Implementing new financial planning and analysis (FP&A) processes and systems is no small feat, especially for state public power utilities like the New York Power Authority (NYPA), whose service operations, customer base, and technology transformation initiatives must take into account state and federal regulations and reporting requirements.

“There is a significant amount of regulation in our business,” Scott Tetenman, NYPA’s Senior Vice President of Finance, recently told ASUG. “There are very specific rules, standards, tariffs, and different nuances you don’t find in other industries.”

As the largest state public power utility in the country, NYPA produces approximately 25% of the state’s electricity production (80% of which is hydropower), operates 1/3 of the state’s high voltage transmission system, and generates approximately $4 billion dollars a year in revenues. Further complicating its FP&A processes, NYPA serves multiple customer groups with different rate structures, and participates in the wholesale electricity market as a generator, load-serving entity, and transmission owner. According to Tetenman, flexible FP&A solutions are a necessity for utilities responsible for adhering to such standards to precisely forecast their financials.

To address regulatory and reporting requirements while removing many of the challenges associated with the unique nature of NYPA’s business, NYPA selected SAP Analytics Cloud (SAC), an approach the utility discussed at the SAP for Utilities, Presented by ASUG conference last October.

ASUG recently sat down with Tetenman and Maciej Przybylowski, NYPA’s Director of Financial Planning, to discuss the organization’s ongoing implementation of SAC into its FP&A processes, solution and vendor selection processes, implementation strategies, approaches to change management, and advice for other utilities weighing the pros and cons of similar journeys.

Modernizing Financial Planning and Forecasting Processes

In 2020, NYPA kicked off its Vision 2030 initiative, a strategic plan that among other ambitious goals includes becoming the first end-to-end digital utility in the United States. A major pillar in the program involved moving from traditional, manual processes to digitally modernized ones. This emphasis is part of a larger, on-going, organization-wide digitalization effort, which includes implementing digital monitoring systems on assets such as generating units and transmission lines, along with replacing manual switches with digital infrastructure.

“There was a big push from our operations side of the business to take what had been manual controls and move everything over to digital,” Tetenman said. “We’re definitely moving in that direction.”

For NYPA, a key effort within this digital overhaul—and one strategy to eliminate time-consuming processes—was to implement a new solution to improve financial planning and reporting functions.

Tetenman first joined NYPA almost 15 years ago; back then, NYPA housed its financial operating forecasts in a Microsoft Excel model, and despite upgrades and enhancements to its layout, that model continued to serve as the structure supporting all the forecasting for NYPA’s financial operations.

“As our business has expanded, not only from a volumetric standpoint but with respect to the breadth of what we’re covering, it’s become more and more difficult to contain all of that within an Excel environment,” Tetenman said. “It’s also become difficult extracting information, putting it into usable formats, and running scenario analysis. Excel is powerful and customizable, but it also has limitations.”

According to Tetenman, the project of shifting to a new FP&A solution was a few years in the making, due to the difficulty of updating a “highly complex forecasting model” that could accommodate the utility’s various functions, systems, and customer tiers, while enabling NYPA to participate in the New York ISO wholesale energy market and fulfill its mission of serving its customer base.

“We felt that it was going to be difficult to find something that could not only replicate [NYPA’s forecasting models] but also give us the flexibility to be able to adapt as our business grows and evolves over the years,” Tetenman said.

As NYPA grew and expanded the scope of its services, the need to leverage a dedicated solution for financial forecasting became apparent. Tetenman noted that, while Microsoft Excel provided NYPA with the flexibility necessary for its FP&A functions, housing all the enterprise’s financial data—along with extracting that data and converting it into usable formats—became more of a burden as NYPA grew. In total, NYPA’s financial planning process incorporates nearly 50 different data streams, which require multiple models to accommodate the forecasting process. Whatever solution the utility implemented, it was imperative that it could support operations while providing the same functionality as the legacy solution.

Inside NYPA’s Discovery Phase and Change Management Process

NYPA is an SAP customer, currently leveraging SAP ERP Central Component (ECC) 6.0, but the organization sent out requests for proposals (RFPs) to several implementation vendors and solutions providers, aiming to find the best fit for its next FP&A solution.

“As we started looking out at potential systems, we realized that there are now solutions that allow for the type of flexibility, reporting, scenario analysis, and advanced analytics that we wanted to do,” said Tetenman. “We made the decision that, yes, it was time to move to a new system.”

Przybylowski noted that NYPA received many responses; after reviewing the proposals and narrowing them down to a set of final options, NYPA requested a test to see “the system and implementation vendor in action,” he said.

The final pool of software vendors was given data sets and specific set-up instructions to simulate processes used by the NYPA FP&A team. Additionally, NYPA also asked for the option to “play around” in each system, so employees could see whether the platforms could be implemented with minimal training.

Beyond FP&A, several other NYPA divisions—including budgets, revenue pricing and analysis, and treasury groups—were involved with the selection process, given access to solution demos, and offered their input and opinions on potential solutions.

“It was not only the FP&A group that was involved in the decision-making, the selection of a vendor, and the selection of a software solution,” Tetenman said. “We had representatives from every group that we work with who have any type of tangential contact with us in terms of putting together a financial forecast. Basically, everybody had a seat at the table.”

Involving the wider organization at this stage made the change management process far easier, Tetenman and Przybylowski agreed. “People knew the changes that were needed to accommodate the new system,” Tetenman said.

After opting to implement SAP Analytics Cloud, NYPA worked with Improving, the selected implementation vendor, for nearly three months to lay the foundation for the final software configurations. During this period, NYPA created a library of documents and processes necessary to facilitate the success of the final software configuration.

NYPA next established project milestones before moving into the testing phase. During this part of the project, Tetenman and Przybylowski said the implementation team focused primarily on ensuring FP&A processes worked correctly and that the financial forecasting results generated by SAP Analytics Cloud reflected those results generated using the legacy Excel solution. While the team wasn’t expecting a perfect one-to-one replication of their Excel results in SAC, Tetenman said that they were looking to results that were “explainable and reasonable.”

Current Status of NYPA’s SAP Analytics Cloud Implementation

NYPA broke its SAC go-live into two distinct phases. Tetenman and Przybylowski noted that the end goal for this first phase was for NYPA to produce both four-year and ten-year financial planning horizons for profit and loss (P&L), with details available for all profit centers.

“We also wanted to produce the data that could be used to satisfy NYPA’s mandatory reporting with the state,” Przybylowski said, noting that the utility must deliver three different financial reports to the New York state government annually.

The next part of its go-live process, which NYPA is currently kicking off, focuses on integrating accounting actuals into SAP Analytics Cloud to produce complete financial reporting throughout the current budget year. “That would serve as a very, very valuable tool for our executive management in terms of identifying the potential areas that need attention,” Przybylowski said.

Advice to Other Utilities Implementing FP&A Solutions

With NYPA’s implementation project underway, Tetenman and Przybylowski also offered suggestions for other utilities embarking on similar journeys. The two once again underlined the need for flexible solutions to accommodate the regulatory and reporting requirements inherent in utilities’ FP&A processes, and to enable their enterprises to run various kinds of calculations.

Tetenman and Przybylowski found that the preparation stage of NYPA’s implementation project was “absolutely critical” to its success. The team found engaging with Improving to prepare its organization for the transition, along with the extensive documentation NYPA had created around its pre-existing systems, to be additionally helpful.

Given the complicated financial requirements for utility companies, along with the added wrinkle that NYPA participates in three distinct utility markets—load-serving entity for customers, generation, and transmission—the organization needed to choose a FP&A solution that met a very specific set of criteria.

“It was key to find something flexible enough to program in what we needed to do,” Tetenman said. “Generalized products would not work for us. We can’t really take things off the shelf and have them be applicable to our business model.”

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