AN IDG CUSTOM SOLUTIONS INITIATIVE IN ASSOCIATION WITH
TRANSFORMING BUSINESS THROUGH JUDICIOUS APPLICATION OF IT
Tata Power, india’s largest private power utility was looking to automate its power generation billing. Moving from a spreadsheet and people dependent process to a SaP platform was not easy. Cio ujjal Kumar ghatak along with TCS developed an innovative solution using standard SaP iS-u modules. This is how they did it.
PLUS INTERVIEW Dinesh Kumar, President (IT) /CIO, Bajaj Energy provides an insight on how CIOs can win employee support during difficult times.
TRANSFORMERS CASE STUDY
A MAGICAL BILLING SOLUTION
POWERS TATA POWER Company Tata Power industry Private Power Utility offering Power Generation, Transmission & Distribution
Tata Power, India’s largest private power utility, was looking to automate its power generation billing. Moving from a spreadsheet and people dependent process to a SAP platform was not easy. CIO Ujjal Kumar Ghatak along with TCS developed an innovative solution using standard SAP IS-U modules. This is how they did it.
Custom solutions Group TATA CONSULTANCY SERVICES
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ecognized as India’s largest and oldest private sector power utility, with a reputation for trustworthiness, built up over nearly nine decades, Tata Power is surging ahead with plans of sustained growth creating greater value to consumers by providing reliable power supply. Tata Power has pioneered the generation of electricity in India. It has successfully served Mumbai consumers for over ninety years and has spread its footprints across the nation. Today, it is the country’s largest private player in the energy sector. Apart from Mumbai and Delhi, the company has generation capacities in Jojobera (Jharkhand), Haldia (West Bengal) and Belgam (Karnataka). Tata Power has an installed power generation capacity of above 2900 MW with the Mumbai power business, which has a unique mix of thermal and hydro power, generated at the Thermal Power Station, Trombay, and the Hydro Electric Power Stations at Bhira, Bhivpuri and Khopoli, accounting for 1797 MW. Its diverse generation capability facilitates the company in producing low cost energy, thereby giving its consumers a greater value for money. Tata Power is the first in the country to get approval for installing and operating 4000 MW UMPP (Ultra Mega Power Projects) at Mundra (Gujarat). Tata Power has drawn its growth trajectory to have a total generation capacity of 25000 MW by 2017. Tata Power is also in the distribution business for the last several decades, supplying power to various High Tension (HT) and Low Tension (LT) customers in and around the city of Mumbai. Further, the Regulatory Commission of Maharashtra state has approved Tata Power to supply power to customers who may desire to change their utility service provider to take advantage of the low tariffs levied by Tata Power - Distribution.
The biggest benefit was that it reduced financial risk by switching over from spreadsheetbased manual system to an integrated SaP erP“ aShoK SeThi , Vice President - Mumbai Operations, Tata Power
Purchase Agreement) or based on the percentage allocation of capacity by company, provided such instances are approved by the regulatory body. Thus, currently, a total thermal and hydro generation capacity of 2027 MW has been allocated to three distribution companies in a certain ratio. Further, the 2027 MW capacity as mentioned above also includes 250 MW newly commissioned coal-based generation (Trombay Unit -8). From this generated power, 60 percent is allocated to two distribution companies and the balance 100 MW is sold as merchant power through auctions conducted by the power traders. The various thermal units consume different fuels such as oil, gas and coal for generation of power. Based on the existing tariff order, billing is carried out by Tata Power - Generation to its main customers — the distribution companies — on a monthly basis. Out of Tata Power’s total revenue from Mumbai, about 85 percent comes from its generation business i.e. from billing its three distribution companies. Total annual generation billing is to the tune of Rs.4000 Crores. Since October 2006, the generation billing process has been conducted manually, using spreadsheets. The monthly quantities would be communicated to the billing group via e-mail and the billing department would prepare the bills and
85%
of TaTa Power’s revenue comes from power generation, totalling more than rs 4000 crores.
PoWer generaTion Billing CriTiCal for reVenue The Electricity Act 2003 has decentralized the generation business. Accordingly, Tata Power Generation Business can sell power to distribution companies either based on duly approved PPA (Power
TRANSFORMERS CASE STUDY
forward it to the distribution companies. One of the key requirements for Tata Power was to mitigate the risk of conducting the generation billing process on spreadsheets and automating it. Tata Power was using the SAP IS-U — SAP’s Industry Specific Solution for Utilities Industry for its distribution business. Ujjal Kumar Ghatak, CIO, Tata Power, was keen that the power generation billing should also be on the SAP platform. “It would have been a huge challenge to use a different platform for the power generation billing, and then integrate that with SAP. We would have spent most of our time dealing with the integration aspect rather than focusing on the billing. So, the power generation billing had to be done on the SAP platform.” he says. However, this was easier said than done. Power generation billing is a complex business process due to several reasons. For each of the distribution companies (customers of Tata Power’s generation business), a provisional bill followed by at least four supplementary bills for every billing period are required to be created. The billing involves a complex business logic based on the Tariff Regulations of the Maharashtra State Electricity Regulator. Tata Power has Hydro as well as Thermal Capacity in its generation portfolio, and each generating unit at the thermal power station is capable of firing on
multiple fuels. Hence the cost of generation was dependent on the quantity of fuel used over the month in the different generation plants. Ta t a p owe r a l s o h a d different types of incentives for its licensees. Besides, the nature of power generation is such that many tariff scenarios would emerge. In case the licensee did not consume its allocated power, Tata Power had the provision to sell the unconsumed power in the open market, and the credit of the sale of allocated energy (of the licensees) had to be provided to them. One of the thermal generating units has about 40 percent of its share allocated as ‘Merchant Power’ — adjustments of the sale of merchant power were required to be incorporated into the allocated shares of licensees. These complex accounting of the billed amounts, discounts and staggered payment receipts had to be raised within SAP Fl-CO (SAP Finance and Control) and then to the SAP IS-U. Tata Power also had non-standard calculations for delayed payment charges and arrears. It also had complex accounting methodologies of DPC (delayed payment charges) and cash discount, involving different treatment for different customers. There was also the unique scenario of Tata Power - Distribution being its sister concern. In this case, there was no need for cash payment as the accounts could be adjusted internally.
Previously, the bills were generated manually and then couriered across to the disComs. a delay of even a single day would translate in loss of interest.
Billing ProCeSS
Power Generation Billing requires multiple monthly bills for a single customer. So we developed an innovative solution using standard SAP IS-U for billing and invoicing. uJJal KuMar ghaTaK, CIO - Tata Power
On the first of every month, two separate main bills (one for power generated from Unit 8 and another for power generated from Non-Unit 8.) would be generated based on the prevailing Tariff Order. On the third of every month, two supplementary bills with differential rate based on Fuel Adjustment Charge (FAC) would be generated. At this stage, four bills would be generated for a single customer (two main bills — Unit 8 and Non-unit 8) and two supplementary bills (Unit 8 and Non-Unit 8). Subsequent to supplementary bills, any number of bills could be generated for any number of times. Supplementary bills may be generated due to changes in fuel quantity, cost or change in Million Units (MUs) generated (normally after audit, once every quarter). The
Custom Solutions Group TATA CONSULTANCY SERVICES
bills were generated manually and then couriered across to the Distribution Companies (also called DisComs). Since this involved figures that ran into crores, a delay of even a single day would translate in loss of significant interest on the sum. This was a highly mission critical and a risk-prone exercise and only experienced and senior staff were allowed to carry this exercise out.
The Solution Automating this process was no easy task. Tata Power’s first attempt to do so failed when their vendor could not fathom the magnitude of the challenge and abandoned it mid-way. Says Ghatak, “Our previous vendor had vast experience in the billing domain, and was confident they could overcome the challenges of the power generation billing. They had implemented billing projects for several utility companies. However, they abandoned this project, and advised us to continue generating the bills manually using spreadsheets, declaring that a business or program logic can never be created for this process. They claimed that the process has too many variables and that it was too dynamic. At that point, Tata Power consulted TCS, who offered to pick up the gauntlet,” he recalls. Working closely with the billing team, the primary task for TCS was to understand the complexities of the power generation billing. They drew all possible scenarios and made adjustments for any issue that the billing team may have faced in the last ten years. The IT team soon realized that in the existing SAP IS-U processes, only one supplementary bill could be generated, as only a single adjustment reversal was permitted. Since there was no existing solution, Tata Power developed a first-of-its-kind solution to tackle this issue. Within six months, they created system workarounds using the standard SAP IS-U for billing and invoicing. The solution seamlessly integrated with all business processes like plant generation data from a module called Load Dispatch and sale of power from SAP-SD (SAPSales and Distribution) module. The maximum number of bills to be generated for a particular customer is fixed and accordingly, the same number of contract accounts is created in SAP IS-U. The contract number would not change and there was no provision for joint invoicing. Generation data along with fuel mix and auxiliary consumption is entered at respective process points and the data is integrated with generation billing. The entire solution is built in SAP.
Business Benefits out of this Integrated IT Solution eamless integration of SAP SD, Fl-CO and S IS-U modules Increased utilization of SAP assets tandardized business processes using SAP which S follows best practices educed financial risk by switching over from R spreadsheet based manual system to Integrated SAP ERP Reduced cycle time Maintaining audit trail at all users / process level ompliance with SOA (Schedule of Authority) as per C business defined practice entralized storage of all data and information C security is assured ystem based solution rather than S person driven
Business Benefits The innovative power generation billing system was a seamless integration of SAP SD, Fl-CO and IS-U modules, increasing the utilization of Tata Power’s SAP assets. It also led to approximately 50 percent savings of manual effort. The biggest benefit was that it reduced financial risk by switching over from spreadsheet-based manual system to an integrated SAP ERP, and standardizing business processes. It has become easier for Tata Power to maintain an audit trail for all users and at all process levels (F&A, Regulatory, Customer and Audit requirements). It also enabled the centralized storage of all data and information, assuring security and reduced cycle time. “Now, the company never misses the deadline of generating the bills on the first of every month.” says Ghatak. “The people-dependency and manual-intervention has also reduced dramatically. These two factors were always looked as top-ten risks for the company in its assessments. The company is now looking to replicate this success in our other plants such as Maithon Power Limited (MPL) in Jharkhand, and Coastal Gujarat Power Ltd (CGPL) in Mundra”, he concludes.
TRANSFORMERS INTERVIEW
FRONT OF THE
TEAM How does a CIO win the support of employees during difficult times? Dinesh Kumar, now President (IT) /CIO at Bajaj Energy, shares his opinion on this and other issues he had to tackle during his long tenure in leading IT departments, many years of which have been in the public sector.
DINESH KUMAR, President (IT) /CIO at Bajaj Energy
CUSTOM SOLUTIONS GROUP TATA CONSULTANCY SERVICES
What are the IT challenges for a power sector company like Bajaj Energy? With green field projects coming up for us, we have a task getting the infrastructure up and ready quickly. Some of the locations for the power sector plants are in places quite far away from the habitable regions and in such places there is a challenge getting the network set up in time. It has to be ensured that this does not come in the way of normal operations. Energy is a capital-intensive industry. Even a delay of a day in setting up the projects can mean a loss of crores of rupees. Thorough planning to integrate the systems at the corporate with those at the regional level is required to ensure that there are no post-implementation hiccups. Moreover, our company cannot afford to have a piecemeal approach while deciding on IT applications; all implementations must be part of an overall strategy and according to best practices.
Is there a lot of scope for IT to cut costs in the power sector? At NTPC, the team, through proper planning, monitoring, discipline and hardwork, had worked to shrink considerably the time frame of deploying a project. At some point, though, one hits the ceiling, and must make imaginative use of IT to further reduce the time. Proper use will improve inventory management, cash/treasury management and procurement and help enable volume discounts by implementing e-procurement solutions. There are many ways to perform better and increase operational efficiency using IT.
In what ways has IT provided a competitive advantage to Bajaj Energy? Currently, IT is in the implementation stage but it shall support project management, and help monitor the use of resources so as to increase effi ciency. If you can manage your project expenses in a better way, signifi cant savings can be realized.
You have worked with a leading public sector company in the past. How different is it managing the IT set up in the private vis-à-vis the public sector? Keeping the discussion very general, if you have a good plan about which you are confident, it would takes much less time to get the approvals and procurement done in the private sector because in a PSU the process tends to be lengthy and system driven Also, in PSUs an appraisal of an employee’s contribution is much more process-driven, whereas, in the private sector, there is more scope for ad-hoc rewards. Also, in the large /Navratna public sectors, on account of training, exposure and scale of operations, the quality of manpower is much better than in most of the privates sector. Of course, there are exceptions everywhere.
In your view, what should senior CIOs like yourself do to tackle change management issues and to stay connected with the workforce, especially the younger generation? A CIO, irrespective of his age, should be technologically competent. He or she also needs to understand the business of the company. When CIOs carry that confidence with them, it makes a difference to the way they handle difficult situations such as those that concern change management issues. You have to lead the entire team during a technological overhaul and that will only happen when they (the employees) respect your understanding of the issues at hand. Whenever there is an age gap, CIOs need to keep themselves updated. They need to understand the aspirations of the younger employees. You should not demand respect, but command it by your technical and managerial capabilities.
Do you think CIOs with a lot of experience in the public sector should be invited to head national committees which require sound technology knowledge, such as the Unique Identity Project? Yes, CIOs of good public sector undertakings get a lot of exposure to government functioning and also have good technological skills. They are better prepared to deal with certain issues such as getting clearances for projects. In that respect, they may be better equipped than people in the private sector who might find procurement a tiring exercise. Private sector technocrats’ unfamiliarity with the government procedures may create some limitations for them. However, those from the private sector are better placed to come with “out of box” solutions since, unlike CIOs from the public sector, they don’t have a mental block in designing innovative solutions. A combination of both will make a better team.
When CIOs are part of the senior management, what do you think is the most important contribution they ought to make in board meetings? CIOs must understand and contribute to the future plans of the company. They should think strategically and have a single view of the company keeping in mind the growth plans of the company.
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