionality to work more than 14,000 field orders without leaving the office. Performed in conjunction with the utility’s wireless fixed network, these orders were worked in a timely manner and not subject to labor availability, weather conditions, or other factors that can delay the completion of orders. SRP is now set to install disconnect switches on at least 25,000 more meters in apartment complexes in and around the Phoenix area.

On/off disconnect capability is increasingly important for several reasons. First, many of the pioneering AMR projects have enabled many utilities to realize many of the low-cost benefits of AMR – i.e., labor and operational cost savings. These utilities are now targeting higher-level benefits to further leverage their AMR/AMI assets. With this added ability, utility management can utilize personnel to perform other higher priority work, while minimizing the risk of lost revenue due to unauthorized electric system usage.

Higher-level benefits are particularly important for utilities looking to upgrade from mobile systems to fixed networks. These utilities often have already used drive-by systems to lower costs and increase accuracy of meter reading, and now require more enterprise-wide benefits to justify AMI fixed network investments.

Meter manufacturers working to integrate remote connect/disconnect
Many meter manufacturers have developed or are working to develop less expensive remote
disconnect components placed under the cover of residential meters. The “under the cover”
capability is vital. Until recently, most vendors offered only remote connect/disconnect collars that are typically installed behind the meter.

Collars pose two problems: cost and the potential for tampering. Collars generally cost about $200 to $250. At that price, few utilities can justify them for more than a small percentage of high cost-to-serve customers. Metering employees are also leery of collars because their physical presence outside of meters can make them tempting targets for tampering.

Vendors are progressing in developing remote disconnect products. A few meter vendors already offer remote disconnect under the glass and many others are expected to have this feature sometime during the next year. And most are working to provide this functionality at a reasonable increase to existing product costs.

Remote disconnect capabilities are also likely to receive a fair amount of regulatory scrutiny in how they are applied by the utility. One concern with remote disconnect is the potential danger at the time of restoration. For example, what happens if a situation occurs where a combustible object is lying on the stove and the stove is left in the “on” position, setting up the potential for a fire.

There are several ways to combat this danger. First, meters can be equipped with a reset switch or button that does not restore power until a customer presses it. Another option is, as a matter of policy, to require customers to be at home when power is restored.

Remote disconnect/reconnect and the Balanced Scorecard provide utilities two more useful tools for enhancing the value of their planned AMI investment, particularly in the absence of any regulatory “push” for implementing the technology. Continued use, and sharing of, these types of tools will help utilities increase their potential justification of AMI, thus providing more ways to improve their utility’s performance.

About the Author
Garrett Johnston is a Consultant in the Operational Excellence group of KEMA Inc. and serves as a key member of the group’s Strategic Metering unit. Garrett Johnston has 8 years of experience in providing energy insights and intelligence to large investor-owned utilities.

Mr. Johnston has authored more than 30 reports on advanced metering. During his career, he has served more than 100 utilities, providing in-depth perspectives on a wide variety of topics, including broadband over power lines (BPL), reliability/outage management and billing. Mr. Johnston has a B.S. degree from James Madison University in Harrisonburg, Va. and is pursuing an MBA from Georgia State University in Atlanta (expected
graduate Dec. 2006).