Software and the Changing Utilities Market
By Albert Warson
When Newmarket Hydro goes on line this summer with new software to serve its 20,000 customers more efficiently, it will simultaneously replace an obsolete information system and improve its cash position by about $600,000. What the commission is doing is consistent with an emerging trend among utilities to be more competitive with hydro rates and generally improve services to customers. Otherwise there is a very real risk of being privatized or absorbed into a regional public utility.
“Our industry must produce good information for customers, while providing good rates and reliability. If we do, they will stay with us. And with Newmarket Hydro`s customer base increasing by about 5 percent a year, that becomes even more critical,” said Dave Weir, the commission`s administrator/treasurer. “We`re not alone. Governments, hard-pressed to slash budgets, cut some services and charge user fees for others, are taking a fresh look at software to streamline their operations and reduce costs. We too had to take a fresh look at our software. Our 16-year-old IBM System 36 and particularly the early 1980s vintage software was very limited in its capabilities. For example, the job-costing system would only charge one account per job.”
“With new Computer Methods International Corp. (CMiC, North York, Ontario, Canada) software we have installed, each job can charge as many accounts as we like. This will considerably change the way we do our reporting while providing much better management information. This requirement was of paramount importance. We wouldn`t have bought it otherwise.”
The new system also had to run on an Oracle relational database management system, which CMiC delivered, and so too will software developed by J.P. Haynes Associates Inc., Orangeville, Ontario, Canada. Both CMiC and Haynes` systems will be fully integrated with the same look and feel. Weir said the commission considered two other products with Oracle databases, but they lacked such features as a strong job-costing function, a Canadian payroll system and a fully developed Windows-based frontend, with fourth generation development tools and in a client/server architecture.
“Our integration of the two softwares is probably the first of its kind available in an Oracle database in North America,” Weir added. “It will enable us to add, modify, change and combine data faster, move to daily billing and an improved pre-authorized, fluctuating check payment arrangement as well as one of equal monthly payments. We`ll be able to give customers more options–when they`re billed, how and when they can pay, more information and better advice.”
The commission will be able to keep on line a tremendous amount of history, indefinitely, about its customers, compared to its old system`s 18-month history retention. One of the major thrusts in the industry is doing comparative history trends, forecasting and customer interface. Why is that important? Because it will allow the commission to quickly produce an electronic, as opposed to a paper, trail of power consumption for customers so they can plan their use of hydro more effectively.
Being able to do daily billing, as opposed to weekly billing, will improve the commission`s cash flow dramatically, which has a real impact on whether it has to borrow to meet other payment obligations. It could also take that cash saving and consider investing it.
The flexibility of the new system will allow the commission to improve its cash flow by shortening the period from when the meter is read to when cash comes in. This could result in a one-time cash improvement of about $600,000, which the commission can pass on to its customers in the not-for-profit utility environment. Haynes` new billing software will be on-line with the commission within a few months, although it has been using Haynes` software products since 1993. It will be reinforced by such CMiC mPOWER modules as general ledger, municipal financials, inventory, office payroll, purchasing requisitions, maintenance management (including job costing), preventive maintenance, equipment costing and maintenance, and service-order invoicing.
Those modules make up the maintenance management extension to the core financials, which is critical in today`s cost-conscious municipal market. Work management, for example, is something local governments and utilities want to manage better, like when to schedule oil changes on trucks. The project management module includes subcontractor management, project costing, and time and materials billing functions so the commission can determine the cost of the billing software on a per-bill basis and whether it will be recovered.
Reengineering The Business Process
Haynes` Utility Management System (UMS) accommodates hydro, water, gas, cable, telephone and other municipal government billings such as trash collection and sewer services–anything that involves metered-based consumption and a rate structure. There is also a range of building permit, election return and other non-financial government services.
UMS has basically reengineered the commission`s entire business process because of the 4GL relational technology environment and can add capabilities it has never had before in a mainframe environment. “The UMS delivers much greater rate flexibility and customer-specific rate structures. This is important, particularly in an era of pending deregulation of water and electric utilities. Deregulation, which enables customers to buy power from a number of suppliers, is already under way among electric utilities in the United States,” said Weir.
Haynes made the move into Windows-based, Oracle applications because the company realized there was a major research and development effort required to get there and CMiC applications already accommodated that need. The combined new software delivers much greater flexibility and rate management–developing customer specific structures, particularly in an era of utilities` deregulation and especially in the United States–which enables customers to buy power from a number of suppliers.
DSM is another valuable feature. It hinges on time-of-use billing, which can be 10 times less expensive than normal rates if the power is used at off-peak times. “We expect the system will allow our commission to be run more efficiently, do more with less, with a more efficient work environment and better control on costs. Admin-istrative staff will probably be able to handle the same billing load with half the staff, once it is fully implemented. Savings will likely be passed along to consumers,” said Weir.
The software integrates such office routines as word processing (letters to customers, etc.), cash-handling capabilities, electronic cash transfers and electronic data-collection devices. The market for firms like Haynes and CMiC is huge and the need is pressing. There are 810 municipalities in Ontario–100 of them of a size that could be relevant. Then there are 306 provincial electric utilities, of which about 100 would be suitable clients. Beyond that there are approximately 115,000 utilities in other parts of the world.
Haynes said that since his company can deal with the rigorous regulations in Ontario it should be able to work with regulations in other parts of the world. As far as Jay Haynes is concerned, over the next five years the market for software geared to local governments and utilities in North America should grow to at least 10 times the $3.7 million a year his company is billing. He`s optimistic because he`s already billing that much on his own, with an extensive suite of software solutions for municipal governments, even before CMiC came along. Most of it was for hydro, water, gas, cable and telephone utilities` billings, with some custom-designed applications for the engineering environment and professional integration services.
But with CMiC tied in with the company in a recent partnership arrangement, their complementary software modules have been combined and repackaged for local governments and utilities. It offers much broader, streamlined administrative capabilities that are bound to attract international sales, building on CMiC`s penetration of the U.S. market and its beachhead in Europe.
The Haynes/CMiC match was made quite casually at a 1994 construction trade show. Haynes recalls his company was initially attracted to CMiC`s Oracle-based payroll system, but then it realized that CMiC`s full mPOWER construction and engineering suite of functions was appropriate to what its customers want.
Albert Warson is a Toronto, Canada-based freelance writer specializing in business subjects, including software development-related topics.