6.1.a. ERMUSR 11-18-2014 - Laserfiche WebLink

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in diversifying their business into natural gas related gas Similar to the transformation that has occurred in the businesses such as production, gathering, processing telecommunication industry from wired phone to cellular- and transportation. based data service, utilities must transform to adapt to the It is fully possible that each of these scenarios will evolving realities of the markets. Utilities must become play out differently depending upon the region of the much more agile to deal with accelerating change and dis- continent you live in. For example, there are already ruptions that are sure to occur over the next several years. significant regional differences in the electric systems What actions can management take now to become of the West Coast, Texas, Midwest, Gulf Coast, the more prepared to be successful in such an uncertain Southeast, and East Coast of the United States. environment?A few considerations are as follows: Each of these regions has a different market characteristic ur in Break down your business into its most basic functions n terms of consumer preferences, climate, and access (i.e., supply,transmission, distribution, services, etc.) to existing reserves of fossil fuels such as natural gas, and markets(i.e., regulated, deregulated,jurisdictions, population densities and regulatory preferences. customer class, gas, electric, etc.). Understand and define the key elements of your core business. More Agile and Customer Focused Assess how the transformational forces impact Target Operating Model strengths,weaknesses, opportunities and threats associated with each function and the overall lo capitalize on the opportunities which enterprise especially as it relates to the key elements of your core business. exist in such a transformative environment with so many divergent possible outcomes, Leverage scenario analysis to stress test business strategies for each of the functions and the overall it is important for utilities to consider enterprise. adopting a much more proactive, agile Refresh your strategy. Design target business and and customer-focused business model. operating models for the enterprise and each of the key functions. Long gone are the days of a utility charging ratepayers in its undisputed service territory for a predictably growing Develop and prioritize a road map of transformation/im- amount electric demand. The forces described in this paper provement initiatives that drive the enterprise and key functions towards optimal target operating models. are steadily chipping away at the traditional business model and the changes are occurring at an accelerated rate. 95% are optimistic and believe the economy will be the same or better Areas of Increased Spending Business Model Threats 1 Business model transformation Energy costs Impact of new Employee compensation and training regulations/legislation --- Geographic expansion within the U.S. 111111.111111111 30%believe Regulatory environment business Cyber-threats(e.g.,hacking, model data breaches) Expanding facilities transformation Customer/employee would remain mobility the major Regulation/control environment spending area Lack of qualified workforce 0% 10% 20% 30% 0% 10% 20% 30% 40% KPMG The Agile Utility-Forces at Work Changing the Industry in North America 7 105