Thursday, March 27, 2008

Building for The Future

Power & Energy talks to Andres Carvallo, Chief Information Officer at Texas-based utility Austin Energy – the 10th-largest public power utility in the nation – about the IT transformation currently underway at his firm.

What does it take to be a chief information officer at a company that provides power to one million residential customers and 41,000 businesses? How about an acute technology vision, the ability to run IT as both a business and as a service provider and a commitment to effective best practices, for starters? Andres Carvallo, CIO at Austin Energy, has all these qualities and more. Over the last few years he’s been driving a program of infrastructure re-organization aimed at streamlining Austin Energy’s IT architectures that is the envy of utilities everywhere. It’s been hard work, but Carvallo is convinced it’s been worth it.

“We have really been trying to streamline the IT architectures to be more flexible, while at the same time enhancing the customer service experience and increasing revenues by offering new services across the enterprise,” he explains. “The wireless and service-oriented architecture transformation we’ve been rolling out has created a building block, if you will, for putting together the smart grid, and has involved a number of initiatives. We have been expanding our metering. We have been playing with sensor equipment on the distribution automation side. We have replaced a lot of our old computing systems. We’re in the process of getting a new billing system. And really what we’re doing is laying all the groundwork and preparing ourselves to go live with our smart grid in the near future, and to be able to do things like peak pricing, time-of-use pricing, prepay pricing, and offer all kinds of new energy management services related to demand-side management.”

It’s a pretty daunting proposition for any company, so how did he go about starting on a project of this size and scope? “Well, you don’t say, ‘We’re going to build a smart grid overnight – here’s hundreds of millions of dollars, rip everything out and build it from scratch,’” he laughs. “It’s a project that comes together as you look at how to improve the different front-of-the-meter and behind-the-meter aspects of your operation. You need to assess your legacy systems. You need to assess the requirements of the market, and where the industry is heading in terms of capabilities. And you need to refresh the infrastructure that is managing your service delivery – everything from your SCADA systems to your outage management systems to your GIS, your ERP and your CRM. All these products and systems need to be integrated.”

In Austin Energy’s case, this meant re-evaluating its entire system architecture. Before Carvallo’s arrival in 2003, the utility had spent several years building IT silos without a CIO at the helm. There were too many manual processes, multiple redundant systems, companywide IT standards were non-existent, and executives had no access to real-time data for making decisions. Carvallo’s solution? Implement a systemic plan to turn the IT department around. He assessed the utility’s needs by interviewing 500 employees and running an inventory of all its systems, before developing a plan that included guidelines for everything from governance to legacy systems, project management to operational efficiency. Once the plan began, Carvallo measured its success against industry benchmarks and key performance indicators.

It’s all part of a $50 million overhaul of the company’s IT system instigated by Carvallo on his arrival. The end goal is to modernize and streamline IT to shave tens of millions of dollars from business operating costs and reinvest those savings back into the company. “To understand the real scale of the transformation we’ve had here, you need to realize where the money is being spent,” he says. “Four or five years ago, roughly 85 percent of our capital and operational expenditures went on keeping the lights on. Only 10-15 percent was going on doing new things. But in a world where the industry is changing so fast, it is very difficult to react if the lion’s share of your annual investment is tied up in keeping the lights on. So you need to redefine how you’re doing business; try to streamline costs so that you can free up cash on an ongoing basis in order to move from an 85/15 spilt to a 50/50 split, which is where we’re at today. We’re investing 50 percent of our capital on innovation, and only 50 percent on day-to-day operations.”

Right now, this translates into a focus on readying Austin Energy’s infrastructure for the advent of the smart grid. “In our case, this means implementing a services-oriented architecture to make the smart grid work,” he explains. “We’re leveraging web services and all those new technologies around Web 2.0 for better integration. And as we expand the use of this set of integration and transformation tools within the enterprise, our core IT transformation expands too. For instance, a critical next step was to reach out to our mobile workforce and equip them with the right mobile equipment so they can wirelessly access the information they need wherever they are.”

The new plan called for laptops in every repair truck that would tell workers where to go and what to do, which had a dramatic impact on delivery of work, reducing the work order lifecycle from weeks to just hours. And all the while, the customer experience keeps being enhanced. “We’ve added online self-service to make it easier to deal with us,” says Carvallo. “And as we continue expanding our smart grid transformation from within our organization out to the home, we can enable cool things like turning meters on and off remotely. And then we can start controlling thermostats and controlling different elements in the home, which enables us to offer time-of-use rates and peak-rate pricing and so on. With this approach, one development leads to the next.”

Austin Energy has been on its transformative journey for over four years now, and Carvallo explains how one-third of the utility’s fleet is now operating on automated meters, and that it has approximately 65,000 customers currently enrolled on demand response initiatives. “We have been learning from all of these things,” he says. “Part of the journey is about transforming the utility internally, but it’s also about how to interact with the different customer segments. What services do they actually want? As we start offering one service, customers should start realizing different things. So we have saved a significant amount of money by automating and eliminating truck rolls, by implementing automatic turn-offs and things like that, and we have gotten a lot of kudos from our customers as a result. Doing business with us today is a lot easier than it was four years ago, and it’s only going to get easier.”

It’s all good news for Austin Energy; not only is the quality of service that the company is providing getting better, the quality of it’s energy is improving too. And the end result is that the company is able to attract even higher value customers such as data center operators, many of which are moving into the organization’s service area because of the flexibility of services Austin Energy is able to offer. It helps that the company is the first electric utility in the United States to receive ISO 9001 certification for its quality management, which plays into Carvallo’s ultimate aim: to help Austin be the most livable city in the country. “It just shows the commitment of the utility to be nimble and customer-driven,” he says. “We’ve really changed a lot of the old paradigms and have shown great willingness to take a posture of business innovation. That counts for a lot amongst our existing and potential customers.”

He cites the example of the utility’s work in developing energy efficient IT systems as a prime case of how the company is working with its clients to reduce energy consumption, ramp up energy efficiency and, ultimately, reduce costs.

“Being an electric utility puts us in an interesting position regarding energy efficiency, especially as it relates to our own operations,” he says. “We need to be seen to be taking a leadership position. And actually we happen to be the number one seller of green energy of any utility in the United States, through our GreenChoice program.” The success of the Austin Energy program centers on a feature whereby GreenChoice subscribers receive a green power cost that stays fixed for up to 10 years – something that has been especially appealing to businesses. There are more 100 percent green-powered businesses (350) in Austin than any city in the country.

“We have a lot of experience, gained over many years, in smart building certification for green energy, and we have a practice inside the company that is specifically focused on datacenters,” he continues. “We recently won two datacenters for Hewlett-Packard, and a datacenter for Paypal (Google), and we provide our expertise in terms of monitoring controlled systems, cooling, de-duplication and compression. And we use and recommend virtualization. And just like we offer our residential customers rebates for installing a 13 SEER air-conditioner versus a 6 SEER air-conditioner, we also offer datacenters up to $200,000 per datacenter rebates if they use certain technologies that we endorse and we recommend.”

Clearly, it’s been a busy period for Carvallo and his team. To date, the overhaul of Austin Energy's IT organization has included implementing a new systems architecture, an updated website, a new customer portal for online electric payments, a wireless system for an automated meter reading system, a wireless system for field service automation and a series of best practices, such as a new IT governance, a project management office, a new IT Infrastructure Library program. The millions of dollars he has shaved off business operating costs has allowed the company to re-direct into future growth areas. “We’re pretty focused right now on the expansion of our infrastructure to deliver the smart grid,” he concludes. “Developments are happening at a phenomenal rate and things are going terrific for us at the moment. We are testing all kinds of technologies related to wireless and broadband over power line, vehicle to grid control management, and everything in between you can possibly imagine.”
Austin, the most livable city in the country? You heard it here first.

In numbers
Austin Energy, owned by the City of Austin, Texas, is the 10th largest public power utility in the US, with 2700 megawatts of generation, one million customers covering 420 square miles, and earning $1.2 billion in sales. The company’s goal is to deliver clean, affordable, reliable energy and excellent customer care to help Austin be the most livable city in the country.

Wireless revolution
Five years ago, Andres Carvallo began implementing a wireless revolution at Austin Energy. Here he outlines the benefits the rollout has brought.

We started our wireless transformation really to impact the bottom line. We looked at all of the key business processes that were critical to the utility, and out of some 2000 business processes, we settled on changing just 71 of them. And we found we were leaving a lot of money on the table, if you will, by doing things the old-fashioned way. We were manually reading meters, deploying trucks the old-fashioned way, and doing workflow in a manual way without using online documentation, workflow and signature approval – we were basically just executing on a formula that had been created 100 years ago. And we were doing that really well, but we were hitting a wall, and leaving money on the table as a result.

So we jumped into wireless to help the field force to accelerate their working practices; to reduce the number of truck rolls; and also to help improve the productivity of our internal staff, in terms of being able to leverage wireless to get the job done and have access to information wherever they were. And the benefits that we got from that, on multiple business processes, were tremendous. So we have been very focused on leveraging wireless to reinvent the business. And then at the same time, using a service-oriented architecture to make the systems more intelligent.

Right now, one-third of our meters are wireless, so deploying the next two-thirds of our wireless meter infrastructure is a current area of focus for us. Our target plan is to replace the entire infrastructure and add some thousands of sensors to our grid by the end of this year; today we’re managing 192,000 devices, but by the Spring of 09 we’ll be managing 500,000. And on top of that, of course, we need all the underlying intelligence in terms of software and systems to manage the creation of this smart grid. We’ll generate an incredible amount of data, and we’re going to go from roughly 20 terabytes a year to 400 terabytes of data a year.”

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