A monthly billing cycle results in exposures of up to 60 days’ settlement. Participant default is likely, and the potential loss from such an event is significant. Spot-market clearing can solve...
CIS: The new Profit Machine
Craven says that looking back at the development of the typical domestic CIS system in the United States, the monolithic tools that were built in then are slowly changing. "What we did back then was we built huge, all-encompassing systems, and the technology was state-of-the-art for its day. But rather than modularize these systems, they were built to handle a whole gamut of different processes-their life was really expected to be the 20-year, 30-year time frame," he says. Market models weren't changing and the industry was fairly stagnant. The systems were built in such a way that the ROI was relatively good, and there were long project times-some took seven or eight years to build. "These systems were designed to support a full range of functionality, and their life was such that they really didn't do a lot of interaction outside of the utility," he explains. "We built a series of large mainframe legacy systems and they handled their job, but they lacked the main thing, dominant today, which is flexibility."
Craven believes CIS changes today are market-driven, and a wholesale change of the system does not seem to satisfy utility needs. "The architecture in and of itself has changed and is tremendously better, but deregulation and emphasis on customer service was not considered then," he notes. "In the old days we really looked at things from a premise of market model uncertainty," he notes. "I still see no cohesive market model-ERCOT or PJM-that we know five to 10 years from now will be there.
"Now it is not a static environment, they are not a vertically integrated utility; they are a group of operating units that has to operate not only externally but also internally," Craven says. Over the past two or three years, he has seen a huge slowdown in wholesale replacements of systems. What Craven sees today is really augmentation of systems-a modularization-that favors replacement systems that increase customer satisfaction and improve process efficiency.
He realizes that utilities, at the end of the day, found they never had best-of-breed of anything, but instead were making tradeoffs. "A few years ago, when utilities had margins … and commissions were more liberal, you could get away with that," Craven explains. Then it was possible to send out five percent of all bills by hand because that constituted "complex billing." Now a company looks at that situation and sees a potential to save money.
Reliability, cost of maintenance, and integration of external and internal systems are all being examined. "We are changing out systems from yesteryear to today. We are just not doing it in wholesale fashion," he explains. "What you find is that companies like Excelergy are adding modules to these large systems, and so five years down the road the modularization would actually become the whole, rather than having the piecemeal effect."
CIS Investment: What Should You Expect?
When a utility invests in CIS, it anticipates increased efficiencies and a return on that investment, which can take the form of dollars or even non-monetary benefits. The dollars saved can be