Enel, Italy’s largest electricity utility, has commanded attention on various fronts over the last few years. There was the Telegestore project – the replacement of close to 30 million meters in homes and small businesses as part of Enel’s automated meter management programme – and the complete restructuring of the utility as Italy’s national electricity market transitioned from full regulation to full competition.
This last task was managed by Luigi Borrelli, IT officer at Enel and winner of the CIO of the Year Award for utilities with over a million customers. The two awards (the other is for CIOs at utilities with fewer than one million customers, which was won by Patrick Cooper of Country Energy in Australia) were the brainchild of Spintelligent, publishers of Smart Energy International, and Energy Central, the parent company of EnergyBiz magazine. Both men were selected by a panel of experts assembled by the two media companies.
Borelli began the restructuring exercise by establishing where the utility needed to be to meet the requirements of full competition, and identifying the technology gaps that had to be filled if the new business model was to be achieved. “One of the most important issues today is to streamline business processes to support ‘go-to-market’ strategies that will allow us to gain market share,” he says. “We believe we’ve identified the technology backbone and the right mix of buy/make solutions that will give us flexibility and the ability to support our business plan.”
Where there are technology gaps there are probably also skills gaps. Borrelli directed some members of his team to focus on analysing the key issues that major utilities in other restructuring markets had encountered. Others looked at market scenarios and conducted software product analysis, and a third group studied the potential impact of these new or modified solutions on Enel’s overall IT infrastructure. “The team did a magnificent job, and success would not have been possible without these major contributions from everyone,” Borrelli stresses. “We established a ‘knowledge innovation’ process that allows us to share all the information we have available throughout the team. This information isn’t only IT-related – it’s about the business and the markets too. This way the whole team is kept up to date, so as to be ready to understand the business needs and to quickly translate them into products or solutions.” Certainly the IT team’s achievements are impressive.
“The scope of the restructuring project was extremely broad, since it encompassed critical information that affected Enel’s end-to-end supply chain,” Borrelli notes. “The solution we identified involved the execution of five parallel implementation projects – a risk management, trading and settlement system; a CRM system; a real-time management control production plant system; customisation of the enterprise resource planning (ERP) and legacy systems involved in new business processes; and the integration hub of these systems.” The complete IT landscape went fully live at the end of 2005, on time and within budget, and the new systems will support the financial and operational growth necessary for Enel to achieve its 9.7% revenue growth target in 2006.
This growth will only come about as a result of improved customer service. Borrelli believes that another key issue facing utility CIOs today is the need to support the change from a ‘product centric’ to a ‘customer centric’ organisation, thereby creating value for customers. “We have restructured ourselves so that technology, applications and business process specialists co-operate throughout the whole chain, from business requirements to solution delivery.” This focus on the business processes colours his vision of future technology innovations.
“Technology is becoming a commodity, and I think we should use the potential it offers to improve support to our business processes. In the future I expect to have more flexibility to implement solutions based on my business processes, instead of having to change my processes to use the application solution.” He also has firm ideas on what utilities can do to stay abreast of the latest technological breakthroughs. “I think it’s impossible for every kind of company to ensure that they themselves implement new technologies for every process they run. In Enel’s case, we have to maintain the competencies of our core business internally – in other words, billing, metering, tariffs and so on – and outsource the other activities.”
Borrelli became a utility information officer by chance. “I studied electrical engineering, so my goal was to work for a utility company in the engineering section. I achieved this, and was then offered the opportunity to move into Enel’s IT division. I enjoyed the work so much that I have chosen to remain in this field – although my engineering background certainly helps in my dealings with other divisions in the company!”
Many of the countries in Europe have signed the Kyoto Protocol and have agreed to meet European Union demands for a reduction in carbon emissions, and Borrelli is fully in favour of this. “As a company we are very focused on the need to become less dependent on oil, as well as improving our supply capability by investing in new technologies such as renewable energy. I think it is important to educate our customers on the importance of reducing energy consumption, and that we should be willing to invest to achieve this outcome. “Utilities in future will be focused on two major areas – internal cost reductions, and the environment, in order to reduce the emissions of CO2. And IT will be the key pivotal factor if this is to be achieved.”
DOWN UNDER, ON TOP
A lot of expensive information technology at utilities is junk. There. It is out in the open.
Such candour, along with a career of accomplishment, distinguishes Patrick Cooper, chief information officer at Country Energy, in New South Wales, Australia. He has overseen a budget of $32 million, effectively captained a squad of 200 employees – including 70 consultants – and ably steered his company through the shoals of deregulation. Based on these accomplishments and others, Cooper was named one of two utility CIOs of the year.
In a recent interview Cooper told EnergyBiz that a lot of technology that was installed at utilities in the past did not provide benefits to the companies involved. In fact, he said the first question to ask before any new technology is installed should be: “What does the current process look like and is technology the right answer?” “Sometimes people forget what they’re trying to achieve,” Cooper continues. “We need first to work to understand the process and then consider automating. In the past, a lot of utilities were run by engineers who saw technology as a solution to a problem. But a lot of installations were unnecessary and didn’t deliver benefits.”
That attitude may not endear Cooper to many engineers, or even IT professionals. Cooper’s philosophy is to look at what is and then imagine what might be in the future: intelligent grids and intelligent IT networks that provide full, real-time visibility across the entire enterprise. “We should be enabling the full infrastructure so you have real-time visibility of its condition,” he said. “We need to move from the current model where customers tell us they’re not getting power to knowing before they tell us, and then moving on to prevent outages completely.”
A part of the fact that Cooper tends to look at things differently may be a result of his background. He didn’t come out of technology, but rather out of accounting and finance. Cooper completed his undergraduate degree at Charles Stuart University in Bathurst and then received an MBA from Deakin University. Then he went into accounting and small business technology consulting. In 1997, having had a falling out with some partners in the consulting business, he joined what was then Advance Energy in Bathurst as manager of finance for Energy Services.
In 2001 Advance Energy was merged with several other small regional utilities to become Country Energy. The following year, Australia’s legislators and regulators decided to go to full retail energy competition. Cooper was named project director for preparing the newly combined utilities for that competition. He was responsible for the completion of all IT projects, organisational change projects, and management of relationships with two consulting firms hired to help.
As one of his associates said: “It was a project with a nine-month deadline and total business failure as its major risk.” Cooper didn’t fail. Instead, he introduced a new project methodology, worked with executive management to establish a new system of IT governance and achieved some major successes, including integrating five legacy customer information systems; enhancing the surviving CIS to enable competition; and developing and implementing processes and procedures for full retail competition.
Cooper was named general manager for information services (CIO in other parlances) in 2002. Since then he has been taking large steps toward improving the IT already in place at Country Energy. He is also very cognisant of the difficulties utilities find themselves in today. “For us, the major challenge is not the global energy crisis or the price of fuel,” Cooper said. “It is that most of our network, like at other utilities, was built with technology and facilities that have a useful lifespan of about 50 years – and it’s been used for 50 years. Customers want reliability, and we haven’t invested in that reliability.
The real competition for money today is between asset replacement and IT. “It is possible to come up with scenarios where we can spend $1 million on IT and free up large amounts of capital for the network asset management programme,” Cooper continues. A major part of his current efforts are directed at finding those scenarios. He thinks some of them may have to do with controlling demand for energy. “If we can really focus on demand-side management and get information to people that will encourage them to react, we can solve part of the problem,” he said. “That is part of having an intelligent distribution network. If we can get realtime pricing information to consumers, especially with such technologies as BPL (broadband over powerlines) we can help there. But we’re still five or ten years away from that.”
Cooper also said he believes that the next breakthroughs in utility IT systems will be “around communications. If we can get use of the power lines we have in place – if we can get to a point in the next three or four years where we can communicate with every meter with little incremental cost – we can drive behavioural changes. That would be a significant change in this industry.
If we can increase reliability, reduce costs, and have an intelligent network that tells us to fix a transformer before it overheats and breaks, we can drive significant costs out of our operations.” Cooper also believes current merger trends in the industry will continue. “We will see large national and global utilities with more focus on driving customer behaviour,” he said. “There will also be a marriage of generation and retail with a significant move toward environmentally sensitive generation. “There is a lot of movement around wind and biomass now, but the real environmental salvation for the short term is nuclear,” he said. The former accountant who sort of ‘backed’ into the utility business said he is continually thinking of ways to make his company better.