Acando review of NordREG proposal regarding a common Nordic end user market for Utilities (ele

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Acando review of NordREG proposalfor Common Nordic end user market

Mathias Malm. August 2010.

●Reason to Change

●Current Nordic Market trends

●Review of NordREG, Proposed Process…

● Suggested: Implementation approach

● Suggested: Time line for Change

Contents

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● Suggested: Next step

● Acando

2010-09-01 Common Nordic end user market - Acando review of NordREG proposal

Reason to Change (1)Introduction

● Will Simplify entry of Suppliers from one region/country to new Nordic regions/countries

● Will be a cornerstone in a more efficient Market

● Will enhance Competition and entry of new Actors within the Nordic Market

● Will support improved Customer Orientation

● Is a step towards an integrated European Electricity Market

© Acando AB 2010-09-01 Common Nordic end user market - Acando review of NordREG proposal

Reason to Change (2)Simplify entry of Suppliers from one region/country to new Nordic regions/countries

● A common Nordic End User market will simplify the entry for Electricity Supplier companies into new Nordic Regions and countries, who are currently present in one Nordic country.

● Lower thresholds for Suppliers within a Common Nordic End User Market

● A Common Nordic end user market will in addition to this improve efficiency for the Retailers and lower the unit costs


Reason to Change (3)Enhance Competition and entry of new Actors within the Nordic Market

● A larger market region will improve the interest for new Market Actors.

● New Actors as well as simplified “movement” of current country/region specific sales companies will increase the competition.

● Lager competition will as such increase the Customer Orientation…


The market design of common Nordic end-user market should provide a harmonized framework for the suppliers to operate in various Nordic countries.

The market design of common Nordic end-user market should provide a harmonized framework for the suppliers to operate in various Nordic countries.

Reason to Change (4)Improved Customer Orientation

● Today, the Customer:� Has Two contracts and Two separate bills

� Receive energy to one premise (site)

� Receive Monthly information about consumption

� Controls consumption based on Monthly information (readings)

� Can not deliver energy

● In the future, the Customer needs:

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● In the future, the Customer needs:� Single Point of Contact and One bill

� Receive energy to Several different premises (e.g. car, home and summer cottage).

� Produce and Deliver energy (micro production) based on market need and receive payment for it.

� Control his energy consumption and avoid large peak consumption, based on:● more detailed information (hourly).● actual current energy price as well as prospective energy price.


The common Nordic end-user market will be open to all customers and it shall be safe for the customers to buy electricity from any supplier .

The common Nordic end-user market will be open to all customers and it shall be safe for the customers to buy electricity from any supplier .

Reason to Change (5)A step towards an integrated European Electricity M arket

● The Energy Market is under influence of the European Union.� Electricity market liberalisation is a central and discussed subject

● A true European liberated energy market is based on a common European end user market.� Starting the work on a Nordic level will simplify the entry into the Common European user user market

for all Nordic Market actors as well as the Nordic end customers.


Reason to Change (6)And for the DSO’s and TSO’s…

● Automated processes will increase the efficiency fro the DSO and TSO’s

● A Common Nordic end user market will decreased the risk, by:

� More clear and more stable market regulations.

� Taking one early step towards a common European end user market.

● Through improved processes and higher degree of automatisation, we expect to increase the quality of data quality.

� …which will increase the efficiency through less amount of manual work and re-work

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� …which will increase the efficiency through less amount of manual work and re-work

01/09/2010 Common Nordic end user market - Acando review of NordREG proposal

Contents

●Reason to Change


� A base for the change…

� Example on Future Nordic market interaction


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● Acando


Current Nordic Market trends (1)A base for the change…

● Depending on Market Model which is specific for each country (and/or region), there are different roles for different market actors which have impact on business processes, e.g:

� DSO’s and TSO’s

� Retailers

� Central Node’s and Cont. Central Clearing house’s (specific for current regions)

● Various plans and regulations concerning the Measurement, Settlement and Billing of

© Acando AB10 2010-09-01 Common Nordic end user market - Acando review of NordREG proposal

● Various plans and regulations concerning the Measurement, Settlement and Billing of energy in various countries

� Finland and Sweden, about 100% AMR meters today, Finland in addition to this has Hourly measurement.

� Norway, AMR metering and Hourly measurement by 2016 (?)

� Denmark (?)

� When will Sweden comply to Hourly measurement for residential customers?

Current Nordic Market trends (2)A base for the change…

● The Common Nordic end user market-scope include a lot of Business areas and Processes, Customers, IT-systems and Formats as well as Countries.

● This Forces Business Processes and Market Communication to be different between different markets and the common solution must manage the diverseness.

● In addition to this European and International trends must influence the common Nordic end user market. To design the Common Nordic end user market with this in mind will decrease future costs for all market actors within the Nordic.


Example on Future Nordic market InteractionFocus on customer orientation together with new and improved services

● A common Nordic register with system operators and the other market participants is operated by “NordREG”.

● A national register of who is the distributor for each premise, who is the retail company etc is operated by the system operator in each country, e.g. “Svenska Kraftnät”.

● The distribution company maintain the premise in the national register � The distribution company updates the national register when the move-in, move-out or supplier

switch is done� Distribution companies sends aggregated values for settlement to other market players

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� Distribution companies sends aggregated values for settlement to other market players

● Each retail company requests meter values directly from each distribution company, and the distribution company grant access to the information based on the contract with theretailer

● Supplier Centric Model where all or most Customer communication go through the Supplier/Retailer of electricity.


Contents

●Reason to Change



� …towards a common Nordic end user market.

� Recommendations based on experience

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� Recommendations based on experience




● Acando


● Specification: Detailed specification regarding target Market Model.

Review of NordREG, Proposed Process… (1)… towards a common Nordic End User Market

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● Specification: Detailed specification regarding target Market Model.

● Design: Detailed specifications on common processes and systems will be developed and changes in national regulations should be adapted.

● Implementation: Phase, including coding, testing and deployment o systems.


● Large impact of the proposed analysis from tf Customer Interaction!

● Good conclusions reagarding Customer and Market Actor needs and behaviour.

● National hubs/databases which stores a large amount of meter values are a good short term solution, but not recomended as a long term solution. This based on:

� Possibilities to increase Energy efficiency by ongoing development within Smart grids.

� Needs for Single point of Contact

Review of NordREG, Proposed Process… (2)tf Market Model

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� Needs for Single point of Contact

� Increased drawback in cost and data quality, when the amount of duplicate databases increase.

● Tight but posible schedule, regardless of which Market communication path that is chosen.


A use of a federated model where Structural premise data is stored centrally (in one or regional hubs) with bilateral data trafic between Market Actors will simplify the long term

development within Customer Orientation, Smart Grids and Single Point of Contact.

A use of a federated model where Structural premise data is stored centrally (in one or regional hubs) with bilateral data trafic between Market Actors will simplify the long term

development within Customer Orientation, Smart Grids and Single Point of Contact.

● Supplier Centric Model (CSM) will support a Customer Oriented Approach, Acando think this is a cornerstone in a succesfully implementation of a common Nordic end user market.

� Outside in thinking (from Customer and society) will promote the long term success!

� Tele Communication market may be an example on a predecessor…

● Much correlation between design of customer interface, data exchange and the market model is needed, this will have impact on the schedule presented.

Review of NordREG, Proposed Process… (3)tf Customer Interface

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� Final implementation of a Supplier Centric Model by 2015 is not realistic, according to the findings from the Task Force.

● We think ”SCM” is a long term lucrative model for all Market Actors, even if we support further investigations (according to the Appendixes) to enhance a succesfully implementation.


Acando support the propsal of NordREG to perform further analysis regarding “SCM”.Acando support the propsal of NordREG to perform further analysis regarding “SCM”.

● Large impact of the proposed analysis from tf Customer Interaction and close relationship with Market Model findings.

● Critical area for success with large amount of data, which most likely will increase in the future (dependent on trends within Energy efficency and Customer orientation).

● A Long term model is essential to keep the overall cost low, current Euopean as well as future trends must be considered.

● Tight schedule to define a detailed design by 2012!

Review of NordREG, Proposed Process… (4)tf Data Exchange

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● Tight schedule to define a detailed design by 2012!


● Well defined and important Task forces, the result of which must be established within the project.

● Three essential (but not exhaustive) steps for a successfully implementation of common Nordic end user market suggested by NordREG (Specification, Design and Implementation).

● Based on this as well as on experience, we suggest a iterative process focusing on the need of the End User (Customer), the Task Forces and a “Plan-Do-Check-Act approach”:

� Plan: Include the two essential steps defined by NordREG (Design). This step include

Review of NordREG, Proposed Process… (5)Recommendations based on experience

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These iterations can will support a successful implementation as well as decreasing the overall cost of a common Nordic end user market for all involved market actors

(incl. Customers) and can to a defined level be executed in parallel.

These iterations can will support a successful implementation as well as decreasing the overall cost of a common Nordic end user market for all involved market actors

(incl. Customers) and can to a defined level be executed in parallel.

� Plan: Include the two essential steps defined by NordREG (Design). This step include overall planning for all iterations as well as for the scope of the

� Do/Implement: Realization of the Business and System changes needed to fulfil the scope of the iteration.

� Check: Crucial evaluation of the iteration and created results.

� Act: Transfer knowledge and learning's to other iterations.


Iterations which have a clear focus within a individual possible area is important, such as:

● Common Nordic Retailer Market, available for all Customers:

� For a subset of Nordic Countries/Regions

� For all Nordic Countries

� For Additional Countries, a subset of Europe (possibly)

● Hourly consumption values to residential Customers (Information)


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● Hourly consumption values to residential Customers (Information)

● Hourly pricing to residential Customers (Billing and Settlement)

● Single Point of Contact and Overall improved Customer Orientation, e.g. regarding:

� Supplier change and Information Exchange

● Increased Customer Control over energy consumption


● The Proposed end date (2015) is excellent but unfortunately not realistic based on:

� The Scope of Change

� The number of Market Actors and their various interest

� Market Regulators in several countries

� Needed Changes in Business as well as IT

� Current degree of Data Quality


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� Current degree of Data Quality

● …based on this as well as our overall knowledge about the Utilitiy sector, we suggest to move this taget date to 2017 (with partial implementation by 2015).

� This will create a realistic time-line to implement a Customer focused Common Nordic end user market.


This work must be based on the current findings from the three (by NordREG) well defined Task forces! This work must be based on the current findings from the three (by NordREG) well defined Task forces!

Contents

●Reason to Change





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● Acando


Suggested: Implementation approach (1)For all or a subset or countries/regions, focused o n customer orientation

● Phase one - Hourly consumption values to residential customers� two contract model

� to control his energy consumption based on hourly consumptions values

● Phase two - Hourly pricing to residential customers� Two contract model

� to control his energy consumption based on energy price

� to control his energy consumption based on peak consumption

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� to control his energy consumption based on peak consumption

� to deliver surplus energy and get paid for it

● Phase three – Single point of contact� one point of contact

� energy from several different premises

� to produce extra energy based based on market need

● Phase four – Increased Customer Control over energy consumption

� to control energy consumption based on energy prices


Suggested: Implementation approach (2) Phase One - Hourly consumption values to residential customers

Hourlymetervalues

Retail company System operator

Residential customer

Hourlymetervalues

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Monthly Meter values

* Distribution Company, Retail Company and Balance provider are the same Entity

Existing UTILTS messages

New message format


Distribution company


Monthlymeter values

Hourly meter values

Suggested: Implementation approach (3) Phase Two – Hourly pricing to residential customers

Hourly metervalues



Hourly metervalues

Spot price

Price perKWh

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Hourlymeter values

Hourlymeter values



New message format




EnergyDemand

Hourly meter valuesLimit energyconsumption

Suggested: Implementation approach (4) Phase Three – Single point of contact and residential customer p roduces energy



Hourly metervalues

Spot price

Hourly Meter values andPrice perKWh

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Hourlymeter values

Hourlymeter values



New message format




EnergyDemand

Hourly meter values

Limit energyconsumption

Needed energy

production

Suggested: Implementation approach (5) Phase Four – Control energy consumption from price perspective and smart meters



Hourly metervalues

Spot price

Hourly Meter values andPrice perKWh

© Acando AB

Hourlymeter values

Hourlymeter values



New message format




EnergyDemand

Hourly meter values

Limit energyconsumption

Needed energy

production

Sport price

Spot Price

Contents

●Reason to Change




● Suggested: Time line for changes

© Acando AB



● Acando


Suggested: Time line for changesBased on common Nordic end-customer market

• Single point of contact

• Customer need energy • Customer need to

• Customer need to produce energy based on market need

• Hourly consumption values to residential customers

• Hourly pricing to residential customers

• Increased Customer Control over energy consumption

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• Customer need energy from several different premises

2012 2014 2015 2017 2018

• Customer need to distribute his energy surplus

2019Common Nordic end user market

Updated Nordic regulations

• Network owner need to control consumption based on demand


●Reason to Change


●NordREG, Proposed Process towards…



Contents

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● Acando


Suggested: Next step (1)Based on Customer orientation

● Initiate with the Specification step according to NordREG proposal� Including further analysis regarding SCM.

� Large degree of coordination between the NordREG task forces required.

● Define a End date when the all Changes are supposed to be active� Based on the scope discussed previously in this documentation, Acando suggest 2017.

● Define Customer focused Business areas (incl interfaces) for Project iterations, in collaboration with:

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collaboration with:

� Market Actors.

� Customer representatives

� Market regulators.

� Market experts (Business processes and future trends experts).

� IT-solution vendors (Meter Data Management, Collection System, CIS and Billing/Settlement).

● Base the processes on well documented present frameworks as much as posible:� ITIL.

� Current Market models within the Nordic as well as European Countries.


Suggested: Next step (2)Based on Customer orientation

● Define Iteration roll out, in cooperation with the defined actors (above)

● Define roll out plan related to countries/region based on feedback from:� Market Actors

� Customer representatives

� Market regulators

● Provide a a deatiled implementation plan to Nordic ministers (2010).

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� Tight schedule for this detailed planning


● Specification (Plan) step should, be aimed to:� Define the overall project goal as well as the goals for the specific iterations (incl. taget dates).

• Acando proposal: (overall) by 2017.

� Define the overall structure for common Nordic Market Communication

• Acando proposal: Federated market model.

� Define the common Business processes.

• Acando proposal: Customer oriented

Suggested: Next step (3)Define Common Processes and Communication

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• Acando proposal: Customer oriented

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Market communication Customer focused business processes


Suggested: Next step (4)Simplified roll-out of well defined packages

Implement(Do)


SpecificationDesign(Plan)

Improve(Act)

Follow-up(Check)

Close

●Reason to Change


●NordREG, Proposed Process towards…

● Suggested implementation approach

● Time line for changes

Contents

© Acando AB

● Time line for changes

●Next step

● Acando


AcandoExperience from Utilities sector

● Acando has substantially knowlege from the Utility sector within the Nordic Countries, where we over many years have been working in close co-operation with several Market Actors; Retail/Supply, Distribution as well as Production and Wholesale.

● We have experience from working with strategic as well as working hands on with detailed business and technical questions.

● We hold experience from (among others) Meter Data Management, Market

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● We hold experience from (among others) Meter Data Management, Market Communication, Outside-in Customer Orientation, Nordic as well as European Common end user markets, Utility IT-landscape Architechtureas well as IT-Solution vendors

● We have insight in Nordic, European as well as International Business and IT development/trends for Utilities!

Acandoin brief…

Acando is a consultancy company that in partnership with its clients identifies and implements sustainable business improvements through information enabled by technology. Acando provides a balance of high business value, short project times and low total cost. Acando creates measurable improvements through the development of processes, organisations and IT systems that strengthen and support each client’s operations. Acando’s task is to acquire a comprehensive view of the client’s business and ensure that each project yields rapid and improved results. The client-base is broad, and


ensure that each project yields rapid and improved results. The client-base is broad, and includes small businesses, large corporations and public authorities.Acando’s most important business partners are Microsoft and SAP. Annual turnover exceeds EUR 135 million and the Group employs approximately 1,100 professionals in six European countries. Acando is listed at NASDAQ OMX Nordic. Acando’s corporate culture is based on three core values: Team spirit, Passion and Results.