New Customer Information Systems Help Utilities Adapt To Nordic Market Shift

Agder Energi Group has become Norway’s first energy company to prepare for the new Nordic energy market.
Published: Mon 22 Feb 2016

The Nordic energy market is the most advanced energy marked in the world. Its citizens are technology focused and conscious of their environmental footprint. With solar panels on their homes and batteries in their homes, traditional energy customers are becoming energy producers. These prosumers want to buy electricity from the grid when it is cheap and sell it when it is expensive. This is the new energy consumer that the industry needs to adapt to.

This supplier centric focus is changing the Nordic energy market. An open market model is being adopted in which new and existing actors can compete on a level playing field without prior business advantages.

Nordic market changes create new demands

The Nordic market changes require that integrated utility providers must split their Distribution System Operator (DSO) and retailer arms into independent businesses. Although each market in Norway, Sweden, Finland and Denmark are doing this step by step and with their respective timelines, the principles are the same.

The three principles are:

1.    Split the DSO and retailer at the organization and system levels

2.    Rollout smart meters

3.    Establish a national data hub to enable market communication between the DSO and retailer.

Denmark is leading the way with data hubs in place. In Finland and Sweden smart meters have been rolled out. And Norway is preparing for the rollout.

“These changes have caused a lot of discussion, especially in Norway where a lot of utilities are integrated, as they require big decisions to be made,” Stian Mikkelsen Madsen, CIS leader at Enoro, told Engerati in an exclusive interview.

The market changes are placing new demands on utility Customer Information Systems (CISs), which must now be split between DSO and retailer.

CIS combines billing

Despite the split, the DSO and retailer must provide combined billing, i.e. one single invoice that reflects the retail and distribution charges to the customers. This means that potentially any retailer may need DSO data for their billing.

At the same time the CIS needs to process more data from smart meters, in real-time. Simultaneously, the customers are no longer just energy consumers, they are energy prosumers.

“The data hub concept is driving a lot of processes in the Nordics, but also the introduction of smart meters is changing the business principles for CISs,” says Mr Madsen.

To handle these changes, the industry needs to automate, digitize and become personalized.

“Automation and digitalization are key to achieving the efficiency and cost containment requirements. On the customer side personalization and new energy services are important for customer engagement and energy efficiency. With the introduction of distributed energy production and local battery storage, the future CIS needs to enable the customers to consume and sell energy at favourable times.”

Preparing Agder Energi for the future

Under Norway’s regulations, the central data hub (Elhub) will start operating in 2017. By 2019 DSOs and retailers must be split and combined billing for consumers provided. Norway is making a conscious move towards market neutrality.

Agder Energi Group, the third largest energy producer in Norway, is a first mover. Enoro has just finished implementing the DSO and retail split in the company.

Agder Energi Group’s DSO, Agder Energi Nett, owns and operates the transmission and distribution networks and delivers energy to 190,000 customers. Its retail arm, LOS, sells energy and services to residential and business markets. It is the largest electricity supplier in the Norwegian business market. This split required migrating Agder Energi’s shared CIS data into two new separate systems at Agder Energi Nett and LOS.

“Agder Energi made the decision to take first mover advantage and to avoid a potential logjam of integrated utilities splitting, particularly in the 2017 to 2019 timeframe,” says Mr Madsen.

The goal was to achieve secure data quality, guarantee market neutrality and control on receivables, and face head-on future business procedures and their requirements. Working closely with Agder Energi this project was on time, within budget and conformed to all quality targets.

To meet the market requirements, Enoro developed a new combined billing solution for its CIS product. It is automated, builds on standard market message flows, has a standard invoicing format and works with market processes defined by the data hub for the future needs of combined billing. The system improves customer engagement and sharpens the competitive edge by owning the customer interactions. And today only three people handle a total of 160,000 network customer's billing processes.

The CIS system of the future is open and as a service

An open CIS system will make it easier to integrate with other IT systems.

“With open APIs, companies are able to build their own solutions on top for their own special needs. This will be more and more important in the coming years with the much fiercer competition between retailers when they will need to fight for every customer,” says Mr Madsen.

He adds that there are also increasing demands for CISs to be provided as a service. The companies are under cost pressures and they do not want to pay large upfront fees or undergo major system upgrades.

“We believe the TCO for CISs needs to drop, and more effort is needed to empower the customers and provide them the tools they want to lower their energy bills and consumption. With the real-time data from smart meters and the data from social media, utilities also will be able to build new insights to better understand their customers and create new products for them.”

CIS is proof of concept

Mr Madsen says that Enoro’s new CIS solution is currently being implemented in five other utility providers in Norway and will shortly be launched in Sweden and Finland.

The critical point is that companies need to understand what splitting an organization’s systems and processes means to the business. “You need to decide whether you want to be a DSO or a retailer. If you go just half way, you will fail as the competition is so fierce.”

The organizational and strategic impacts are so considerable that this process should not be viewed as an IT project but a strategic business decision.

“This new model will lead to a new way of working and there are many processes that need to be agreed internally. For example, with combined billing the DSO shifts its invoice component to the retailer, who has to take the full financial risk towards the consumer. It needs a full team working on it with the support of management.”

Mr Madsen is also convinced that what is happening in the Nordic market will occur in Europe later. “So what we are doing is like a proof of concept and if it can succeed there it will elsewhere,” he concludes.

Further reading

Enoro: Customer Case: Agder Energi & LOS