Question

London Hydro (LH), the electricity provider of London, Ontario, and surrounding areas, is wrapping up a lengthy and costly system upgrade that was sparked by government regulations. Ontario prides itself on using the latest technologies to conserve electricity. In 1998 it passed two regulations that paved the way for smart-metering: the Electricity Act, 1998 and the Ontario Energy Board Act, 1998. Smart-metering uses computerized electric meters on homes and small businesses that can record electricity use on an hourly basis. So, rather than totalling up kilowatt-hours on a monthly basis as traditional meters do, smart meters provide a record of electricity use every hour. Smart meters are able to report usage directly to utility companies over phone lines or the Internet. The benefit of smart meters, in addition to saving the electric company the cost of sending an employee to read meters, is setting time-of-use pricing. Time-of-use pricing charges customers more for electricity during peak hours (11 a.m.– 5 p.m.), less during mid-peak hours (7 a.m.–11 a.m. and 5 p.m.–10 p.m.), and even less during off-peak hours (10 p.m.– 7 a.m.). Time-of-use pricing should encourage consumers to consume less during peak hours, adding up to big savings for Ontario, its citizens, and the environment. Ontario’s smart metering initiatives have power companies across the province scrambling to meet specifications and deadlines. Software and hardware must be purchased and installed to prepare for the arrival of a tidal wave of customer consumption data. London Hydro started to prepare early in hopes of getting a jump on the competition. Rather than adding a new system to accommodate smart metering, London Hydro decided it was time to upgrade all of its systems. London Hydro’s old custom-built system could barely keep up with current usage. The company decided to shop around for a new system that could not only accommodate smart metering but could tie that data in with core business systems. Mridula Sharma, London Hydro’s Director of Information Services, stated that LH was in need of “a more integratable solution that was scalable and flexible.” The company needed to “prepare for future growth as well as enhance business process workflow,” Sharma said. Sharma and her team set to work outlining the details of the new system based on government mandates and internal needs. With a systems analysis report in hand, Sharma began searching for a company that could design and implement the system. Soon, she narrowed the field to three candidates: SPL Solutions (Oracle), another customer-built solution, and SAP for utilities. Sharma chose SAP primarily because the system was designed for use by a utility company and required little customization. London Hydro selected another outside firm, Wipro Technologies, to implement the system because Wipro had extensive experience implementing utility software. The resulting system provides powerful management of smart metering data flowing from the government’s central smart metering data repository. The task of assigning time-of-use prices based on customer consumption is fully automated and will cause London Hydro no additional overhead.

[Source: Chapter 12, R. M. Stair and G. W. Reynolds, Principles of Information Systems: A Managerial Approach, 9th ed. Cengage, 2010.]

a) Why did London Hydro initiate its smart-metering system development?

b) What benefits did London Hydro enjoy by purchasing an off-the-shelf system and outsourcing the implementation?

Answer 1

a) To conserve electricity in the city Ontario and the surrounding areas. Smart-metering system works as follows :

1) It uses computerized electric meters on homes and small businesses that can record electricity use on an hourly basis. So, rather than totalling up kilowatt-hours on a monthly basis as traditional meters do, smart meters provide a record of electricity use every hour.

2)It uses "Time-of-use pricing", which charges customers more for electricity during peak hours (11 a.m.– 5 p.m.), less during mid-peak hours (7 a.m.–11 a.m. and 5 p.m.–10 p.m.), and even less during off-peak hours (10 p.m.– 7 a.m.).

b) The London Hydro enjoys the following benefits :

1) saves the cost of sending an employee to read meters.

2)customization.

3)No additional overhead since the task of assigning time-of-use prices based on customer consumption is fully automated.

4) Their system is powerful than the government’s central smart metering data repository.