PPL – The first strategically AMR enabled utility
In the spring of 2002 PPL Electric Utilities began implementing an AMR capability that will result in it being the first utility in North America that is strategically AMR enabled. By having two-way communication to every end point device, including meters, and by collecting interval energy use data daily for its 1.3 million electricity customers. PPL can meet present business needs while having the flexibility to serve evolving market needs.
PPL is a strong proponent of energy competition, and prides itself on being a company that delivers on its promises. The key promise providing the foundation for the AMR initiative is the company’s commitment to customer excellence – PPL received the 2001 JD Power Award for Customer Service.
In the spring of 2000 PPL believed that the excellence of its present manual meter reading process would in the near future limit its ability to deliver its promise to continuously provide its customers with the industry’s best customer service. PPL decided it needed to initiate a meter reading strategy project to address these concerns.
PPL believed there had been significant progress in the AMR market since a previous business study concluded that the time was not right to introduce AMR. The company felt that a new AMR business case project might conclude AMR was feasible. If so, PPL wanted to maximise the success potential of a projected $160 million project by leveraging the experience of experts with actual AMR project ‘scar tissue’. This would allow the utility to take benefit from the experts’ knowledge base. One aspect of this was PPL’s desire to ensure that it was as well prepared to do its once-in-a-lifetime project as are the manufacturers, who have experience advantage gained during prior projects. PPL augmented its own team for four reasons:
- Experience – augment the PPL team with external support to capture the ‘scar tissue’ advantage.
- Schedule – quickly start the project without compromising PPL team existing responsibilities.
- Risk Management – leverage proven AMR project tools and processes for:
- business case financial model and benchmark cost – benefit data
- templates for executive reports, RFIs, RFPs, bid assessments, contracts
- risk management planning
- contract models, document templates and negotiation experience.
- Cost – a proven project road map would help PPL’s team clear milestones faster, at a lower cost.
PPL engaged MW Consulting in a staged project to participate in a joint team to create and implement a new meter reading strategy. PPL chose MW Consulting because of its prior experience with the industry’s largest AMR projects, including PECO Energy, and for its proven business case development processes – tools which include a financial model and benchmark data.
The three stages of PPL’s project, leading up to the present implementation activity, were:
Stage 1 – Develop the meter reading strategy business case.
Stage 2 – Develop the financial business case for AMR.
Stage 3 – Select the best manufacturer and negotiate a contract.
The staged business case processes and templates supported PPL in assessing its current business needs as well as projecting its future needs. PPL concluded that the dynamics of the Pennsylvania market, the diverse present business needs and the uncertainty of future business needs meant it needed to become AMR enabled without being constrained by today’s definition of AMR system functionality. In 2000, the Stage 2 report indicated that PPL was strategically best served by deploying an AMR system that enabled it to acquire appropriate interval data from all customers as needed, and to process the data at a central server into the information products required to meet its business needs. Interestingly, in the spring of 2002 the California Public Utilities Commissioner (PUC) began reviewing a petition that proposes exactly what PPL is now doing.
The Stage 1 goal was to decide, within 40 days, on PPL’s best meter reading strategy from among five options, including the status quo. After extensive interviews with internal process owners, preparing a preliminary financial case based on benchmark data and a review of industry trends, PPL decided that AMR was the superior long-term strategy to meet both its own and its customers’ needs.
The Stage 2 goal was to develop, within 120 days, a highly quantified analysis of the prospective business case and the benefits it offered to stakeholders. (See Figure 1).
The three main activities comprising Stage 2 were:
- Request for Information (RFI) to replace benchmark data with current product and price information.
- Refining the internal business case assumptions on costs and benefits.
- Modelling the financial results.
PPL’s team saved valuable time by customising a standard RFI template and financial model to cut months from the project schedule. The PPL team met with process owners to develop definitive commitments to project benefits. The business case analysis was to focus only on quantifiable internal benefits – no soft benefits for future revenues and the like were to be included. An overview of AMR Business Case ModelerTM is shown in Figure 2.
PPL used ModelerTM to assess 24 different customer segments throughout its service area in the context of urban, suburban and rural territory for numerous benefit opportunities. The team used ModelerTM to simultaneously compare and assess the benefits and operational implications of three different proposals, each composed of up to three different AMR technologies deployed in PPL’s service area, while also assuming varying levels of competitive meter reading by third parties, as allowed in Pennsylvania’s competitive market. PPL assessed different technology mixes to assure itself that the solutions proposed by the bidders represented an optimal strategy now and into the future.
PPL’s business case also leveraged a risk management template to create a report that characterised, assessed and provided mitigation strategies for over 70 individual project risks. The dozen most economically significant risks were included in a business case sensitivity analysis, to enable PPL management to understand the implications and conclude that the team was being prudent in managing project risk. This template’s identification of risks and the preparation of mitigation strategies was valuable to the team, allowing it to manage the project to avoid surprises at the time of preparing for the field tests, interface development and implementation activities.
A thorough review of the financial case and risk management report by management, finance, process owners and other stakeholders concluded that the Stage 2 business case reflected enough potential benefits to warrant going to Stage 3. In Stage 3 PPL awarded contracts to DCSI Inc and Comverge Inc. DCSI’s TWACSTM system will be used to support about 99.5% of PPL’s residential and business customers. Comverge’s CDC-II solution will use cellular digital packet data (CDPD) radio to support over 6,000 VT (voltage transformer) metered customers.
PPL completed its Small-scale System Test (SST) of over 10,000 meters in May 2002. The SST is designed to validate system functionality and performance, together with deployment processes, as well as to assess remaining risk management criteria. Successfully completing the SST indicates that the system is ready for system-wide implementation. When deployment is completed in mid 2004, PPL will have the largest deployed AMR system, capable of two-way messaging with all metering and other end point devices. The system will harvest interval data from all of its customers on a daily basis, enabling PPL to deliver on its promise of customer service excellence.