AMR–Strategic Implications for the New Power Enterprise
By Mark Rodgers, Mtel Fixed Wireless
Over the last several years, utilities have responded to the impending challenges and opportunities of deregulation by embracing business process reengineering (BPR). As with their corporate counterparts in other industry segments, the goal of the BPR effort was to significantly reduce costs, primarily through elimination of organizational redundancies and process inefficiencies. With this initial restructuring largely accomplished, utilities` strategic attention will shift to the second, and perhaps more difficult, phase of the continuous BPR effort.
The next phase of BPR strategic attention for utilities and their nonregulated energy service providers (ESPs) is managing the enterprise for value creation and growth. This effort`s aim will be the enterprise-wide expansion and optimization of sales, marketing and customer service functions. While many strategies will be considered within the context of key corporate and industry drivers (pace and scope of deregulation, industry consolidation, etc.), the selection and implementation of an automated meter reading (AMR) system should serve as an immediate and foundational element. Properly integrated within the corporate BPR context, an AMR system can serve both as a catalyst for this effort, as well as a sustaining factor for achieving success.
Suggesting an AMR solution as a foundational element in the pursuit of value creation and growth strategy may come as a surprise to some. Historically, AMR systems were considered only within a cost reduction framework. This emphasis placed the consideration of AMR systems typically within the meter engineering department. Its goal was simply securing the lowest cost means to collect consumption data from a meter for billing purposes. In this context, most AMR systems could not be cost justified with the current cost of manual, monthly meter reading. Accordingly, after nearly two decades of AMR system analysis, less than 5 percent of available meters have any AMR functionality.
Now however, the utilization of advanced technologies has given rise to a new generation of AMR systems. These systems, while providing meter reading as a core functionality, also provide enhanced service features that will redefine the utilities value proposition to its customers. These service features fall broadly within two categories, including customer satisfaction features and value-added services.
Customer satisfaction features minimally include the ability for the customer to establish their billing cycle, remote service turn on/turn off, delivery of month-to-date usage and cost with comparison to prior month, customer off-premise control of significant energy consuming systems, and automated tariff conversion. In an era where Disney has established the benchmark for customer satisfaction, these features represent only a starting point. Accordingly, AMR systems should, in part, be evaluated in light of their capabilities to support the continuous innovation of customer satisfaction services.
The provisioning of value-added services, however, is the mechanism by which the utility distribution company or energy service provider will attain sustained competitive advantage and incremental, high-margin service revenues. Examples of residential value-added services include wireless backup for security systems, family messaging services and customizable information delivery. The provision of customized information delivery include “community event” bulletin boards, severe weather warnings and special interest services (sports, stocks, news).
For the commercial and industrial (C&I) customers, a myriad of innovative services are being developed, such as corrosion and cathodic protection systems monitoring and reporting, manufacturing process control and monitoring, and environmental monitoring systems. Additionally, the AMR systems must provide a national scope for aggregate billing, power delivery and power quality across multi-site locations in the increasingly competitive pursuit of national C&I accounts.
Accordingly, AMR systems will be a core component of any value creation and growth strategy. The AMR system evaluation then requires cross functional teams representing the marketing, sales, customer service, information technology, financial and metering disciplines. These teams must evaluate the value of the AMR system in light of the corporate strategic context, while ensuring that the system is technically robust and capable of delivering these value-added services on a national basis.
This “AMR architecture” analysis must ensure that each element of an end-to-end AMR solution is optimized to deliver low-cost meter reading while enabling the provision of current, and future, value-added services. The primary elements of this architecture analysis include the endpoint hardware, the wide area network (WAN) and the controlling software. An AMR system optimized across these structural elements is essential for enabling sustained competitive advantage and growth.
Component and Network Selection
Key attributes in the endpoint hardware evaluation include the flexibility to incorporate cost effective retrofit devices to existing meters as well as under the glass integration with new solid state meters. Additionally, these endpoint devices must support multiple local area network (LAN) topologies, including the various power line carrier protocols and localized wireless LANs. As such, the endpoint device provider must have the manufacturing and technological scale and scope to provide these devices in large volumes of exceptional quality at a low cost.
In light of the strategic considerations, the selection criteria for the WAN architecture become readily apparent. The criteria begins with a full two-way data network to provide the enhanced customer service features and value-added services. Additionally, the network must have a national scope to allow for rapid response to deregulation and the early acquisition of national accounts.
In addition, the ability of the WAN to support broadcast services (one-to-many) and direct (one-to-one) over the air services is necessary for the customizable delivery of information services. Finally, the network must demonstrate the highest level of quality, capacity and scalability.
The controlling software system evaluation takes on increased importance in light of the rate and scope of change characterizing the power industry. The key success factors in this environment include the embedded protocol conversion (including multiple LAN protocols as well as legacy system interface protocols), over-the-air updates to feature capabilities of endpoint devices, and rapid transformation of collected data into useable, strategic information.
Notwithstanding these important decision criteria, the system must be demonstrably economic value added as compared to alternative investment strategies. This places a new requirement on the AMR strategic value analysis in reflecting rate of return across elements in the value chain which are difficult to quantify, such as customer satisfaction, retention and competitive advantage. Even so, a cohesive strategic investment in AMR is a rare opportunity to enhance value creation and growth while simultaneously lowering costs.
The power industry is entering an exciting new era. While comparisons to other industries that have been deregulated are interesting, the electric power industry restructuring will not completely mirror these historical comparisons. Rather, it will be the new energy enterprises that have the discipline and vision to develop, communicate and implement top line, high growth value strategies that will define this new era. Don`t be surprised when many use AMR as the foundation upon which these strategies are implemented and through which the true benefits are realized.
Mark Rodgers is vice president of Fixed Wireless for Mobile Telecommunication Technologies Corporation (Mtel). In this role, he is responsible for the development and commercialization of fixed wireless services utilizing Mtel`s Advanced Messaging Network. Prior to joining Mtel, Rodgers specialized in information technology systems for the telecommunications industry with Andersen Consulting. Rodgers has served as chairman of the Personal Communications Industry Association`s (PCIA) marketing and consumer affairs committee. He also serves as a member of Mississippi State University`s External Research Advisory Board, where he earned his bachelor`s of science degree in chemical engineering.
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