Dealing with regulation

One of the issues with regulated and partially-regulated utilities such as those in the public sector, is that the actions of the regulator may impact projects already started.  That’s the cautionary tale this week out of New Zealand:

TrustPower announced to the stock exchange this month that it had suspended work on an $18 million project to replace its billing and customer management systems with Oracle software and would probably have to write off a portion of the $9.5m it had spent on the system to date.

Meridian Energy put a project to install Oracle software on hold in December in similar circumstances. Contact Energy last year raised eyebrows within the industry by budgeting up to $80m to replace its systems with software from Germany’s SAP.

Contact would not comment on whether it believed any unnecessary complexities in the electricity market were behind the big bill, or had contributed to a decision by its original implementation partner, IBM, to pull out of the project, but said it was now pressing ahead with the investment.

TrustPower spokesman Graeme Purches says it became clear Oracle’s software would need to be extensively changed to meet the demands of the New Zealand market, so TrustPower had decided to review its options.

Oracle had tendered software used in Australia that both companies believed would do the job, but the difficulty of dealing with 28 electricity lines companies that had their own ways of calculating tariffs, reconciliation with the wholesale market, and a variety of metering technologies meant the software would need to be largely rewritten.

"New Zealand is a complex market and it is probably no coincidence that three companies have had to pause projects and they are all in New Zealand."

Oracle was not to blame, he says. "Maybe there was an issue about us not communicating in enough detail what we were expecting."

This entry was posted on 21. February 2010 at 07:52 and is filed under projects, vendors. You can follow any responses to this entry through the RSS 2.0 feed. You can leave a response or trackback from your own site.

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