Automated metering infrastructure is one of the most costly investments a transmission and distribution company will make. As witnessed in several recent large utility deployments, the costs of a fixed network system, coupled with a meter-data-management solution, represent an investment of hundreds of million dollars. Inherently complex, a major automated metering infrastructure (AMI) implementation faces risks at many levels — technical, operational and logistical. Once a commitment is made, risk management deserves as much attention and as much focus as any other aspect of the project. A risk-management plan should be part of the overall assessment of a decision to invest in AMI infrastructure.

RISK IDENTIFICATION

In most AMI initiatives, a small cross-functional team is charged with initial feasibility assessment. Represented disciplines should include revenue cycle (billing/metering processes), information technology (IT), metrology, financial and distribution design/operation. Typically, the team initially focuses on business case development, but it's critical that risk assessment be integrated as early as possible. The steps to risk identification are as fundamental as blocking and tackling, and just as important that they be well executed.

• Prior experience

  Most midsize to large utilities have had at least some experience in rolling out large technology projects like customer information system replacement, work management or mobile technology platforms for field workforce. Interviews with former project managers, IT personnel involved with the project and solution providers involved in past deployments are key to understanding core competencies and skill sets on such projects. Having the skill set to staff large projects with capable personnel, demonstrate success on system integration, schedule/cost management, partner with solution providers and effect change management is critical in most large-project implementations. An understanding of your strengths and weaknesses in these areas is key to understanding and managing your risks going forward.

• Risk-focused interviews

  It's important that the business lines understand all of the implications of automating a highly manual process. Ideally, any infrastructure or technology investment should result in improvements in process efficiencies, financial benefits and service levels. Understanding threats to achieving these benefits, or unintended impacts on other business processes, can best be understood through face-to-face interviews with business line managers and their staffs. Drill down on as many departments and processes as possible such as financial, field operations, asset management, outage management and logistics (procurement).

  Such interviews typically will shed light on the strength of the business benefits as well as identify issues requiring attention. For example, call center managers will be able to understand the benefits of a fixed network system in terms of eliminating estimated bills, decreasing complaint and violation exposure, and reducing manual billing driven by bad reads. An initial reaction of an outage manager might be, “Meter readers guide foreign crews during outages; who will I use in the future?” The loss of meter readers as field guides may seem like a relatively small risk compared to the benefits a fixed network brings to outage management, but helping the business lines assess options will help coalesce internal support for the project.

• Due-diligence field visits

  A fairly extensive number of investor-owned utilities have completed AMI deployments or they are currently underway. Site visits are an obvious source of lessons learned for both implementation and operational experience. Site visits also must include potential solution providers to assess quality and depth of personnel, manufacturing processes and service approaches.

• Independent review

  As documentation around risk identification develops, introduction of a third-party review or audit provides an objective perspective to supplement the views of team members. Consulting services from firms having experience with large project implementation is often useful at this point. Regardless if a consultant is used for this review, corporate auditing staff can provide valuable perspectives at this point in the decision process. Often involved in post-project reviews, the involvement of auditing staff early in the decision process yields several benefits. Audit personnel will bring their own experience and perspectives to bear on the risk findings. Additionally, the very involvement of corporate auditing is, in itself, a due-diligence measure.

RISK CATEGORIES

During the risk-assessment process, all risks are categorized by one of five risk sources. These sources describe the generic areas where specific risks are likely to occur:

1. Cost-based risks outline the nonachievement of financial benefits of the AMI program. Typical cost risks include external contractor overspending, and additional costs in changing and solving design, application or operational problems.

2. Schedule-based risks focus on the nonachievement of AMI program milestones within the specified time frame. Typical schedule-based risks arise from extensions from scope changes, resource unavailability, and additional schedule extensions from solving those risks outlined in the “cost” risk above.

3. Technology-based risks consider the nonachievement of solution specifications and benefits expected. Typical risks include new and nonstandard platform technology, integration problems with existing IT applications/systems, performance expectations not achieved, functionality not delivered, communication infrastructure inadequacies and overall system operability.

4. Operational-based risks focus on the organization and business process changes arising from the AMI deployment. Operational risk tends to manifest in suboptimal work practices that lead to lower-than-expected benefits realization. Typical risks consider communication and training of key personnel on new business processes and applications, behavior change, and adoption rates of new tools and processes.

5. External-based risks consider the “environmental” factors that are largely outside the control of AMI program management and stakeholders, which can directly and indirectly affect the successful delivery of the AMI solution and benefits. Typically, external risks arise from legislative regulations, legal requirements, customer satisfaction or lack thereof, and communication to the market.

MANAGING THE RISKS

Success in most great enterprises is often accomplished by focusing on a couple key principles. Such is the case in managing risks around a large AMI implementation. For AMI deployments, those principles are:

• Establish a strong management team with clear accountabilities

• Develop and enforce management controls around key project deliverables

• Develop and manage a risk-mitigation plan

• Stage rollouts to validate processes and technology

• Contract a risk mitigator.

STRONG MANAGEMENT TEAM

While establishing a good management team may seem axiomatic, securing the right personnel is often challenging. Understandably, utility execs are sometimes reluctant to assign a strong performing manager to a multiyear implementation. This reluctance is often a reflection of many utilities' weakness in developing personnel. This is further exacerbated if a particular utility doesn't have a good track record in transitioning personnel back into the business once a project is completed. Similarly, a company with a history of loading projects with suboptimal performers is clearly increasing its risks in any large-project implementation.

Role clarity is an essential ingredient for effective team operation. The IT lead is responsible for providing a system operating environment and interfaces with other applications; the implementation lead is accountable for maintaining schedule and physical deployment; a change-management lead works with the business to understand impacts on current business processes; and an operation lead assumes responsibility for running the system as soon as the first meter is installed. An overall project manager tracks metrics and project finances. Once these positions are in place and roles communicated, leads are held accountable for their individual metrics.

MANAGEMENT CONTROLS

The principle focus of management controls should be directed to billing data accuracy, meter inventory and installation management. Small-scale tests and parallel manual reading are the principle measures to assure billing accuracy. The key to both billing accuracy and installation management is the ability to develop or otherwise deploy automated interfaces that will ascertain the status of a given meter during deployment. For example, does the customer's record accurately reflect meter status? Is the meter currently being read manually? What meters are being deployed today?

In addition, quality checks addressing outread accuracy and installation methods are not only important for verifying accuracy, but also in establishing a discipline and rigor in the installation process.

MITIGATION PLAN

A good mitigation plan addresses five major risk characteristics:

• Risk profile

  Describes probability and impact should the risk occur.

• Prioritize risk

  What are the five or six key risks the project team will focus on?

• Mitigation

  What are the specific mitigation measures for each identified risk?

• Assign

  Assign risk-management accountability to the appropriate lead.

• Monitor and update

  The status of risks should become part of the standard metrics-tracking project.

The mitigation plan cannot be a static document, but is intended to be an integral, ongoing part of the planning, monitoring and management of the AMI program.

STAGED ROLLOUTS

Assuming an AMI solution meets technical, business and financial requirements, a project's schedule should reflect intent to capture the benefits as soon as possible, consistent with available resources. Typically, this will involve a deployment period of three to five years, depending on the amount and type of meters installed. A staged rollout in this context means that small deployments are undertaken to validate key processes and that the system responds appropriately in varied operating environments. In the case of PPL Electric Utilities' deployment of DCSI's Power Line Carrier solution, the utility performed two small-scale tests; one verified the system's ability to operate in an LTN environment and the later verified basic system functionality and operating characteristics.

CONTRACT AS MITIGATOR

A well-staffed project with clear roles and objectives is one of the most effective tools in managing risk. Similarly, the working and contractual relationships with the solution provider are paramount in a successful deployment. From one perspective, a well-negotiated contract can mitigate many major implementation and operational project risks. Aside from financial and legal considerations, the contract must achieve clarity addressing scope, operational requirements and material quality.

Invest as much time and effort as possible in developing the necessary details around the scope of work and schedule portion of the contract. Clarity on these topics is not only imperative for an understanding between buyer and seller, but also assures alignment between a delivered solution and the business needs it's intended to support: What exactly is the deliverable to be provided and who will provide the resources to install and implement it? What is the intended functionality of the system? What is the path to future upgrades? What are the expectations around the scalability of the system?

Business, technical and operational requirements need to be rigorously documented and included as a part of acceptance testing, which in turn should be incorporated as part of the contract. In PPL's original deployment of DCSI's TWACS system, the acceptance plan reflected 164 discrete items. The risk of a system that can't satisfy business requirements is obvious and needs to be addressed in contract language.

A deployment that could involve hundreds of thousands of component parts is likely to experience some failure rate of individual components. Understanding an acceptable level of failure, typically 0.5% on meter components, for example, and having it reflected in the contract is a key risk mitigator in AMI deployments.

PROCESS APPROACH

AMI system deployments will extend over years. Managing risks over this period requires a process approach that includes risk identification and documentation, mitigation strategies, personal accountability and paying attention to detail during contractual discussions. Managed as an iterative process and not a “once and done” checklist item, the probability for a successful deployment is greatly enhanced.

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Bernard J. Bujnowski serves as PPL's director of AMR. He was involved in the project's entire scope, including securing management approval to deploy a system-wide solution. Subsequent project implementation involved the deployment of a fixed-network automated system to all of PPL Electric Utilities' 1.3 million customers. The project was completed on budget and ahead of schedule. Bujnowski is currently executive sponsor for deployment of a meter-data management solution. He started his career with the Federal Power Commission in Washington, D.C., then worked for an engineering consulting firm in southern New England prior to joining PPL. bjbujnowski@pplweb.com

PPL'S AMI JOURNEY: A TIME LINE

January 2000: Business case development and implementation planning begins

April 2000 to March 2001: Vendor selection process takes place

October 2001: Management approves project

November 2001 to January 2002: Preimplementation planning begins

February 2002 to October 2004: Project is deployed

February 2006: Meter-data management project commences

October 2006: Meter-data repository becomes operational.