Utility Sees Big Payoff From IT Investment

BOSTON (06/08/2000) - After a 1994 merger of two Midwest utilities created Cinergy Corp. in Cincinnati, the mad pace toward gas and power deregulation in Ohio began in earnest.

Faced with so much change in the business environment, Cinergy reorganized and has spent more than $20 million since 1998 to better integrate its computer systems.

The result: Cinergy is a $6 billion utility that expects $12 million in savings by year's end because of its information technology investments, said Greg Ficke, vice president of operation services.

Now Cinergy is poised to spend millions more on further IT enhancements, including an interactive Web site, Ficke said. Cinergy has approved all its IT spending based on a return on investment in three to five years, Ficke added.

Extensive Training Required

Although the company's new automated systems have brought advantages, they have also been a big adjustment, Ficke acknowledged. Employees needed extensive training.

"I'd be lying if I said it wasn't difficult, because we were changing people's jobs, and culture change was part of it," Ficke said.

"With end users, you want to underpromise and overdeliver," he added. "And that way people feel good about what they're getting."

Cinergy serves 1.4 million electric and 480,000 gas customers in Ohio, Indiana and Kentucky. But the company faces some competitive threats when Ohio moves to electricity purchasing deregulation next January. Indiana and Kentucky are planning to move in that direction within a few years.

"The vision that Cinergy has shown is similar to the vision of other forward-thinking utilities facing deregulation, maybe the top 15 in the nation," said Rich Nicholson, an analyst at Meta Group Inc. in Stamford, Connecticut. "But a lot of the other utilities are making piecemeal IT improvements, whereas Cinergy took the holistic view."

Many utilities are unveiling a variety of automation systems, including automatic dispatching of service vehicles or customer service software, analysts said. Duke Energy North America in Charlotte, North Carolina, for instance, built its own software to monitor power production in real time so it could submit bids in the wholesale energy market.

But, said Ethan Cohen, an analyst at Aberdeen Group Inc. in Boston, "there's definitely a case to be made" that Cinergy is better prepared than it was before to make customer service changes and be more competitive.

Leaner Systems

After the October 1994 merger between PSI Energy Inc. in Plainfield, Indiana, and Cincinnati Gas and Electric Co., the combined firm, Cinergy, found it had 43 systems that didn't talk to one another, Ficke said.

Cinergy whittled its systems down to five, which resulted in the reduction of its workforce from 9,100 employees to 9,000. Some workers were reassigned and others took early retirement packages, he said.

The systems no longer require technicians to enter data by keyboard. Instead, workers map out plans for new gas or electric lines into a computer-aided design system. When a project is designed, the Cinergy system tabulates the materials needed for construction.

By summer's end, the automatic mapping system will enable real-time readings of outages using remote sensors, Ficke said. The utility now relies on calls from customers to pinpoint outage locations.

"We'll have a much better picture of what's going on and . . . [it will] save us costs on the number of crews going out," Ficke said.

And a new Web-based system that lets customers make service orders or report trouble online should cut down on customer phone calls, Ficke said. The system is scheduled to be rolled out in three phases, with some services starting later this year.

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