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Putting Knowledge into Action

Utility rate reviews are now a common part of the day to day activities of Utility operations and organisations face a myriad of reviews and operational standards assessment across IT and business functions. Although energy and regulatory price assessments tend to concentrate on a review of the charging regime for utility services, including the underlying revenue requirements, regulatory agencies involved in utility rate reviews are also challenged to protect consumer interests and ensure that rate increases are justified by market conditions, rather than used to subsidize inefficient management practices.

Indicative of the pressures facing utilities as part of any price control review is the need to present a compelling and credible story and to ensure that regulatory agencies have confidence in the data presented. In addition the need to balance cost increases and customer service against a background of ever increasing energy costs places additional pressures on organisations.

An objective, market-based assessment of utility operations, conducted as part of the rate review process, can help achieve this goal. A benchmark assessment compares the cost efficiency, service quality, and productivity of a utility's IT and business operations against the standards of top-performing organizations in the competitive market. Through this comparative analysis, it becomes possible to identify areas where the utility is performing well, and areas where improvements can be made. More importantly, the analysis shows what actions should be taken to drive improvements.

The use of functional models in the benchmark analysis to underpin the market-based assessment of utility operations ensures that regulatory agencies and utility organisations involved in price reviews are working off an industry standard and including those elements of the business that are appropriate and pertinent to a price review. In addition, functional models ensure regulatory agencies and utility organisations are examining consistent data, reviewing appropriate business operations and providing an objective assessment to score organisations against peer groups.

By providing a fact-based, auditable review of a utility's operations, a benchmark analysis can be an invaluable tool in helping regulators conduct an impartial assessment, and reconcile the conflicting views of various parties involved in this often contentious process.

UtiliPoint International, Inc. (UtiliPoint) and Compass Management Consulting Limited (Compass) have combined their benchmarking and functional models expertise to offer an integrated solution for benchmarking and regulatory price review requirements. UtiliPoint and Compass use a set of functional models to map and capture detailed data about utility business processes and informational technology operations. Figure 1 outlines the integrated functional model across the principal domain areas of customer care and billing, human resources, supply management services, finance and accounting and information technology infrastructure. Underscoring the integrated functional model is a common, cross domain benchmarking methodology.

The functional model is designed to provide utility organisations with a tool to review operations in the principal price review areas of service charging, revenue and customer care.
In addition to the detailed functional models used to map and capture detailed data about utility business processes, the model also includes an infrastructure functional model to map and capture detailed data about utility IT.

UtiliPoint and Compass use a multi-dimensional audit approach that yields exacting price insights about how a company and its service is performing holistically, i.e. how its performance measures up against the industry, key business trends, and external risks. This multi-dimensional review increases the accuracy of the findings and the delivered report.

The detail of the UtiliPoint and Compass databases allows them to select comparison companies that match as closely as possible to the client organisation, thereby reducing the need for normalization. Every organisation and business operation is unique and some amount of normalization is always required. Where adjustments are warranted, the detail of the UtiliPoint and Compass databases allows for the identification, isolation and analysis of differences that a high level approach cannot address
UtiliPoint and Compass utility industry expertise is robust and nearly matchless in the North American market. UtiliPoint’s and Compass’s broad knowledge and footprint of analysis services spans the market for utility technology and services. With this integrated functional model approach to benchmarking and regulatory price review, that industry expertise and market-based assessment knowledge is now available to European based utility organisations.

Stage 2 implementation of the functional model allows utility organisations to use the benchmarking and market analysis data to optimise ongoing business performance and to use this model as a strategic and decision making framework. Through the benchmarking process organisations can identify and learn from global best practices and use the model analysis as a tool in the quest for continuous improvement.

UtiliPoint, as a recognized thought leader in the energy/utility market place has extensive knowledge and insight into the business operations of utility organizations. Compass is a recognized leader in benchmarking with a focus on IT having pioneered the industry more than 26 years ago. Compass capabilities are supported by the Compass factbase™, made up of experienced benchmarking consultants, robust proprietary tools and methodologies and the world’s most comprehensive data base of IT performance metrics.

UtiliPoint International, Inc. and management consultancy Compass are partnered to provide operational performance improvement services to the energy and utility industry. The partnership leverages Compass' proven comparative analysis methodology and global database of operational metrics in combination with UtiliPoint's utility and energy industry experience, database, and insight into critical customer-facing business processes. Working together, the two firms deliver a market-based and objective assessment of a broad range of a utility's outsourced and in-house IT and business operations.

Visit UtiliPoint online at www.utilipoint.com

Visit Compass online at www.compassmc.com