“Asset Management & Utility Automation at the Crossroads”

Welcome to FocusPoints™ Online Market Briefings Presented by… “Asset Management & Utility Automation at the Crossroads” The Evolution of Asset Management in Utility Automation/IT Markets How well you focus… will determine your reality

Presentation Contents • Session Organization • Webcast Objectives • Topic Background • Speaker Introductions • Presentations • Question & Answer Session • Wrap-up

Session Organization • 90-minute Session consists of: • 3 featured presentations; 20-25 minutes each; 2 by InfoNetrix analysts; 1 guest speaker • Strategic Perspective by Mike Marullo • Tactical Perspective by Mike Smith • Guest Perspective by Roy Brandon • 15-20 minute Q&A (Time permitting; can be extended via email chat after session ends) • Session Wrap-up

Webcast ObjectivesEducate • Stimulate • Relate • Educate • Explain topic in clear terms that can be easily understood and interpreted • Offer rudiments that can be used in substantive, practical (actionable) ways • Provide a basis for further understanding

Webcast ObjectivesEducate • Stimulate • Relate • Stimulate • Offer provocative concepts, ideas and suggestions that can be applied to the activities of session participants in ways can deliver tangible results • Show how automation & IT can be used to meet specific market challenges and create business opportunities that are financially and technologically sound

Webcast ObjectivesEducate • Stimulate • Relate • Relate • Highlight ways to apply market intelligence for practical use and applications • Provide bridging paths from concepts to actionable measures • Build a foundation upon which specific market entry (or expansion) strategies, tactics and action plans can be clearly formulated and executed

Today’s Topic “Asset Management & Utility Automation at the Crossroads” The Evolution of Asset Management in Utility Automation/IT Markets

Today’s Speakers • Mike Marullo: Strategic Perspective • InfoNetrix Co-founder & Principal-in-Charge of Strategic Market Research & Development • 30+ years industry experience • Mike Smith: Tactical Perspective • InfoNetrix Co-founder & Principal-in-Charge of Tactical Market Research & Development • 15+ years industry experience • Roy Brandon: Guest Presentation • Strategic Asset Management Client Relations Officer • 25+ years industry experience

Strategic Perspective “Automation/IT and Asset Management Trends in North American Utility Markets” Presented by Mike Marullo Director-Strategic Market Research & Development InfoNetrix LLC New Orleans, LA

Why A/M now? • Aging infrastructure • Assets nearing end of useful life • Most are 35-50 years old (or more) • Affects substantially all market sectors • Electric power grid • Water mains & distribution lines • Roads, bridges, rail, telecommunications, etc.

Why A/M now?Continued • Do more with less! • Restructuring of electric and water utilities has introduced a profit motive just as infrastructure is at its weakest point • Deregulation • Privatization • Consolidation • Besides pure cost-cutting measures, utilities are looking for operational efficiency and work force optimization • CMMS (Computerized Maintenance Management Systems) • Mobility & Field Force Automation

What changed? • In the past 10 years: • The utility view of automation has changed from a reactive, expense posture to an increasingly pro-active, investment view • Technology convergence and industry standardization have blurred the lines among formerly segregated platforms • Aging utility infrastructure is being pushed beyond traditional safety and reliability limits by restructuring and demand evolution • Political & regulatory pressures on utilities to level the playing field and improve safety and reliability have substantially increased while investment has waned and infrastructure has fallen into disrepair • Customer service expectations are increasing even as utilities face new barriers to repair/replace/upgrade facilities

What are the choices? • Build more generation? Not likely in time; not really the problem • Build more transmission? Takes too long; the problem is NOW! • Do Nothing? (Been there; done that!) • The result was at least somewhat predictable: 8-14-2003 • Largest blackout in US/Canadian history • 50 million+ lost power for up to 38 hours

What are the choices?(Continued) • Just repair the things that break? • Most of the large transmission transformers, pumps/filters, and other pieces of critical infrastructure equipment) are built outside North America • Procurement lead times for replacement of these assets can run from several months to several years • Utilities can no longer afford to keep excess inventory on hand in case of a catastrophic failure • The entire infrastructure is in decline, increasing the chances for multiple, simultaneous failures of critical infrastructure • The blackout caused outages but virtually no equipment damage; the next time we might not be so lucky!

Monitor assets more frequently and more precisely Utility automation platforms are already in place at most utilities but are under-utilized for various reasons: Outdated (compartmentalized) budgeting process Piecemeal approach to addressing “wholesale” problems Automation viewed as a luxury rather than a necessity Communications bandwidth limitations Mounting security issues Holistic solution sets need substance; not lip service Huge amounts of data collected are widely… Extensively unknown to the people who want it Inaccessible to the people who need it Access restricted by the people who have it What are the choices?(Continued)

What’s on the horizon? • Suppliers must understand the drivers and incentives • Economic justification (It’s all about the money; get used to it!) • Technology is not the barrier; make the business case • Move the information to where it’s needed; when it’s needed; in the form & format it’s needed • Utility view of automation must change • Automation saves time & money; it doesn’t just consume it • Suppliers must become full partners in problem-solving to be effective; internalized “spec & bid” practices are outdated • There is no shortage of data; only information. We must all get smarter about making the distinction between the two

What are the drivers? • Critical assets first • High value infrastructure • Single mode of failure • Weakest link • Long repair/replacement period • Those with limited support knowledge pool

Drivers (Cont’d) • Infrastructure decay • Staff reductions & brain-drain • Non-operational data demands • Better information access for… • Reliability-centered maintenance (RCM) • Condition-based monitoring (CBM) • CMMS

The Funding Plan • Key elements of the funding plan • Holistic Budgeting Model (Automation + A/M) • Business Case (ROI & CBA) • Technology Strategy Plan, and… Information Flows & Functions: Where it’s needed • When it’s needed • In the form it’s needed

And, finally… • Business case • Do the homework (What is really critical?) • Do the math (ROI, Cost:Benefits Analysis, etc.) • The Carrot and the Stick • Show the benefits • Know the consequences • You can’t prove a negative! • Use automation to show safety, efficiency and cost savings • Don’t try prove that something won’t happen

InfoNetrix Advisory ServicesFocusPoints™Online Market Briefing Next, Mike Smith will present a tactical market perspective … “Asset Management Impact on Automation/IT Spending in North American Utility Markets”

Tactical Perspective “Asset Management Impact on Automation/IT Spending in North American Utility Markets” Presented by Mike Smith Director-Tactical Market Research & Development InfoNetrix LLC Sacramento, CA

Presentation Contents • Asset Management Views • Traditional Platforms • IAS Program Scopes & Survey Results

Asset Management Views • Perspectives on Asset Managementfrom senior industry executives • “Asset Management is the job of every person in the utility, with the possible exception of a few people working in the billing department.” • Executive of an Asset Management Software Company • “All of this SCADA data creates the basis for a utility to implement asset management.” - Sr. Consultant with a leading IT Services Firm What does all of this mean?

Asset Management Views (Cont’d) • Asset Management is still emerging and evolving • New suppliers are entering the market from other markets; even other industries • New solution/service offerings are being introduced • “Traditional” solution suppliers repositioning offerings • Increasing M&A activity will blend and borrow from various sources • A “new” market is organizing and taking shape • Absorbing pieces of existing (traditional) markets • Creating new solution sets • Nurturing a new generation of suppliers

Traditional Platforms • Geospatial & Field Automation Solutions (GFAS) • AM/FM/GIS • Work Management • Workforce Management • Mobile Computing • Real-time Automation & Controls (RTAC) • SCADA • EMS/DMS • Field Data Devices • Utility Customer Care Solutions (UCCS) • CIS • CRM • Call Centers • EBPP & Bill Print • Computerized Maintenance Management Systems (CMMS) • Focused primarily on the maintenance activities in the utility • Starting point for many Water/Wastewater utilities

GFAS Program • Includes IOUs, Munis, RECs & others • Survey: 963 electric utility decision-makers surveyed during program year • Results: 314 systems projects valued at $72 MM • Plus: • 174 Projects with a Mobile component, valued at $44 MM • 200+ service projects valued at over $63 MM

GFAS Program(Continued) • Asset Management Implications for GFAS • Emphasis on leveraging significant GIS investments • “We have built the system and created the data; now what?” • Work Management Implementations • WMS has evolved from managing large design projects to Managing the Life Cycle of Assets • Taking it to the Field… • Migration of centralized applications into field applications • Workforce Management (Efficiency & Optimization)

GFAS Program Results Leading Geospatial Platform Suppliers By Number of Projects (Based on 677 Projects for US & Canadian Utilities with <100K Customers)

GFAS Program Results (Continued) Leading Geospatial Platform Suppliers By Total Project Values (Based on $65 Million in Projects for US & Canadian Utilities with <100K Customers)

GFAS Program Results (Continued) Leading Geospatial Platform Suppliers By Number of Projects (Based on 136 Projects for US & Canadian Utilities with 100K+ Customers)

GFAS Program Results (Continued) Leading Geospatial Platform Suppliers By Total Project Values (Based on $148 Million in Projects for US & Canadian Utilities with 100K+ Customers)

GFAS Program Results (Continued) Leading Field Automation* Suppliers By Number of Projects (Based on 230 Projects for US & Canadian Utilities with <100K Customers) *Applications include Outage Management; Work Management; Workforce Management & Mobile Computing

GFAS Program Results (Continued) Leading Field Automation* Suppliers By Number of Projects (Based on 61 Projects for US & Canadian Utilities with 100K+ Customers) *Applications include Outage Management; Work Management; Workforce Management & Mobile Computing

RTAC Program • Includes IOUs, Municipals, RECs, etc. • Electric Utilities • Survey: 987 electric utility decision-makers interviewed in program year • Results: 288 System & RTU Projects valued at over $150 MM • Plus: Over 8,700 planned RTU installations • Water/Wastewater • Survey: 988 water/wastewater decision-makers interviewed in program year • Results: 215 System & RTU Projects valued at over $82 MM • Plus: Over 3,600 planned RTU installations

RTAC Program(Continued) • Asset Management Implications of RTAC • RTAC is primarily an operations tool, BUT: • Generates A LOT of data that can (and does) support Asset Management • Data is often interfaced to GIS, OMS, CMMS, and other systems/applications, creating opportunities to improve numerous asset management and customer service scenarios

RTAC Program Results Leading Electric Utility RTAC System Suppliers By Number of Projects (Based on 471 Projects for US & Canadian Utilities with <100K Customers)

RTAC Program Results (Continued) Leading Electric Utility RTAC System Suppliers By Total Project Values (Based on $173.3 Million in Projects for US & Canadian Utilities with <100K Customers)

RTAC Program Results (Continued) Leading Electric Utility RTAC System Suppliers By Number of Projects (Based on 141 Projects for US & Canadian Utilities with 100K+ Customers)

RTAC Program Results (Continued) Leading Electric Utility RTAC System Suppliers By Total Project Values (Based on $523.6 Million in Projects for US & Canadian Utilities with 100K+ Customers)

RTAC Program Results (Continued) Leading Water/Wastewater RTAC System Suppliers By # of Projects (Based on 799 Projects for US & Canadian Utilities)

RTAC Program Results (Continued) Leading Water/Wastewater RTAC System Suppliers By Total Project Values (Based on $504.5 Million in Projects for US & Canadian Utilities)

UCCS Program • Over 1,000 Electric/Water/Gas utilities interviewed in program year includes: • IOUs • Municipals • RECs • Federal/State/District Utilities • Program identified • 128 CIS/CRM Projects • Valued at $278 MM+ • 143 Other Customer Care Projects • Valued at $21 MM+ • Includes Call Center, EBPP, Bill Print & Consulting

UCCS Program(Continued) • Asset Management Implications of UCCS • CIS solutions usually includes work/service orders, critical pieces for asset management • Customer data that resides in CIS • Indus Service Delivery Model (SDM) combines: • Asset Management • CIS • Mobile Workforce Management • Is this the emerging model for comprehensive asset management solutions in the future?

UCCS Program Results Leading CIS Suppliers By Number of Sites (Based on 614 Installations at US & Canadian Electric/Gas/Water Utilities)

InfoNetrix Advisory ServicesFocusPoints™Online Market Briefing Next, Today’s Guest Speaker Roy Brandon… ASSET MANAGEMENT “A Management Strategy for Utilities”

Guest Presentation “Asset Management:A 21st Century Management Strategy for Utilities” Presented by Roy Brandon Client Relations Officer Strategic Asset Management Rancho Murieta, CA

What is Asset Management? • An accounting strategy • A software product • A maintenance concept • Just another flavor of the month?

Asset Management Provides a Common Path Align plant resources to achieve the business goals of the organization at the lowest cost.

Asset Management is a cross-functional Initiative Maintenance Purchasing Engineering Operations Systems Production Control Accounting Asset Management Aligned Utility Vision & Strategies with Roles & Responsibilities

“Asset Management & Utility Automation at the Crossroads”