AMERICAN GAS MAY 201358

The procurement function can help utilities achieve

significant improvements—and the first step is

helping stakeholders understand its potential

BY SAMIR KHUSHALANI AND PATRICE MAHEO

that works across the organization to man-age supplier relationships, focuses on total cost of ownership, and collaborates and is closely aligned with the business units.

Moving procurement up this curve will take effort—and the key to getting started is to develop a clear, compelling business case for procurement transformation. This may sound like common sense, but it is not unusual for organizations to embark on a transformation initiative without go-ing through this upfront exercise.

The business case will not only help the organization understand the poten-tial benefits of transformation, it can also provide a foundation for measuring progress and recalibrating programs as they are implemented. And it can be an effective vehicle for getting stakeholders engaged and behind the improvement ef-fort. Overall, we’ve found that companies that develop a business case for transfor-mation are twice as likely to realize their expected value on time or earlier than planned, compared to those that don’t develop one.

The details of the business case will vary from organization to organization, but in general, a compelling business case will encompass three key qualities. To get the attention and buy-in of stakeholders, the business case should do the following:

Be strategic. The business case should make a clear connection between the pro-

Utilities today face a variety of challenges, especially in terms of ensuring safe operations and upgrading infrastructure. But many are overlooking a key tool that can help them meet those

challenges—the procurement function. Experience has shown that advanced

procurement practices can help utilities control costs in several areas. For ex-ample, improvements to procurement have helped utilities save 5 percent to 13 percent in engineering and technical services costs; with distribution materials, such as pipes and valves, utilities have cut 6 percent to 12 percent. Often, these ben-efits are achieved relatively quickly, in just three to six months. As a rule of thumb, cost-savings opportunities from advanced procurement practices typically reach $60 million to $120 million per billion dollars of procurement spend. Those savings can help utilities deliver more infrastructure projects—and demonstrate their commit-ment to controlling costs to regulators and rate payers.

To achieve those types of benefits, however, most utilities will need to take a different approach to procurement. Today, procurement in the industry is often seen as a traditional back-office operation. But it can be more. It can be transformed from a project- and transaction-focused orga-nization to a strategically oriented group

B U R N E R T I P S

PROCUREMENT

MAKING THE CASE

posed improvements and the needs of the business. It should provide a rationale for the change and explain how it is aligned with corporate strategy. It should also lay out a high-level view of the associated risks, constraints, and dependencies that will be involved—all of which helps to give decision makers a full understanding of what to expect.

Often, business decision makers are not looking for a broad, enterprise view of potential benefits. Instead, they want a value proposition that is linked to their situation. What will it mean, specifically, to their business unit? What timetable can they expect for realizing those benefits quarter by quarter as the effort is ramped up, and then over the long run?

MAY 2013 AMERICAN GAS 59

Clearly explain the expected econom-ic value. The business case should provide qualitative and quantitative analyses of the benefits the change will bring and describe both financial and nonfinancial benefits. It should also give decision makers a few improvement options to consider, detailing the preliminary options that were consid-ered and explaining how the list of viable options was selected. This not only gives those decision makers a choice, it also helps them understand why certain options are being proposed over others.

A key element that needs to be worked very diligently with the finance function and the business unit in question is the spend baseline. More often than not, there is misalignment between various groups’ perspectives on the baseline for specific categories. So it is critical to work collab-oratively with stakeholders to lay out and agree on the baseline assumptions.

Be achievable. It’s important to set up the transformation effort for success. This means letting the stakeholders understand what will be expected in terms of resources and sponsorship. The business case should spell out project- or program-management responsibilities, governance, and risk-plan-ning processes, and identify the tactical factors that will need to be considered.

One thing that is often overlooked is the question of how the improvements are going to be “encoded” into the organiza-tion. What are the rules that will govern the working relationship between procurement, the business unit, finance, and IT? How will the new processes be built into ERP systems? What spend visibility tools will be used to monitor progress toward realizing the change initiative’s expected value?

In developing the business case, the procurement organization should put itself in the shoes of the business stake-holders. In the utilities industry, the lead-ership team is typically faced with non-stop challenges. They have a lot on their plate, and there is a limited window for considering such transformation efforts. A compelling, clear business case gives

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the procurement organization a chance to show that it has done the due diligence and understands the way forward. And it can help executives recognize the poten-tial strategic value that a transformed, advanced procurement function can bring to the utility. u

Samir Khushalani is the U.S. leader of KPMG’s Procurement Advisory practice, and Patrice Maheo is a managing director in the practice. Both serve KPMG’s energy clients. The views and opinions expressed are those of the authors and do not necessarily represent the views and opinions of KPMG LLP.

AMERICAN GAS MAY 201360

SAFETY CONSULTANT/SENIOR SAFETY CONSULTANTWe have a challenging opening for a Safety Consultant or Senior Safety Consultant to work at our MDC location in Henderson, CO. In this role, you will primarily serve a service center or area(s), however, you may also be requested to assist with other departments within that business area. Gas Journeyman experience or gas utility industry knowledge is preferred to support safety programs for gas side of the business.

Responsibilities:• Provide technical safety consulting services to

plants or areas within Xcel. Responsibilities include recognition, evaluation and recom-mendations for minimizing employee inju-ries/illnesses through hazard identification, accident investigation, audits, ergonomic assessments and review of accident history.

• Provide inspections, observations and feed-back to any location on any safety related topic, issue, concern, problem or recommen-dation. Will function as a consultant to local safety committees, employees and manage-ment. Will assist in program development and direction and be responsible to audit the

Listings may be posted on AGA’s website for 90 days and in one issue of American Gas. Rates: AGA member companies: $150 for up to 50 words, $1 per additional word; nonmembers: $250 for up to 50 words, $2 per additional word. All ads must be prepaid. Unless noted, the code following each listing ensures confidentiality and should be referenced in correspondence.

TO SUBMIT A LISTING TO JOBLINE, PLEASE VISIT WWW.AGA.ORG.

results. Provide input for safety compliance training programs and training needs.

• Partner with business area management to ensure safety regulatory requirements are understood and program compliance is being achieved for such processes as audits, accident investigations, right-to-know training, confined space training, ergonomics, safety meetings and safety committee meetings.

• Develop safety programs and policies through the Safety Manual, safety news, other safety related manuals, reports and videos.

• Maintain professional expertise. Attend professional development conferences/semi-nars and maintain professional certifications. Participate on internal or external task force committees related to new regulatory compli-ance or continuous improvement in safety. Maintains a working knowledge of current safety regulations and service.

To Apply: http://jobs.xcelenergy.com/job/Henderson-Safety-ConsultantSenior-Safety-Consultant-Job-CO-80640/2453971/

SUPERVISOR-METER TECHNOLOGYOversees field operations for the Company in the areas of measurement, pressure regulation, instrumentation and alarm circuits. Acts as liai-son between Gas Measurement Department, Accounting, and Field Operations. Responsible for assuring accurate accounting of gas mea-surement data. Maintains system-wide telemetry system in compliance with Company guidelines and State and Federal regulations. Minimum Qualifications: Must possess advanced industrial electronics knowledge and expertise at a level normally acquired through a Bachelor’s Degree and five (5) years directly related technical experience in electronics, instrumentation, circuitry, teleme-ter design, maintenance and repair. Thorough knowledge is required of pneumatic and elec-tronic controls, instrumentation and electronic data-gathering equipment and circuitry, and the regulation and control of natural gas systems. Advanced computer skills and expertise in software applications specific to field measure-ment equipment. An equivalent combination of education and experience may be considered. Please send all responses to theresa.whitcomb@cngc.com.

J O B S

Let American Gas help! Our Jobline department lists career

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MAY 2013 AMERICAN GAS 61

Automotive Resources International (ARI) (page 5)4001 Leadenhall Rd.PO Box 5039Mount Laurel, NJ 8054856/787-6563www.arifleet.com/value/utilities

Border States Electric1734A Airpark Dr. Grand Haven, MI 49417800/342-3791616/842-2382www.border-states.com

Brief Relief2320 Meyers Ave. Escondido, CA 92029800/366 3941815/434-3308www.briefrelief.com

Bristow Group Inc.2000 W. Sam Houston Pkwy. S, Suite 1700Houston, TX 77042713/267-7600www.bristowgroup.com

Clevest Solutions13911 Wireless Way, Suite 100Richmond, ON V6V 3B9Canada866/915-0088604/214-9700www.clevest.com

DriveCam Inc.8911 Balboa Ave. San Diego, CA 92123858/430-4000www.drivecam.com

Enersys12875 Capricorn St.Stafford, TX 77219281/598-7100www.enersyscorp.com

FleetBoss Global Positioning Solutions Inc.241 O’Brien Rd. Fern Park, FL 32730407/265-9559www.fleetboss.com

Hiwa Fittings36 MinAn Rd., New Hi-Tech Industry Development Park Zibo 255088Chinawww.hiwaflow.com

J. J. Keller & Associates Inc.3003 Breezewood LaneNeenah, WI 54956800/843-3174877/564-2333www.jjkeller.com

Marlin Gas Transport d/b/a Marlin CNG3610 Galileo Drive, Suite 106Trinity, FL 34655727/375-5007www.marlingas.com

Midland Resource Recovery600 Campbell St.PO Box 344Cornwall, ON K6H 5T1Canada613/933-5666www.mrrus.com

National NGV Fleet Summit3015 Main St., Suite 300 Santa Monica, CA 90405888/993-0302www.ngvsummit.com

NEC Corp. of America6535 N. State Hwy. 161 Irving, TX 75039 214/262-2000www.necam.com

Oracle500 Oracle Pkway.Redwood Shores, CA 94065650/506-7000www.oracle.com

Paragon Software Systems Inc.2591 Dallas Pkwy., Suite 300Frisco, TX 75034972/731-4308www.paragonrouting.com

Pe Ben Usa Inc.13738 Fm 529 Rd, Houston, TX 77041281/452-4204www.pebenusa.com

PipeLine Machinery13333 Northwest Frwy., Suite 500Houston, TX 77040713/939-0007www.plmcat.com

RouteSmart Technologies Inc.8850 Stanford Blvd., Suite 3250Columbia, MD 21045800/977-7284410/290-0226www.routesmart.com

SageQuest31500 Bainbridge Rd., Suite 1Solon, OH 44139888/837-7243216/896-7243www.sage-quest.com

Spacesaver Corp.1450 Janesville Ave. Fort Atkinson, WI 53538800/492-3434920/563-6362industrial.spacesaver.com

Steelweld Equipment Co.PO Box 440St. Clair, MO 63077 877/436 3993636/629-3704www.steelweld.net

Tailwind International Air Charters4600 Claire Chennault Dr., Suite 210Addison, TX 75001972/380-4407www.twintl.com

Telogis Fleet Management Software85 Enterprise, Suite 450Aliso Viejo, CA 92656866/835-6447www.telogis.com

TG Mercer Consulting Services Inc.PO Box 1870 Aledo, TX 76008-9998817/489-7100www.tgmercer.com

Utility Inc.1484 Brockett Rd., Suite 200Tucker, GA 30084404/816-0300www.utility.com

Xerafy3102 Maple Ave., Suite 450, Dallas, TX 75201214/800-2339www.xerafy.com

B U Y E R ’ S G U I D EEvery October, American Gas publishes a comprehensive Buyer’s Guide. This year, we’re pre-senting category-specific previews prior to the full guide. In this issue: companies that provide vehicles and fleet management operations. AGA and American Gas are not responsible for omissions, misprints, or other proofing errors, and do not recommend or endorse any of the vendors. Statements and data have been provided by the vendors and have not been authen-ticated. AGA associate members are boldfaced in blue; vendors advertising in this issue appear in red. AGA associate members advertising have page numbers in parentheses.

TO SUBMIT A LISTING, PLEASE VISIT WWW.AGA.ORG.

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M A R K E T P L A C E

AMERICAN GAS MAY 201362

N E X T M O N T H

AGA MEMBER LISTINGOur annual listing of the members (full, limited, international, and associate) of the American Gas Association—with an inside look at who the members are, how the roster has changed, and how the associa-tion is evolving.

MUTUAL ASSISTANCE: GETTING READY FOR HURRICANE SEASON Last fall’s Superstorm Sandy may have left a path of destruction in its wake, but it also taught some valuable and lasting lessons:

how to plan ahead and, just as critically, how utilities across the country can marshal forces, both at home and in affected regions, to work together, restoring service, helping people, and preventing further damage. Here’s a look at how several utili-ties combined their resources—and how they’ll do it again, even better, the next time disaster strikes.

PROFILETwenty-eight-year-old Pedro Santos, launched OSComp Systems to bring a revolutionary idea to fruition: a technol-ogy that decreases the amount of energy required to compress and transport natural gas. Here’s his story—and the reasons why industry experts and venture capitalists have lined up behind him.

PIPELINE Issues, updates, and need-to-know reports about natural gas industry developments.

A VIEW FROM: What’s going on at the federal, state, and city levels. With a special focus on Wall Street, Main Street, Elm Street, and foreign capitals.

BURNER TIPSAccounting, audits

BUYER’S GUIDE PREVIEW Valves, fittings, flanges

HEADWAYMethane emissions

C E L E B R AT I N GY E A R SY E A R S

826 Chi, Action for Healthy Kids, Altrusa International Foundation of Fox Valley (District 6), Alzheimer’s Association, American Cancer Society, American Gas Foundation, American Red Cross - Hurricane Sandy Disaster Relief, American Red Cross of Greater Chicago, American Society of Mechanical Engineers Foundation, Batavia Interfaith Pantry, Batavia Public Library, Boys and Girls Clubs of Chicago, Bring Change 2 Mind (Partner with NAMI), Camp Southern Ground, CASA Kane County, Center for Business Education, Innovation, and Development, Center for Neighborhood Technology, Chicago’s Children’s Museum, Chicago’s Museum of Science and Industry, Delnor Community Hospital, Elburn Leo Club, Empty Bowls, Fox Valley Animal Welfare Leagues, Fox Valley Volunteer Hospice, Futures Without Violence, Geneva Academic Foundation, Geneva Fire Department, Geneva History Center, Geneva Music Boosters, Habitat for Humanity of Northern Fox Valley - Pottawatomie Habitat Partnership, Harvest for All Kane County, Hesed House, Homes for Endangered and Lost Pets (HELP), Hope by 12, International Crane Foundation, Kane County Veterans Assistance Commission, Lazarus House, Les Turner ALS Foundation, Literacy Volunteers Fox Valley, Make a Wish Foundation, March of Dimes, Midwestern Educational Research Association, Mooseheart Child City and School, Mutual Ground, Nami (National Alliance on Mental Illness) of Dupage County, IL, Northern Illinois Food Bank, Old Town School of Folk Music, Playing for Change, PTSD Foundation of America, Ravinia Music Festival, Reach for the Moon Foundation, Respiratory Health Association, Ronald McDonald House Charities, Santa for the Very Poor, Shelter Box, SME Education Foundation, Smithsonian Institution, Steel Beam Theatre, Suicide Prevention Services of America, The Balanced Mind Foundation, TriCity Family Services, Tri-City Salvation Army, United Way of Central Kane County, United Way of the Midlands, Univer-sity of Wisconsin – Stout, University of Wisconsin Sailing Team, Urban Gateways: Center for Arts Education, VH1’s Save the Music Foundation, Working Bikes, Wounded Warrior Project

75 Years 75 Charities

NORMAC has a proud, 75-year tradition of providing quality products to America's gas utilities. To commemorate our 75th anniversary, we've made meaningful donations to 75 charities that we believe are making transformative differences for families and communities. We invite you to consider supporting them, too.

A full list appears on our website:www.normacnow.com/giving

“The name you know… the products you trust”

CARO

LE ERGER-FASS

MAY 2013 AMERICAN GAS 63

American Gas Association 11, 25

American Gas Magazine 22

ARI 5

Dow Chemical Co. 3

Elster Gas NA 31

Emerson Process Management 47

Gas Technology Institute (GTI) 17

Holland Engineering 10

Itron 23

American Gas advertisers support your association. AGA members and associates are boldfaced.

A D I N D E X

Kerotest Manufacturing Cover 3

Lymtech Scientific 51

Marsh Bellofram Cover 2

A.Y. McDonald Mfg. Co. 16

Mears Group 9

Michels Corp. 12

Minnich Manufacturing 18

NORMAC 62

Parkline Building Systems Inc. 59

Performance Pipe 55

Picarro Inc. Cover 4

Pipetel Technologies Inc. 6

Quorum Business Solutions 21

Sensus Metering 13

Sparus Holdings 22

Total Energy 43

ULC Robotics 36

Utility Pipeline Ltd. 10

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AMERICAN GAS MAY 201364

Lower costs, improved services, and better business

operations: AMI is an opportunity we can’t afford to miss

BY JOSEPH TURGEON

galvanic and impressed current cathodic protection measurement and reporting to meet PHMSA 192 monthly and annual is an area of great interest to utilities to leverage their AMI network. Another concept is to combine pressure sensors with AMI com-munication devices on mains, distribution lines, and service lines, to report high and low pressure across the network. These applica-tions also take cost out of operations by allowing technicians to solve problems rather than “read routes.”

There has been a lot of talk about Big Data. There’s huge po-tential for AMI to turn measurement data into useful information that could improve areas like customer service, operations, preven-tive maintenance, safety, and regulatory compliance. For example, analyzing time-synchronized hourly usage across customers could help engineering, gas control, and operations departments better understand residential usage patterns. Correlating time-synchro-nized meter data between master meters and consumers could allow utilities to more accurately inventory gas-day levels, leading to better localization of leaks and theft, and to more accurate lost and unaccounted calculations.

But there are AMI innovations we’ve only begun thinking about. Could we combine hourly interval reading and prepayment software into a better class of service for some customer segments, rather than require upfront deposits or have to engage in collec-tions? Could AMI communications be integrated into a compact, solid-state residential gas meter at an affordable price?

The AGA Distribution Measurement Committee is helping to shape the discussion and the future of AMI. The committee comprises distribution utilities as full members, and manufac-turers and other organizations as associate members. The newly established AMI subcommittee is currently defining its mission and charter and seeking additional distribution-utility members to contribute to its efforts. Together we can work to ensure that all utilities seize the unique opportunities now presented by AMI. u

Joseph Turgeon is a principal consultant for Black & Veatch, a global consulting firm, and chairman of the AGA AMI subcommittee.

Utilities have been talking for a while now about advanced metering infrastructure (AMI), or “smart” meters. Many now face a decision about whether to spend money on the technology. But unless we make a compelling case for AMI, and unless we invest in the right solutions and strategies, we’ll miss a singular opportunity to improve our businesses.

Several American Gas Association member utilities are now upgrading to AMI. But most utilities in North America still deploy field technicians for once-a-month meter readings. As a result, they’re missing out on the many potential benefits of AMI.

To address this situation, we must make a case for AMI by demonstrating that it can reduce costs and improve services. We also need to deploy AMI to collect and act on safety-related data. We should apply AMI data to better understand usage and improve service levels. And we need to identify new categories of data that can make AMI even more valuable.

The good news is that the AGA Distribution Measurement Committee and AMI subcommittee are taking active steps to ad-dress these issues and more.

To date, AMI deployments have focused on meter reading. But it’s hard to make a case for AMI simply to support monthly billing. We need to demonstrate operational efficiencies such as using the hourly or daily metering data to improve customer engagement, drive conservation, satisfy regulatory requirements, and improve operations. In the end, the AMI case will be made by reducing truck rolls and improving efficiencies across the organization.

In terms of safety, technologies developed for the electric or water sectors can be adapted to gas applications in areas such as theft detection, leak detection, load balancing, monitoring, and automation. Several manufacturers are working on devices for a smart gas infrastructure, such as remote-disconnect valves to address residential theft and non-pay situations. Automating

MAKING THE CASE FOR SMART METERS

H E A D W A Y