IS-U/FERC SAPs Global Utilities Regulatory Solution

A White Paper June 1996

Document Contents

SAP R/3 and Regulatory Processing

Financial Processing Order Processing Regulatory Translation Table Audit Trace Tables

IS-U/FERC Functionality Conclusion Bibliography Additional Information

By James McClelland Industry Centre of Expertise Utilities and Telecommunications

Introduction
In todays economic and highly competitive marketplace, it has become crucial for organizations to identify costs of product and operation activities. Without accurate costing information, companies are unable to make informed decisions, thus impacting the reporting of performance and revenues. The tracing of utility expenses to their appropriate state and energy regulatory categories has long been a laborious, but necessary, activity within the energy sector. Corporations must report regulatory related activities to federal authorities annually in a specialized format sufficing demands not only of the regulatory commission but also federal auditors providing detailed information as to the composition of each regulatory account.

SAP R/3 and Regulatory Processing

SAP R/3 offers regulatory account processing as add-on functionality to the R/3 v3.0 product IS-U/FERC. This is achieved by augmenting the standard FI general ledger to include a regulatory account ledger. This ledger operates in the same manner as any other SAP standard chart of accounts, prefixing all regulatory accounts with the digit 9 or a value determined by the user. A strategy has been designed to extract all regulatory related financial data, accumulate and post these values to their appropriate regulatory accounts for reporting purposes, via a regulatory account translation table. The program runs in batch mode and may be scheduled at the users convenience, usually at the end of accounting periods. IS-U/FERC executes in two phases, FI processing (Financial Accounting) and non-FI processing referred to as order processing.

Financial Processing: The FI processing of the regulatory process focuses strictly on G/L accounts that do not impact other aspects of the system. If it is determined that a G/L account has regulatory implications, the appropriate regulatory account is input in the alternative account field by an authorized administrator. When the regulatory process is executed, it scans all accounts in the general ledger searching for contents in the alternative account field prefixed with the digit 9. If the contents of this account field match an account within the regulatory account ledger, the value is posted to the regulatory ledger, otherwise a record is written to an error log file. For each debit entry to a regulatory account, a corresponding credit entry is made into an internal clearing account for internal audit purposes. Balance Sheet accounts can have a many to one relationship with each specific regulatory account.

Balance Sheet Accounts

any balance sheet account, impacting FERC, will be posted to the respective FERC account based upon the alternative account field logic

Profit / Loss Accounts

the appropriate value will be posted to the FERC account and a corresponding value will be posted to the summary account 999... for audit purposes FERC chart of accounts and check account number groupings are user defined

FERC Accounts

Order Processing: The order processing of the regulatory process focuses on profit and loss accounts by utilizing CO internal orders, PM maintenance orders, PS work breakdown elements, and PP order structures. Like FI processing, if it is determined that an order has regulatory implications, an entry is made in the regulatory indicator field at the order header, during order creation, and postings are made to the appropriate regulatory ledger account. When the regulatory process is executed, it scans all order structures searching for contents in the regulatory indicator field. If contents of this indicator match a regulatory indicator value, the order values are posted to the respective regulatory account via the regulatory account translation table, otherwise a record is written to an error log file. For each debit entry posted to a regulatory account, a corresponding credit entry is made into an internal clearing account for internal audit purposes.

Balance Sheet Accounts

CO Module

HR

Cost Center

MM FERC Order

Profit / Loss Accounts

FI Order PM

FERC Accounts

ABAP/4 Processing FERC Translation Table

PS

PCE + FERC ind. = FERC Acct.

The regulatory indicator is currently a user defined field, common to all orders in the order master file. A regulatory indicator field will be added, as standard, to the order master file in a future release of R/3 v3.0. The regulatory indicator classifies a cost center or order, such that a regulatory account can be derived from the combination of G/L account associated with the primary cost element and regulatory category. This key information is stored in a user defined regulatory translation account table. This table is composed of three elements, a general ledger account number, a regulatory indicator and the associated regulatory account.

As stated earlier, the regulatory process runs in batch mode and may be scheduled to execute at the users convenience. As each entry is posted to the respective regulatory account, the system maintains two internal tables to enable trace back functionality within the R/3 system. They are the detailed audit trace table and the condensed audit trace table. The detailed audit trace table maintains all pertinent date relevant to regulatory audit reporting summarizing each regulatory posting enabling full trace back and drill down capability standard within the R/3 system.

The condensed audit trace table stores strictly summary relevant data associated with the regulatory activities within the system, such as: primary cost element and final regulatory activity.

IS-U/FERC Functionality
IS-U/FERC is available as add-on functionality in R/3 v3.0 for utilities. It enables the user to use standard SAP settlement rules to allocate costs within cost centers and all orders throughout the system directly to regulatory specified orders and accounts. It collects information created from PM (Plant Maintenance), PS (Project Systems) , CO (Cost Accounting), and PP (Production Planning) modules. SAP has maintained the flexibility and integrity of its drill down functionality, ease of reporting and full integration with this design. IS-U/FERC is a global regulatory reporting module providing corporations multi-state, multi-company, multi-country, multi-currency reporting capabilities. IS-U/FERC has full rollback and restart capabilities after the regulatory process has executed, simulation functionality, internal audits to verify data integrity, reconciliation capabilities, regulatory data archiving, and standard regulatory reporting for quick access to internal information and process error logging. IS-U/FERC will be delivering regulatory planning capabilities in early 1997.

Conclusion
R/3 is an open, scaleable, integrated solution, enhanced and tailored to meet the specific needs of the utility industry. It enables customers to support most of their information needs and requirements with a single integrated package. It maintains and builds on the core SAP systems strengths of on-line, real-time functionality, thorough integration of applications, and international legislative and multi-currency support. SAP offers more than just transaction processing software. In the most basic application, the product can simply replace existing transaction processing systems. Utility specific industries can take full advantage of the R/3 utilities through an effort to re-think and re-design existing business organization and processes. The integrated nature of the SAP software provides a foundation for utility companies to achieve successful benefits through re-engineering.

Additional Information
For additional information regarding the issues discussed in this white paper, please contact: SAP Canada 1-800-880-1727 SAP America 1-800-727-5872