Execute the FERC Reporting Process with SAP BPC

  • by Dr. Marco Sisfontes-Monge, Managing Partner, Arellius Enterprises, Inc.
  • October 16, 2012
Learn about the Federal Energy Regulatory Commission (FERC) reporting process and its importance to the utilities industry. See how to develop and implement the FERC calculation and reporting process using SAP Business Planning and Consolidation.
Key Concept

The Federal Energy Regulatory Commission (FERC) is the United States federal agency with jurisdiction over interstate electricity sales, wholesale electric rates, hydroelectric licensing, natural gas pricing, oil pipeline rates, liquefied natural gas terminals, interstate natural gas pipelines, and nonfederal hydropower projects. FERC is an independent regulatory agency within the US Department of Energy. All FERC decisions are reviewable and supported by the US federal court system. FERC reporting refers to any financial reports that utility firms in the US must provide to FERC. FERC reporting includes financial and operational information from electric utilities, licensees, and other firms subject to the jurisdiction of the FERC. FERC reporting functionality is included in the SAP ERP Central Component (SAP ECC) module as part of the IS-U/FERC module. This data is specific to the US regulatory environment.

The information provided by utility companies to the Federal Energy Regulatory Commission (FERC), also known as FERC reporting, is supported by the US Federal Power Act (18 C.F.R. Part 101). This information is not confidential and is fully available to the general public. As part of the submission process, electric companies are required to provide FERC Form 1 and FERC Form 60. Natural gas firms must provide FERC Forms 2, 2-A, and 3-Q. Form 1 and Form 60 are applicable to service and operating companies in the electric business that sell or provide transmission services that exceed the following criteria:

  • Megawatt hours of total annual sales: 1 million
  • Hours of annual sales for resale: 100 megawatts
  • Hours of annual power exchanges delivered: 500 megawatts
  • Hours of annual wheeling for others (deliveries plus losses): 500 megawatts

In the case of natural gas companies whose combined gas transported or stored for a fee exceeds 50 million dekatherms in each of the previous three years, FERC Form 2 and 3-Q must be submitted. Each natural gas company not meeting the threshold for FERC Form 2, but having a total gas sales or volume transactions exceeding 200,000 dekatherms in each of the previous three calendar years, must submit FERC Forms 2-A and 3-Q. Newly established entities must use projected data to determine whether they must file the FERC Form 3-Q and FERC 2 or 2-A.

The same framework can be used to accomplish or create the reports required by the natural gas firms using SAP Business Planning and Consolidation (SAP BPC) to support the SAP ERP Central Component (SAP ECC) controlling FERC module procedures to manage actual, forecast, plan, and budget data for future business expectations and communicate them to the FERC.

The SAP ECC FERC Process and Its Limitations

I previously discussed the SAP FERC process in more detail in the article “Understanding the FERC Process.” I recommend that you use that article as a reference point. The SAP ECC FERC process can be summarized as follows (Figure 1):

  1. Identify the cost objects (e.g., Work Breakdown Structure [WBS] elements, cost centers, orders, cost elements, and other cost collectors) relevant for FERC calculation.
  2. Identify a list of FERC indicators to be assigned later to the cost objects.
  3. Identify the cost elements relevant as part of the SAP FERC calculation.
  4. Establish the mapping relationships between natural SAP G/L accounts and SAP FERC accounts using FERC indicators and cost element ranges.
  5. Perform the assignment of FERC indicators to SAP ECC cost objects.
  6. Execute the FERC process to perform mapping and populate the FERC accounts with the data following the mapping rules defined in step 4.


Figure 1
The SAP ECC FERC process (simplified)

For a better understanding I simplify the end-to-end process of SAP ECC data from a FERC perspective in Figure 2. Notice that I have divided time from T0 to T6. T0 is the first time when the month is opened in SAP ECC to post transactions. T6 represents the moment when month-end closing occurs. Notice that for FERC purposes the time when the data is available in the tables for service companies is T1 in a pre-burden and pre-allocated view (before overhead postings, direct and indirect, as well as direct allocations occur). Postings for operating companies occur in T5 after the FERC indicators have been removed from the service companies. Postings for operating companies also occur after all the Managerial Accounting (CO) and FI processes have occurred before settling all cost objects to either cost centers or G/L accounts for preparation of the month-end closing process.


Figure 2
End-to-end view of one month of actuals in SAP ECC and its relation with the FERC process

Defining what each view means for a utility company can be quite complex, so do your homework before finalizing your financial design process. Also, Figure 2 must be adjusted to the particular needs of your firm, but it provides a general description of the kind of data that the FERC process in SAP ECC must consider from start to finish. Defining the pre-burden and pre-allocated burden and allocated views requires a lot of interaction between the SAP teams and the regulatory department. If you focus on the FERC process one more time, you can see that configuration in the SAP system is quite complex and requires a clear understanding of the differences between transactional data and FERC data. FERC data is a mapping from transactional data, and it is more static than FI and regular CO postings.

I choose to use the WBS element as the cost collector, specifically the WBS element level 2, or the project/activity combination, and assign the FERC indicator according to the mapping rules defined in the system. However, your implementation might require a combination of several SAP CO objects, so review the implications of the FERC process with your auditors, financial and legal reporting, financial, accounting, operations, FI and CO teams.

For our purposes, the WBS element and assignment of the FERC indicator to the WBS, and the linkages to be described later are sufficient to move forward with this design. Once I complete this task, the system transfers this information to the cost elements associated with the WBS element in which the FERC indicator was assigned. The data is then ready to perform the FERC mapping process.

In the example shown in Figure 1 I use only primary cost elements that are the controlling equivalent of SAP G/L accounts in the SAP FI module. After I assign the FERC indicator to the WBS elements, the FERC mapping occurs and the FERC account or regulatory G/L account is populated. It is possible to attach the same FERC indicator to multiple WBS elements or different FERC indicators to the same WBS. However, the mapping of the process is limited by the relationship or mapping table created, and that works behind the scenes to populate the appropriate FERC account. Now that you have an understanding of the capabilities of the SAP ECC FERC module, let’s review a few of the drawbacks:

1. Only one cost object or collector (e.g., WBS, cost center, order) is carried over to the FERC tables. For example, this limitation affects the level of information that is available from the SAP ECC FERC reporting because the mapping only carries one cost object without the relationships with other cost objects such as cost centers. In this way, as shown in Figure 1, if the indicator is set up in the WBS element level 2, then only the WBS element is available in the mapping, and the relationships with orders, cost centers, and other cost objects are lost. To resolve this issue, use the characteristic derivation capabilities from SAP NetWeaver Business Warehouse to provide information such as the cost center associated with the WBS element in which the indicator is assigned.

2. The FERC indicator traces the costs from the moment the FERC indicator is assigned to a cost collector. Even though this facilitates the tracing of costs, it complicates tasks when FERC reporting  for service companies has to be executed in a pre-burden and pre-allocated scenario. Similarly, when the system calculates the FERC mappings and populates the appropriate reports for operating companies in the post-burden and post-allocated view, the service companies’ indicator interferes with the results. To execute the SAP ECC FERC mapping calculations in the SAP ECC FERC module for the operating companies without the distortion of the FERC indicators set up for the service companies, all indicators must be removed prior to the execution of the FERC module to calculate the values for the operating companies.

3. FERC calculation is not real time because the SAP ECC FERC tables are only populated until the FERC module is executed. Therefore, to update the FERC accounts, I need to execute the FERC module so that the FERC reports are refreshed with any new data, mapping changes, or assignments that occurred in the transactional data.

4. FERC for service and operating companies cannot be executed at the same time. There is a required delay that has to happen while other CO and FI processes occur to prepare the transactional data before the FERC calculation can be executed for the operating companies.

5. The FERC process differs from the traditional transactional processes from SAP. It requires a clear understanding of the influence of FI and CO in your data and mappings.

The Relationships Between Cost Objects and the FERC Module

The CO structures and WBS elements describe relationships of objects (i.e., how transactional data is stored and how reporting must occur in the SAP ECC environment). They also describe how the transactional data is posted. Table 1 and Figure 3 provide a brief example of why cost objects and any of their relationships must be aligned with the overall design of SAP ECC to simplify the SAP ECC FERC process and why both SAP cost object design and transactional data must support the SAP ECC FERC process. The design in Figure 3 and Table 1 affects how information is used, analyzed, and calculated as part of cost center accounting, project system, internal orders, the FERC module, assignment of overheads, direct and indirect allocations, and many more areas.

Table 1 includes multiple possible scenarios that describe how the SAP cost objects can be configured and some of the relationships that might occur. In this case, Table 1 only focuses on the most common cost objects such as WBS elements, cost centers, and orders. I create four different scenarios that describe how the data is arranged in the SAP ECC tables and what happens if the FERC indicators are assigned to each line for each scenario.


Table 1
Different transaction postings using the different cost objects

To provide a brief example on how SAP ECC Cost Collector relationships influence how the FERC process is executed, I review the diagram shown in Figure 3. This diagram shows the relationship and the three main SAP cost objects that are used in a real SAP implementation to store costs either at the order, WBS, or cost center level. In Figure 3 there are also relationship arrows among these types of objects. These relationships are dependent relationships in the following ways:

  • When an SAP order is created, it is always linked to a cost center and a WBS element.
  • When a WBS element is created, it is always linked to a cost center.
  • The cost center is considered the highest level of summarization of costs for the design shown in Figure 3.
  • A WBS element is unique to a cost center and company code.
  • A cost center can have multiple WBS elements associated with it.


Figure 3
SAP CO structures and relationships between cost objects

All these elements shown in Figure 3 affect primary and secondary cost elements, as well as SAP G/L accounts. For the purposes of this article, I consider primary cost elements as a driver of the SAP FERC G/L account. I do not consider secondary cost elements as part of the FERC process.

Scenario 1 in Table 1 is the perfect posting for reporting and FERC following the relationships shown in Figure 1 because it contains every component critical for financial reporting in the CO module. Scenarios 2, 3, and 4 are possible configurations of the data that can be created using SAP ERP, with the problem that the cost objects are not completely linked to each other. Therefore, information might be lost depending on how the FERC reporting occurs either driven by WBS, cost centers, or orders. This lack of unity complicates the FERC process, and the legal department must be clear on how these relationships affect the information that they need to review and report to the US FERC commission.

Scenario 1 in Table 1 provides a complete linkage of the selected cost objects. Everything is linked to support cost allocations and overheads, thereby allowing users to focus on the project. Activity information is contained in the WBS elements in which the SAP ECC FERC module can attach the regulatory indicators. Scenario 1 provides information at the lowest level of detail with the SAP internal order, and the highest level of detail is the cost center. Scenario 1 also provides an intermediate level of reporting higher than order and lower than cost center, which is the purpose of the WBS element level 2 in this design.

In scenario 1, which is the recommended design and the one that I choose to use for my SAP BPC example, I use the WBS element level 2 (Project/Activity) to assign the regulatory indicators to a project. Activity is reflected in the WBS element, and thus becomes the source object for the SAP ECC FERC module. Scenario 1 allows users to report US$100 either using WBS or cost center reporting, and the value has the same effect at the company code level, and US$100 shows in a report for the WBS or the cost center. For this reason let’s say that scenario 1 provides a complete relationship of SAP CO objects at different levels of details and aggregation.

Scenario 2 in the cost in US dollars was entered directly in order 112 and linked to a cost center without a WBS element. This means that if you design your FERC process based on WBS elements, and there is no WBS linked to scenario 2, then the US$200 entered in scenario 2 is not be reflected in the FERC mapping when the FERC module is executed. The same thing happens for scenarios 3 and 4 if the WBS element is the selected object to assign the FERC indicator. Scenarios 3 and 4 also cause the problem that the only common point to report the information accordingly is the company code and not cost center or WBS elements. In this way, as shown in Table 1, cost center and WBS elements work as grouping cost collectors.

Figure 3 describes the relationships required for the SAP CO objects to be created to maintain the data with the correct links to perform financial, operational, and FERC reporting. Also, the relationships shown in Figure 3 for scenario 1 mean that if you choose to report based on cost centers all postings from SAP orders and WBS elements are considered. Similarly, if you choose to report based on WBS, all the information posted to the cost centers and SAP orders are available, and the totals must match. Therefore, either assigning the FERC indicator at the cost center or WBS element level carries the same total sum. If one single line is missing from the relationships described in Figure 3, and if a FERC indicator is assigned, there is missing information or you are at risk to consider the same transaction more than once if you select the FERC indicator assigned to cost centers, WBS elements, and SAP orders.

The SAP BPC FERC Process

Now that you have a clear idea of what the SAP ECC FERC process does, as well as the major considerations for required alignment of actual data, I explain why the SAP BPC team has a more difficult task if the goal is to have the same level of comparison between SAP FERC actual data extracted from SAP ECC into SAP NetWeaver BW and then into SAP BPC. The SAP BPC team also plans, budgets, and forecasts data sets and calculates FERC for each of them. I design an alternative strategy to be implemented in SAP BPC as shown in Figure 4.


Figure 4
SAP BPC FERC account derivation process

When situations are so complex that your implementation team doubts that the process is possible, go back to the basics and remove the complexity of the problem by using a clear, concise business model (Figure 4). If my goal is to calculate the SAP BPC FERC reporting for plan, budget, forecast, and any other data sets needed, it is important that I simplify FERC based on the information previously discussed. In this way, based on the information that I know in Figure 1, I can create an SAP BPC-specific FERC process.

Step 1. Set up the list of FERC indicators to be used in the system to classify your SAP CO cost objects, such as WBS elements, orders, and cost centers (Figure 5).


Figure 5
SAP FERC indicators in the SAP BPC environment

Step 2. Determine the Dimensions in SAP BPC that align with the fields to be extracted from the SAP ECC FERC module. You can use the SAP NetWeaver BW FERC extractors as a reference to plan your design as shown in Figure 6.


Figure 6
Fields available in the SAP NetWeaver BW FERC extractor for summary data

Note
The FERC module has a limited amount of information available after the module is executed in SAP ECC. For the purposes of this SAP BPC business model, I focus on the following fields: Profit Center, Fiscal Year/period, Amount, Object Identification In Output Format (with Object Type) — which is the CO object in which the FERC indicator is assigned in the transactional data, G/L account, company code, cost element (source cost element or the cost elements associated with the CO objects in which the FERC indicator is attached), and FERC account number. The SAP NetWeaver BW FERC extractor is a completely different extractor from the traditional FI and CO extractors that are common to most implementations, and it is available with the SAP IS Utilities versions for SAP ECC and SAP NetWeaver BW.

Step 3. Set up the FERC chart of accounts for balance sheet and income statement. These accounts and groupings are additional to your traditional SAP G/L accounts used by the transactional system. They are FERC specific. These accounts also must be set up in your SAP BPC account dimension as any other account hierarchy used in SAP BPC.

Step 4. Set up the SAP FERC mapping tables that link the indicators and cost element range to the list of FERC accounts. Generally, a Microsoft Excel sheet is required as reference to support the configuration as shown in Table 2. You can review a more extensive table in the previous article, “Understanding the SAP ECC FERC Process.” Note that Table 2 clearly maintains the combination to the mapping SAP G/L account + FERC indicator = FERC G/L account.

Company

 

Source object

 

SAP FERC G/L account (target)

 

FERC indicator

 

SAP G/L account (source)

 

USD

 

5110

 

WBS_Level2

 

144000

 

101

 

C4560700

 

10

 

5110

 

WBS_Level2

 

144000

 

101

 

C4565310

 

20

 

5110

 

WBS_Level2

 

144000

 

101

 

C4567360

 

30

 

5110

 

WBS_Level2

 

144000

 

101

 

C4565380

 

40

 

5110

 

WBS_Level2

 

144000

 

101

 

C4565410

 

50

 

5110

 

WBS_Level2

 

144000

 

101

 

C4210300

 

60

 

5110

 

WBS_Level2

 

144000

 

101

 

C4191180

 

10

 

5110

 

WBS_Level2

 

144000

 

101

 

C4302000

 

30

 

5110

 

WBS_Level2

 

144000

 

101

 

C4191370

 

10

 

  Table 2 An example of the FERC G/L account mapping

Step 5. Populate the members in the category dimension in SAP BPC. Note that I need to create a category value for each source data set (such as actual, plan, budget, or forecast) and the target data set (such as FERC_BUDGET, FERC_Plan, FERC_Forecast). I choose to create FERC_BUDGET as the target of the data generated using the BUDGET_VF category value as the source data set (Figure 7).


Figure 7
Review the SAP BPC category dimension values

Step 6. Define a development strategy for how the SAP FERC indicators are assigned to SAP CO objects available in the SAP BPC environment. In this case the WBS element is the CO object to be used to receive the assignment of the FERC indicators in the subaccount dimension using the BUDGET_VF category. In SAP BPC there are multiple choices to choose, depending on the type of data management package. The transactional data resides in the BUDGET_VF, or final version, of the budget in SAP BPC. After the FERC indicators are assigned, the FERC program shown is executed to perform the mapping from the source category (BUDGET_VF) to the target category in FERC_BUDGET.

Note
For SAP BPC and SAP NetWeaver BW architects it is clear that additional data modeling strategies and transformation of data is required to prepare the data for the FERC indicator assignments with the dimensions shown in Figure 6, Table 2, Figure 8, and Figure 9. However, these steps are outside the scope of this article.

In the SAP BPC version 7.x or EPM 10, and also of the kind of environment that you are using — either SAP BPC version for NetWeaver or SAP BPC version for Microsoft — the important part is that the FERC process can be developed in either version, but the tools available are slightly different and identified as follows:

  • Business rules (available in both versions)
  • Package links (available in both versions)
  • SAP BPC Script Logic (available in both versions; be aware of the differences in commands and coding between the two environments, meaning the same script logic program cannot run in two different environments without adjustments)
  • SSIS packages (only available for SAP BPC version for Microsoft)
  • Business Add-Ins (BAdIs — ABAP programs specifically designed for SAP BPC version for NetWeaver)
  • ABAP programs and process chains (only for SAP systems)
  • A combination of the preceding tools depending on the SAP BPC version. For example, you cannot use SSIS packages with the NetWeaver version.

Step 7. After selecting how my FERC process is to be designed, I need to link the program to an SAP BPC data management package before it can be executed and SAP FERC G/L accounts are populated accordingly. Remember that there must be an alignment between your plan, budget, and forecast data similar to the discussion provided in Figures 3 and 4.

Step 8. I assign the FERC indicators to my transactional data either using a manual process or the alternatives described in step 6. Generally, this data can be separated into two programs or a single program that performs the complete process at once. As shown in Figures 8 and 9 I choose to have two separate programs: one for the FERC indicator assignments and another one to execute the FERC calculation process.


Figure 8
A sample of a FERC indicator assignment data management package


Figure 9
A sample of a FERC calculation data management package

Step 9. Follow the SAP BPC FERC model provided in Figure 4. Translate these relationships to the transactional data as shown in Figure 10. Notice that I show an SAP BPC EvDRE ([Everest] Data Range Exchange) report, and I choose to display the data available in the database filtered by natural accounts and using the FERC G/L account 144000 for the BUDGET_VF data set. It is clear that the transactional data resides in the BUDGET_VF category value, and once the program is executed, the SAP BPC FERC data resides in the target category value identified in Figure 7.

In my example the mapping data is available in the FERC_BUDGET category value. Note that in my example I map all the SAP G/L natural accounts (their total value is US$1100). I map all these accounts for the 101 FERC indicator to the target SAP FERC G/L Account 144000. For that reason, there are no values in this account in Figure 10 because only values from the FERC_BUDGET data set are available in this account.


Figure 10
Review the SAP BPC transactional data for the BUDGET_VF data set

Step 10. Execute the SAP BPC data management package by clicking Run FERC Data Management Package (Figure 9). In this case I want to execute the FERC mapping data management program created using BUDGET_VF as the reference data set, company 5110, in USD currency, and for 2005. JAN (Figure 11). Note that I execute the Run FERC data management package. The FERC program maps the SAP Natural G/L accounts (traditional Balance Sheet and Income Statement Accounts) according to the logic identified and maps the accounts to the target SAP FERC accounts, such as the 144000 shown previously in Table 2.


Figure 11
Execute the SAP BPC FERC customized data management package

Step 11. Perform FERC reporting using the SAP BPC EvDRE tool used for customized reports or use the predelivered templates to generate the FERC reports. Remember that the FERC reporting requires a completely separate set of accounts for balance sheet and income statement and parent nodes. To better understand what just happened after the execution of the SAP BPC FERC program (Figure 12).


Figure 12
Review the FERC calculations using an SAP BPC EvDRE report

As shown in the SAP BPC EvDRE report in Figure 12, I work in a different data set called FERC_BUDGET. The SAP G/L natural accounts are empty, meaning that there is no data for these accounts. In comparison, the FERC G/L account 144000, which is not an SAP G/L natural account, is populated with data for the time period selected, 2005.JAN. Understand that the term SAP G/L natural account is an SAP G/L account that exists in the SAP ECC environment.

The store transactional data, compared to SAP FERC G/L accounts, are not natural accounts, because they are derived based on the mappings required for the FERC calculation. Therefore, no transactional data can be posted directly to them. A few exceptions might occur for the SAP ECC FERC module to this rule, such as selected expense, balance sheet, and revenue accounts. In this way, I demonstrate that the SAP BPC module is capable of supporting the FERC process from SAP ECC to generate a FERC view for plan, budget, forecast, and any other data set required.

 

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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You may contact the author at msisfontes@arelliusenterprises.com.

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