Application No.: Exhibit No.: Witnesses: SCE- P. De Martini K. Wood J. Gooding P. Campbell L. Letizia (U -E) TESTIMONY SUPPORTING APPLICATION FOR APPROVAL OF ADVANCED METERING INFRASTRUCTURE PRE-DEPLOYMENT ACTIVITIES AND COST RECOVERY MECHANISM Volume AMI Phase II Pre-Deployment Activities and Cost Recovery Mechanism Before the Public Utilities Commission of the State of California Rosemead, California December 1, 00 LAW 0
LAW 0
VOLUME - TESTIMONY SUPPORTING APPLICATION FOR APPROVAL OF ADVANCED METERING INFRASTRUCTURE PRE-DEPLOYMENT ACTIVITIES AND COST RECOVERY MECHANISM Table Of Contents Section Page Witness I. INTRODUCTION...1 P. De Martini II. OVERVIEW OF AMI PHASE II - PRE-DEPLOYMENT...1 A. AMI Phase II Scope...1 B. Phase II Objectives...1 C. Summary of AMI Phase II Costs...1 D. Product Testing Continues...1 K. Wood E. Requests For Proposals...1 1. Metering And Telecommunications System Infrastructure...1 a) Candidate Technologies And Vendors...1 b) SCE s Approach To The Metering And Telecommunications System RFP...1. Meter Data Management System (MDMS)...1 J. Gooding. Installation And Deployment Of Field Equipment...1 K. Wood F. AMI Phase II Deliverables...1 P. De Martini III. PHASE II COST ESTIMATION PROCESS...1 IV. AMI PHASE II COST ESTIMATES BY FUNCTION...1 A. AMI Product Management...1 K. Wood 1. AMI Product Management Phase II Objectives...1. AMI Product Management Phase II Cost Assumptions...1. AMI Product Management Phase II Deliverables...1 B. Information Technology (IT)...1 J. Gooding -i-
VOLUME - TESTIMONY SUPPORTING APPLICATION FOR APPROVAL OF ADVANCED METERING INFRASTRUCTURE PRE-DEPLOYMENT ACTIVITIES AND COST RECOVERY MECHANISM Table Of Contents (Continued) Section Page Witness 1. IT Objectives...1. IT Planning Assumptions...1. IT Phase II Deliverables...1 C. Business Process And Organizational Readiness...1 P. Campbell 1. Objectives Of The Business Process And Organizational Readiness Functions...1. Business Process And Organizational Readiness Cost Assumptions...1. Business Process And Organizational Readiness Deliverables...1 P. De Martini D. Field Deployment...1 1. Field Deployment Objectives...1. Field Deployment Phase II Cost Assumptions...1. Field Deployment Phase II Deliverables...1 E. Customer Tariffs, Programs And Services...1 1. Customer Tariffs, Programs And Services Objectives...1. Customer Tariffs, Programs And Services Assumptions...1 a) Load Control Programs...1 b) Tariffs...1 c) Prepayment Programs...1 d) External Communications and Customer Information...1 e) Market Research...1 -ii-
VOLUME - TESTIMONY SUPPORTING APPLICATION FOR APPROVAL OF ADVANCED METERING INFRASTRUCTURE PRE-DEPLOYMENT ACTIVITIES AND COST RECOVERY MECHANISM Table Of Contents (Continued) Section Page Witness f) Gas and Water Utility Use of the AMI system...1 F. Systems Integrator...1 1. Systems Integrator Objectives...1 a) Program Management Organization (PMO)...1 b) Business Process Design...1 c) Data Center Aggregator Integration...1 d) Meter Data Management System...1. Systems Integrator Costs...1. Systems Integrator Cost Assumptions...1 G. Program Management Organization (PMO)...1 1. Program Management Organization Costs...1. Program Management Organization Objectives...1. Program Management Organization Cost Assumptions...1 H. Contingencies...1 V. COST RECOVERY MECHANISM...1 L. Letizia A. Modification Of The Advanced Metering Infrastructure Balancing Account (AMIBA)...1 B. Proposed Operation Of The AMIBA...1 C. Forecast Of Phase II Revenue Requirements And Rate Changes...1 D. Summary Of SCE s Cost Recovery Request...1 -iii-
VOLUME - TESTIMONY SUPPORTING APPLICATION FOR APPROVAL OF ADVANCED METERING INFRASTRUCTURE PRE-DEPLOYMENT ACTIVITIES AND COST RECOVERY MECHANISM List Of Figures Figure Figure II-1 AMI Phase II Pre-Deployment Schedule...1 Page -iv-
VOLUME - TESTIMONY SUPPORTING APPLICATION FOR APPROVAL OF ADVANCED METERING INFRASTRUCTURE PRE-DEPLOYMENT ACTIVITIES AND COST RECOVERY MECHANISM List Of Tables Table Table II-1 SCE Phase II Estimated Cost by Function (Thousands of 00 Nominal Page Dollars)...1 Table IV- AMI Product Management Phase II Costs (Thousands of 00 Nominal Dollars)...1 Table IV- Information Technology Phase II Costs (Thousands of 00 Nominal Dollars)...1 Table IV- Business Process and Organizational Readiness...1 Table IV- Phase II Field Deployment Costs (Thousands of 00 Nominal Dollars)...1 Table IV- Customer Tariffs, Programs and Services Costs (Thousands of 00 Nominal Dollars)...1 Table IV- Phase II Systems Integrator Costs (Thousands of 00 Nominal Dollars)...1 Table IV- Phase II Program Management Organization Costs (Thousands of 00 Nominal Dollars)...1 Table V- Summary of SCE s AMI Phase II Revenue Requirements...1 -v-
1 1 1 1 1 1 1 1 0 1 I. INTRODUCTION Based on the positive Phase I results described in Volume 1 (Exhibit SCE-1) of this application, SCE is now ready to proceed with Phase II of its AMI project. The purpose of this Volume is to present a detailed description of the proposed pre-deployment activities and cost estimates for Phase II. As proposed, Phase II activities will include: (a) assessing responses to SCE s requests for proposals (RFPs) and selecting AMI meter and communication systems products for field testing; (b) procuring and testing the meter data management system; (c) assessing meter installation service options; (d) conducting field tests of the integrated components of the selected metering and communications system solutions; (e) preparing and developing the first AMI release (Release 1), primarily involving the meter data management system; 1 (f) developing demand response programs and customer rate alternatives designed to enable full customer participation in the benefits of AMI; (g) developing the business processes to support AMI deployment; and (h) finalizing the business case for system-wide AMI deployment. Phase II will take place in calendar year 00 and will cost an estimated $ million to complete. Section II of this Volume is a general description of Phase II activities and objectives, and summarizes the major components of the Phase II cost estimate. Section II also contains a description of several on-going activities including product testing and SCE s Requests for Proposals (RFPs) that were initiated in Phase I, but will be evaluated in Phase II. Section III presents the cost estimation process and methodology used to develop the Phase II cost estimates in seven functional categories, details of which are contained in Section IV. 1 Release 1 will test the end-to-end functionality of the AMI metering, communications and information systems and will be executed as part of Phase III in 00. -1-
Section V sets forth SCE s cost recovery proposal for the costs that SCE expects to incur for Phase II of the AMI deployment plan. SCE is proposing a modification to its Advanced Metering Infrastructure Balancing Account (AMIBA), which was established pursuant to the Commission s decision in SCE s AMI Phase I proceeding. The established AMIBA tariff includes language stating that the AMIBA may be expanded by subsequent Commission decisions to include the recorded costs associated with later phases of SCE s AMI project. Because SCE may still incur Phase I costs after January 1, 00, SCE is proposing to create two sub-accounts within the existing AMIBA to separately record Phase I and Phase II AMI costs. The recovery of Phase II costs through the AMIBA account will ensure that no more and no less than SCE s reasonable AMI-related revenue requirements are ultimately collected from customers. See Decision (D.)0-1-001 issued December 1, 00. --
1 1 1 1 1 1 1 1 0 1 II. OVERVIEW OF AMI PHASE II - PRE-DEPLOYMENT This section summarizes SCE s AMI Phase II proposed schedule, objectives, costs and key deliverables. Phase II pre-deployment planning centers around: (a) Completing the first field acceptance test (The AMI Field Test) of the Majority Telecommunications system; and (b) the initial development of AMI Release 1, which includes end-to-end systems integration with supporting business processes and procedures for deployment of AMI. Phase II also includes development and testing of the Meter Data Management System (MDMS) in the SCE test environment. Phase II planning and cost estimates were developed by a management team representing each of seven key functional areas including a Program Management Organization (PMO) that has administrative responsibility for the successful completion of the AMI project. The Phase II activities and cost estimates for each of these seven functional areas are summarized in this section and presented in detail in Section IV. A. AMI Phase II Scope The overall scope of SCE s AMI Phase II activities is summarized as follows: Complete the testing of initial AMI product submissions received in Phase I; Perform product qualification testing for the integrated meter and communications products expected to be submitted as part of the RFP process; Select the majority communications network suppliers and AMI meter suppliers and procure the meters and network components to conduct the field Test; Select the MDMS vendor and field installation contractor(s) and procure the software application(s) to conduct the scalability tests and begin initial development of Release 1; Deploy up to,000 residential and small commercial meters integrated with the selected majority communications network supplier across as many as ten separate geographic and topographic terrains; Identify and develop the business processes needed to support advanced metering capabilities for the AMI field test and for AMI Release 1 and implement the AMI Field test processes; --
1 1 1 1 1 1 1 Validate the compliance of the Majority Communications Network Supplier and Meter 1 Supplier with the technical requirements and service levels set forth in the agreements with these suppliers; and Prepare and implement the MDMS, the Data Center Aggregator (DCA), and the integrated IT systems in the SCE test environment. Phase II activities will be conducted in the context of the AMI Field Test and the development of the Meter Data Management System (MDMS) in the SCE test environment. The initial development of AMI Release 1 will also take place in Phase II; the completion of Release 1, including production release, will occur as Phase III activity beginning in 00. SCE expects the Majority Communications Network solution will provide network coverage to a very high percentage of meters in SCE s territory. This will be validated in the AMI Field Test. SCE also anticipates the integration of the Majority Communications solution into two separate meter vendors products. The first of these integrated meter products (Meter 1) will be tested in the Field Test with the second (Meter ) being tested later in the Release 1 test. One of the two meter vendors is also expected to provide commercial and industrial meters, which have been integrated with the Majority Communications solution. Phase II activities are expected to take 1 months to complete and will be conducted in accordance with the proposed project schedule and time-line shown in Figure II-1. --
Figure II-1 AMI Phase II Pre-Deployment Schedule Phase II Phase III Deployment through Q 01 AMI Field Test Prep. & Development AMI Field test Execution Release 1 Preparation and Development Release 1 Execution Start of: Q1 00 Q 00 Q 00 Q 00 Q1 00 Q 00 Q 00 1 1 1 1 1 1 1 1 1 0 1 B. Phase II Objectives SCE s Phase II activities have been organized into seven functional areas. The Phase II objectives for each of these functional areas are as follows: AMI Product Management: Verify and validate the selection of a majority telecommunications solution by field testing with an integrated AMI meter. Complete an assessment of the telecommunication system performance across various topographies. Information Technology: Test the automation of meter reading systems from the meter to the Data Center Aggregator while continuing manual meter read entry into the production billing system (CSS). Business Process and Organizational Readiness: Identify and develop new and interim business processes required to support the AMI Field Test and those needed to support Release 1 deployment of AMI; and design and implement organizational readiness programs to facilitate the transition to AMI technologies and new business processes. Field Deployment: Install and deploy AMI Field Test meters using SCE employees, oversee network installation and select the Phase III deployment vendor. Customer Tariffs, Programs & Services: Develop the portfolio of tariffs and programs to enable customers to benefit from full deployment of AMI technology. --
1 1 1 1 1 1 1 1 0 Systems Integrator: Provide technical consulting services in support of key Phase II activities such as the evaluation and selection of the Meter Data Management System (MDMS), scale testing of the Data Center Aggregator (DCA) and MDMS, development of back office system interfaces, support for Business Process Design and Processes and Program Management Organization support. Program Management Organization: Provide program administration and oversight of project planning, financial assessment, regulatory process, and legal activities relating to Phase II as well as the preparation activities related to Phase III. C. Summary of AMI Phase II Costs The budget estimate for Phase II totals $ million over 1 months. This estimate is broken-down into the seven key functional areas making up the SCE AMI organization plus an allowance for contingencies. The metering and telecommunication systems being installed for the AMI Field Test are considered to be a permanent capital investment that will be left in place to serve out its expected useful life once the field tests are completed. As such, SCE plans to capitalize the cost of the metering and telecommunications equipment and the installation costs in the same way it accounts for any other metering and telecommunication system infrastructure investment. Table II-1 shows a functional break-down of the estimated O&M and capital costs associated with Phase II. --
Table II-1 SCE Phase II Estimated Cost by Function (Thousands of 00 Nominal Dollars) Functional Area O & M Capital Total AMI Product Management,00,00 1,00 Information Technology,00,00 1,00 Business Process and Org. Readiness 1,00 0 1,00 Field Deployment 00 00 1,00 Customer Tariffs and Programs 1,00 0 1,00 Systems Integrator,00,0 1,00 Program Management Organization,000 0,000 Contingency,00,00,00 Total Cost Estimate,000,000,000 1 1 1 1 1 1 1 Costs shown are based on the maximum number of metering installations anticipated. To the extent the total number of metering installations and/or costs may vary from these estimates, the actual cost will be tracked in the AMI Balancing Account (AMIBA). Capital expenditures will also be incurred in Phase II for the MDMS system vendor award and for the IT system integration. These capital expenditures are also considered to be permanent operating systems that will remain in place for their useful life and they will be accounted for in the same manner as any other capitalized software and associated equipment. The seven functional cost categories and the provision for contingencies are discussed in more detail in Section IV of this Volume. D. Product Testing Continues SCE is currently working closely with nine meter and telecommunications vendors who appear capable of meeting SCE s technology requirements developed in Phase I and who plan to have their products available by the first quarter of 00. Component level testing of metering products in laboratory environments has already begun at SCE s Test Lab in Westminster, California; this effort includes testing for accuracy, reliability, safety, environmental conditions, vibration, and life expectancy. SCE will also submit communications equipment external to the meter to a similar battery of tests. Communications testing will include all aspects of --
1 1 1 1 1 1 1 1 0 1 communication to and from the meter including home-area-network (HAN) and the local-areanetwork (LAN), through the wide-area-network (WAN) to carry data/messages to and from the DCA provided by the telecommunications vendor. SCE is testing meters with integrated communications modules for radio-frequency capabilities including signal strength and telecommunications interference. The laboratory testing will help SCE to better understand the meter and telecommunications solutions that best meet its requirements for functionality and performance. The main objectives of the component test plan are to develop confidence in a number of key areas including in key component level functionality, the testing processes, with vendor offerings, and with technology maturity. Achieving these objectives will help mitigate some of the technology risks by focusing attention on those features and components that provide the greatest value for the business case. E. Requests For Proposals SCE has issued two RFPs during Phase I, which will be evaluated in Phase II. At least one additional RFP will be issued and evaluated in Phase II. The RFP results will provide the basis for contract negotiations and awards for the execution of the AMI Field Test and Release 1 to be conducted in Phase II and Phase III. RFPs to be evaluated in Phase II include: Metering and Telecommunications System Infrastructure, Meter Data Management System (MDMS), and Deployment of Field Equipment. These RFPs are discussed in the following sections. 1. Metering And Telecommunications System Infrastructure The AMI Metering and Communications System includes several component parts: (1) next-generation electric meters, () a communications card integrated under the meter cover; () telecommunications network equipment; () any required WAN services, and () DCA built upon a Commercial Off-the-Shelf (COTS) software application that provides telecommunications network management and control and provides a gateway to and from the --
1 1 1 1 1 1 1 1 0 1 meters and telecommunications network to upstream applications such as MDMS, with the DCA also including a Network Management Console and secure Key Management Service. The component parts are expected to work together to allow the AMI Metering and Communications System to (a) transmit data generated by installed meters over the telecommunications network to the DCA, and (b) transmit data and information from the DCA back to the meters, all in accordance with SCE s stated functional and non-functional requirements which were developed as part of the Phase I activities. SCE expects to select the majority communications supplier and first meter supplier from the meter and communications providers that team together to provide SCE with an integrated product that is made available to SCE for product qualification testing in February 00. SCE expects selection of the second meter vendor to occur after the majority communications vendor has been selected and expects to allow meter vendors that were not selected as the first meter vendor some time so they can work with the majority communication vendor to develop an integrated product that meets SCE s requirements. SCE expects product qualification-testing of the second meter to begin in June 00. a) Candidate Technologies And Vendors As a result of the intense AMI system design process undertaken by SCE in Phase I, SCE s metering and telecommunications system RFP will contain a comprehensive and demanding set of technical and business metering requirements. Given SCE s work with the vendor community in Phase I, SCE is confident that the new generation of metering capabilities defined in its RFP will be met by multiple meter manufacturers. The likely result will be competitive bids, meeting or exceeding SCE requirements at or below SCE s anticipated cost. This is not just wishful thinking, but rather the result of an extensive collaborative process with metering and telecommunications system manufacturers that began nearly two years ago in conjunction with preparation for SCE s original proposal for Phase I and II filed in March 00. As a major Phase I activity, SCE followed a rigorous process designed to influence the direction and timing of vendor AMI product development work. Through this --
1 1 1 1 1 1 1 1 0 1 collaborative process, SCE proactively involved diverse AMI manufacturers in ongoing dialogue focused on product enhancements and desired system functionality. SCE identified an initial pool of potential vendors for AMI related products or services and conducted a Market Survey of over 0 potential North American and International AMR/AMI product suppliers. SCE received encouraging feedback including a significant response rate, the level and extent of product development activities among vendors, and the apparent alignment with core feature integration between meter and communication vendors. SCE was also encouraged by the indicated development time-lines and the quoted target product prices. SCE found that significant technology advancements were underway as compared to what was commercially available only 1 months earlier. The information obtained through the survey served as a first screen to better identify active industry players. b) SCE s Approach To The Metering And Telecommunications System RFP The AMI Metering and Telecommunications System RFP includes electric meters with a communications card integrated under the meter cover; telecommunications network equipment; any required wide area network service; and the software application that provides a gateway to and from the meters to upstream applications such as MDMS. The component parts are expected to work together to provide the two-way transmission of data and information in accordance with SCE s requirements. SCE prefers to select a single communications supplier as part of this RFP (the majority communications network), but may need a second communications supplier (the minority communications network) for remote or hard to reach parts of SCE s service territory, or to supplement coverage deficiencies identified during field testing. After performance milestones are achieved by the vendors for completed portions of the communications network, SCE would take over operation of the completed parts of the network. The communications supplier will need to clearly identify how it proposes to meet SCE s Information Assurance --
1 1 1 1 1 1 1 1 0 1 requirements protecting the confidentiality and integrity of any data transmitted over the communications network. These robust security requirements are intended to ensure the integrity and confidentiality of the information that is exchanged between the DCA and the AMI Meters, in response to inadvertent and malicious risks within the environment. SCE plans to have at least two meter suppliers, at least one of which is able to replace commercial as well as residential meters. As part of the RFP, each meter supplier shall be required to demonstrate that it can provide a meter that includes a communications card procured from the communications supplier and a disconnect switch, among other required components, integrated under the meter cover.. Meter Data Management System (MDMS) The MDMS is a key component of the AMI Program and is central to capturing the key benefits to be delivered from AMI. The MDMS provides the core functionality of a Meter Data Repository (MDR), including loading meter data from the telecommunications network, processing the data through Validation, Editing and Estimating processes (VEE), and making data accessible to users and other systems. The MDMS facilitates value-added functionality to be enabled through use of data acquired via the AMI System and managed in the MDMS. Data processed and made available via MDMS to other SCE or new systems provides real-time intelligence to many areas of SCE s utility business. SCE has researched the availability of MDMS vendors and packaged software during Phase I of the AMI project. SCE conducted a market survey of MDMS applications with the assistance of Accenture in early 00 and followed with a Request for Information (RFI) that included the seven leading MDMS vendors. The results of the RFI were evaluated over the past four months. This effort led to some key discoveries and direction for developing an MDMS and provided SCE with an analysis of how well each MDMS vendor s product matched SCE s expected business functions under the AMI program. The analysis looked at the functionality, As defined in SCE s Metering and Telecommunications System RFP. --
1 1 1 1 1 1 1 1 0 1 costs, risks, implementation time, development time, and license fees, and concluded that the most effective approach is to acquire a COTS software package. SCE issued a Request for Proposal to MDMS vendors in December 00 and expects to make a selection of a vendor in the first quarter of 00.. Installation And Deployment Of Field Equipment SCE revisited its earlier deployment strategy of using internal SCE resources to accomplish the installation and deployment of over four million meters and the associated telecommunications systems. Based on benchmarking leading practices of other utilities in North America and proposed deployment plans in California, it became clear the burden of such a major undertaking on SCE s existing workforce would be very costly not only from the standpoint of the AMI project, but also in terms of the impact it would have on SCE s employees and its on-going business functions, which must continue while AMI field installations are taking place. As SCE began to look at the prospects of out sourcing the AMI installations, it became clear that this is an area of potential cost savings and risk mitigation. SCE now expects to outsource the majority of its AMI meter installations to one or more independent installation contractors. Installation contractors using union labor will be responsible for approximately eighty five percent (approximately. million) of the AMI meter installations during the Phase III deployment period. SCE employees will be responsible for fifteen percent of the AMI meter installations during the deployment period, including about 00,000 existing and all new customer meter sets during the deployment period. In November 00, SCE reached a Project Labor Agreement with Local of the International Brotherhood of Electrical Workers (IBEW), that provides rates and work rules for the AMI Program that facilitates the RFP responses for installation contractors. Meter Reader and Field Services Representative labor force reductions (including affected management positions) resulting from Under the current deployment plan employee impacts are expected to be minimized through normal attrition and anticipated retirements, which should ease the impact of the reduction process on employees. -1-
1 1 1 1 1 1 1 1 0 1 0 AMI are not expected to occur until Phase III and preparations to address the transition will be made during Phase II. Depending on the combination of metering and telecommunications solutions, installation contractors may be tasked with some telecommunications infrastructure installations as well. The scope of installation services will likely include management of the meter and telecom vendor product shipments and logistics associated with field deployment, and the salvage of retired meters. Field deployment will progress from using SCE resources to install the Field Test meters in late 00, to selecting a deployment contractor for the installation of meters for the Release 1 test in 00. The Release 1 test will focus on validating installation contractor systems and processes and their alignment with SCE systems and processes. Following the Release 1 test, full-scale field deployment will begin mid-year 00, ramping to a maximum monthly production flow by late 00 or early 00. F. AMI Phase II Deliverables The following deliverables will be completed in Phase II: Results of the RFPs, including evaluation criteria and identification of the companies selected for the meters and telecommunications, MDMS and field deployment; Final AMI system design and architecture documentation; Component level test results for stand-alone meter and communications components that were tested prior to or in parallel with the integrated products; Integrated product qualification test results for those meter and communications products deployed for the field test; Initial results of the field test, including assessment of the performance of the majority communications solution in the various geographies; Business process maps and resulting requirements and functional specifications; AMI Release 1 development and testing plan consisting of a work breakdown structure and schedule showing task dependencies, milestones and key deliverables; System-wide AMI deployment plan consisting of a work breakdown structure and schedule showing task dependencies, milestones and key deliverables; -1-
AMI Business Case update; and Full AMI deployment application to the Commission. -1-
1 1 1 1 1 1 1 1 0 1 III. PHASE II COST ESTIMATION PROCESS Phase II activities and cost estimates were developed following a rigorous process that included the development of planning and budget assumptions for each functional area. For consistency, all planning and budget assumptions were based on a common set of AMI Program releases. Each release has a proposed set of functional objectives, which will define all the capabilities and systems to be implemented as each release is moved into production. Scheduling and priorities within each planned release were driven by the six basic functional criterion prescribed by the Commission, and the business case requirement to begin taking advantage of field labor cost savings and customer demand response benefits at the earliest possible time. Other regulatory requirements were also considered, including: support for the solar initiative and net-metering; customer and system security requirements; and the ability to interface with water and gas meters. These requirements had already been defined as a result of the Use Case Process completed earlier in Phase I. A team was formed for each functional area consisting of an assigned lead manager, project-oversight representation, and subject area experts (SAEs), as appropriate. An exhaustive list of planning and budget assumptions was then developed from which a determination could be made of the required resources (labor, non labor and capital) needed to complete the assigned tasks. Cost estimates were then based on the budget assumptions and a list of full-timeequivalent (FTE) SCE personnel, by classification (or their contract labor equivalent). Non-labor cost estimates were developed on a unit cost basis utilizing the experience and judgment of the SAEs. Joint Assigned Commissioner and Administrative Law Judges Ruling Providing Guidance for the Advanced Metering Infrastructure Business Case Analysis, in R. 0-0-001, dated 0/1/0, pp. &. (These six functional criterion are addressed in Section III.E of Volume 1 (Exhibit SCE-1) of this Application. The Use Case Process is described in the Phase I Conceptual Feasibility Report (see Exhibit SCE-). -1-
Much scrutiny was given to assuring that only incremental costs were included and that no estimated cost included SCE labor or functions that are already funded as part of SCE s ongoing operations provided for in its regular cost-of-service proceedings (i.e., SCE s 00 and 00 General Rate Cases). -1-
1 1 1 1 1 1 1 1 0 1 0 1 IV. AMI PHASE II COST ESTIMATES BY FUNCTION SCE s AMI Phase II cost estimates are based on the anticipated activities required to prepare, develop and execute the AMI Field test as well as the preparation and development of AMI Release 1, as described in the previous section. The execution of Release 1 will be part of the Phase III full deployment cost estimate to be included in SCE s Phase III Application to be filed with the Commission in 00. The project plan assigns these activities to seven functional areas as follows: AMI Product Management Includes engineering and design activities, product evaluations and procurement of the metering and telecommunications systems. Also includes validation of the majority telecommunications solution by field testing with an integrated AMI meter. Information Technology (IT) Includes automation of meter reading from the meter to the DCA and the procurement of the MDMS in preparation for Release 1. Business Processes and Organizational Readiness Identify and develop Business Processes to support advanced metering capabilities for the AMI Field Test and AMI Release 1. Develop and implement employee communication programs and external engagement activities. Field Deployment Install and deploy AMI Field Test meters using SCE resources, oversee network installation and select the Phase III deployment vendor. Customer Tariffs, Programs and Services Develop the portfolio of tariffs and programs to enable customers to benefit from AMI technology. Systems Integrator Provide technical consulting services in support of Phase II activities, including the evaluation and selection of the MDMS, scale testing of the DCA and MDMS, development of back office system interfaces, support for Business Process Design and Processes and transitional Program Management Organization support. Program Management Organization Provide management oversight and governance of the AMI project including financial assessment, business case development, cost control and the regulatory process. -1-
1 1 1 1 1 1 1 1 0 The following sections describe the scope, objectives, cost estimates and, where appropriate, the deliverables anticipated for each of the seven functional areas encompassing SCE s AMI Phase II activities. A. AMI Product Management Though the majority of the system design and engineering activities were completed in Phase I, there remain several tasks that could not be completed until the specific metering and communication technologies were resolved. These tasks include finalizing the platform specific architecture, the telecommunications system engineering for the field tests, and design, engineering and planning activities for full deployment. The Product Management function also plays a key role in the vendor engagement process, the evaluation of the RFP results, and is responsible for procurement of the metering and telecommunications systems hardware and software. Quality assurance of the metering and telecommunications hardware also falls under the responsibility of Product Management and includes visual inspection and evaluation of the shipments of meters and communications field equipment before releasing to Field Deployment for installation. During Phase II AMI Product Management will verify and validate the selection of a majority telecommunications solution through field test results with the integrated AMI meters and complete an assessment of the affect various topographies will have on overall telecommunication system coverage. Phase II costs related to the Product Management function are estimated to be $1. million as detailed in Table IV-. -1-
Table IV- AMI Product Management Phase II Costs (Thousands of 00 Nominal Dollars) Cost Category O&M Capital Total General 00 0 00 Communications Equipment 00,00,0 & Installation Meters 0,00,00 Product Testing 1,00 1,00,00 Product Quality,00 0,00 Vendor Engagement and 00 0 00 Procurement AMI Product Management Total,00,00 1,00 1 1 1 1 1 1 1 1. AMI Product Management Phase II Objectives The AMI Product Management objectives for Phase II include the completion of a platform specific Reference Architecture for the majority telecommunications solution and completion of the telecommunications network design required to conduct the field test. Product Management will also verify and validate the selection of a majority telecommunications solution by field testing with the integrated AMI meters and confirm that all functional and performance requirements are being met through the product qualification, quality assurance, and field acceptance testing processes. Finally, Product Management will oversee the procurement of metering and telecommunications network systems and ensure the network design is completed for Release 1 testing.. AMI Product Management Phase II Cost Assumptions The Phase II budget for the Product Management function was based on activities necessary to complete the preparation and execution of the Field Test of up to,000 meters to be installed in the second half of 00. The Field Test will include a mix of residential and small commercial customers (Form-S meters only). All field test meters will be installed by SCE. In addition, the Phase II budget includes preparation activities for the Release 1 test of up to,000 meters, installations for which will take place in the early stages of Phase III, -1-
1 1 1 1 1 1 1 1 0 1 in the first quarter of 00. Release 1 is to include residential and small commercial meters as well as some medium size Commercial customer meters (i.e., 0kW to 00 kw). The Phase II budget for Release 1 includes preparation and ramp-up activities as well as equipment costs for Release 1.. AMI Product Management Phase II Deliverables Key deliverables from Product Management include: Final system design and architecture documentation; Component level test results; Integrated product qualification test results; and Initial results of the Field Test. B. Information Technology (IT) In Phase II, the IT function includes the design, development, procurement and testing of the DCA and core back office systems (MDMS) that will be needed to establish two-way system communications with each customer s premise. Eventually (in Phase III) the AMI IT systems will access and process the data generated by the AMI meters and any in-home devices supporting future AMI-enabled programs. In Phase III, the IT function will also include the integration of all new AMI systems developed in Phase II, with existing SCE systems as necessary to provide a seamless operational transition of existing business processes to the new automated processes being introduced by AMI. The largest single element of the IT function is the development and implementation of the MDMS utilizing Commercial Off-the-Shelf (COTS) packaged software. The Phase II cost estimate includes the SCE Resources and Consulting support needed to complete the purchase of the MDMS COTS package, the infrastructure hardware installation for the COTS package, and the associated upgrades and interfaces to systems. The IT scope also includes any AMI security and network management enhancements to the DCA needed to meet SCE s corporate policies and requirements as well as integration of the -0-
deployment vendor IT systems for supply chain management and inventory control. Phase II costs related to the IT tasks are estimated to be $1. million as detailed in Table IV-. Table IV- Information Technology Phase II Costs (Thousands of 00 Nominal Dollars) Cost Category O&M Capital Total MDMS Development,00,00,00 DCA Development 0,00,00 Testing 00 00 Telecommunications 00 1,00,0 Engineering IT Total,00,00 1,00 1 1 1 1 1 1 1 1 0 1. IT Objectives The key objectives of the IT function are to automate the meter reading process from the meter to the DCA during the AMI Field Test while continuing manual meter read entry into the billing system (CSS). Preparation activities for Release 1 include: the purchase and initial configuration of the MDMS in-unit test; the initial configuration of the DCA in-unit test; the design, construction and unit test of the system upgrades; and the design, construction and unit test of interfaces between new AMI systems, deployment vendor systems and SCE systems.. IT Planning Assumptions The IT Phase II budget estimate for MDMS was based on the Phase I RFI responses. In addition, MDMS processors and data Storage estimates utilize the current SCE unit cost for processors and storage. The cost estimate to build the backbone for the back-office system carries a lower level of confidence, which has been factored into the contingency, due to uncertainties around the architectural design and detailed infrastructure blueprint, interface mapping and external dependencies. Labor, tools and hardware costs are included to build a Service Bus for exchanging data between the MDMS and systems. The DCA COTS package will be purchased as part of the Meter and Telecomm RFP. The Hardware cost includes unit test, system test and production (year 1) hardware. It was assumed that SCE will need to procure systems integration development, test and production environments. -1-
1 1 1 1 1 1 1 1 0 1. IT Phase II Deliverables A preliminary integration plan with interfacing SCE applications and systems is expected to be completed during Phase II. Additionally, the results of the System Integration RFP and Data Center Aggregator (DCA - COTS) unit testing results report will also be available after completion of Phase II. C. Business Process And Organizational Readiness The Business Process and Organizational Readiness functions are both program support functions and have been combined for Phase II budgetary purposes. The scope of the Business Processes and Organizational Readiness functions is to design, develop and implement new business processes and the organizational preparedness programs, including internal and external communications programs needed to support the Phase II advanced metering capabilities. This includes the establishment, integration and implementation of new processes, organizational changes, targeted training and orientation, customer and employee communications, and external engagement activities needed to assure a smooth transition over to new business processes, automated systems and realigned roles and responsibilities. Business process scope during Phase II will include the development of process maps and business requirements for the following: Automated meter read data collection, validation, and summarization for billing; AMI systems operation and management; AMI customer support and communications; Deployment of AMI meters and network communication equipment; and Deployment vendor handoffs and systems integration with SCE. SCE recognizes that the implementation of AMI will introduce a significant change to both employees and customers. This change must be proactively managed and planned well in advance of the first meter implementation and throughout the lifecycle of AMI deployment. Successfully managing this change will minimize business disruption, enhance productivity and accelerate customer understanding of the objectives of SCE s AMI project. --
Phase II costs related to the Business Process and Organizational Readiness functions are estimated to be $1. million, as shown in Table IV-. Table IV- Business Process and Organizational Readiness Cost Category Phase II Cost (Thousands of (00 Nominal Dollars) Business Process 00 Organizational Readiness 1,0 Bus. Process and Org. Readiness Total 1,00 1 1 1 1 1 1 1 1 0 1 1. Objectives Of The Business Process And Organizational Readiness Functions The Phase II objectives of the Business Process and Organizational Readiness functions are to: Develop new business processes to enable AMI functionality and benefits; Develop business requirements and functional specifications for system configuration and integration; Understand and map employee and customer change impacts; Implement a comprehensive, multi-tiered communications program (both internal and external); and Deliver training to affected employees that require new skills, responsibilities and performance metrics.. Business Process And Organizational Readiness Cost Assumptions The Business Process Design cost estimates for Phase II assume that an integrated team of SCE project managers, subject matter experts and Systems Integrator business process analysts will complete all business process planning, scoping, analysis and documentation necessary to support the AMI Field Test and Release 1. Design activities for Phase II will support all identified business processes necessary for AMI Field Test and Release 1, and design results will be provided to the Information Technology, and Organizational Readiness Training --
1 1 1 1 1 1 1 1 0 1 and Testing teams for use in the development, testing, and implementation of system, process, and organizational changes required to support AMI functionality. The Organizational Readiness cost estimates assume internal communications professionals will manage and deliver all internal AMI communications programs. Phase II cost estimates also include the development of the external stakeholders communications strategy and implementation. For example, a customer communication package will be developed in preparation for the AMI Field Test. Costs also include the continuation of SCE s external Technical Advisory Board utility best practice assessments, as well as support for industry standards activities (e.g., Utility-AMI, OpenAMI, EPRI Intelligrid, Gridwise Architecture Council, AMI-MDM).. Business Process And Organizational Readiness Deliverables Business Process and Organizational Readiness deliverables include: AMI Field Test and Release 1 Functional Specifications; AMI Field Test and Release 1 Business Process maps; Documentation of organizational impacts of new processes; Communications Plan (including Multi-media based solutions); and Training Strategy and Employee Training Solutions. D. Field Deployment Phase II AMI Field Test activities will include the installation and deployment of up to,000 meters using SCE employees for meter installations and to oversee the telecommunications network installations. This includes the validation of SCE deployment and testing processes for new meters. Field deployment will progress from using SCE resources for the Field Test to selecting a deployment contractor for the installation of meters for the Release 1 test in 00. Phase II costs related to the Field Deployment function are estimated to be $1. million as detailed in Table IV-. --
Table IV- Phase II Field Deployment Costs (Thousands of 00 Nominal Dollars) Cost Category O&M Capital Total Meter Installations 0 00 00 Deployment 00 00 00 Total Field Deployment Cost 00 00 1,00 1 1 1 1 1 1 1 1 1 0 1 1. Field Deployment Objectives The Phase II Field Deployment function objective is to establish vendor and SCE processes and technology that reliably scale for Phase III deployment.. Field Deployment Phase II Cost Assumptions For the AMI Phase II Field Test, it was assumed up to,000 meters will be installed in the third and fourth quarter of 00. The test will include a mix of residential and small commercial meters and all installations will be done by SCE employees. It was also assumed that for Phase II incremental electrician costs (e.g., A-base rewiring, panel replacement) are negligible. AMI Release 1 assumptions include the preparation for installation of up to,000 meters beginning the first quarter of 00. Release 1 will include a mix of residential and commercial & industrial (C&I) meters, and most installations are expected to be done by one contract deployment vendor.. Field Deployment Phase II Deliverables The primary deliverables for the Deployment function are to install the Field Test telecommunications and metering infrastructure on time and on budget such that necessary technical testing may be executed. E. Customer Tariffs, Programs And Services An essential part of SCE s AMI program implementation is to establish tariffs and programs to enable customers to benefit from full advanced meter deployment. SCE s business case places a high priority on providing the means for customers to limit their electrical --
consumption during high-cost, on-peak periods and to take full advantage of lower off-peak pricing and direct load control incentives. This results not only in reduced customer energy costs, but also accounts for a major element of SCE s long-term cost reductions associated with energy and capacity cost savings. The Use Case process conducted in Phase I identifies the potential for new pre-payment programs to be enabled as a result of the AMI capabilities of accessing on-demand meter reads and remotely connecting and disconnecting electric services. The potential for implementing prepayment programs will be explored further in Phase II, including the functional and regulatory requirements prerequisite to providing prepayment services. Phase II costs related to the Customer Tariffs, Programs and Services function are estimated to be $1. million, as shown in Table IV-. Table IV- Customer Tariffs, Programs and Services Costs (Thousands of 00 Nominal Dollars) Cost Category Phase II Cost (Thousands of 00 Nominal Dollars) Load Control, Tariffs & Pre-payment 00 External Communication & Market 00 Research Total Customer Tariffs, Programs and 1,00 Services Cost 1 1 1 1 1 1 1 1 0 1. Customer Tariffs, Programs And Services Objectives The objectives of the Customer Tariffs, Programs and Services function are to develop the appropriate tariffs and programs needed to meet SCE s AMI demand response program objectives and to validate that these programs are properly deployed to enable customers to benefit from full deployment of AMI technology.. Customer Tariffs, Programs And Services Assumptions Cost assumptions for the Customer Program Functions are broken-down into the following five functional areas: (1) Load Control Programs; () Tariffs; () Prepayment Programs; () External Communications; and () Market Research. A sixth area covered by this --
1 1 1 1 1 1 1 1 0 1 function is the use of the AMI system to remotely collect and manage gas and water meter reads for other utilities in SCE s service territory. Since this is an on-going activity, no incremental Phase II costs have been included for this function. The work concerning these Customer Program Functions is described as follows: a) Load Control Programs The preliminary business case for AMI relies on load control programs for significant peak load reductions and power procurement benefits. An essential part of the approach to load control is a Programmable Communicating Thermostat compatible with the anticipated Title building code standard under development by the California Energy Commission (CEC) for implementation in 00. SCE will continue to work with the CEC and other utilities on developing the PCT technology that is compatible with Title and AMI. SCE envisions leveraging the Title PCT s installed by customers as well as providing customers PCTs (Title compliant) to existing customers in lieu of air conditioning compressor switches. SCE will work with thermostat vendors and other parties to accelerate the design and testing of affordable PCTs. SCE will also examine potential tariff designs and system requirements to enable pay-for-performance (such as by reduction event) rather than seasonal incentive payments. b) Tariffs The preliminary business case relies on TOU and CPP rates to provide significant peak load reductions. SCE proposes an AB 1X compatible default TOU rate and an optional CPP-F rate for all residential customers, and a default TOU rate for C&I customers below 0kW. SCE also proposes a mandatory TOU for customers above 0kW with an optout option to CPP-F. In preparation for the final business case, SCE will examine other rate structures, including a three-part TOU rate, CPP-Variable, a CPP rate with enabling technology, a Peak Time Rebate and other rate structures. Part of this analysis will include rate and market research building on the Statewide Pricing Pilot experience to determine customer preferences and adoption. --