Integrated Resource Planning

Let me start by Vikram Budhraja qouting Machivelli. “It must be remembered there is nothing more difficult to plan, more uncertain of success, nor more dangerous to manage, than the creation of a new order of things”. In this article Vikram discussed the integrated resource planning by giving California’s electric utility industry as an example. Starting with the industry’s history, he was able to point out that we can still use the best attributes of integrated resource planning but still opening the industry from competitive market.

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By doing this they will be able to provide the consumers choice and will stop the monopoly of electric industry thus achieving lower rates in California’s electric utility. Having the ‘Blue Book’ deregulation proposal, they were able to achieve their goal. Which made it favorable for both parties, the consumers and the producers or the electric industry. The creation of blue book was not that easy, just like Vikram’s qouting Machivelli. But they were able to do it through planning.

Enterprise resource planning systems integrate internal and external management information across an entire organization, embracing finance/accounting, manufacturing, sales and service, customer relationship management. Enterprise resource planning systems automate this activity with an integrated software application. Their purpose is to facilitate the flow of information between all business functions inside the boundaries of the organization and manage the connections to outside stakeholders. The speaker, Budhraja, Vikram S. stated in a forum how trends and technologies are changing the electric utility industry even in vital ways.

These factors affects the traditional centrally controlled and heavily regulated integrated resource planning process. He mention in chronological, the history of the electric utility industry. Having this included in the forum will give viewers basic ideas on how has the electric utility industry been doing for the past years. California, having some of the highest electric rates in the country results to disconnect from the market place and from technological trends causing a collision course with emerging competitive trends, this have led to pressure for deregulation and competition.

In this article, it is aim to determine on how can we preserve the best attributes of integrated resource planning while opening the market to competition. The speaker, in his talk included the three fundamental principles of the Blue Book. He stated that neither consumer nor shareholders like this prospect. Other parties, mostly environmentalist have concerns of their own which stem from the fear that competitive market system will mean less of their preferred policy. In the forum, he point out Edison’s three-part plan in response to the commission’s proposal.

It is good that the speaker clearly elaborated the plan and the features of POOLCO, which is the centrepiece of Edison’s proposal. This will give the viewer’s a better understanding of what Edison Co. has planned. In the latter, he stressed that electric utilities will focus more on customers’ needs and meeting them through investments on the customer side of the meter, giving consumer some assurance. With the case of Southern California Edison Company, the company had found themselves at the crossroads on the emerging competitive trends and technology that has been changing the industry in some ways.

Technology and competition are challenging the traditional centrally controlled and heavily regulated integrated resource planning process. Looking at the integrated resource planning process in California, a complex process has been politically manipulated. As integrated resource planning disconnects from the marketplace and technological trends, effects can be seen as the company collides with the emerging competitive trends. The problem arises as how can the company preserve the best attributes of integrated resource planning while opening the market to competition.

The company came up with the idea of restructuring the industry from vertical integration to have competitive business units. And it was where the competition took them. As the company unveiled the Blue Book, we can see how they opened the market for industrial customers which had a good effect as customers can now have direct access to their service. It was also good that the company shifted their focus to customers, utilities and lower rates. How the company shifted also shifted to conservation has directly impacted the company’s competition in the industry.

With this, we can say that market, competition and technology have fundamentally changed the business giving them new market and opportunities for growth. California went to a competitive market structure to capture the efficiency benefits of supplier competition through lower prices. This worked when there was a surplus but the efficiency savings were overwhelmed by increased costs measured in tens of billions of dollars when the market stopped functioning. The government has stepped in to provide price stability and reliability. The new industry structure is still evolving.

California’s experience is a reminder that the physics of electricity, whereby production and consumption must be perfectly coordinated in real-time, is testing economics and free market principles. There must be flexibility and will to adjust market rules and operations in light of market performance. Competitive electric markets must be designed in recognition of the fact that electricity is different from other commodities, no storage, network effects, short time constants and that market economics and engineering realities have to be harmonized.