Custom Developments for FERC-Compliant Financials Reporting Using SAP HANA and SAP EPM 10

  • by Dr. Marco Sisfontes-Monge, Managing Partner, Arellius Enterprises, Inc.
  • May 8, 2014
Follow the stages of the development of a real-life custom solution developed for financial reporting within the oil and mining, utilities, and electric and gas distribution industry in the United States. Compare this improved solution with the same processes executed in SAP ERP Central Component (ECC) Managerial Accounting (CO) and Financial Accounting (FI) modules.
Learning Objectives

Reading this article, you will learn how to:

  • Review the limitations of SAP ERP Central Component (ECC) for the US utility industry and how SAP Enterprise Performance Management (EPM) 10.0 and SAP HANA can deliver customized solutions and simplifications of processes
  • Use a customized solution based on EPM and SAP HANA to simplify the planning, forecasting, consolidation, and reporting process
Key Concept

The US Federal Regulatory Commission (FERC), an independent agency that regulates the interstate transmission of electricity, natural gas, and oil, reviews proposals to build liquefied natural gas (LNG) terminals and interstate natural gas pipelines as well as to license hydropower projects. The Energy Policy Act of 2005 gave FERC additional responsibilities as outlined in FERC's Top Initiatives and updated Strategic Plan. Therefore, a more transparent view of the makeup of the revenue and expenses of utility companies is required.

Companies in the U.S. utility and oil and mining industries face difficulty maintaining the visibility and transparency in financial processes such as planning and consolidation that regulators in the US, especially the Federal Regulatory Commission (FERC), require. FERC compliance is factored into decisions and financial reporting of companies that do business in the utility and oil and mining industries.

I explain how a team from Arellius Enterprises developed a customized solution based on SAP Enterprise Performance Management (EPM) 10.0 that was designed for oil and mining, utilities, and electric and gas distribution in the United States. Our team developed this solution to provide an alternative approach to the same processes that occur in SAP ERP Central Component (ECC) with SAP EPM 10.0. The alternative solution includes Business Intelligence (BI) components of both BusinessObjects and SAP NetWeaver BW and uses SAP HANA as the database. This solution includes five key components: ALLOC_PERC, OPEX_CAPEX, FINANCIAL_PLANNING, FINAL_PLAN, and CONSOLIDATION.

I review the ECC, Managerial Accounting (CO), and Financials Accounting (FI) functionality that our team replicated using SAP EPM 10.0 and SAP HANA as the back-end database for performance reasons. The development of this functionality was done based on a simplification of the sophisticated SAP ECC processes in SAP ECC CO and FI modules. To develop this customized solution, a detailed assessment and revision of the SAP ECC process had to be performed and an extensive involvement with multiple teams was required to finalize the product that I describe. I review the justification that caused this product to be developed and made available to my clients in the utility industry and available for further customization for a particular company.

From an IT perspective, Figure 1 summarizes the overall problem that utility companies have complying with FERC reporting regulations. The three components (FERC, Actuals, and Budget), combined with consolidation processes, are critical and mandatory elements in the industry from a transactional point of view. Any other additional information, such as planning and forecasting, depends on these components and is complementary. Maintaining consistent data during different processes (forecast, plan, actual) makes it difficult to compare complex data at these different levels. This is the challenge finance teams at utility companies face.

Dr. Marco Sisfontes-Monge

Dr. Marco Sisfontes-Monge is managing partner of Arellius Enterprises based in New York City and for more than 15 years has supported SAP implementers, direct clients, and other customers in Europe, North America, Latin America, Asia, and Africa in the following industries automotive, insurance, pharmaceutical, logistics, software, utilities, chemical, oil and gas, exploration and natural resources, discrete and process manufacturing, retail, and financial services. His background includes project management and performance measurement, product- and activity-based costing, design optimization, discrete and process simulation, system dynamics, and structural equations modeling. He also has finance specializations from the London Business School and Said Business School from Oxford University. He wrote the SAP PRESS books CPM and Balanced Scorecard with SAP, Controlling-Profitability Analysis (CO-PA) with SAP, Implementing SAP Business Objects Planning and Consolidation (SAP BPC): Volume I: Foundations, and Implementing SAP BusinessObjects Planning and Consolidation (SAP BPC) Volume 2: Advanced Concepts.

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