But that is the reality of the utilities business. Every year something unplanned will happen, something either breaks or burns down, and then there is no alternative but to fix it. The money then has to come from somewhere, with minimal disruption to the organization.

In our experience there are four key questions that need answering in these budget change situations:

Question One: What did we agree to?
For many organizations just reassembling all the information for the current capital plan is a challenge. Many organizations rely on spreadsheets which have different versions, come from different parts of the organization and have changed since the last planning cycle. But it’s critical that the plan-of-record and all the associated information can be quickly reassembled.

Question Two: What projects are already underway?
The further into the year the change is required, the larger the number of active projects. Those projects will have suppliers contracted, engineering resources assigned and money spent. So before any plan re-optimization the first step is to see which projects are underway and therefore what remains of the budget after those projects, and the unplanned investment, are taken out.

Question Three: What is the best use of remaining funds?
The optimization activity that occurred during the annual capital planning cycle has to happen again. Projects from across departments, organizations, lines of business need to be compared once again, looking at what-if scenarios to understand the implications of cancelling different projects.

Question Four: Does everyone understand the new plan?
It’s not just about creating the (new) optimal mix of capital investment projects, it is also important to be able to communicate the new plan and its implications to key stakeholders. Affected project teams, executives and regulators may all require visibility into the implications of the new plan as the changes ripple through the organization.

Asset Investment Planning (AIP) software helps organizations to answer these questions. First of all users can quickly get access to the current capital plan updated with the most current project information so you can see what projects are already underway. Users can then apply the new budget constraints and using advanced optimization capabilities the user can run what-if scenarios to look at different alternatives. Finally, because all the information for each project is readily available, including quantifiable project benefits, communicating the new plan to internal and external stakeholders can be done quickly and efficiently.

Budget changes and tough decisions will remain a fact of life; Asset Investment Planning software makes the task easier.

Jon C. Arnold, Managing Director, Worldwide Power & Utilities Industry, Microsoft Corporation

One of the most effective ways that utility and energy companies can do more with less is by optimizing both current and future asset investment decisions. Due to the growing number of complex variables that drive such decisions today, the optimization of what, when and where investments must be made (to implement and maintain a Smart Grid initiative, for example) demand far more than the “what if” scenarios that organizations can formulate manually. While external spreadsheet perspectives may help organizations to prioritize and give weighting to some variables, this data becomes much better vetted and far more meaningful when aggregated and analyzed with other critical and multifaceted data sets such as those generated by a company’s ERP, EAM, GIS and Legacy systems.

Processing multiple data sets that comprehend numerous changing asset investment planning (AIP) variables, both quantitative and qualitative, is a daunting task without the proper analytical tools. Fortunately, sophisticated AIP software is available to simplify this task from our Gold Certified Partner Axia Software, within the new Windows® 7 operating system, in its new REVEAL™ AIP Software solution.

Backed by a certified software development team and leveraging more than 25 person years of development work, Axia Software’s REVEAL™ AIP Suite was designed from the ground up to orchestrate analytical algorithms and multiple data sets to optimize asset investment decisions. On November 30, 2009, all salient AIP attributes embodied in REVEAL became seamlessly operable with both 32-bit and 64-bit versions of Windows 7. These attributes include multi-year project and program tracking, asset investment optimization, and linking corporate objectives to capital investment plans for asset lifecycle management.

So what benefits, if any, come from porting Axia’s REVEAL software to Windows 7?

According to Trevor St. Germain, CTO of Axia Software, the REVEAL AIP Suite runs faster and looks better on both 32- and 64-bit flavors of Windows 7 than it did running on earlier XP and Vista operating systems. However, the benefits are more pronounced with the 64-bit option, notably, faster booting and improved security plus a significant increase in operating speed of the REVEAL optimization engine, thereby boosting overall performance. And since REVEAL is architected on the .net framework and supports the Microsoft Smart Energy Reference Architecture (SERA), Axia has leveraged this technology in ways to further benefit its customers by facilitating the alignment of information technology with their business processes to create an integrated utility which bodes well for utility and energy companies on a mission to do more with less. – Jon C. Arnold: Microsoft Power and Utilities Blog

blog comments powered by Disqus

Curtail Wasteful Asset Investment Budget

With numerous multiyear projects in play and mounting pressures to align asset investment decisions with corporate goals, asset intensive industries often lack the visibility to make informed re-investment decisions after projects are initially funded. While a portion of contingency funds built into Asset Investment Planning (AIP) budgets is wisely utilized to support approved projects, there is frequently a significant portion across all approved projects that is either unspent or poorly utilized. During fiscal period reviews, functional departments must decide whether to reallocate unspent budgeted funds or relinquish them.

Project managers within electrical power utilities and oil/gas energy companies, two of the most asset intensive industries, often resort to “throttling” their budgets. The objective of this manipulative effort is to impede or “choke” off unspent funds from being surrendered by reallocating them toward projects that have yet to be fully vetted, often due to lack of visibility.

By some estimates, impetuous budget throttling squanders about 7% of annual cap/ex funds on low/no-yield projects. Such squandering can be substantially curtailed by executing the following two measures:

1. Change business rules when functional departments are reluctant to relinquish unspent funds. The preferable change is to pool surplus and available contingent funds so they can be directed at high value projects that narrowly missed winning funding at the onset of the fiscal period.

2. Change how key data sets are analyzed and used to ensure wise use of unspent funds. Improve rapid correlation of and visibility to key data so that decision makers can objectively reallocate funds to high-yield projects, especially those that support quantifiable corporate goals while comprehending the long term need of human and material resources.

While executing the first measure is fairly straightforward, the second one requires the sifting through largely unstructured (and un-related) data sets – most of which already exist in asset intensive organizations — to optimize asset investment decisions. Fortunately, this data manipulation task including the rapid correlation of multivariable options can be streamlined with new software tools that have come to market. Such tools are proving to be an ideal antidote to wasteful throttling.
Besides neutralizing subjective, emotional arguments during re-prioritization periods, fully featured software tools can also quickly establish a baseline for ensuing budgeting cycles. Moreover, they can rapidly identify the lowest cost options for maximum risk mitigation as they simultaneously help formulate AIP budgets that are defensible, transparent, repeatable and auditable.

Happy Asset Investment Planning!

blog comments powered by Disqus

Relationships between a utilities and regulatory agencies need not be adversarial. Indeed, a utility should view a regulatory agency as one of its major stake holders — no less important than its workforce or stockholders – during the formulation of AIP strategies. Building two-way trust and confidence must start with clear and open communications. However, its sustenance calls for proactive measures initiated by the utilities. Although such proactive measures may vary from regulator to regulator, there are some that apply to all. The top 5 of these proactive measures are:

1. Lead the relationship with regular communications both electronically and in print to the regulatory agency not only from the utility CEO but also from the utility’s professional staff directly to key regulatory staff members. Avoid surprises by issuing timely alerts on  planned and completed projects
2. Anticipate information requests by staying abreast of critical issues facing regulators, and by preparing AIP data that can help resolve the issues.
3. Defend asset investment decisions with comprehensive analyses of all variables driving AIP decisions, and provide data views that the regulator can use to endorse proposed spend levels and associated rate increases.
4. Minimize subjective judgment by providing objective data that expedites the regulatory review and approval of utility-formulated rate cases, financial and otherwise. Quoting subjective views by “experts” without objective backup, or at least well presented empirical results, will not satisfy today’s business savvy regulators.
   
5. Leverage technology platforms that present consistent and timely views of key AIP variables at a moment’s notice. Data manipulation and usage must be efficient, repeatable, and low cost to answer the same types of questions regarding each rate case filing. Ideally, utilities should be comfortable inviting regulators to “look over their shoulders” to view the data analyses outcomes delivered by their technology platforms.

Building and improving upon regulatory agency relationships should be a high priority for utilities. Fortunately, there is a new generation of powerful AIP software tools that simply the task of initiating the proactive measures described above.

blog comments powered by Disqus

Written by Trevor St. Germain, CTO Axia Software

Electrical utilities around the globe are facing increasing pressure to make smart decisions when it comes to upgrading their aging power grids. On the one hand, they must deal with the external demands of reliability standards, mounting environmental compliance and more prescriptive regulatory oversight, and on the other they must align their asset investment planning (AIP) to meet internal corporate objectives.

Bridging this gap becomes even more challenging due to the lack of visibility needed to optimize spend levels while mitigating risk. Unfortunately, a utility’s operations staff often makes asset investment decisions that are hit and miss, and frequently out of sync with executive strategic aspirations.

If this sounds like being between a rock and a hard place, it need not be thanks to emerging software tools that can dynamically manipulate multi-variable data in real time. When such software tools are properly developed and leverage existing relevant data sets, they can enable utilities to streamline correlations and extend visibility, and, as a result, optimize asset investment decisions. In deploying such software tools, the top 3 actions that utilities can take to optimize asset investment decisions are:

1. Adopt Common Technology Platform that “brings the process to life” as it establishes common rules for drawing from common sources of relevant data and a regimen for contrasting and correlating various opportunities to determine which will best meet common goals.
2. Establish Closed Loop Process that brings corporate objectives and new opportunities in line with decisions about when/which assets should be replaced/upgraded with limited resources while feeding back results to all decision makers to validate effective alignment.
3. Drive Transparent Communications with user friendly interfaces that is top down, bottom up and across the organization, which expedites and simplifies practical reporting relevant to each group and those in between using common language (including utility-specific jargon).

By deploying software tools with a common platform, utilities can transform multiple data sets into multi-variable optimizations that can be factored into multifaceted business and operations plans. While optimizing AIP decision-making, multi-variable optimization techniques can ensure that each asset investment aligns with corporate objectives that must address stakeholder influences, earnings and profitability expectations, customer satisfaction and environmental regulations as well as the collective impact of these factors and others on risk mitigation.

blog comments powered by Disqus

With this inaugural blog, I welcome your interaction with me and other bloggers to develop an instructive forum on how we can improve Asset Investment Planning (AIP) in the 21st century. While my views may be influenced by my long experience in working with power utilities – perhaps the most asset intensive of all industries – I believe that the development of better AIP approaches for this field can be applied to others such as oil/energy, telecommunications, healthcare and mining – and even to federal and state governments.

Among the topics you can expect me to address over the next three months are the following:

• How Electrical Utilities Can Do More With Less
• Gaining Visibility to Avoid Wasteful Budget “Throttling”
• Minimizing Impact of Aging Infrastructures & Workforces
• Top 5 Ways to Improve “Regulatory Relations

While working in the power utility field for more than 15 years, I witnessed many sub-optimal approaches to defining and processing key decision-influencing variables, both quantitative and qualitative, and the difficulties in bringing organizational silos together to better communicate and collaborate. It was difficult then and much more challenging now given the mounting requirements imposed by new environmental regulations and more prescriptive regulatory oversight. Compounding these external challenges are others internally driven by more impatient stakeholders who are more closely tracking how well corporate objectives are being met.

As the old Chinese proverb proposes, “May you live in interesting times.” If not interesting, these times are certainly extremely challenging for asset intensive organizations. Please share your views on where you think AIP is going…or better yet should be going…and any AIP topics you think we should address.

I look forward to our future discourses.

 Trevor St. Germain, CTO,  Axia Software Corp.

blog comments powered by Disqus