Sets BasicsAndVocabulary

Application No.
:
Exhibit No.: SCE-09
Witnesses: B. Hodges
L. Miller
K. Payne
M. Yazdi
(U 338-E)
2009 General Rate Case
Enterprise Resource Planning (ERP)
Before the
Public Utilities Commission of the State of California
Rosemead, California
November 2007
SUMMARY
• Section I defines “Enterprise Resource Planning,” referred to throughout as ERP, as the
use of multiple components of computer software and hardware to integrate an
organization’s data and processes into a unified system (referred to as an ERP system).
This section provides a general overview of ERP systems and states SCE’s goals for its
own ERP implementation, which will result in the replacement of nearly half of our
existing IT portfolio, including many obsolete legacy systems. Our goals, as discussed in
Section I, include achieving efficiencies first described in SCE’s Business Process
Integration (BPI) testimony in the 2006 GRC and increasing the functionality of our
systems to better serve our customers and meet our business challenges.
• Section II describes our ERP implementation in detail. There, we discuss:
o our status quo business processes and the business challenges we hope to address
through the implementation of our ERP system;
o our business-case development and the steps we undertook to plan our ERP
implementation;
o the scope of our ERP implementation, which will integrate and streamline
business processes across the Company, including Energy Generation, Energy
Delivery, Customer Services, Corporate Financial Management, and Corporate
and Operations Support;
o the estimated costs of our ERP Project—we estimate one-time capital
expenditures of $400.7 million (nominal dollars) over the 2006 to 2009 period
and Test Year 2009 O&M expenses of $6.7 million (constant 2006 dollars);
o the benefits we expect to achieve due to the efficiencies derived from business
process integration; and
o our cost effectiveness analysis— SCE found that benefits exceed costs, with a
resulting benefit-to-cost ratio of 1.10.

SCE-09 ERP
Table Of Contents
Section Page Witness
I. ENTERPRISE RESOURCE PLANNING (ERP) POLICY.......................................1 M. Yazdi
A. Overview Of Enterprise Resource Planning ..........................................2
1. The History Of ERP Systems ....................................................2
2. The History Of ERP Systems At SCE .......................................3
3. Key Changes From Status Quo..................................................5
4. How An ERP System Meets SCE’s Business

Challenges..................................................................................6
B. BPI And The Evolution To ERP............................................................8
II. OUR ERP PROJECT ..............................................................................................10 K. Payne
A. Introduction..........................................................................................10
1. Why Install An ERP System At SCE?.....................................10
a) An ERP System Will Assist SCE In Its

Efforts To Improve Its Business Processes
And Better Meet Customer Needs ...............................10
b) An Aging Application Portfolio...................................13
c) Installing An ERP System Makes Sense

Given Our Aging Workforce .......................................14
d) Installing An ERP System Will Also Make

It Easier To Meet Ever Increasing
Compliance And Regulatory Requirements ................15
2. SCE Established A Business Case Team To

Evaluate The Benefits Of An ERP System..............................17
a) The Business Case Team Evaluated

Alternatives To ERP ....................................................18
b) Why SCE Selected SAP As Its Primary

Vendor..........................................................................19
c) The Project Approach And Project

Management Team Structure.......................................21
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SCE-09 ERP
Table Of Contents (Continued)
d) SCE Has Retained A System Integrator To

Assist It In Installing SAP............................................23
e) SCE Has Attempted To Identify And

Minimize The Risks Associated With Its
ERP Project..................................................................25
B. Scope And Schedule ............................................................................25 L. Miller
1. Scope Of ERP ..........................................................................25
a) Detailed Evaluation Of SCE’s Business

Processes Helps To Ensure That SAP
Assists In The Successful Integration Of Our
Business Processes.......................................................26
b) The Business Process Scope Is Defined At

The Highest Level By The Six Mega-
Processes But Implemented At The Team
Level ............................................................................28
(1) Finance.............................................................29
(2) Human Resources ............................................31
(3) Operations Support ..........................................32
(4) Enterprise Asset Management

(EAM) ..............................................................33
(5) Customer Services ...........................................34
(6) Reporting And Analytics .................................34
c) Other Areas Of The Project Scope Are

Critical To A Successful ERP Deployment .................35
(1) Organizational Readiness (OR) .......................35
(2) Technology ......................................................36
(3) Portal ................................................................37
(4) Security And Controls......................................38
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SCE-09 ERP
d) Deployment Of SAP Modules Will Meet

SCE’s Required Functionality .....................................38
(1) SAP ERP..........................................................39
(2) SAP SCM (Supply Chain

Management) ...................................................41
(3) SAP CRM (Customer Relations

Management) ...................................................41
(4) SAP PLM (Product Life-Cycle

Management) ...................................................42
(5) SAP SRM (Supplier Relationship

Management) ...................................................42
(6) SAP’s Work Efficiency Component

And Governance, Risk And
Compliance Module.........................................43
e) Bolt-Ons.......................................................................43
(1) Introduction......................................................43
(2) Scheduling........................................................44
(3) TDBU Graphical Design

Tool/Compatible Units.....................................46
2. ERP Schedule...........................................................................47
a) SCE Will Use A “Phase-In” Approach To

Implement ERP............................................................47
(1) Release 0: GBU SONGS Document

Management, Collaboration Tools...................48
(2) Release 1: Company Financials,

Human Capital Management,
Budgeting/Business Intelligence,
Enterprise Asset Management, Non-
Energy Billing, Supply Chain ..........................49
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SCE-09 ERP
(3) Release 2: Additional Finance And

Human Capital Management,
Contractor Portal, Supplier
Relationship Management/Supply
Chain, Business Intelligence............................49
(4) Release 3: Additional Asset

Management, Supplier
Self-Service/Supply Chain, Business
Intelligence.......................................................50
(5) Release 4: Additional Asset

Management, Customer Portal,
Customer Services, Business
Intelligence.......................................................50
C. ERP Costs ............................................................................................53
1. Overview..................................................................................53
2. Recorded And Estimated Project Costs 2006-2009.................54
a) One-Time Project Capital Expenditures ......................54
(1) Vendor..............................................................54
(2) SCE Labor........................................................57
(3) Hardware/Infrastructure...................................59
(4) Bolt-ons............................................................60
b) One-Time Project O&M Expenses ..............................63
(1) Labor Expenses................................................64
(2) Non-Labor Expenses........................................65
3. Estimated On-Going Costs 2006-2011 ....................................67
a) On-Going Capital.........................................................68
b) On-Going O&M...........................................................68
(1) On-Going Labor...............................................69
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SCE-09 ERP
(2) On-Going Vendor ............................................69
4. Summary Of Costs (2006-2020) For Cost-

Effectiveness Analysis .............................................................69
a) 2012 – 2020 Capital .....................................................69
b) 2012 – 2020 O&M .......................................................71
D. ERP Benefits........................................................................................72
1. Overview..................................................................................72
2. Methodology ............................................................................73
3. Supply Chain Benefit Category ...............................................74
4. Information Technology Benefit Category..............................77
5. Accounting, Reporting And Analytics Benefit

Category...................................................................................78
6. Work Management Benefit Category ......................................79
7. Human Resources Benefit Category........................................82
8. Other Benefits ..........................................................................84
a) Avoided Software Expenditures ..................................84
b) Avoided Infrastructure Expenditures...........................85
c) Avoided Labor Expenses .............................................86
9. Performance Management .......................................................88
10. Summary Of Benefits ..............................................................89
E. Cost-Effectiveness Analysis ................................................................90 B. Hodges
1. Methodology ............................................................................90
a) Benefit-To-Cost Analysis ............................................90
b) Revenue Requirement Model ......................................91
2. ERP Will Benefit Customers ...................................................91
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SCE-09 ERP
3. Cost-Effectiveness Impact Of Additional Avoided

Software Expenditures .............................................................92
F. Summary ..............................................................................................93 L. Miller
Appendix A Witness Qualifications
Appendix B Map To Costs And Benefits In Other SCE Testimonies
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SCE-09 ERP
List Of Figures
Figure Page
Figure II-1 ERP Project Implementation Roadmap ......................................................................... 21
Figure II-2 SCE Business Process Hierarchy.................................................................................. 27
Figure II-3 SAP ERP Business Suite............................................................................................. 39
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SCE-09 ERP
List Of Tables
Table Page
Table II-1 ERP Process Scope...................................................................................................... 29
Table II-2 Release Schedule......................................................................................................... 48
Table II-3 Total ERP One-Time Capital Expenditures 2006 – 2009 (Nominal $000).......................... 54
Table II-4 ERP One-Time O&M Expense 2006 – 2011 (Constant 2006 $000) .................................. 64
Table II-5 Total On-Going Capital Expenditures 2009 – 2011 (Nominal $000) ................................. 68
Table II-6 ERP On-Going O&M Expense Constant 2006 – 2011 (Constant $000) ............................. 68
Table II-7 Total ERP Capital and O&M Costs 2006 – 2020 (Nominal $000)..................................... 69
Table II-8 Annual, Steady-State Benefits in 2015 (Constant 2006 $ millions).................................... 73
Table II-9 Avoided Software Expenditures (Nominal $millions) ..................................................... 85
Table II-10 Avoided Infrastructure Expenditures (Nominal $millions)............................................. 86
Table II-11 Avoided Labor Expenses (Constant 2006 $ millions).................................................... 87
Table II-12 ERP O&M Benefits by Category (Constant 2006 $ Millions) ......................................... 89
Table II-13 ERP Capital Benefits by Category (Nominal $ millions) ............................................... 90
Table II-14 Net Present Value of the Revenue Requirements of ERP Costs and Benefits
($000) .................................................................................................................................. 92
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1 I.
2 ENTERPRISE RESOURCE PLANNING (ERP) POLICY

3 The purpose of this exhibit is to provide an overview of SCE’s current effort to implement an
4 Enterprise Resource Planning (“ERP”) system at SCE. An ERP system typically uses multiple
5 components of computer software and hardware to integrate an organization’s data and processes into a
6 unified system. A key component of most ERP systems is the use of a unified database to store data for
7 the various system modules.
8 SCE’s recent ERP efforts began in 2005 as an outgrowth of SCE’s Business Process Integration
9 (“BPI”) initiative and the growing recognition that its major systems were becoming increasingly
10 obsolete. BPI was the catalyst for SCE to examine its business processes to make them simpler, smarter
11 and stronger. It became apparent during SCE’s BPI efforts that SCE’s technology systems were not up
12 to the challenge: to effectively integrate and improve SCE’s business processes required better
13 integrated and up-to-date technology systems. Accordingly, in June 2005 SCE approved the formation
14 of a business case team to evaluate the feasibility of implementing an ERP system at SCE. The business
15 case team was comprised of representatives from across SCE’s business units to ensure that we took a
16 holistic and comprehensive approach when determining the feasibility of installing an ERP system at
17 SCE. SCE’s Business Case Team concluded that the benefits of installing an ERP system at SCE
18 exceeded the costs of installing such a system.
19 When the ERP business case team discussed the implementation of an ERP system with various
20 stakeholders and executive committee members, a number of important questions were asked, including;
21 ¾ Why ERP?
22 ¾ Why now?
23 ¾ Why SAP?
24 ¾ What are the alternatives?
25 ¾ What are the business drivers?
26 ¾ How does an ERP system support customers and business operations?
27 ¾ How does an ERP system relate to SCE’s Software Asset Management program?
1
1 ¾ How does an ERP system relate to BPI?
2 ¾ What have other utilities experienced when implementing an ERP system?
3 The business case team set out to answer these and other important questions to determine
4 whether an ERP system made sense for SCE and its customers. Answers to these and other questions, as
5 discussed in the testimony below, demonstrate that installing an ERP system will benefit SCE and its
6 customers.
7 A. Overview Of Enterprise Resource Planning

8 In order to better understand why SCE has decided to move forward with installing an ERP
9 system, it is useful to look at (1) the general history of ERP systems, (2) the history of ERP systems at
10 SCE, (3) the key differences between SCE’s current system and business process structure and those that
11 are envisioned after our ERP Project has been completed, and (4) the way that an ERP system will help
12 SCE meet its business challenges.
13 1. The History Of ERP Systems

14 The term “Enterprise Resource Planning” dates back to at least the early 1960s when it
15 was used to describe systems to plan the use of enterprise-wide resources in the manufacturing
16 environment. The first computerized ERP system was the result of a collaborative effort between J.I.
17 Case, a tractor manufacturer, and IBM to improve material requirements planning using software
18 systems to schedule production processes and raw material purchases for all production processes
19 simultaneously.1 Over time, ERP systems branched out into other corporate areas such as customer
20 care/relationship management, billing, human resources, supply chain, finance, and work, asset, and
21 project management. Eventually, ERP systems evolved to use multi-module application software to
22 integrate business processes across functional departments.
23 Today’s ERP systems combine process improvement and technology automation to help
24 businesses better manage work. They consist of a broad set of best-practice processes that are supported
25 by a multi-module software system. Typically, an application vendor installs an ERP system with the
1 See:
http://www.itweb.co.za/sections/features/erp/feature0703050705.asp?A=ENT&S=Enterprise&T=Section&O=FPSH.
2
1 goal of replacing “islands of siloed information” with a single, packaged software solution that
2 integrates the basic enterprise business processes and applications (e.g., financials, payroll, customer
3 services, and procurement) into one software platform that uses a centralized database. Although other
4 specific applications or “point solutions” may still be needed to meet a specific business need, these
5 point solutions can often be easily appended to the ERP system and its central database.
6 With an integrated ERP suite, data is entered only once and then propagates to all parts of
7 the business, giving users consistent, real-time data from which to work. Such integration results in
8 better resource utilization through the sharing of common information across the enterprise. Decision
9 makers, field workers, and analysts alike have ready access to the same information and business
10 processes. Thus, an ERP system enables the right people to look at the right information at the right
11 time. Better system integration also improves a company’s ability to comply with increasing regulatory
12 requirements, such as the Sarbanes-Oxley Act of 2002 (SOX), which requires documented, auditable
13 financial and operational workflow processes. In addition, operating procedures and compliance
14 requirements can be captured in the system and shared with employees across the company.
15 One of the leading providers of ERP systems is SAP (Systems, Applications, Products).2
16 SAP is also the leading utility-specific vendor. Other ERP system providers include Oracle, Lawson
17 Software, and J.D. Edwards.
18 2. The History Of ERP Systems At SCE

19 SCE first explored the use of a limited ERP system in 1999 to address back office system
20 needs. SCE concluded at that time that an ERP system could best fill the gaps that existed in its back
21 office systems. After careful review, SCE selected SAP as its Commercial-Off-The-Shelf (COTS)
22 solution and was prepared to implement SAP. But in 2000 the energy crisis dictated cost containment
23 and all ERP efforts were put on hold.
24 The idea of implementing an ERP system reemerged as a result of SCE’s efforts to better
25 integrate its business processes through BPI.3 Briefly, an integrated business process passes information
2 SAP is headquartered in Walldorf, Germany and employs over 28,000 people in more than 50 countries, including 5,400
software developers around the World.
3
1 seamlessly through the process flow, usually by storing data in and retrieving data from a central
2 database. Information is not lost within department “paper-trails” as it is aggregated and re-keyed to suit
3 the needs of the department or re-keyed into different software applications at different times.
4 SCE determined that the seamless flow of information needed to realize the benefits of
5 BPI required an integrated software system and an ERP system emerged as a possible solution because
6 such a system could replace a large portion of SCE’s disparate, largely unconnected application
7 portfolio with a single, modular software system.
8 Installing an ERP system was also seen as consistent with and a complement to SCE’s
9 Software Asset Management (“SAM”) program. One of SAM’s key objectives is to continuously assess
10 SCE’s existing software application portfolio to retire, remove, extend the useful life of, or consolidate
11 applications where possible and/or replace them with COTS or similar solutions. SCE’s planned ERP
12 implementation will enable SCE to replace over 300 IT-supported applications, or nearly half of our
13 existing IT portfolio by installing one large integrated, software package.4 Such an implementation will
14 not only enhance the capabilities of the individual applications being replaced, but will also make it
15 easier to provide an integrated enterprise view of SCE’s business to support business analyses and
16 decision-making.
17 Accordingly, in June 2005, SCE commenced a formal business case review of an ERP
18 system.5 SCE created a team to evaluate whether an ERP system was the overall best solution to meet
19 SCE’s business needs and to establish a vision, target and initial business case. Upon completion of the
20 review, the team recommended the comprehensive deployment of an ERP system because, among other
21 reasons, the benefits of installing such a system exceeded its costs and would enable SCE to improve its
22 business processes.
3 As discussed in more detail in Section B below and SCE-12 Productivity, BPI was part of SCE’s process integration
improvement effort launched in December 2003 and was also part of SCE’s TY2006 GRC.
4 The SAM framework, which contributed significantly to our ability to review and identify the cluster(s) of SCE
applications that can be logically combined and served by a COTS application such as an ERP system, will continue to
support the management of our software assets. The SAM framework will enable us to assess how the breadth and depth
of the ERP system can be leveraged to reduce the complexity of our system portfolio. This will happen in parallel with
ongoing SAM activities to assess the health and disposition of other applications in our portfolio.
5 The business case review process is discussed in more detail in Section II.A.2 below.
4
1 Following approval of the ERP business case from SCE’s Board of Directors, SCE
2 created the current ERP Implementation Team, to begin the design, build and delivery of the ERP
3 Project. This organization is responsible for completing the design, configuring the software and
4 infrastructure, developing timelines and deployment goals for the ERP Project, and eventually assuring
5 delivery and results.
6 In addition, within our ERP Project, teams and business leaders have been assembled to
7 focus on the development and configuration of software and the specification of business processes. For
8 example, a Finance team oversees the implementation of the SAP financial modules, a Human Capital
9 Management team oversees the implementation of SAP human resource modules, and so forth. More
10 importantly, however, collaborative efforts across teams determine process specifications that cross
11 multiple modules.
12 3. Key Changes From Status Quo

13 Due to differing business needs, the exchange of information between business processes
14 and across departments often has to be manually performed, which impedes process integration and
15 restricts our opportunities to gain efficiencies. As an example, consider a request from a builder for
16 service connection. The original customer contact likely occurred via SCE’s Customer Service Business
17 Unit (CSBU). The builder’s request then moves to SCE’s Transmission and Distribution Business Unit
18 (TDBU), where work management and supply chain processes enable the appropriate coordination of
19 resources and materials. If TDBU were immediately aware of the order, and all other similar orders, it
20 could aggregate the material needs across orders, check inventory and commence procurement of just
21 the right amount and type of material. TDBU’s information systems, however, are not fully integrated
22 with the company’s supply chain, financial, and customer care systems. As work is performed,
23 materials are taken from local inventories where TDBU manages materials as “pools.” As inventory
24 diminishes, materials are ordered through SCE’s supply chain and financial systems to replenish pre-set
25 levels of material without regard to just-in-time needs. It is at this “interface” between multiple systems
26 where the flow of information, and therefore the flow of work, currently suffers delays and
27 inefficiencies.
5
1 SCE’s deployment of an ERP system will enable us to make the necessary interfaces to
2 better manage our operations by replacing a disparate collection of aging, business-unit specific
3 applications with an updated and integrated collection of mutually-compatible applications that will
4 facilitate our corporate-wide focus on business processes integration. The ERP system will also replace
5 SCE’s multiple, overlapping, and at times, conflicting databases with one unified database to store data
6 for the various system modules.
7 4. How An ERP System Meets SCE’s Business Challenges

8 In our last GRC, SCE proposed a number of technology-related projects, each stressing a
9 similar set of challenges and themes in support of these projects.6 Broadly, these challenges and themes
10 are:
11 ¾ The need to upgrade outdated software;7
12 ¾ The inefficiencies that result from disparate systems and manual workarounds;8
13 ¾ The exponential increase in the number of point-to-point interfaces between
14 customized-software applications that require, but have no natural, interconnectivity;9
15 ¾ The advantages of using off-the-shelf software systems supported by vendors;10
16 ¾ The appropriate fit between a business process and a technological solution;11
6 These themes come from prior GRC testimony. For easy reference, the full texts of the footnote citations below are
collected in the work papers. We have included a few quotes within the footnotes to convey a sense of SCE’s challenges
over the last decade in the systems area. Sections II.A.1 and II.B.1 below discuss many examples of SCE’s systems
challenges.
7 See e.g., TY2006 GRC, SCE-5, Vol. III, pp. 162-163; TY2006 GRC, SCE-5, Vol. III, p. 113 (“As SCE’s software assets
age, they are susceptible to obsolescence as a result of discontinuation of vendor support and/or changes in
technology.”); TY2006 GRC, SCE-5, Vol. III, p. 155.
8 TY2006 GRC, SCE-5, Vol. III, p. 117; TY2006 GRC, SCE-5, Vol. III, p. 57; TY2006 GRC, SCE-10, p. 36
(“Unfortunately, a substantial number of these business applications do not reflect the work we do today, requiring
manual ‘work-arounds’ for disparate systems to communicate with each other or match the end-to-end work process they
support.”).
9 TY2003 GRC, SCE-6, Vol. 6, Chap. III, p. 202.
10 TY2006 GRC, SCE-5, Vol. II, p.17 (“Using Commercial-Off-The-Shelf (COTS) applications/components to build
information systems will give SCE access to the enhanced capabilities that vendors often bundle with such commercial
products.”); TY2006 GRC, SCE-5, Vol. III, p. 115; see also footnote 12 below.
11 TY2006 GRC, SCE-5, Vol. II, p. 13; SCE-5, Vol. II, p. 16 (“[T]he current business needs have changed so significantly
from the needs that the software system was originally designed to meet, that it makes sense to replace the system rather
than continue to modify the older design.”); TY2006 GRC, SCE-5, Vol. III, p. 163.
6
1 ¾ The risks associated with an aging workforce;12
2 ¾ The efficiencies gained from a standardized, integrated technology platform, easily
3 adaptable to new applications and which naturally facilitates the transfer of
4 information;13
5 ¾ The benefits of improving business processes that reach across multiple organizations
6 within a business unit;14
7 ¾ The benefits of improving business processes that span the entire enterprise;15 and
8 ¾ The need to increase functionality in order to improve customer service and meet
9 regulatory requirements.16
10 By installing an ERP system, SCE believes that it will eliminate the current inefficiencies
11 associated with obsolete and disparate software systems through a modern, integrated suite of
12 applications. Our ERP Project will replace approximately 50 percent of our legacy systems, thereby
13 substantially modernizing SCE’s application portfolio and standardizing SCE’s enterprise architecture.
14 ERP will also allow SCE to better meet other business challenges. Take, for example,
15 SCE’s need to more efficiently meet regulatory requirements. An ERP system will facilitate auditing
16 financial data and improve reporting and analytics by providing a “single source” database with data
17 transparency. It will also contain system and process controls to help prevent erroneous reporting. One
18 such control is SAP’s ability to automatically route write-off requests that exceed a certain threshold to
19 the appropriate finance manager or controller.
20 Additionally, an ERP system will eliminate inefficiencies that result from disparate
21 systems and manual workarounds by allowing business units to share common data and practices across
22 the company. Users can input data into one location that is processed with other data and accessed as
12 TY2006 GRC, SCE-5, Vol. III, p. 168; TY2006 GRC, SCE-10, p. 35.
13 TY2006 GRC, SCE-5, Vol. II, p. 20.
14 TY2006 GRC, SCE-10, p. 80.
15 TY2006 GRC, SCE-10, p. 35.
16 TY2006 GRC, SCE-5, Vol. II, p. 230.
7
1 informational reports in a real-time environment. Just by logging into the system, anyone with
2 appropriate security authorization, be it a warehouse clerk or the CEO, can see the information
3 necessary to make informed and quick decisions.
4 B. BPI And The Evolution To ERP

5 For a number of years, SCE has pursued business-process improvements, and business-process
6 integration remains a committed focus of SCE. Our previous BPI testimony discussed the “silo”
7 problem in some detail.17 In brief, this problem, endemic in larger and older institutions, results from
8 the separate evolution of essentially independent departments within a single enterprise. Differing
9 business needs within separate departments have resulted in the development of unique software
10 applications and often independent information infrastructures. Although a business process may run
11 smoothly while moving through the protocols within a given silo (e.g., a department, division, or even a
12 person) at some point information, and perhaps actual material, must pass from one silo to another. This
13 often results in bottlenecks because the information to be used by the next “silo” must be “handed off”
14 through a manual re-transcription or a recompiling of data from one application to another. The ideal
15 business process, as envisioned by BPI, seamlessly passes information throughout the process flow from
16 one subtask to the next, not only within separate business units, but across the entire enterprise.
17 BPI emerged from the recognition that core business processes must be viewed from “end-to-
18 end” with an eye toward integration of the process flows as they span the entire enterprise.
19 Management’s recognition of this imperative sprang from the convergence of business demands,
20 confronting SCE over the past few years.18 Those demands include: (1) an electric grid that requires
21 extensive capital investments to meet expanding customer growth and to replace aging infrastructure;
22 and (2) an expectation from customers, as a result of the information age, for faster, more convenient
23 real-time “self-service” options. To meet these demands, SCE must improve its business processes to
24 eliminate bottlenecks, overlapping work, manual handoffs, and other duplicative efforts.
17 See, e.g., TY2006 GRC, SCE-10, pp. 34-98.

18 TY2006 GRC, SCE-10, pp. 35-36.
8
1 SCE’s experience with its BPI efforts has led to an approach by which business processes are
2 evaluated, prioritized and process changes implemented. And BPI has helped to guide our plans to
3 install our ERP system, the avenue by which the information integration, crucial to BPI success, will be
4 delivered. In deploying the integrated, SAP-based technology platform (our vendor-specific ERP
5 system), SCE will provide the integrated, information highway envisioned and required by BPI19 to
6 achieve its ultimate, efficiency goals, although, as discussed in section II.B.1.e below, some “point
7 solution” applications will need to be “bolted-on” to the ERP system for complete process integration for
8 those business processes targeted by our ERP Project.20
19 Further discussion of BPI, the original 13 projects and their current status can be found in the Productivity Exhibit, SCE-
12.
20 As discussed in Section II.A.2.c, our ERP Project targets 33 Level Two business processes.
9
1 II.
2 OUR ERP PROJECT
3 A. Introduction
4 In the policy section, we discuss how SCE set out to answer a number of questions in assessing
5 whether it makes sense to install an ERP system. Two of the primary questions were: “Why install an
6 ERP system at SCE?” and “Why install one now?” To answer these questions, we looked at some of the
7 business challenges currently facing SCE and how an ERP system might assist the Company in meeting
8 those challenges.
9 This section of testimony discusses our reasons for concluding that installing an ERP
10 system now at SCE is the best overall solution to meet our business challenges. We also discuss in this
11 section the process by which we reached that conclusion and the steps we are taking during
12 implementation to ensure that the ERP system furthers our BPI efforts. In addition, we discuss the
13 scope of our ERP Project, the schedule for its implementation, its costs, our projected benefits, and the
14 cost-effectiveness of the project. As discussed in Section II.E, SCE found that the benefits of our ERP
15 Project exceed its costs, with a resulting benefit-to-cost ratio of 1:10 to 1.
16 1. Why Install An ERP System At SCE?

17 Briefly, SCE’s business challenges include: (1) simplifying and integrating a variety of
18 complex business processes; (2) updating and maintaining an aging application portfolio; (3) dealing
19 with an aging workforce; and (4) meeting increasing regulatory and reporting requirements. We discuss
20 each of these challenges and how an ERP system will help us better meet them in the following sections.
21 a) An ERP System Will Assist SCE In Its Efforts To Improve Its Business Processes
22 And Better Meet Customer Needs
23 To simplify and better integrate our business processes, SCE launched an effort in
24 2003 that became known as BPI. The goal of BPI, as discussed in Section I.B above, is to reinvent and
25 better integrate SCE’s business processes and create greater visibility across business units. During our
26 BPI efforts, SCE determined that the seamless flow of information needed to realize the benefits of BPI
10
1 required better integrated software systems than what exists at SCE today. SCE’s current application
2 portfolio consists of:
3 • 35 different application environments;
4 • 15 different databases with multiple versions;
5 • 15 different programming languages; and approximately
6 • 600 different applications.
7 Costly to maintain, this web of disparate and complex systems hinders our efforts
8 to enhance functionality, as well as, our ability to integrate and improve SCE’s business processes. Our
9 Supply Chain’s procurement, material management and accounts payable systems, for example, do not
10 connect with one another. This results in the accounts payable function being largely a “paper-trail”
11 operation, requiring paper-invoice administration, paper validation, and phone calls to resolve
12 information gaps with other Supply Chain areas. This leads to work delays and reduces end-to-end
13 visibility.
14 Such connection “gaps” also invite human error (and therefore data error), making
15 compliance reporting (such as SOX reporting) more challenging.21 And new functionality requires
16 appended subroutines and other modifications that only add to the complexity of SCE’s current systems.
17 Continual and compound modifications create more complexity, require more complicated interfacing,
18 and result in ever increasing security risks. A small enhancement to a complex system may have
19 unintended consequences to other applications connected to that system despite thorough testing.
20 Installing an ERP system at SCE emerged as a possible solution. Unlike “Best of

21 Breed” applications,22 an ERP system consists of a suite of applications from a single vendor (in our
22 case SAP) with multiple, fully-integrated modules. Each application interfaces one time with the central
21 Section II A.1.d addresses SOX and other functionality requirements.

22 A “Best of Breed” application is a business-specific application or “point solution” to meet a very specific need. As
discussed in Section II.A.2.a, SCE considered installing Best of Breed applications as a possible solution to SCE’s
business challenges but ultimately determined that an ERP system was a better overall solution. As discussed there, the
integrated platform and “open architecture” design – what SAP provides – is preferable to the Best of Breed option
where SCE still has to maintain a disaggregated platform of applications that uses different program languages, propriety
software, operating software, and technologies.
11
1 database, rather than numerous times in point-to-point contacts with other systems. Because single data
2 entry populates multiple applications in the suite simultaneously, data transfer is timelier. The
3 integrated platform and “open architecture” design of an ERP system, such as SAP, also makes it easy to
4 install future system modules and makes it easier to develop interfaces with new non-SAP software,
5 such as the Bolt-ons discussed in Section II.B.1.e below, for applications that are not a part of SAP’s
6 suite of applications.
7 The fully-integrated SAP modules23 enable applications to communicate easily
8 with one another, share and update information, form an integrated view of business processes and
9 lessen dependence on manual processes that result from breaks in connectivity. SAP’s financial
10 modules, for example, are fully integrated with other company functions, making the current mostly
11 manual corporate budget development, reporting and tracking processes unnecessary.
12 SAP also contains a single, web-based entry point, known as a Portal, which
13 allows employees to perform their work and access personal and corporate information. The benefits of
14 the Portal include:
15 • a single sign-on, security based entry into the system;
16 • visibility of information across business units;
17 • the ability to share common data and practices across the entire enterprise; and
18 • the ability to input data into one location that is processed with other data and
19 accessed as informational reports in a real-time environment.
20 Such features will make it possible for SCE to provide better customer service.
21 This contrasts with SCE’s current application portfolio, which can be the source of negative customer
22 experience. For example:
23 An SAP module represents a collection of business processes. Each module deals with an area of business. Typical
modules include Procurement, Inventory and Warehouse Management, Financial Accounting, Fixed Asset Management,
and Plant Maintenance.
12
1 • Customers who access the internet for real-time “self-service” can be
2 disappointed because of the delays that result from us having to manually re-
3 key information into another system; and
4 • Customers may have to place several calls to different departments before
5 they get all the information they need to complete a transaction.
6 SAP should reduce such negative customer experiences. SAP’s interactive
7 web-based, self-service option will allow customers to fulfill their requests directly online.
8 b) An Aging Application Portfolio
9 Another business challenge facing SCE is software obsolescence.24 Our entire
10 utility business operations depend on the reliable operation of our information systems because we use
11 information systems throughout our business units to (1) manage physical assets, such as generation,
12 transmission and distribution, (2) meet customer service obligations, and (3) maintain vital company
13 records. System obsolescence, therefore, puts the quality of service to our customers at risk. It also
14 places at risk SCE’s ability to keep information secure and to report accurate information to regulators.
15 A number of SCE’s legacy systems suffer from serious limitations due to their
16 aging technology. The majority of SCE’s Customer Service Systems (“CSS”), for example, are coded in
17 multiple abandoned software languages, and SCE’s Material Management System (“MMS”) is not
18 accessible from the internet, which hinders our ability to communicate directly with our suppliers’
19 systems. Additionally, there are a number of obsolete interfaces that require significant changes with
20 non-integrated systems due to upgrades or advancements in underlying technology or operating

21 software.
24 As discussed in IT’s Capitalized Software Exhibit, SCE-5, “Software Obsolescence” can occur through (1) Technology
Obsolescence, (2) Vendor Obsolescence or (3) Business Obsolescence. Technology Obsolescence results when the
technology that an application uses is identified by the vendors as being phased out (i.e., no longer approved for use).
Vendor Obsolescence results when a COTS application is no longer supported by the vendor. And Business
Obsolescence occurs when the application no longer adequately supports the business function for which it was initially
built or purchased.
13
1 Some examples of the risks associated this aging portfolio include:
2 • A failure with one of our work management or dispatch applications that
3 results in a delay in service “turn-ons” and “turn-offs” could: (1) hinder a
4 customer’s ability to move into a new dwelling because the power has not yet
5 been turned on; (2) result in the loss of revenue for business customers
6 because the business could not operate due to a lack of power; and (3) result
7 in incorrect billing due to delays in order completion.
8 • Our aging systems could put critical operations at risk if a computer hacker or
9 computer virus is able to enter our systems because the aging systems are no
10 longer vendor supported, and so we are unable to get the necessary security
11 “patches” or other upgrades; and
12 Doing nothing will only increase such risks. Installing an ERP system, and SAP
13 in particular, can reduce these and other risks associated with software obsolescence. This is because
14 SAP will replace the majority of SCE’s core legacy systems, including:
15 • MMS
16 • CARS (Corporate Accounting and Records System )
17 • PeopleSoft (SCE’s primary Human Resources system)
18 • PASSPORT (TDBU’s work management system)
19 • MOSAIC25 (SONG’s work management system)
20 • CSS
21 In total, SAP will replace over 300 IT-supported applications, or approximately
22 half of our existing IT application portfolio.26
23 c) Installing An ERP System Makes Sense Given Our Aging Workforce
24 The added benefit of replacing over 300 IT-supported applications with SAP is
25 that it will help SCE deal with some of the challenges that we will face as a result of our aging
25 MOSAIC stands for Maintenance, Operations, Station Technical and Administrative Integrated Computer.
26 A full list of the systems that will be replaced by the ERP system can be found in our workpapers.
14
1 workforce. SCE currently faces the choice, much like the decision to replace or modify outdated
2 software, to either train new IT professionals to maintain and modify outdated systems as our
3 experienced employees retire, or modernize our systems now to take advantage of the state-of-the-art
4 knowledge that the majority of IT professionals possess.
5 The choice is a relatively easy one. It is simply not cost-effective to hire new
6 employees and train them in outdated skills. Modern computer science programs no longer teach the
7 obsolete coding languages used for our core legacy systems. As the programmers for these systems
8 retire, finding trained replacements will be increasingly difficult and will likely come at a premium. In
9 contrast, there are many individuals in the marketplace with the necessary skills to maintain ERP
10 systems, such as SAP, because these types of software systems are common throughout industry and
11 currently taught in computer science and trade schools.
12 Training business unit analysts to interact with outdated legacy systems likewise
13 delays the inevitable. New employees trained on modern, user-friendly systems perform productively
14 now and require no immediate retraining. New employees trained on outdated systems, in contrast,
15 require imminent retraining as complete obsolescence forces replacement of our systems.
16 Moreover, SCE needs to be able to compile effectively and access easily years’ of
17 acquired employee expertise so that that knowledge can be readily accessed by our future workforce.
18 Many employees with specialized expertise in current processes, plant operations, and specialized
19 equipment operations will soon retire. The specialized knowledge these individuals possess to operate
20 our assets such as SONGS, Big Creek, and many of our large transmission substations must be passed
21 on to the next generation of workers. SCE needs an effective work management system, document
22 management system, and knowledge repository to do this. SAP contains such systems.
23 d) Installing An ERP System Will Also Make It Easier To Meet Ever Increasing
24 Compliance And Regulatory Requirements
25 In order to build a sound regulatory framework, SCE must be able to meet its
26 obligations and commitments to its regulators. This, however, is becoming more challenging because of
15
1 ever increasing compliance and reporting requirements that require better integrated and more flexible
2 computer systems.
3 Examples of increasing regulatory requirements include new reporting
4 requirements mandated by the Sarbanes-Oxley Act of 2002 (SOX). SOX, which stemmed from
5 accounting scandals earlier this decade, requires publicly traded companies to establish documented,
6 auditable financial and operational work flow processes. Our legacy systems were not designed to do
7 this. As a result, we have resorted to manual processes to produce timely and auditable reports to
8 comply with SOX. But these manual steps break the continuity of the audit trails required for SOX
9 reporting (as well as other compliance mandates) and introduces the possibility for error. Every new
10 requirement coded into a non-standard system adds another degree of separation from the original
11 purpose and design of the system. This increases data integrity and security risks, making regulatory
12 compliance ever more challenging.
13 Other regulatory agencies demand new oversight and control requirements as
14 well. As an example, Homeland Security and the North American Electric Reliability Corporation
15 (NERC) require new system controls to prevent cyber threats that could jeopardize our electric grid.
16 And the Federal Energy Regulatory Commission (FERC) has instituted new reporting and operations
17 protocols. FERC 2004 Standards of Conduct, for example, mandates that SCE possess up-to-date
18 information and allow public access to certain information in order to ensure separation between
19 transmission and power purchasing organizations.
20 An ERP system, such as SAP, provides improved controls that make it easier to
21 comply with these new regulations. For example, we will be able to more easily comply with SOX
22 because SAP provides a built-in, automated controls environment to mitigate erroneous reporting. SCE
23 can also configure SAP controls along the end-to-end workflow to automatically alert, inform, and
24 request authorization of managers. And SCE can define the level at which write-offs must receive
25 approval and SAP will automatically notify the user of the necessary approval requirements. SCE can
26 also configure SAP processes to automatically route write-offs that exceed a certain threshold to the
27 appropriate finance manager or controller. Such best practice protocols will make it easier for SCE to
16
1 enforce compliance, enable SCE to maintain an accurate, real-time view of company financials, and
2 reduce the number of manual controls currently in place. SAP’s centralized database also supports the
3 regulatory compliance environment SCE needs. Single-point-of-entry and data integrity control
4 protocols underlie the data consistency necessary to ease auditing tasks, satisfy SOX reporting
5 standards, and meet the accuracy standards of all our reporting obligations. SAP will also help us to
6 better meet the new NERC and FERC requirements through SAP’s role-based security feature.
7 Beyond regulatory reporting, similar controls will apprise management of the
8 status of any given business process. SAP will also allow SCE to track a wide range of events for better
9 management control, and provide a forward look of processes that will allow managers to better plan
10 future business activities.
11 2. SCE Established A Business Case Team To Evaluate The Benefits Of An ERP
12 System
13 SCE’s Utility Management Committee approved the formation of a business case team in
14 2005 to evaluate the feasibility of installing an ERP system at SCE. The business case team was made
15 up of representatives from across SCE’s business units to ensure that a holistic and comprehensive
16 analysis was conducted.
17 As previously mentioned in Section I.A., we evaluated SAP in 1999 against other ERP
18 vendors and determined that SAP was the market leader in providing ERP systems to utilities.27 The
19 business case team confirmed that SAP was still an industry leader when we conducted a review of ERP
20 providers in 2005, and in fact, determined that SAP had increased its market share and its presence in
21 the utility industry. Thus, the business case team determined that it should move forward with a
22 business case analysis using an SAP implementation. This means that all scope scenarios and cost
23 numbers were based on SAP modules and the implementation sequences recommended by SAP and
24 others who have had prior SAP implementation experience. In addition, our site visits and peer
25 interviews were with utilities that had installed SAP systems.
27 During the 1999 RFP process, SCE identified six potential vendors (i.e., SAP, Lawson Software, Oracle, Minicom, Indus
International, and PeopleSoft) and issued RFPs to two of those vendors, SAP and Indus International.
17
1 To improve SCE’s understanding of why other utilities decided to implement SAP and to
2 more fully understand the benefits and risks of implementing SAP, SCE management chartered a group
3 of employees, primarily from TDBU, Supply Chain, IT, and Finance, to conduct field visits to two
4 utilities – Energy East and FirstEnergy Corp. – who had recently implemented SAP.28 These peer utility
5 visits confirmed that implementing SAP would be a logical choice for SCE.
6 In addition, employees from several business units were commissioned to contact and
7 interview a number of utilities that had implemented SAP to validate its capabilities. The utilities SCE
8 interviewed included Pacific Gas & Electric, Sempra, FirstEnergy Corp., Florida Power & Light,
9 Dominion Virginia Power, Public Service Elec. & Gas (PSE&G), Detroit Edison (DTE), NorthWestern
10 Energy, Niagra Mohawk, CenterPoint, PPL Electric, Pacific Corp, Entergy Texas, We Energies, Energy
11 East, OGE Energy Corp, and SMUD. SCE also conducted conference calls, at the executive level, with
12 DTE, We Energies, PSE&G, and Energy East to learn more about the risks associated with
13 implementing SAP and how to minimize the impact on the utility workers in the field.
14 Our interviews, visits, and conference calls helped us benchmark benefits, refine
15 management plans, verify the functionality of SAP and prepare risk management strategies. These
16 consultations also gave SCE access to real-world, utility-based examples from which to model our own
17 ERP effort.
18 a) The Business Case Team Evaluated Alternatives To ERP
19 The business case team also looked at alternatives to an ERP system. Those
20 alternatives were (1) remain at status quo; (2) rely on business process improvements alone; or (3)
21 replace SCE’s aging systems with “Best of Breed” (BoB) point solutions. The first of these two
22 alternatives were quickly dismissed because so many of our aging systems need to be replaced in any
23 event due to obsolescence. As discussed in Section A above, it is necessary for SCE to replace a
24 significant portion of its aging portfolio. Also, we cannot fully achieve our BPI goals without better
25 integrated systems.
28 Please see the ERP benchmarking, site visit, and best practice documentation in our ERP workpapers under the
“Benchmarking” section.
18
1 The BoB option would replace SCE’s aging systems with business-specific
2 applications. The advantage of this option is that SCE would have in place “point solutions” to meet our
3 specialized business needs. Specialized applications are not available with ERP systems alone since
4 ERP vendors focus on broad, fundamental business functionality. As a result, any specialized business
5 needs that cannot be met by the ERP system must be satisfied using a BoB application. For example,
6 SCE has identified two significant functions, as discussed in Section II.B.1.e, that cannot be met with
7 SAP alone (i.e., Scheduling and Graphical Design Tool/Compatible Units). Accordingly, these
8 applications will need to be “bolted-on” to the ERP system.
9 The team, however, determined that the drawbacks to the BoB option outweighed
10 its benefits. The main drawback is the significant costs and maintenance necessary to have the different
11 software platform interfaces of the BoB applications integrated and synchronized since they are not
12 designed to interface with one another. Another shortcoming of the BoB option is that there is no
13 centralized database. This means that the same data has to be entered multiple times into the different
14 programs. This can lead to reconciliation problems due to human error in the data entry process and
15 slow down the flow of information from one process to the next.
16 In contrast, the main limitation of an ERP system (i.e., specialized applications
17 are not a part of the ERP suite and must be appended to the system) can be more readily overcome
18 because some ERP systems, such as SAP, use an “open architecture,” making it easier to develop
19 interfaces with non-SAP software. ERP vendors, such as SAP, often partner with BoB providers to
20 ensure that the BoB solution integrates with their ERP modules. Moreover, the team reviewed various
21 industry surveys that concluded that in most of the areas of functionality (i.e., finance, supply chain,
22 human resources, and customer service) SAP was considered the BoB application.
23 b) Why SCE Selected SAP As Its Primary Vendor
24 Based on its work, the business case team concluded that an ERP system was the
25 best long-term, cost-effective solution for our company and that SAP was the vendor that had the most
26 complete out-of-the box, utility-specific solutions to meet SCE’s business requirements.
19
1 SCE selected SAP as its primary vendor for a number of reasons. SAP, the
2 world’s third-largest software company, leads ERP solution delivery with over 91,000 installations
3 worldwide, representing more than 40 percent of market share. SAP also leads utility-industry ERP
4 installations and has served the utility industry for over 20 years with 950 utility customers, including
5 Pacific Gas & Electric and Sempra. In fact, information-technology industry analysts, such as Gartner
6 and Meta, rank SAP first in overall utility-industry ERP development and rank SAP application suites
7 strongest in the Customer Service, Finance, Human Resources, Supply Chain and Work Management
8 areas.
9 SAP has also demonstrated a strong commitment to develop point solutions
10 specific to utilities. For example:
11 • SAP co-developed a FERC Accounting Module with PG&E; and
12 • SAP co-developed compatible units design and pricing modules for work
13 order management with Energy East.
14 Finally, SAP’s integrated platform allows easy, optional inclusion of additional
15 modules. And its open architecture accommodates new, integrated functionality using non-SAP
16 products.29 This is an important feature because SCE intends to leverage its investment in SAP by
17 integrating BoB solutions otherwise unavailable through SAP but necessary to meet core business needs.
18 With the conviction that SAP was the right vendor for an ERP system at SCE, the
19 business case team developed its charter, a scope and schedule to estimate costs, as well as the benefits
20 and risks associated with implementing an ERP system at SCE. Because implementing an ERP system
21 was something new to SCE, we engaged SAP’s Value Engineering group to assist us in developing the
22 assumptions necessary to complete the business case.
23 SCE team members from all major departments in the Company evaluated SAP’s
24 capabilities to determine whether they would meet our business needs. To help them do this, we held
29 “SAP NetWeaver unifies technology components into a single platform. It provides the best way to integrate all systems
running SAP or non-SAP software.” SAP web page: www.sap.com/usa/solutions/business-
suite/erp/pdf/BWP_Overview_mySAP_ERP.pdf.
20
1 SAP workshops during two one-week sessions attended by over 150 business unit representatives.
2 During these sessions, SAP provided product demonstrations, answered questions, and generally
3 enhanced our understanding of SAP’s capabilities and how they could apply to our business.
4 Over the course of six months, the business case team confirmed the assumptions,
5 the costs, the proposed schedule, and the benefits of implementing SAP at SCE. The details of the
6 business case are discussed in Sections II.B through E below. Approval to proceed with the project was
7 granted and the ERP Project was launched in early 2006.
8 c) The Project Approach And Project Management Team Structure
9 In structuring its approach to implementing its ERP system, SCE used the
10 standard five-phase approach recommended by SAP. The five phases are: (1) Project Preparation; (2)
11 Business Blueprinting; (3) Realization; (4) Final Preparation; and (5) Go Live and Support. Figure II-1
12 below graphically shows this approach and its various phases of work.
Figure II-1
ERP Project Implementation Roadmap
13 1. Project Preparation = Planning
14 2. Business Blueprinting = Design
15 3. Realization = Development and Testing
16 4. Final Preparation = Prepare to Implement, Train, and Test More
17 5. Go Live and Support = Launch the New System
18 The primary purpose of the Project Preparation phase is to confirm the project’s
19 scope and schedule, further define the technology assumptions in the business case, procure the SAP
21
1 software, obtain a System Integrator (“SI”),30 and refine and establish the project management structures
2 and begin to staff-up the project. As part of “Project Preparation,” we established the ERP
3 Implementation Team. This team was initially comprised of SCE personnel from all parts of the
4 business and SAP experts.
5 A critical part of the Project Implementation Team is establishing and maintaining
6 the programs necessary to monitor and control all aspects of the Project. This includes policies and
7 procedures for: (1) Governance; (2) Controls for Scope, Schedule and Cost; (3) Roles and
8 Responsibilities; (4) Staffing; and (5) Status Reporting – content and frequency. The Program
9 Management Team is responsible for these activities throughout the Project implementation period.
10 As part of the Business Blueprinting or “design” phase, our ERP Implementation
11 Team (which now includes SI personnel) mapped SCE’s business processes. Our Implementation Team
12 ultimately focused on about 70 prospective, high-level processes. In the end, the Team concluded that
13 SCE should target 33 core business processes to be included within the scope of our ERP system. These
14 33 core business processes cross business unit boundaries and involve 174 sub-processes, 1,466
15 activities, and 11,182 work steps.
16 To assist in the mapping process (and in later project phases), the ERP
17 Implementation Team is organized into six sub-teams that oversee specific process areas. Those process
18 areas are: (1) Finance; (2) Human Capital Management; (3) Operations Support; (4) Asset and Work
19 Management; (5) Analytics and Reporting; and (6) Customer Care. These sub-teams not only took
20 responsibility for mapping processes, but are also responsible for the specific business process
21 integration efforts in their respective areas. They are also responsible for managing the replacement of
22 our current systems in their respective areas, as well as for ensuring the functionality of the SAP
23 modules that replace the old systems. In addition, we have established several support teams to help in
24 the project implementation. These teams are the Organizational Readiness Team, the Project
25 Management Team, the Technology Team, the Portal Team, and the Securities and Controls Team.31
30 The purpose of the SI is discussed in the following section.

31 We discuss each of these teams in more detail in Section II.B below.
22
1 Far from being “silos,” however, these teams work closely with one another (literally, in the same work
2 area) to ensure that our objective of “end-to-end” business process integration is met.
3 d) SCE Has Retained A System Integrator To Assist It In Installing SAP
4 As discussed above, SCE’s ERP Implementation Team includes a System
5 Integrator to help with the implementation of our ERP system. An SI is a third party experienced in all
6 facets of an ERP system and is an expert in the approach and methodology for deploying an ERP
7 system. The specific expertise an SI provides includes, but is not limited to: (1) business and
8 operational expertise; (2) process redesign expertise; (3) ERP functional and technical experience; (4)
9 project management experience; (5) educational and organization change leadership; and (6) quality and
10 risk management experience. Nearly all ERP implementations rely on the expertise of a SI to leverage
11 the SI’s experience in managing such a fundamental change. SI companies range from small niche
12 companies to large consulting firms. We chose Deloitte Consulting Services (“Deloitte”) through a
13 competitive bidding process to be our SI. In this section, we discuss the importance of the SI in the
14 implementation process and why we chose Deloitte.
15 The SI is important for establishing techniques and procedures to assure quality in
16 the installation process as well as how to best manage the organizational impacts that result from
17 changes in business processes due to the ERP system. An SI is fully knowledgeable in the specific
18 characteristics of the business where the ERP system is to be installed and how the ERP system will
19 handle those specific characteristics. An example would be how a utility plans and installs physical
20 plant assets in the field and subsequently how those assets are handled by the utility’s financial systems.
21 The SI, to make an appropriate recommendation on how the EPR should be configured, must understand
22 both the utility’s asset and accounting processes as well as the specifics of the ERP system’s (here SAP)
23 accounting and asset modules.
24 SI personnel work collaboratively with the company to guide, define, and direct
25 the development of the business requirements, processes, technologies, training, and organizational
26 impacts associated with the installation of an ERP system. SI personnel also work to ensure that new
27 systems and retained, older systems integrate with one another and support process integration.
23
1 To assist it in selecting its SI, SCE conducted a market analysis of SI providers in
2 North America. It requested that Gartner, Inc. conduct a market analysis of SIs using the following
3 criteria: (1) total ERP services revenue; (2) industry focus/capabilities; and (3) company capabilities
4 based on revenue ranges for each module or industry in North America. SCE also looked at market
5 orientation, innovation and thought leadership, practice area profile, services portfolio, technology
6 capabilities, tools and methods, and resources.
7 Based on this analysis, SCE issued RFPs to the following providers: (1)
8 Accenture; (2) Bearing Point; (3) Cap Gemini; (4) Deloitte; and (5) IBM. Proposals were submitted by
9 everyone but Cap Gemini.32 SCE evaluated the bidders on five criteria: (1) program and risk
10 management, (2) cost, (3) implementation approach and methodology, (4) project organization and staff
11 experience, and (5) cultural fit. The bids were ranked based on the information the bidders provided in
12 their proposals and any clarifications we requested about the proposals, as well as on-site
13 demonstrations and interviews with key bidder personnel. We also checked the bidders’ references.
14 Deloitte was selected as the successful bidder based on their overall scores on the
15 five criteria listed above. Deloitte brings to the table a thorough understanding of utility-industry
16 leading practices in process integration through its experience in deploying over 20 utility-specific ERP
17 solutions. Some of the North American utilities where Deloitte has installed an ERP system include
18 FirstEnergy, Centerpoint, Reliant, Montana Power and Puget Sound Energy. In addition, Deloitte’s
19 Energy & Resources practice is one of the leading professional services providers to the energy industry,
20 serving the dominant market share of Fortune 500 energy companies and utilities. Deloitte has also
21 developed tools that assist clients in mapping and reengineering processes and tracking progress in the
22 ERP implementation process. Deloitte additionally focuses on training and organizational change to
23 ensure employee familiarity with new systems and processes. Deloitte also has an added advantage in
24 that it is familiar with many of SCE’s systems, business processes, and company culture because SCE
25 has used Deloitte on a number of projects over the years.
32 Bearing Point submitted its bid with Deloitte’s proposal as a subcontractor to Deloitte.
24
1 e) SCE Has Attempted To Identify And Minimize The Risks Associated With Its
2 ERP Project
3 SCE has spent a great deal of effort considering the risks associated with
4 installing an ERP system. Recommendations from Deloitte and SAP, combined with interviews and site
5 visits to utilities that have previously implemented an ERP system, provided the basis for most of the
6 risks and mitigation actions we have identified.33 For example, one of the risks we identified was delays
7 in deploying ERP would increase implementation costs. To mitigate this risk we have worked with our
8 SI and SAP consultants to establish a phased deployment schedule with strong project governance on
9 scope control. In addition, the deployment schedule includes sufficient time between each Release to
10 allow for stabilization.
11 B. Scope And Schedule
12 1. Scope Of ERP
13 Because of our focus on business process integration, our Project’s scope is much broader
14 than simply replacing discrete applications that perform certain functions. As discussed in more detail
15 below, the scope of our ERP Project includes the identification of business processes, sub-processes,
16 activities, and work steps that define how SCE does its work. These processes allow SCE to effectively
17 match SAP modules to our processes to best meet SCE’s business needs. In fact, SCE’s business
18 process scope forms the foundation of our ERP system’s scope; that is, the scope of our ERP system
19 flows from the requirements of our business processes. At the close of Blueprint or the “design phase,”
20 we have identified 33 fundamental business processes, 174 sub-processes, 1,466 activities, and 11,182
21 work steps that will be impacted by our ERP Project.
22 At the end of the Project, SAP will replace approximately 50 percent of our current
23 systems, including a significant number of our core legacy systems, such as our financial system, CARS,
24 MMS, our procurement system, and CSS. In addition, SAP will interface with selected retained systems
25 and partially replace a small number of other systems. Eventually, these other systems may also be
33 See workpaper entitled “Key Risks and Mitigation Actions.”
25
1 replaced with an SAP solution as the capabilities of SAP are expanded. For functions not supported by
2 SAP, we anticipate “bolting-on” compatible applications to obtain the benefits of a fully-integrated
3 system. Our workpapers contain the list of replaced, partially replaced and interfaced systems resulting
4 from our ERP Project.
5 a) Detailed Evaluation Of SCE’s Business Processes Helps To Ensure That SAP
6 Assists In The Successful Integration Of Our Business Processes
7 Essential to our business process classification efforts has been our “Business
8 Process Teams,” which have been charged with understanding and categorizing our current business
9 processes so that we can effectively map SAP functionality to our business requirements. By combining
10 within these teams SCE specific knowledge of current “as is” work practices and our SI’s knowledge of
11 SAP and industry leading practices, we have been able to achieve the best process design all the way
12 down to the individual work step.
13 The SCE Business Processes are hierarchical in nature, with the highest level
14 being the Mega-Process. Our seven Mega-Processes are:
15 • Energy Acquisition and Supply;
16 • Energy Generation;
17 • Energy Delivery;
18 • Customers Services;
19 • Corporate Financial Management;
20 • Corporate Support; and

21 • Operations Support.
22 The first Mega-Process, Energy Acquisition and Supply, is the only Mega-Process
23 excluded from the ERP scope because SAP does not offer the functionality required to execute the work
24 covered by this Mega-Process.
25 Our Business Process teams have broken down each of these Mega-Processes into
26 “Level Two” processes, lower-level processes, sub-processes, activities and, work steps. The
27 breakdown of Mega-Processes into Level Two processes is shown on Figure II-2, SCE Business Process
26
1 Hierarchy. Currently there are 33 processes within our ERP Project Scope and they are listed as Level
2 Two on the Process Hierarchy.
Figure II-2
SCE Business Process Hierarchy
End-to-End Energy Product Management End-to-End

Management & Support
Customer Mgmt
Level One
Energy Energy Energy Customer Corporate Corporate Operations

Acquisition & Generation Delivery Services Financial Support Support
Supply Management
Plan Energy Develop & Manage Develop & Manage Manage Plan & Manage Manage Human Manage Supply
Supply Asset Strategy Development & Corporate Strategy Resources Chain
T&D Asset Strategy
Delivery of Program
Level Two
Out of Scope
& Services
Manage Information
Procure & Sell Manage Resource Develop & Maintain Manage Technology Manage
Strategy & Operating T&D Work & Resource Manage Customer Capital & Risk
Energy Strategies Real Estate
Model
Relationships
Out of Scope
Manage Internal
Manage Plant Audits
Manage T&D Manage Customer Manage Accounting Manage
Asset Programs System Manage Customer & Controls
& Projects Relationships Environmental
Asset Programs Installations & Manage Business Health & Safety
& Projects Services Processes
Manage Manage Business

Operate Plant Operate T&D Corporate
Bill for Products Manage Protection
Assets System Assets Communications
& Services Corporate Taxes
Maintain Manage Decision Manage

Maintain Plant Legal Services Manage Other
Assets T&D Assets Support Operations Support
Manage
Manage Customer Provide Regulatory
Installationsand
& Shareholder Operations
Installations Services
Services
Services
Out of Scope
Manage Ethics &
Compliance
Process Description Manage

Governmental
Affairs
Out of Scope
3 In collaboration with our System Integrator, each of the Level Two processes has
4 been broken down into lower level processes and subsequently into sub-processes, activities, and work
5 steps.
6 The Mega-Process, “Operations Support,” serves as a good example to illustrate
7 this effort. This Mega-Process includes the following Level Two processes: “Manage Supply Chain,
8 “Manage Real Estate,” “Manage Environmental Health and Safety,” “Manage Business Production,”
9 and “Manage Other Operations Support.” Each of these Level Two processes has been further broken
10 down into lower-level processes. For example, under “Manage Supply Chain,” is the lower-level
27
1 process “Manage Logistics,” which refers to managing the flow, storage and delivery of materials.
2 Included under this lower-level process are eight sub-processes.34
3 These eight sub-processes are made up of over 70 activities. For example, there
4 are seventeen distinct activities in the sub-process “Manage Materials and Inventory.”35 These activities
5 are further broken down into work steps. For example, the “Supply Chain Logistics Management
6 Reports” activity is made up of 23 work steps, such as Plant/Storage Location Audit Report; Inventory
7 Control Data Report; Material Transaction Report; and Summary of Planned Material. It is these sub-
8 processes, activities, and work steps that determine our SAP software configuration. For example, all of
9 the 23 work steps under “Supply Chain Logistics Management Reports” correspond to an SAP
10 “transaction,” i.e., a standard operation performed by SAP. Integration of work steps, activities and
11 processes occurs through the exchange of information from one SAP module to the next. These
12 interfaces are built into the design of SAP, and once configured, integration occurs seamlessly.
13 b) The Business Process Scope Is Defined At The Highest Level By The Six Mega-
14 Processes But Implemented At The Team Level
15 To effectively implement SAP, we decided to organize our ERP implementation
16 team, as discussed in Section II.A.3.c, into six Business Process teams to design, test, and implement the
17 SAP modules that fall within their specific process areas. Each of these Business Process teams
18 oversees certain process areas (i.e., Finance, Human Resources, Operations Support, Enterprise Asset
19 Management and Work Management, Customer Care, and Reporting and Analytics). We also have five
20 additional teams to assist in the implementation process. These teams are “Organizational Readiness,”
21 “Technology,” “Project Management,” “Portal,” and “Security and Controls.”
34 These sub-processes are: (1) Materials Planning; (2) Receive and Store Goods; (3) Manage Materials and Inventory; (4)
Manage and Fulfill Material Requirements; (5) Manage Returns; (6) Manage Material and Asset Disposition; (7)
Manage Transportation Operations; and (8) Manage Material Master Data.
35 These activities are: (1) Maintain Stock Placement Strategies; (2) Maintain Stock Removal Strategies; (3) Perform
Inventory Counts; (4) Generate & Fulfill Replenishment; (5) Manage Shelf Life of Materials; (6) Monitor Inventory
Levels; (7) Manage Internal Stock Movements; (8) Supply Chain Logistics Management Reports; (9) Approve Write
On/Off; (10) Write On/Off to the General Ledger; (11) Define Replenishment Policies; (12) Perform Cycle Count; (13)
Update/Replace in Variance, Reconcile Inventory; (14) Determine Cycle Count Performance; (15) Manage Consignment
Materials; (16) Monitor Material and Inventory Related Performance; and (17) Manage Hazardous Material.
28
1 Because of the integrated nature of SAP, these process teams (and their respective
2 sub-teams) are responsible for configuring the business processes, sub-processes, activities, and work
3 steps that directly affect their area of responsibility, as well as for any other process areas that interface
4 with their area. For example, a sub-team of the Enterprise Asset Management Team, the Generation
5 Asset Management Team, is responsible for the Mega-Process “Energy Generation” within the
6 Generation Business Unit. This includes responsibility for functions, such as work planning, work
7 scheduling, work control, equipment performance monitoring, plant operations, and plant maintenance.
8 In addition, the Generation Asset Management Team must coordinate with other teams that interface
9 with these areas, such as the Operations Support Team for material and the Finance Team for
10 accounting.
11 Table II-1 summarizes the number of Processes, Sub-processes, and Activities,
12 over which the six main Business Process Teams have responsibility. Once the project is complete,
13 these processes, sub-processes, activities, and work steps, which document how work is done at SCE,
14 will lay the foundation for future business process improvement initiatives.
Table II-1
ERP Process Scope
Team Processes Sub-processes Activities
Finance 3 35 300
Operations Support 3 22 200
EAM 20 62 530
Customer Care 5 32 247
Human Resources 1 15 129
Analytics & Reporting 1 8 60
Total 33 174 1466
15 (1) Finance
16 The Finance Team is responsible for implementing all of the financial
17 functions required by the company to conduct business, such as regulatory and managerial accounting,
18 accounts payable, and asset accounting. They are also responsible for configuring the SAP system to
19 meet the financial reporting needs of the Company and configuring the cost flows to meet certain design
20 requirements, such as:
29
1 • Complying with Generally Accepted Accounting Principles (GAAP);
2 • Complying with FERC Uniforms System of Accounts – O&M and
3 Capital;
4 • Improving and automating internal controls;
5 • Maintaining the current financial base for the GRC (i.e., FERC account
6 and “activity,” that is the basis upon which our business units describe
7 their work and explain the level of expense or capital funding needed); and
8 • Improving the integration of work management/operational processes and
9 financial reporting.
10 This Team is also responsible for mapping our financial sub-processes to ensure
11 that SAP is properly handling:
12 • Financial and Regulatory Reporting
13 • Fixed Assets
14 • Management Accounting
15 • Accounts Payable
16 • Treasury
17 • Non-Energy Billing
18 Because our financial systems touch nearly every aspect of our business, the
19 finance processes must integrate with nearly all other business processes, and thus, must integrate with
20 nearly all of the other SAP modules. For example our Finance functions need to integrate with our
21 Asset Management, Work Management, and Supply Chain operations. A good example of how
22 integration will occur between SAP modules is the planning, construction and closing of a transformer
23 installation in the field. The substation planner will open a work order in SAP, describe the material
24 needed for the work and establish the proper accounting. SAP then queries the warehouse for stock
25 availability and sets up a delivery date based on to the planner’s description and instruction. If the
26 material is not available in the warehouse, SAP notifies a buyer that the material needs to be bought.
27 After the material is delivered and received, SAP alerts accounts payable that the vendor should be paid.
30
1 The work order then goes to the crew in the field; the transformer arrives per the scheduled delivery
2 date; the crew installs it and when the work is done, the work order is closed and all costs are charged
3 according to accounting information provided by the planner at the outset. Once the work order is
4 closed, the installed transformer becomes a new plant asset; the plant ledger is updated and the
5 appropriate fixed asset capitalization is completed.36 The actual plant ledger is housed in externally
6 purchased software called PowerPlant. This highly specialized utility industry software for fixed asset
7 capitalization was purchased by SCE and is integral to the design of our capital asset accounting.
8 PowerPlant integrates fully with SAP.
9 (2) Human Resources
10 The Human Resources Team is responsible for the largest Level Two
11 process, “Manage Human Resources,” within the Mega-Process “Corporate Support.” Within the
12 “Manage Human Resource” process the most significant sub-processes are:
13 • Acquire Talent
14 o Recruiting and Selection
15 o Hiring and On-boarding
16 • Provide Compensation
17 o Compensation
18 o Benefits
19 o Disability Claims
20 o Time and Attendance

21 o Payroll Processing
22 o Off-Cycle Payroll Processing
23 o Payroll Reporting and Reconciliation
24 • Develop Employees
25 o Train Workforce
36 Although this is a somewhat simplified example, it highlights the interfaces that occur within the SAP system on a real
time basis.
31
1 o Performance Management
2 • Manage the Relationship
3 o Employee Data
4 o Organization and Positions
5 o Labor and Employee Relations
6 o Employee Separation
7 Because all of these sub-processes are impacted by SAP, our ERP system
8 will replace of a number of our current human resources’ legacy systems, including PeopleSoft, ATS
9 LAN (timekeeping), JOIS (internal job postings) and LMS (learning management).
10 SAP will improve our ability to manage our people.37 For example, when
11 GBU plans and schedules work, the personnel resources required to do the work can be instantly pulled
12 up from the Human Resources database. We will also be able to track labor hours on a real time basis
13 using SAP’s time keeping module. This feature will allow us to more readily track the cost of work.
14 (3) Operations Support
15 The Operations Support Team is responsible for integrating the Supply
16 Chain processes. Supply Chain refers to the logistics of planning for, procuring and controlling the
17 efficient storage, flow and delivery of materials and contract services. Our SAP procurement, logistics,
18 and warehousing functions – all a part of the Supply Chain – will be internally integrated so that anyone
19 who procures material, contractors or equipment can use the same SAP tools. We plan to enhance these
20 features and deliver them over multiple releases 38 with various SAP self-service and collaboration tool
21 modules, which will allow us to integrate directly with suppliers’ systems. Once this functionality is in
22 place, we can send orders to the supplier via the internet and we can also receive information from
23 suppliers – particularly the larger contractors that provide utility field construction services – and that
24 information can be integrated into our work management plans.
37 One of the systems being replaced is PeopleSoft. For additional systems being replaced, please see workpapers.
38 As discussed in Section II.2 below, our ERP system will phase-in over five deployment “Releases” consisting of five
project phases depicted in Figure II-1.
32
1 Our Operations Support Team is also responsible for Documents and
2 Records Management, as well as Land Management functions for our Corporate Real Estate
3 department.39 The SAP Document and Records Management (DM/RM) functionality will initially be
4 implemented at SONGS to replace their aging Nuclear Document Management System. We will
5 leverage standards developed there so that other Business Units can, in the future, deploy their own SAP
6 DM/RM system at the pace that meets their own document management needs.
7 SCE’s Corporate Real Estate Division will implement the Real Estate
8 modules in SAP to help them manage their portfolio of land and building assets and the SAP work
9 management capability to manage the repair and maintenance of our real estate assets.
10 (4) Enterprise Asset Management (EAM)
11 The EAM Team oversees those business processes that relate to Asset and
12 Work Management. Our Asset Management business processes track and maintain information related
13 to the location, age, design characteristics, inspection, maintenance and operating statistics, installation,
14 removal, replacement and salvage of our utility plant assets. Our Work Management business processes
15 mainly involve the scheduling and planning of work activities. At the end of our ERP project, our Asset
16 and Work Management business processes within our major business units (TDBU, CSBU and GBU)
17 will employ SAP to plan and manage work.
18 We have set up two EAM sub-teams, the Generation EAM Team and the
19 TDBU/Non-Energy EAM Team, because the scope of work that relates to Asset and Work Management
20 is large (20 of the 33 business process that will be affected by ERP) and because some work planning
21 processes differ depending on whether you are installing a distribution pole or installing a nuclear
22 reactor coolant pump. The two sub-teams, however, have common oversight because many of the sub-
23 processes are identical regardless of the type of work being done (e.g., cost structure for projects).
39 Two areas that are traditionally a part of Operations Support -- Transportation Services Department (Fleet) and Real
Estate Facility Management -- are being handled, for ERP purposes, by the Enterprise Asset Management Team. This is
because the business processes in these areas (e.g., managing information about plant assets) more closely relate to the
other business processes being handled by our Enterprise Asset Management Team.
33
1 The Generation EAM Team oversees the asset and work management
2 process for both SONGS and our Power Production organization. After our ERP system is installed
3 both organizations will use common systems to manage our Generation assets. The TDBU/Non-Energy
4 EAM Team oversees the asset and work management business processes for TDBU, CSBU, Carrier
5 Solutions, Transportation Services Department – Fleet and IT. To achieve the functionality required to
6 handle the dynamic nature of TDBU’s scheduling of construction and maintenance work, it requires that
7 we install two Bolt-ons to SAP. These Bolt-ons are discussed more fully in Section II.B.1.e below.
8 Our EAM Teams also works closely with our Finance and Operations
9 Support Teams because we need to maintain financial records for all of our assets and because any
10 materials needed to work on our assets must move through our Supply Chain business processes.
11 (5) Customer Services
12 Our Customer Services Team oversees business processes that support our
13 customers. These processes include Customer Care activities such as: (1) developing and managing
14 customer programs and services, (2) capturing meter reads, (3) performing bill calculations, (4) billing,
15 credit, and collections efforts, (5) accounts receivable, and (6) responding to customer inquiries at our
16 call centers. Implementation of SAP in these areas will result in the replacement of our current
17 Customer Service System (“CSS”) and our customer relationship management systems.
18 As part of our ERP Project, we will also implement new and improved
19 information reporting tools to enhance our customer relationships. Such tools will be particularly useful
20 for providing consulting assistance for energy efficiency and demand response products and services.
21 Our ERP system will also improve our capability to serve our customers
22 because our customer services’ systems will interface with our distribution work management, Finance
23 and Supply Chain systems, which will enable our customer service representatives to provide timely and
24 more accurate information to our customers.
25 (6) Reporting And Analytics
26 Our Reporting and Analytics Team is responsible for defining and
27 developing the reporting requirements to support both internal and external reporting. Because SAP has
34
1 an integrated database and enhanced reporting tools, its reporting capabilities are virtually endless.
2 Thus, we need to carefully determine which reports will most effectively meet our business needs. This
3 is the Reporting and Analytics Team’s responsibility. In addition, the team is responsible for creating
4 any specialized reports (i.e., non-standard SAP reports) to meet our business needs. This will be the
5 case for a number of our external reports needed to meet our regulatory reporting obligations, such as
6 the Rule 20 Report for Overhead to Underground Facility Conversions and CPUC General Order 156
7 for WMDVBE Reporting.
8 c) Other Areas Of The Project Scope Are Critical To A Successful ERP Deployment
9 In addition to the six Business Process Teams, we have created four additional
10 teams to assist in the implementation process. Those teams are the Organizational Readiness Team, the
11 Technology Team, the Portal Team, and the Security and Controls Team.
12 (1) Organizational Readiness (OR)
13 Because an SAP implementation of this size cannot be accomplished
14 successfully without careful evaluation and assessment of the change implications and readiness of the
15 organization to accept and implement the necessary changes, we created an OR Team to assess the
16 changes and develop plans to prepare the organization for deployment. The SI is a key component of
17 the OR Team because of the extensive experience Deloitte has in SAP implementations. SI personnel
18 assist their SCE counterparts and work with key business people to assess the changes, design and
19 develop change management plans and steps necessary for the business to minimize operational
20 interruptions. The OR Team will create the appropriate training curriculum, conduct initial “train-the-
21 trainer” courses and assist organizations in further deployment of the training program.
22 To assist in the OR process, the Business Process Teams identify “change
23 implications” that they believe will need to be addressed to make the deployment successful. The OR
24 Team captures this information, conducts additional assessments, and works with the business units to
25 identify job and organizational changes, procedural and operational changes, and develop mitigation
26 steps to ensure we have a smooth and successful implementation. Mitigation steps include a
27 communication and change management strategy and plan aimed at the needs of each specific business
35
1 unit, end-user training that is targeted for the right audience, and hands-on demonstrations to reinforce
2 the capability of the system.
3 Additionally, the OR Team also works closely with the Security and
4 Controls Team and the Business Process Teams to map current SCE business positions into SAP roles,
5 which are essential components of SAP’s security access measures and ensure the right people are
6 performing the appropriate roles.
7 (2) Technology
8 The Technology Team is responsible for installing and maintaining the
9 hardware and software environment during the life of the Project. This includes maintaining the
10 hardware and the operating systems that manage the ERP system. The Technology Team coordinates
11 closely with SCE’s IT Department because responsibility for maintaining the hardware and software
12 environment shifts to the IT Department as our ERP system goes live. When the ERP deployment is
13 complete, our IT Department will be fully responsible for all hardware and software maintenance.
14 The Technology Team is also responsible for programming activities that
15 are necessary to implement our ERP system. These activities include:
16 • Reports: Performing the necessary programming to allow the
17 specialized reports created by the Reporting and Analytics Team to
18 integrate with SAP’s modules;
19 • Interfaces: Developing the interfaces to current legacy systems and
20 external parties that will need to be connected to SAP;

21 • Conversion: Creating data conversion routines to bring existing data
22 into SAP;
23 • Enhancements: Making enhancements to SAP to take advantage of
24 SAP’s flexibility to add specialized functionality to meet our unique
25 requirements;
26 • Forms: Creating the unique forms that are only used by SCE; and
36
1 • Workflows: Establishing routines for SCE unique workflow
2 processes, such as documents routing for approvals.
3 These activities are referred to as the RICEFW Development Objects for
4 short; and it stands for Reports, Interfaces, Conversions, Enhancements, Forms and Workflow.
5 (3) Portal
6 Our Portal Team is responsible for SAP’s Portal. The Portal represents
7 the single point of entry for all SCE employees into SCE’s intranet and to SAP. Through this interface,
8 employees can access their work, upload data, download reports, approve documents, initiate work and
9 have access to important employee information. The Portal will eventually replace our current Intranet
10 website, EDNA.
11 To illustrate the benefits of Portal, we cite the example of how Portal can
12 be used by a SCE manager. At the beginning of the day, the manager will logon to the SCE network.
13 The access point will be Portal. Because of the manager’s unique password, SAP will know who this
14 manager is and what systems or information he or she can access. If, for example, the manager is from
15 Customer Service, he or she might be automatically granted access to check on customer records.
16 After the manager has logged in, he or she will check the “workbox” to
17 see if there are any documents needing approval. This might be an invoice for payment, a request from
18 an employee for a vacation day, or an employee’s expense account. Once approved, these documents
19 will automatically move through the SAP workflow process to the next level of approval or to the
20 appropriate department for processing. The manager might also want to check on his/her available
21 vacation days or the status of personal records. All of this can be done once the manager logs into
22 Portal.
23 The Portal will also be used by customers or suppliers to transact business
24 with SCE. Customers will have the ability to initiate turn-on/turn-offs or to pay their bills through the
25 Portal. And suppliers will be able to receive direct orders via the supplier collaboration portal, which
26 will enable Procurement to shorten the cycle time from order to delivery of material.
37
1 (4) Security And Controls
2 The Security and Controls Team is comprised of three work groups
3 dedicated to design, build, and implement controls for SAP Business Processes, Information
4 Technology, and Application Security. This team will ensure that these controls adequately address the
5 Company’s control risks and meet our control objectives. For example, this team will examine SAP
6 control designs to validate that they meet current SOX control objectives and requirements. This team
7 will also work with the Business Process Teams and Technology Team to ensure that SAP controls are
8 (1) appropriately developed, configured, and tested, (2) included in SAP process procedures and
9 training, and (3) transitioned properly with each Release.
10 With regard to Security, this team is responsible for defining, building,
11 and testing the access security provisions for every employee. Security access within SAP is “role”
12 based. Each position in SCE will be mapped to these roles and only certain roles will be defined as
13 having certain access privileges. For example, a payroll clerk role will be granted access to the payroll
14 system in SAP but a lineman will not.
15 In addition, this team will be responsible for the installation and
16 implementation of the Governance, Risk, and Compliance module (GRCM) as described in Section
17 B.1.d.6 below.
18 d) Deployment Of SAP Modules Will Meet SCE’s Required Functionality
19 With a better understanding of our business processes and how our ERP system
20 will impact those processes, we can now discuss the specific SAP modules that SCE has purchased as
21 part of our ERP Project. We have bought the SAP Business Suite For Utilities. This suite contains a
22 complete package of business solutions that links people information, financial information and business
23 processes together to deliver a complete ERP solution and can be tailored to fit the size of the company
24 and the extent of the functionality to be deployed. Because SAP has developed this business suite for
25 the utility industry, it contains utility-specific functionality. For example, it incorporates a FERC
26 accounting module.
38
1 SAP Business Suite For Utilities contains five specific SAP “Solutions,” all of
2 which are fully integrated. The five Solutions are: (1) SAP ERP; (2) SAP SCM; (3) SAP CRM; (4) SAP
3 PLM; and (5) SAP SRM. Each of these Solutions is discussed in more detail below. Figure II-3 is a
4 pictorial representation of these five Solutions.
Figure II-3
SAP ERP Business Suite
SAP ERP Business Suite

SAP PLM
Maintenance & Quality
Distribution Management
SAP ERP
Purchase Order
Sales Order &

SAP SAP
Management
Financials
SRM Human Resources CRM
Corporate Services
Operations
Inventory & Production
SAP SCM
SAP NetWeaver
5 (1) SAP ERP
6 SAP ERP is the center Business Solution of the Business Suite. It
7 contains the core business functions designed to meet the needs of most business applications. These
8 functions or “modules” include: Financials, Human Resources, Corporate and Support Functions,
9 Production Support, Sales and Service, Procurement and Logistics Execution, and Analytics. The sub-
10 systems in each of the modules are set out below:
11 • Financials
12 • Financial Accounting
39
1 • Management Accounting
2 • Financial Supply Chain Management
3 • Corporate Governance
4 • Human Resources
5 • Talent Management
6 • Workforce Process Management
7 • Workforce Deployment
8 • Corporate Services
9 • Real Estate Management
10 • Enterprise Asset Management
11 • Project and Portfolio Management
12 • Environmental Health and Safety
13 • Travel Management
14 • Quality Management
15 • Operations
16 • Sales and Service
17 • Sales Order Management
18 • Service Delivery
19 • Aftermarket Sales and Services
20 • Procurement and Logistics Execution

21 • Procurement
22 • Inventory and Warehouse Management
23 • Logistics
24 • Transportation
25 • Product Development and Manufacturing
26 • Product Development
27 • Production Planning
40
1 • Manufacturing Execution
2 • Life Cycle Data Management
3 • Analytics
4 • Strategic Enterprise Management
5 • Financial Analytics
6 • Operations Analytics
7 • Workforce Analytics
8 (2) SAP SCM (Supply Chain Management)
9 SAP SCM provides enhanced capabilities to manage our supply chain and
10 this will improve our entire supply chain processes. It builds upon the capabilities in the SAP ERP core
11 functions, by including additional functionality to support strategic sourcing initiatives, better
12 forecasting, and material life-cycle planning. It also provides for better visibility and analytics in the
13 core functions of Supply Chain, Procurement, and Order Fulfillment.
14 (3) SAP CRM (Customer Relations Management)
15 SAP CRM brings together the business processes required to provide
16 improved customer service. For example, the module “Campaign Management” is designed to improve
17 our ability to manage our special customer programs. Such capabilities build on the core functions and
18 allow us greater visibility into our customers’ needs and our programs and services to manage our
19 customer relations more effectively. Improved information about our customers will also be more
20 readily available using SAP CRM and organized in a way to help target certain customers with the right
21 programs to meet their needs. This will be especially helpful for deploying our portfolio of energy
22 efficiency and demand response programs.
23 The Sales systems contained in SAP CRM will also provide greater
24 account and contact management capabilities. On the service side, we will improve our handling of
25 customer inquiries because SAP CRM interfaces with the other SAP modules contained in the SAP
26 Business Suite For Utilities.
41
1 (4) SAP PLM (Product Life-Cycle Management)
2 SAP PLM is a set of modules that allows us to better manage our assets.
3 Key modules in this Solution include Enhanced Enterprise Asset Management, Life-Cycle Collaboration
4 & Analytics, and Life-Cycle Data Management. These modules enable collaborative engineering,
5 project management and change and configuration management.
6 (5) SAP SRM (Supplier Relationship Management)
7 SAP SRM is one of the most critical set of solutions in the SAP Business
8 Suite For Utilities. It pulls together in integrated fashion information from PLM, ERP, and SCM and
9 provides the capability to:
10 • Develop better supply strategies through focused sourcing initiatives,
11 supplier selection and contract management – including spend
12 analysis, supplier selection processes, contract management and
13 catalog buying;
14 • Expedite the purchasing process through process automation and
15 compliance management for goods and services (e.g. self service
16 procurement and services procurement); and
17 • Gain higher supplier participation through supplier self-service,
18 connectivity, collaboration and supply chain visibility, including
19 design collaboration, collaborative replenishment and supplier
20 connectivity.
21 Underlying all of these solutions, as shown in Figure II-3, is something
22 called SAP NetWeaver. This is the engine that creates the integration that occurs with the people, the
23 process, and the technology platform. It enables all the applications to operate together with a single
24 database of information that operates in real time.
42
1 (6) SAP’s Work Efficiency Component And Governance, Risk And
2 Compliance Module
3 We will also install SAP’s Work Efficiency Component (WEC) and its
4 Governance, Risk and Compliance module (GRCM) as part of our ERP system. WEC will be used at
5 SONGS. It provides specialized capabilities for surveillance testing and Nuclear Regulatory
6 Commission mandated maintenance rule requirements. GRCM will enhance our security and controls
7 capabilities. Specifically, GRCM will (1) improve security access controls to facilitate building and
8 maintaining the security of users and their roles; (2) monitor and enforce Segregation of Duties (SOD)
9 with automated alerts; and (3) provide management with SOD analysis and reporting tools. It also has a
10 built-in repository for SOX process-control documentation and for control testing documentation. In
11 addition, it contains automated control monitoring, testing and management certification and signoff.
12 In summary, the discussion above provides an overview of the SAP
13 products purchased and implemented as part of SCE’s ERP Project. This is not intended to be an
14 exhaustive list of all the technical modules purchased but a representative list that relates back to the
15 scope of the ERP project as discussed in Section A.1 above. A complete list of modules can be found in
16 workpapers.
17 e) Bolt-Ons
18 (1) Introduction
19 As discussed above, our ERP system will include two Bolt-ons to SAP. A
20 Bolt-on is a Best-of-Breed (“BoB”) software application that performs a vital business function that is
21 beyond the capabilities of the standard SAP modules. But because of SAP’s open architecture and
22 partnerships with a number of BoB providers, BoB solutions – such as the ones SCE will install – can
23 integrate tightly with SAP’s modules.
24 During the company-wide BPI effort that preceded our ERP Project, areas
25 in need of improvement (“pain points”) were identified in several TDBU work processes. The majority
43
1 of these are addressed by SAP.40 But SAP’s capabilities are limited for graphical design of distribution,
2 transmission, and substation capital work and for scheduling this work. Because these design and
3 scheduling capabilities are critical components of TDBU workflow,41 we determined that we should
4 “bolt-on” a BoB scheduling application and a BoB design application to SAP as part of the ERP
5 Project.42 SAP interfaces to these Bolt-on systems are included in the main project scope, and our
6 System Integrator will provide the necessary support to make sure these Bolt-ons interface properly with
7 SAP.
8 Because the Scheduling initiative was already underway as part of the BPI
9 work, the Scheduling and GDT/CUs Bolt-ons are managed separately by a team in TDBU. This Team
10 reports into the ERP Program Management Team. Because of this, the scope, cost, and schedule for the
11 Bolt-ons are shown as a separate line item even though the work is included in the ERP Project.
12 (2) Scheduling
13 In its prior BPI testimony, SCE described the need to implement
14 integrated forecasting and scheduling, improve processes, and obtain better information for improved
15 work estimation.43 BPI envisioned a Scheduling system incorporating a pre-determined set of
16 scheduling rules created by TDBU to meet the following objectives:
17 • Ensure that all work is made visible in order to schedule and complete
18 work in the most efficient manner possible.
40 Please see Test Year 2006 GRC, SCE-10; the impact of ERP on BPI, and the subsequent evolution of the BPI initiatives
are described in the Productivity Exhibit, SCE-12.
41 The end-to-end TDBU workflow begins with Work Initiation, moves through Design, Scheduling, and Performing
Work, and ends with Closing Work.
42 In the future, these tools (particularly Scheduling) may be adapted in areas outside of TDBU, such as CSBU,
Transportation Services, and GBU.
Due diligence for choosing the “Bolt-On” Option was performed by a) benchmarking other utilities that have installed
SAP, and b) by discussions with SAP personnel, SCE’s System Integrator (Deloitte), and the Gartner Group.
43 TY2006 GRC, SCE-10, pp. 51-53.
44
1 • Ensure that all TDBU Divisions (Distribution, Transmission,
2 Substations) can and do make use of the tool for scheduling their
3 work.
4 • Optimize the match-up between specific work requirements and skill
5 sets of available crews, ensuring that crews are assigned to jobs that
6 require their specific skills, and for which they are neither over nor
7 under-qualified.
8 • Facilitate optimization by sub-dividing work orders into a set of
9 schedulable operations (units of work), so that certain types of work
10 requiring the same skill set (e.g., underground civil work, cable
11 pulling) can be accumulated and assigned as a batch to crews
12 possessing the required skills.
13 • Facilitate schedule adjustment, caused by last-minute changes to the
14 schedule that result from emergency repair work or the residual affects
15 from the prior day’s work (e.g., “day-of” adjustments to crew or
16 material availability).
17 • Assure that all pre-construction activities are performed (e.g.,
18 constructible design, job-site ready, material ready, and designated
19 structures prefabricated),44 so that all requirements to execute a job are
20 in place before the crew is dispatched, eliminating false job starts and
21 resulting lost crew time.
22 Through analysis and benchmarking, it was determined early on that the
23 capabilities of SAP were not sufficient to satisfy the objectives of the TDBU scheduling needs.45
24 Ultimately, the software Clicksoft was selected as a Bolt-on to SAP and is being implemented as part of
44 Some overhead structures are pre-built “on the ground,” at the service center or regional store, and set on the pole as a
complete unit.
45 Please see workpapers entitled “Endeavor Summary and ERP Impact Analysis” in our workpapers under the
45
1 the ERP Project. Currently, Clicksoft provides this capability to 25 Telecom companies and 36 Utilities.
2 Clicksoft is a certified Bolt-on application of SAP and is fully integrated into the SAP system. An SAP-
3 certified application provides assurance to the purchaser that the interfaces are well-defined and
4 supported by SAP.
5 (3) TDBU Graphical Design Tool/Compatible Units
6 An optimal design process includes efficient design planning, the correct
7 materials list, the right construction equipment, and the right personnel with the right skill sets to
8 complete the construction. But as with scheduling, numerous “pain points” currently exist in the design
9 process making it less than optimal. These “pain points” relate to the design and assembly-list
10 processes.46 For example, repetitive design “types” are recreated for each specific project. This means
11 that planners must build projects up from the smallest micro units, which can result in inconsistency and
12 errors. Similarly, assembly lists are not integrated with ordering, which can also result in errors.
13 The construction process suffers similar inefficiencies. Inconsistent or
14 inaccurate engineering can lead to incorrect construction, redesign, return of materials, or field crews
15 building ad hoc modified designs (“as built”). Ordering incorrect material causes project delays, false
16 starts, and added costs. Also, “as built” designs are not examined when a work-order is closed to
17 determine whether they deviate from the final design. Deviations, in turn, impacts plant data and asset
18 management.
19 In its prior BPI testimony, SCE intended the GDT/CUs solution would be
20 able to create simplified designs and make it easier to both “design to standards” and “build to design.”
21 This Bolt-on allows SCE to take advantage of previous designs by establishing a repository or library of
22 design templates. It also reduces the time needed to identify the materials required for designs by
23 creating pre-determined assembly lists based on the type of service request.
24 SAP, however, does not possess a module to perform graphical design as
25 we have just described although SAP does have the capability to manage Compatible Unit (CU) data
46 Design refers to computer and software-assisted electrical drawings. “Assembly Lists” are used to identify specific
material that will be used for a construction project.
46
1 (called Units of Work or Operations in SAP).47 Thus, we determined that we should “bolt on” a
2 GDT/CUs (i.e., a Graphical Design/Compatible Unit Tool) solution to SAP. Although we have not
3 identified as yet the specific GDT/CUs Bolt-on we will use, we are in the process of doing so. As with
4 the Scheduling Bolt-on, we intend to use a certified SAP partner.
5 2. ERP Schedule
6 a) SCE Will Use A “Phase-In” Approach To Implement ERP
7 As discussed above, the scope of ERP is far-reaching and will result in the
8 replacement of over half of SCE’s systems. This means that employees in every business unit will see
9 familiar legacy systems disappear. Prior system conversions, such as our conversion of our previous
10 Customer Information System (CIS) to CSS, during the 1990s, have shown that a phased-in approach
11 minimizes the impact to on-going operations. Our SI and SAP have also recommended phasing in SAP
12 as the best way to implement SAP. A phased-in approach would allow delivery of functionality over
13 time, starting with foundational processes and modules. It would also allow the same team of trainers to
14 prepare employees in staggered sessions and re-use of other personnel from earlier rollouts. It would
15 also allow us to stabilize the systems rolled out during each phases before the next phase. For these
16 reasons we chose to phase in our ERP system.
17 ERP will phase-in over five deployment periods, which we refer to as “Releases”
18 (i.e., Releases 0-4).” We expect the first four Releases to take place over the next three years, and the
19 fifth Release to be implemented by 2013. Each of these Releases will be described in further detail
20 below. To accomplish this phased rollout approach, all of the SAP Solutions in the SAP Business Suite
21 For Utilities, with the exception of SAP SRM and SAP CRM, will be deployed in Release 1. SAP SRM
22 will deploy in Release 2. In Release 3, we will further deploy SAP ERP and SAP SRM to additional
23 business units. SAP CRM will deploy in Release 4. Table II-2 displays our ERP Release schedule.
47 CU is a term used to refer to the linking together of material and labor, with required skill sets and equipment, into a set
of base-level design and construction components.
47
Table II-2
Release Schedule
2006 2007 2008 2009 - 2013
Affected Audiences
Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 2009 2010 2011 2012 2013
Project Prep Overall Project Prep and Blueprinting for
and Business Release 0 through 3 completed Q1 2007 and
Blueprint Release 4 will complete in Q4 2007
Go-Live 9/07 SONGS - Doc/Rec Mgmt & C-Folders; IT -
Release 0 Technology Foundation Support
Go-Live 4/08 All SCE - Finance, Non-Energy Billing,
Release 1 Payroll, HR and Supply Chain; GBU, IT,
Fleet, Carrier Solutions, Real Estate (Land,
Facilities) and TDBU Capital - Work Mgmt,
Scheduling Phase 1 (1/08)
Go-Live 9/08 All SCE - Remaining HR, GBU Work
Release 2 Mgmt and Operations Support - Supplier
Relationship Mgmt
Go-Live 3/09 TDBU Maint and Insp - Work Mgmt,
Release 3 Scheduling Phase 2 and GDT/CUs; Ops
Support - Supplier Self Service
Go-Live 9/13
Release 4 CSBU - Customer Care (CCS/CRM), Work
Mgmt, Remaining Non-Energy Billing
Portal 2006 Pilot 2007 Releases Support for ERP Implementation All SCE - EDNA, myEdison.net
Project Prep Blueprint Realization
Final Prep Go-Live & Support
1 (1) Release 0: GBU SONGS Document Management, Collaboration Tools
2 We anticipate Release 0 to occur in September 2007.48 This initial,
3 limited Release serves as a model for future DM/RM implementations and will test the technology
4 environments for the ERP system. This Release will permit testing of integrated processes between
5 basic asset management functions and document management within GBU.

6 During Release 0, three of the SAP Product Lifecycle Management (PLM)
7 modules (i.e., Document Management, Records Management, and C-Folders) will deploy. This initial
8 Release will deploy SAP’s document and records management capability for procedures only at
9 SONGS. SAP’s Document Management capability is a prerequisite for using the C-Folders
10 Collaboration Tool (functionality within PLM that will provide web-based collaboration between SCE
48 A limited deployment of Portal began in September 2006 to give a first look at some of SAP’s capabilities. A working
version of Portal went live in December 2006 for approximately 100 users, and since then, several hundred more users
have been added. We anticipate that all employees will be on Portal by mid 2007.
48
1 and various contractors on projects at SONGS). We are deploying C-Folders initially at SONGS
2 because most of our projects there require significant contributions from outside experts, and this
3 collaboration tool will greatly enhance the interactions with these experts. The C-Folders can later be
4 configured for other company uses.
5 (2) Release 1: Company Financials, Human Capital Management,
6 Budgeting/Business Intelligence, Enterprise Asset Management, Non-
7 Energy Billing, Supply Chain
8 Release 1 launches our core functionalities. It is scheduled to occur in
9 April 2008, which will allow time to apply any lessons learned from Release 0. The financial functions,
10 with the exception of energy accounting, will be deployed in Release 1. Full budgeting capability,
11 necessary for financial management, deploys in this rollout as well.
12 We will also deploy during Release 1, those systems connected to our
13 Supply Chain business processes, and we will deploy the payroll and other basic human resource
14 modules. Non-Energy Billing, Asset Management and Non-Energy Functions also rollout.
15 In addition, the first phase of the Scheduling Bolt-on will be deployed
16 prior to Release 1 in January 2008, which will mitigate the impact that the ERP system will have on
17 TDBU.
18 (3) Release 2: Additional Finance And Human Capital Management,
19 Contractor Portal, Supplier Relationship Management/Supply Chain,
20 Business Intelligence
21 Release 2 is scheduled for September 2008, a full year after Release 0.
22 This should allow ample time for stabilization of the SAP system. In addition, we can assess
23 organizational impacts and apply lessons learned from the first two Releases.
24 With Release 2, all remaining financial and human resource functions
25 deploy. In addition, the Portal will support contractor and supplier access permitting collaboration and
26 contributing to the Supply Chain process integration. Additional analytics and reporting functions also
27 deploy at this time to support this additional scope.
49
1 (4) Release 3: Additional Asset Management, Supplier Self-Service/Supply
2 Chain, Business Intelligence
3 Release 3 is scheduled for March 2009. Release 3 will bring additional
4 Asset and Work Management functionality within TDBU with the further deployment of Bolt-on
5 functions, i.e., GDT/CUs Bolt-on and Phase 2 of the Scheduling Bolt-on. In order to pursue continuous
6 process improvement within the Supply Chain, as well as other processes, further supplier automation
7 deploys in Release 3 to permit supplier self-service and supplier/SCE inventory collaboration. Again,
8 required reporting deploys in support of these and other functions.
9 (5) Release 4: Additional Asset Management, Customer Portal, Customer
10 Services, Business Intelligence
11 The final Release of Customer Service functionality is scheduled to deploy
12 in 2013. Release 4 primarily applies to our Customer Service Business Unit (CSBU) organization.
13 Asset and Work Management for CSBU operations completes our Asset Management process
14 deployments. During this Release, our customer service functions, such as customer information
15 management and billing deploy. At this time, additional systems capacity goes on-line to handle the
16 associated high volume of data. For improved customer service, the Portal will also provide enhanced
17 customer self-service. In addition, the final Business Intelligence functionality, also associated with
18 Customer Care, deploys.
19 During the time SCE was preparing the NOI, we anticipated implementing
20 the SAP Customer Care System (“CCS”) module deployed in the last release scheduled for 2009. To
21 meet this timeframe, without jeopardizing the implementation schedule of the concurrent Edison
22 SmartConnect™ advanced metering project, SCE anticipated the need to make some modifications to its
23 current Customer Service System (“CSS”), and then also make necessary customizations to the SAP
24 module to enable it to function with the SmartConnect™ systems.
25 The initial Customer Care module design was completed after SCE
26 tendered the NOI, and this effort identified additional system changes that would need to be made to
27 SAP to meet SCE’s business needs. These changes resulted in associated cost and schedule impacts,
50
1 which are described in this testimony. In addition, SAP has launched a new effort to modify its product
2 to enable enhanced advanced metering functionality. In so doing, SAP will now begin to develop much
3 of the functionality necessary for advanced metering, rather than requiring its customers, such as SCE,
4 to modify the SAP modules to include such functionality. The result will be a customer care solution
5 with needed advanced metering functionality for SCE that will be more robust and integrated into the
6 entire ERP system than if SCE had made these modifications on its own.
7 Although SCE believes its initial plan to modify the SAP CCS module to
8 work with SmartConnect™ could be successful, the initial Customer Care design process revealed
9 significant differences in terms of meter data management and architecture between this option and
10 SAP’s vision to incorporate advanced metering functionality within the SAP product. This issue would
11 eventually lead to challenging migration issues once later versions of SAP became available. With
12 SAP’s recent initiative to develop this functionality for future delivery, it is in the interests of SCE’s
13 customers to delay implementation of the fourth release of ERP until such time as the advanced
14 metering functionality has been developed by SAP within its product.49
15 Given the overlap in the original deployment schedules, SCE was going to
16 have to modify its existing CSS system to incorporate the SmartConnect™ system requirements anyway
17 so that CSS would be available as an interim system until the CCS system as part of ERP became
18 available in the middle of the SmartConnect™ deployment. Given the enhanced functionality that SAP
19 intends to develop to enable advanced metering functionality within the integrated ERP system, it does
20 not make sense for SCE to modify CSS as part of the SmartConnect™ deployment activities, then
21 modify CCS in 2009 to enable advanced metering functionality, only later to move towards the newer
22 SAP technology that is expected to include the necessary advanced metering functionality. In lieu of
23 developing two separate interim systems and the cost and risk associated with implementing both, SCE
49 SCE has developed our GRC revenue requirement on a “business as usual” basis, essentially asking for the funding SCE
needs to operate in the absence of SmartConnect™. See SCE-4, Volume 2, Appendix C. The delay in implementation
of the CCS module does not change this premise, as all incremental costs associated with modifying systems to connect
with and enable SmartConnect™ functionality are accounted for in the SmartConnect™ application and business case.
51
1 has now decided to defer implementation of the SAP CCS module and instead, continue to use its
2 existing CSS system until 2013.
3 This delay in implementing the CCS module will reduce risk to both
4 projects by minimizing or eliminating the unknown variables associated with two concurrent efforts.
5 Attempting to implement both the CCS module and the SmartConnect™ systems concurrently when
6 each has many “moving parts,” may have created a certain level of risk to both projects. The success of
7 both the ERP and the SmartConnect™ implementations will be enhanced by deploying these major
8 programs sequentially instead of concurrently. Not only will scarce knowledgeable business and
9 technological resources be more readily available, but building the SmartConnect™ systems to the
10 existing CSS system will mitigate the risk of unknown inconsistencies between SmartConnect™ and
11 SAP that would be difficult to manage in the middle of deploying both simultaneously. Waiting until
12 the SAP technology incorporates the functionality to handle the recent advances in metering technology
13 will mitigate this risk.
14 Delay of the last phase of ERP will not impact the project’s earlier
15 releases or affect the benefits for SCE customers from those earlier modules. Thus, SCE will reflect all
16 of the benefits achieved from ERP Releases 0 through 3 without modification in this GRC cycle.
17 SCE’s revenue requirement in this 2009 GRC does not include the
18 forecast costs and benefits associated with the fourth Release. In addition, we have conducted a benefit-
19 cost analysis on the revised business plan with the Release 4 costs and benefits extended to the later
20 implementation schedule. The overall business case is still positive, with a benefit-to-cost ratio of 1.10
21 to1. Thus, even with the deferral we will still achieve significant benefits for our customers during the
22 rate case cycle and the overall plan is still in the best interests of our customers and will result in a better
23 end product, when taking into account the better integration with the emerging SmartConnect™
24 systems.
52
1 C. ERP Costs
2 1. Overview
3 In this section of testimony we present (1) the one-time costs of our ERP
4 implementation;50 (2) future on-going costs of our ERP Project, for which cost recovery is requested in
5 our IT Operations Testimony, SCE-5;51 and (3) a summary of all ERP-related costs for years 2006
6 through 2020, utilized in our cost-effectiveness analysis.52 Through recorded 2006 and forecast 2007-
7 2009, SCE estimates one-time ERP Project capital expenditures of $400.7 million.53 These capital
8 expenditures break down as follows: recorded expenditures of $105.7 million for 2006; forecast
9 expenditures of $262.2 million for the period 2007-2008; and forecast expenditures of $32.8 million in
10 2009. For the GRC forecast period, 2009-2011, SCE seeks recovery of one-time ERP Project O&M
11 expenses, of $6.7 million in constant 2006 dollars, ($20.1 million over the three-year period).
12 Subsection 2 below presents our one-time capital expenditures over the project
13 implementation period of 2006-2009 and our one-time O&M expenses, in constant 2006 dollars, for the
14 period 2006-2011. We also address one-time O&M expenses, such as employee-related severance costs
15 projected to continue into 2010 and 2011.
16 Subsection 3 presents the on-going costs of ERP over the rate case cycle 2009-2011. The
17 only on-going ERP-related capital expenditures in this period for which SCE seeks cost recovery are the
18 Hardware/Infrastructure Refresh costs in 2011. Although we discuss the reasonableness of this capital
19 item here, cost recovery for these refresh costs are requested in the IT Operations Exhibit, SCE-5 (see
20 also Appendix B herein).54 Similarly, the 2009-2011 forecast for ERP-related recurring O&M expenses,
21 which includes our SAP Software Maintenance and our Hardware/Infrastructure Maintenance are also
22 requested in the IT Operations exhibit.
50 “One-time costs” refer to capital expenditures and O&M expenses associated with the overall planning and design of
ERP (i.e., project preparation, blueprinting, etc.) and for implementation of Releases 0 through 3.
51 See Exhibit SCE-5, Volume 2, IT O&M Capital, Section II.A.2.e.2; Section I.D.1.b.1; Section I.D.1.b.1.
52 Costs associated with implementation of Release 4 have been included in the benefit-cost analysis.
53 This figure excludes the costs of the participants’ share of ERP costs related to SONGS.
54 Appendix B consolidates cost and benefit references to other testimony in this proceeding related to ERP.
53
1 Subsection 4 presents a table with all the ERP-related costs over the period 2006 to 2020,
2 including the cost associated with implementing Release 4 by 2013. We present these costs in this
3 subsection to consolidate the information necessary to evaluate the cost-effectiveness of the project.
4 2. Recorded And Estimated Project Costs 2006-2009

5 a) One-Time Project Capital Expenditures
6 Our capital expenditures for our ERP Project fall into four categories: (1)
7 Vendor, (2) SCE Labor, (3) Hardware/Infrastructure, and (4) Bolt-ons. Table II-3 summarizes recorded
8 and estimated one-time project capital expenditures for these categories over the project implementation
9 period 2006-2009.
Table II-3
Total ERP One-Time Capital Expenditures 2006 – 2009
(Nominal $000)
Year 2006(rec.) 2007 2008 2009 Total

Vendor Costs $ 66,241 $ 74,164 $ 52,172 $ 10,096 $ 202,673
SCE Labor $ 13,856 $ 32,355 $ 46,341 $ 10,647 $ 103,199
Hardware/Infrastructure $ 18,315 $ 22,620 $ 2,632 $ - $ 43,567
Bolt-on Costs $ 7,256 $ 18,585 $ 13,335 $ 12,070 $ 51,246
Total $ 105,667 $ 147,725 $ 114,480 $ 32,814 $ 400,686
10 (1) Vendor
11 Vendor expenditures are for the System Integrator, SAP Consultants,
12 Other Consultant/Contract Services, Training, and Software Licenses. Each of these is discussed below.
13 (a) System Integrator
14 The largest component of our vendor costs are for the services of
15 Deloitte, the SI we selected to help manage the implementation of our ERP system. SCE does not have
16 the necessary familiarity with SAP or SAP-specific software tools to successfully implement its ERP
17 system alone. Accordingly, our personnel must partner with SI personnel who bring the necessary
18 expertise and SAP-specific software tools.55 As discussed in Section II.A above, the SI is thoroughly
55 Deloitte employs about 35 proprietary and third-party software packages to manage SAP-based ERP implementations.
Deloitte refers to its overall implementation methodology as ASAP: Accelerated SAP.
54
1 familiar with all facets of an ERP system including process redesign, educational and organizational
2 change leadership, program management, and quality and risk management. Because of this expertise,
3 the SI also has specific tools and procedures to track progress of our SAP implementation.
4 Among other things, the SI provides the expertise to develop the
5 project plan and schedule based on the scope developed during the Blueprinting phase of the project.
6 They work with SCE personnel to map the proposed integrated business processes to corresponding
7 SAP-standard operations, develop detailed specifications to interface with remaining legacy systems,
8 convert data from the legacy systems to SAP, and design reporting requirements.
9 With the SI’s guidance, SCE resources mapped the SAP business
10 processes to meet SCE’s requirements and determined the RICEFW56 Development Objects. Once
11 these design specifications are completed and configured, the SI provides the necessary planning,
12 testing, and training programs to “go-live” with each Release.
13 As discussed in Section II.A.3.d, we selected Deloitte as our SI,
14 after a competitive-bid process. Deloitte best met our selection criteria,57 bringing a proven SAP
15 implementation methodology and significant utility experience with over 20 utility ERP deployments.
16 We negotiated a fixed-price contract which concludes in 2009. The contract incorporates incentives to
17 complete implementation milestones in a timely manner and meet various performance goals associated
18 with budget targets and risk management. Also included in the contract is a provision to transfer SAP
19 knowledge to SCE. This is an important provision because it will enable SCE to support its ERP system
20 after implementation.
21 (b) SAP Consultants
22 Our Implementation Team, as discussed in Section II.A.2.c, also
23 includes SAP consultants. Our current estimates for SAP consultant expenditures are based on two
24 full-time SAP experts through 2009. These consultants are needed to advise us in the more technical
56 RICEFW stands for Reports, Interfaces, Conversions, Enhancements, Forms, and Workflows. See Section II.B.1.c.2.
57 SCE’s five criteria were: (1) program and risk management; (2) cost; (3) implementation approach and methodology; (4)
project organization and staff experience; and (5) cultural fit.
55
1 aspects of the SAP system. For example, our SAP experts can review, or otherwise expedite, code
2 enhancements and advise on optimal use of SAP functionality within SCE’s business environment.
3 (c) Other Consultant/Contract Services
4 Other consultant/contract services involve technology services,
5 including short-term project support. Such costs are typical when installing new systems. For example,
6 SCE typically contracts with vendors, such as Infosys Technologies, for off-shore software support to
7 code interfaces, modify in-house applications, and implement new applications. We have also used
8 short-term contract employees to assist us in better matching project-peak work loads and available skill
9 sets.
10 (d) Training
11 Included in our training expenditures are the capital costs for
12 training our project team members who must implement SAP and for those who will train key users.58
13 These costs include SAP-specific training packages that were purchased in 2006 to provide required
14 training for team members necessary during project Blueprinting and Realization phases. We expect to
15 incur similar training costs in 2007 and 2008.
16 (e) Software Licenses
17 Vendor expenditures also include the purchase of our SAP License
18 and the license for PowerPlant. As discussed in Section II.A.2. above, we selected SAP to be our ERP
19 vendor because it leads the industry in utility-specific ERP solutions and has a strong commitment to
20 develop point solutions specific to utilities, such as a FERC accounting module. SAP’s application
21 suites were also ranked strongest in the customer services, finance, human resources, supply chain and
22 work management areas. In addition, SAP’s integrated platform allows optional inclusion of additional
23 modules and its open architecture accommodates new, integrated functionality using non-SAP products.
24 We selected PowerPlant to append to our SAP system to house our plant ledger because we needed
25 highly specialized utility industry software for fixed asset capitalization.
58 See Workpaper entitled “Accounting Policy Statement: Capitalized Software-ERP” which addresses capitalized training
costs.
56
1 SCE incurred most of its one-time SAP License costs at the onset
2 of the Project.59 This is because the integrated nature of SAP requires the basic business and utility
3 modules to be in place in order to map business processes and test SAP functionality. This, however,
4 does not mean that the entire SAP system must “go-live” immediately. We plan to phase-in the
5 deployment of our ERP system, as discussed in Section II.B.2, to allow ample time for stabilization of
6 the system and employee training. Much of the SAP software must be operational even for our initial
7 integration testing and deployment. Later purchased SAP software includes supplementary modules to
8 support SOX compliance requirements and work management at SONGS.
9 (2) SCE Labor
10 Our forecast labor estimates are based on output from Deloitte’s
11 Parametric Estimator (“PE”), one of Deloitte’s proprietary ERP-implementation tools, along with our
12 own estimates. Developing a staffing plan of this complexity requires a detailed knowledge of required
13 tasks and project plans, as well as proven planning tools, for each implementation phase of an ERP
14 project. Deloitte, because of its many utility-industry SAP implementations, possesses this knowledge.
15 SCE worked in concert with Deloitte to ensure that appropriately-chosen
16 parameter values captured characteristics unique to our company, such as size, skill sets of our
17 employees, and management structure. We developed our resource estimates based on a select number
18 of parameters, or variables. The primary variables we used to determine the labor hours needed over our
19 SAP implementation fall into two categories: resource and scope.
20 The resource parameters refer job roles, such as Developer, Business

21 Process Analyst, Legacy Programmer, Learning Consultant, and Team Lead.60 The PE contains 20
22 standard job roles that help determine the number and type of resources needed for the various phases of
59 The recorded 2006 costs cover all the major suites included in our purchase of SAP as described in Section II.B above,
including SAP ERP, SAP CRM, SAP SCM, SAP SRM, SAP PLM, and SAP Netweaver.
60 The complete list is: Application Architect, Developer, Business Process Analyst, Business Information Functional
Resource, Communications Analyst, Change Consultant, Business Information Technical Resource, Integration
Manager, Application Specialist, Legacy Programmer, Program Office Support, Team Lead, Program Manager, Project
Planners, System Analyst (Spec for Legacy and SAP), Technical Architect, Integrity/Security Specialist, Learning
Consultant, Technical Consultant (BASIS, WF, ALE, Middleware), and PMO Administrative.
57
1 an SAP implementation. The resource worksheet includes allocations for SCE and contract resources
2 and includes functions for varying or fixing the number of resources for each select job role. For
3 example, for our SAP implementation, we have fixed the number of Program Managers at two, one for
4 SCE and one for Deloitte. We do not, then, adjust the number of resources in this job role regardless of
5 the value assigned to the scope variables.
6 The scope variables influence the bulk of the labor calculations and final
7 labor outputs. The scope variables include inputs for the number of processes, activities, and work
8 steps, RICEFW Objects, replaced legacy systems as well as the number of end users and end-user
9 locations, and the number of employees requiring training. Altogether, the scope worksheet includes 22
10 parameter categories with each category containing up to six input fields. We use the information input
11 into these fields to calculate the number of hours by job role and phase.
12 Deloitte’s experience with numerous SAP implementations enables them
13 to estimate the hours of effort, by role type, needed to perform a single instance of a given task.
14 Accordingly, standard work rates (i.e., hours per task) for the various tasks required to implement SAP
15 are included in our labor modeling. For example, a single sub-process design requires about three days
16 of work from a Business Analyst (an SCE employee) in conjunction with about two days of work for an
17 Application Specialist (a consultant employee). A few other job roles collectively contribute about two
18 additional days of work. Similarly, unit-work efforts for about 20 to 50 tasks per project phase for each
19 of five phases are included in our labor modeling.61 These work-effort estimates also incorporate
20 complexity. For example, producing the basic design for a unit component62 of the SAP data base
21 requires about 60 hours of effort split between client and consultant job roles. A modified component
22 requires about four times as much effort; a custom component about eight times the effort.
61 These basic, unit-effort estimates apply to each rollout as well; each rollout is composed of five phases (see Figure II-1
above). The number and types of activities within each phase will generally vary across rollouts. The workpapers
contain descriptions of the parameters and work activities modeled within the PE.
62 Standard data-base components are referred to as Business Intelligence Objects, such as “InfoCubes.” The PE
summarizes these objects as Business Warehouse Infocubes.
58
1 The variables described above are used to determine the labor hours for an
2 SAP implementation. Following the example above, if 180 sub-processes are to be designed, then 180
3 instances of sub-process design work go into the calculation of the hours of effort required by job roles
4 employed in this work. Continuing the example, because three work days, or 24 hours, of Business
5 Analyst effort are needed for one instance of sub-process design, 4320 hours are required from this job
6 role to complete the sub-process designs for the project. The product of all the unit-work efforts and the
7 number of instances of the work activities (i.e., the variable inputs) provide the total effort by job role
8 required to complete each phase of the project. Depending on the timelines, these hours determine the
9 number of employees required to fill the job roles. SCE’s forecast labor expenditures are primarily
10 based on these labor-hour outputs.
11 The total estimated labor hours were allocated across the remaining three
12 years of the project based on our phased implementation schedule. Our forecast labor expenditures are
13 based on these time-phased labor hours and our own estimated labor rates. SCE’s labor rate estimate is
14 based on the average labor rate of our project employees.
15 (3) Hardware/Infrastructure
16 Hardware refers to the UNIX servers, data storage capacity, and operating
17 software needed to run the ERP system. Infrastructure refers to the communications network necessary
18 to connect users to the system. These capital expenditures include capitalized warranty charges, for both
19 the hardware and operating software.63
20 SCE will deploy the ERP system on a UNIX-server platform consistent

21 with SAP’s and our strategic direction to use a UNIX-based environment. The 2006 and early 2007
22 hardware purchases were procured by our IT department through their procurement process, using our
23 strategic-sourcing partners. Procured at competitive prices, these hardware purchases establish a
24 reasonable basis for forecasting hardware costs through the project analysis period.
63 The warranty covers hardware and operating-system software over the life of the assets. We further assume that future
hardware refresh costs will also include the warranty.
59
1 To operate our proposed ERP system, SCE must procure sufficient server
2 and storage capacity. Working with SAP, Deloitte, and IBM, we obtained the server, storage, and other
3 hardware capacity needs for our ERP deployment scope. It was determined that 8 “frames,” would be
4 needed for the project. A frame is a set of servers, storage capacity, and operating software to which
5 central processing units (“CPUs”) and storage can be added in a modular manner.
6 A significant portion of the hardware expenditures have already been
7 recorded to date. This is because most of the hardware and infrastructure must deploy early to enable
8 effective testing. Testing, particularly of integrated processes, will occur in the latter half of 2007 in
9 order to prepare for Release 1 in 2008. By the end of 2007, we will have procured about 75 percent of
10 the hardware capacity required for our ERP deployment. A major hardware purchase, primarily the
11 additional CPUs and storage units, will be required prior to Release 4, which will be outside this rate
12 case cycle. These additional expenditures are necessary because Release 4 deploys our SAP-based
13 Customer Care System and imposes significant additional capacity needs to manage the large volume of
14 customer data requirements.
15 (4) Bolt-ons
16 The Scheduling and GDT/CU Bolt-ons, as discussed in Section II.B.1.c,
17 are managed separately by a team within the TDBU organization reporting to our ERP Program
18 Management Team. The Bolt-on expenditures in Table II-3 above are aggregated and include vendor,
19 hardware, and labor expenditures. Our cost estimates are based on rollouts for the Scheduling Bolt-on
20 and GDT/CUs Bolt-on. Each of these components is discussed below.

21 (a) Vendor
22 Vendor costs refer to the costs of the license and capitalized
23 maintenance warranty for the Bolt-on software and the contract costs for the applications services
24 necessary to interface this software with other TDBU applications.
25 ClickSoft, the Scheduling Bolt-on software selected by SCE, is
26 also a certified SAP Bolt-on application. As a certified bolt-on, ClickSoft receives a level of SAP
27 support that ensures integration with core SAP modules and similar support when SAP upgrades
60
1 versions. SCE selected ClickSoft through a competitive procurement process.64 Based on bid
2 evaluations, SCE determined ClickSoft provides the best approach for creating dynamic work
3 scheduling and automated optimization features while integrating with the SAP application.
4 The GDT/CUs software vendor has not yet been selected. We are
5 currently undertaking the same competitive procurement process used to select ClickSoft and anticipate
6 that the GDT/CUs software we select will be an SAP certified bolt-on.65 To date, we have issued an
7 RFP, and have received three bids. From these bids, we selected two vendors, and had them perform an
8 in-depth demonstration using SCE generated business scenarios. Our GDT/CUs software vendor cost
9 estimate, incorporated in the expenditures shown in Table II-3, falls between these two bids. We expect
10 to select the GDT/CUs vendor during the third quarter of 2007.
11 Other vendor costs for this project are primarily for application
12 services, provided by InfoSys and other consultant/contract service providers, to interface the Bolt-on
13 software with other applications, such as DSRP.66 For the first Scheduling rollout, these contractor cost
14 estimates were developed through a detailed work breakdown structure (WBS). A WBS identifies
15 major work categories that are used to estimate the resource types and level of effort for a typical
16 Software Development Life Cycle (SDLC).67 We identified specific applications68 used within our work
17 management processes that will require coding modifications in order to integrate with ClickSoft.
18 Based on our previous experience with typical software development projects of the size and complexity
19 of the Scheduling Bolt-on, we estimated the level of effort for each anticipated interface or other coding
20 modification.
64 See SCE-12, Section X.B.3.b. ClickSoft was one of three responders to SCE’s RFP for a COTS scheduling application.
ClickSoft was one of the top two vendors selected for Commercial, Technical, and Client User evaluations, performed
onsite. ClickSoft was selected for a pilot demonstration based on the evaluation of Commercial, Technical, and User
scores. Based on the pilot demonstration, SCE selected ClickSoft as its scheduling vendor.
65 Our GDT/CU vendor evaluation criteria are provided in the workpapers.
66 DSRP stands for Distribution Service Request Pricing. See SCE-12, Section X.B.1.a.
67 A typical Software Development Life Cycle includes five phases: (1) Design; (2) Construction/Configuration; (3)
Testing; (4) Training and Deployment; and (5) Stabilization.
68 In addition to DSRP, we determined interfaces and/or other coding changes were required for the following applications:
Passport, RSB, our E-Mobile applications, CSS, CMIS, DPIS, ACP Work Orders, MPA, SXP, IDM, and RPC.
61
1 The remaining rollouts for Scheduling and GDT/CUs will also
2 require interfaces and coding modifications to existing systems. The other vendor estimates for the
3 remaining rollouts were developed using preliminary high-level tasks and resources required to support
4 a typical SDLC. Our estimates for these rollouts are based on a comparison of the size and complexity
5 to the first Scheduling rollout, and to other similar software development projects.
6 (b) Hardware
7 Our IT department, in collaboration with the vendor, estimated the
8 sizing needs for the servers and storage hardware required to deploy the Scheduling Bolt-on, ClickSoft.
9 Hardware costs for this Bolt-on were, like the hardware costs for ERP, procured by our IT department at
10 competitive prices through our strategic-sourcing partners. These costs represent about five percent of
11 the Scheduling Bolt-on expenditures.
12 Since the GDT/CU team did not begin their planning until after the
13 ERP project was initiated, its hardware requirements were included in the analysis described in
14 subsection 3 above.
15 (c) Labor
16 Our forecast labor expenditures are based on rollouts for the
17 Scheduling Bolt-on and GDT/CUs Bolt-on. The labor estimates for Phase 1 of the Scheduling Bolt-on
18 were developed using a detailed WBS. The labor estimates for the remaining Bolt-on rollouts were
19 developed using high level tasks and resources required to support a typical SDLC.
20 We estimated the development cycle for the first Scheduling

21 rollout to be twenty-one months from Design through Stabilization. The detailed WBS includes work
22 categories such as hardware installation and data migration, project planning and management, system
23 engineering and training development. We identified the resource types required for each work category
24 and estimated the percent of time these resources would devote to each of the SDLC phases. For
25 example, we estimated 10 percent of two IT systems engineers would be needed for fourteen months of
26 the development cycle. Systems engineers are needed for the greater part of the development cycle as
27 they provide an ongoing technical consultation role, monitor and assess the application architecture
62
1 development and system integration points and coordinate the technical review processes at the end of
2 each phase. Our labor expenditures for this rollout results from summing the product of hours and labor
3 rates for the various resources and duration of the SDLC.
4 SCE’s capitalized labor for the Scheduling Bolt-on includes
5 hardware installation and data migration, project planning and management, training development, and
6 labor for project design. These capital labor estimates were developed through a detailed work
7 breakdown structure (WBS) that supports the Scheduling Bolt-on scope. We identified specific
8 activities and resources required to support a typical Software Development Life Cycle of the size and
9 complexity of the Scheduling Bolt-on. For example, we identified the number of business-unit
10 resources needed for the design phase, the test development and testing phases, and the deployment and
11 stabilization phases. We estimated the percentage of time these resources would devote to the project
12 and to each phase, and we estimated labor rates for these resources. The Scheduling Bolt-on forecast
13 labor expenditures result from summing the product of hours and labor rates over the various resources.
14 Labor estimates for the remaining rollouts GDT/CU Bolt-on were
15 developed through the use of subject matter experts and comparable programs like DSRP and other
16 similar software development projects. We identified high-level tasks and resources required to support
17 a typical Software Development Life Cycle of the size and complexity of the GDT/CU Bolt-on. The
18 GDT/CU Bolt-on capitalized labor estimates are consistent with the Scheduling Bolt-on capitalized
19 labor estimates.
20 b) One-Time Project O&M Expenses

21 Our one-time Project O&M expenses fall into two categories: Labor and Non-
22 Labor. Table II-4 presents our estimated one-time Project O&M expenses, in constant 2006 dollars, for
23 the period 2006-2011. This was used to forecast our Test Year O&M request of $6.7 million.
63
Table II-4
ERP One-Time O&M Expense 2006 – 2011
(Constant 2006 $000)
Year 2006(rec.) 2007 2008 2009 2010 2011 Total

Labor $ 289 $ 1,595 $ 3,323 $ 2,201 $ - $ 348 $ 7,756
Non-Labor $ 2,049 $ 6,365 $ 14,375 $ 8,475 $ 4,164 $ 4,959 $ 40,387
Total $ 2,338 $ 7,960 $ 17,698 $ 10,676 $ 4,164 $ 5,307 $ 48,143
1 Unlike SCE business units, with their ongoing operations, no meaningful
2 historical pattern of O&M expenses can be established to determine Test Year expenses for the ERP
3 project. Likewise, our 2006 recorded O&M expense is not representative of future year O&M expenses
4 because our expenses vary by level of effort by year based on the project scope and schedule.
5 Accordingly, SCE’s TY2009 request for one-time Project O&M expenses were developed using a
6 budget-based methodology. This was based on averaging our estimated expenses for the GRC forecast
7 period 2009-2011, as shown in Table II-4 above.69
8 (1) Labor Expenses
9 Our SCE Labor expenses fall into two categories: (a) SCE Labor for SAP
10 and (b) SCE Labor for Bolt-ons.
11 (a) SCE Labor For SAP
12 SCE’s Labor forecast for SAP implementation consists of the

13 project-related labor that is properly expensed. These expenses are primarily based on Organizational
14 Readiness activities. As discussed in Section II.B.1.c.1, Organizational Readiness prepares

15 organizations and employees for the significant changes an ERP system implementation brings to a
16 company. The expense-related Organizational Readiness activities include the communication of
17 impending changes to SCE’s business units and employees, and training delivery. These costs were
18 estimated based on the total population of personnel who will need training, the average number of
69 Because the Commission adopts only a Test Year level of O&M expense, applying escalation for 2010 and 2011
expenses, averaging or “normalizing” one-time expenses over the three-year GRC cycle ensures that adequate revenues
are available for our expenses and that we do not over collect.
64
1 hours of training per employee, the estimated number of employees per class, and the number of classes
2 to be taught.
3 (b) SCE Labor For Bolt-ons
4 These labor expenses are for activities similar to the above
5 described labor expenses for SAP. They include expenses for training, communications and other
6 expense items. These costs were developed based on detailed and preliminary planning for each of the
7 Bolt-on rollouts. As described above, we developed a detailed work breakdown structure for Phase 1 of
8 the Scheduling Bolt-on. For this rollout, we identified the number of trainers, training hours, and
9 estimated the number of TDBU employees requiring training. For the remaining rollouts, the labor
10 estimates were developed through a comparable analysis to the first Scheduling rollout.
11 (2) Non-Labor Expenses
12 Our Non-Labor expenses fall into three categories: (a) Legacy System
13 Transition, (b) Project related, and (c) Bolt-on.
14 (a) Legacy System Transition Expense
15 Legacy System Transition refers to both interfacing existing legacy
16 systems with the ERP system and preparing legacy systems to be replaced when the ERP system is
17 phased-in and stabilized. This includes the interfaces needed to be developed in the legacy system
18 software to ensure interaction with the ERP system. These interfaces are needed to provide essential
19 data to our customers, regulators, and our management. For example, a legacy system may be capturing
20 data out of CARS in the current system. With ERP, the remaining legacy systems will need an interface
21 program to capture data out of SAP. The alternative is the potential loss of critical historical data
22 needed for customer, operational, and regulatory requirements. Our forecast is based on high level tasks
23 and estimated resource hours required to develop the interfaces and transition the legacy systems offline.
24 We used contractor rates to determine our Legacy System Transition expenses.
25 (b) Project-Related Expenses
26 Project-related expenses include (1) Employee-related, (2)
27 Training and communications support, and (3) IT Help Desk support costs.
65
1 (i) Employee Related
2 Employee-related expenses include the costs of severance
3 and retention, employee development and employee general expenses. The ERP program anticipates
4 savings from system efficiencies as discussed in Section II.D resulting in a reduction of 200 positions by
5 2011. We estimated a subset of these positions will require a severance package. Based on our
6 severance policy, we estimated the severance costs using an average cash severance per employee.
7 Because these costs will be incurred over a period of time after implementation of the ERP system, they
8 are forecast to be incurred through 2011.
9 Employee retention costs are based on an estimate of the
10 incentives needed to retain critical project employees. These employees may need to be retained to
11 ensure that we do not lose knowledge critical to developing SCE’s business processes and SAP
12 knowledge gained by employees during the project. These estimates were based on an average retention
13 cost across a number of employees we determined to possess critical knowledge and may be more likely
14 to leave SCE.
15 Employee development costs refer to those costs associated
16 with such things as Leadership, Project Management and employee-skills training. These costs were
17 based on the number of project employees and the average per employee general training expenses
18 incurred historically.
19 Employee general expenses include reimbursable expenses
20 for travel, mileage, and meals,70 as well as expenses for employee recognition. They also include
21 periodic meeting expenses to communicate to all of the ERP team progress and next steps. We
22 estimated these costs based on an allowance per employee.
23 (ii) Training And Communications Support
24 Training and communications support refers to contractor
25 costs for delivering training and communications through the project implementation period. As
70 Because ERP affects all areas of SCE’s operations, project employees have to travel extensively to our different
locations to determine requirements, validate processes, obtain approvals, and other project activities.
66
1 explained above, the expense-related Organizational Readiness activities include the communication of
2 impending changes to SCE’s business units and employees, and training delivery. These costs were
3 estimated based on the total population of personnel who would need training, the average number of
4 hours of training per employee, the estimated number of employees per class, and the number of classes
5 to be taught.
6 (iii) IT Help Desk
7 IT Help Desk expenses are based on anticipating a ramp-up
8 of calls to our IT Service Center with ERP-related questions. We estimate that we will need an
9 additional seven contract administrators to field SAP-related assistance calls from all company-wide
10 users in 2008 and 2009 when the ERP system is becoming fully operational. Following 2009, we
11 anticipate the number of calls coming into our IT service center to return to normal operations. This
12 estimate is based on our experience with new system implementations such as Lotus Notes and the
13 upgrade from Windows 98 to Windows XP.
14 (c) Bolt-On Non-Labor Expense
15 Bolt-on Non-Labor expenses were developed as part of the overall
16 WBS development effort described above. These expenses include contract and material costs for
17 training procedures, training delivery and other Organizational Readiness activities. The estimates were
18 developed through detailed and preliminary planning that identified the number of procedures, training
19 courses, trainees and duration of training required.
20 3. Estimated On-Going Costs 2006-2011

21 As stated in subsection 1, this section presents the ERP on-going capital expenditures and
22 O&M expenses from 2006-2011. These ongoing expenses are for maintenance that SCE has paid and
23 will incur on an annual basis and for Hardware/Infrastructure Refresh expenditures that are expected to
24 occur every five years. We discuss the reasons for these costs here, but cost recovery for on-going
25 Capital expenditures and O&M expenses is requested in the IT Operations Exhibit, SCE-5, Volume 2
26 (see also Appendix B herein).71
71 Appendix B consolidates cost and benefit references to other testimony in this proceeding related to ERP.
67
1 a) On-Going Capital
2 Table II-5 presents estimated on-going capital expenditures for
3 Hardware/Infrastructure Refresh over the rate case cycle 2009-2011.
Table II-5
Total On-Going Capital Expenditures 2009 – 2011
(Nominal $000)
Year 2009 2010 2011
Hardware/Infrastructure $ - $ - $ 18,612
4 As discussed in subsection 2, Hardware/Infrastructure refers to UNIX servers,
5 data storage capacity, operating software and communications network. The estimated useful lives of
6 these assets are five years and therefore need to be refreshed every five years.72 SCE incurred
7 Hardware/Infrastructure expenditures of $18.527 million in 2006, as shown in Table II-3. Our recorded
8 expenditures include $18.315 million for the Hardware/Infrastructure material and approximately
9 $212,000 for the capitalized installation labor. To arrive at the 2011 refresh forecast reflected in Table
10 II-5 above, we escalated recorded labor costs to approximately $297,000. The Hardware/Infrastructure
11 material costs were held constant due to technological progress in server performance.
12 b) On-Going O&M
13 ERP on-going O&M expenses are associated with labor costs for
14 Hardware/Infrastructure maintenance and vendor costs for SAP software maintenance. Table II-6
15 presents our estimated O&M expenses, in constant 2006 dollars, for the period 2006-2011.
Table II-6
ERP On-Going O&M Expense Constant 2006 – 2011
(Constant $000)
Year 2006(rec.) 2007 2008 2009 2010 2011

Labor $ - $ - $ - $ 1,266 $ 1,266 $ 1,266
Non-Labor $ 2,178 $ 6,974 $ 7,468 $ 7,233 $ 7,176 $ 7,525
Total $ 2,178 $ 6,974 $ 7,468 $ 8,499 $ 8,442 $ 8,791
72 See Exhibit SCE-5, Volume 2, IT O&M and Capital, Section II.A.2.c.
68
1 (1) On-Going Labor
2 Our on-going labor forecast is based on the estimate of additional
3 resources required to support the UNIX-server environment for the ERP system. We estimated nine
4 additional FTEs to support 180 additional server partitions. Our experience indicates that one additional
5 FTE is needed for every 20 partitions.73
6 (2) On-Going Vendor
7 The on-going vendor expenses are for SAP software maintenance fees,
8 which entitles SCE to software upgrades. Our maintenance contract allows future upgrades, patches,
9 and other related maintenance support. The SAP Software Maintenance expenses are based on a fixed
10 schedule for five years, through 2010. By contract, these costs escalate after 2010 up to five percent
11 plus CPI.74 We have forecasted the fee increases in year 2011 accordingly.
12 4. Summary Of Costs (2006-2020) For Cost-Effectiveness Analysis

13 Based on the 2006 to 2011 costs discussed above, we summarize all costs for our cost-
14 effectiveness analysis and discuss here those costs that will occur after this rate case cycle. Table II-7
15 summarizes all relevant costs, 2006-2020, required to evaluate our ERP Project’s cost-effectiveness.
16 The final year for our project economics, 2020, represents seven years from the final rollout in 2013 and
17 is based on a seven-year life for the ERP software assets.
Table II-7
Total ERP Capital and O&M Costs 2006 – 2020
(Nominal $000)
Year 2006(rec.) 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 Total
Capital $ 105.7 $ 147.7 $ 114.5 $ 32.8 $ - $ 58.1 $ 64.5 $ 52.6 $ - $ - $ 31.9 $ 28.4 $ 27.9 $ - $ - $ 664.1
O&M $ 5.4 $ 17.6 $ 30.7 $ 23.6 $ 14.4 $ 16.9 $ 13.2 $ 26.3 $ 28.5 $ 14.4 $ 15.4 $ 16.6 $ 17.8 $ 19.1 $ 20.5 $ 280.4
Total $ 111.0 $ 165.3 $ 145.2 $ 56.4 $ 14.4 $ 75.0 $ 77.7 $ 79.0 $ 28.5 $ 14.4 $ 47.3 $ 45.0 $ 45.7 $ 19.1 $ 20.5 $ 944.5
18 a) 2012 – 2020 Capital
19 Forecast capital expenditures over the 2012 to 2020 period encompass Release 4
20 implementation costs, Hardware/Infrastructure Refresh and Vendor Cost capital expenditures.
73 See Exhibit SCE-5, Volume 2, IT O&M and Capital, Section I.C.3.a.1.

74 CPI: Consumer Price Index.
69
1 Our Release 4 cost estimates are based on the cost methodologies discussed in
2 Section II.C.2 above. We forecasted our labor, hardware, and vendor costs related to the replacement of
3 our current customer service system with CCS.
4 Our estimates of SCE labor for the various phases of the Release 4
5 implementation75 are derived from staffing plans developed through our experience to date with the
6 effort. Our staffing plan anticipates the tasks and level of effort provided by the SI and estimates our
7 own labor effort required to jointly complete the various phases of the CCS implementation.
8 As discussed in Section II.C.2.a.3, we will purchase the remaining hardware
9 capacity related to Release 4, about 25 percent of the capacity required for our ERP system. These
10 capacity requirements are based on the sizing analysis previously described. We have also held constant
11 the unit hardware costs per our assumption of technological progress in server performance as discussed
12 on Section II.C.3.a.
13 As previously discussed, we need to refresh our Hardware/Infrastructure assets
14 every five years. The Hardware/Infrastructure assets required for Release 0-3, and forecast to refresh in
15 2011, will continue to require refresh in 2016. The Release 4 Hardware/Infrastructure expenditures,
16 described above and forecast for the 2012-2013 timeframe, will require refresh in 2017-2018.
17 On-going Vendor Costs refer to expenditures for SI services when we upgrade the
18 SAP software. These upgrades for Releases 0-3 are anticipated in 2011-2012 and 2016-2017 since
19 upgrades occur every five to seven years. Although we will incur vendor costs of about $14.0 million in
20 2011, we anticipate that this upgrade will not be operational until 2012; therefore, we do not seek cost
21 recovery for these forecast costs in this rate case. Also, Vendor Costs for upgrades to CCS modules
22 occur in 2017 and 2018, and are presented here for the purposes of cost-effectiveness analysis only.
23 For the purpose of our cost-effectiveness analysis, the expenditures in Table II-7
24 include the participants’ share at SONGS of our ERP Project implementation. These expenditures are
25 excluded from the cost-recovery request in this Exhibit.
75 See Section II.A.2.c for a description of the 5-phase approach to an SAP implementation.
70
1 b) 2012 – 2020 O&M
2 Forecast expenses over the 2012 to 2020 period include expenses related to our
3 CCS implementation and Software and Hardware/Infrastructure Maintenance O&M expenses discussed
4 in subsection 3.b above.
5 Release 4 forecast expenses in the post 2011 period are estimated
6 consistently with the methods used for similar one-time expense forecasts discussed above. We have
7 not categorized these expenses as labor and non-labor, however, because these costs do not impact cost
8 recovery during this rate case cycle.
9 SCE labor was based on ERP labor expense forecasts, described
10 previously. These expenses are primarily for Organizational Readiness activities. Similarly, Release 4
11 will require Project-Related Expenses, such as retention and severance, training, and IT Help Desk.
12 The largest component of the Release 4 implementation expense in the
13 post 2011 period is for Legacy System Transition, previously described. Most of these costs, for ERP as
14 a whole, are associated with the transition of our current customer service system because of the large
15 data management and computational requirements of CSS.
16 On-going expenses include Software Maintenance and
17 Infrastructure/Hardware Maintenance. Software Maintenance expenses were escalated as previously
18 described for the post 2011 period.
19 Infrastructure/Hardware Maintenance was escalated as previously
20 described as well. In addition, these costs increase in 2012 to reflect the full 12 FTEs required for
21 maintenance of all the ERP-system capacity once the final hardware purchases, required to operate the
22 CCS system, occur.
23 For the purpose of cost-effectiveness, the expenses in Table II-7 include
24 chargeback costs for our ERP Project implementation that are assessed across departments within SCE.
25 These expenses are excluded from the cost recovery request in this Exhibit.
71
1 D. ERP Benefits
2 1. Overview
3 The purpose of this testimony is to explain the benefits SCE expects to attain as a result
4 of its ERP implementation. Accordingly, in this section we discuss our ERP benefits methodology,
5 processes targeted for improvement, and estimated savings we expect to achieve through this rate case
6 period and over the life of the program. This testimony also discusses other benefits due to avoided
7 capital and O&M costs that would have been spent in the absence of the ERP Project.
8 During the business case review process, we took several steps to determine and quantify
9 the benefits an ERP system could produce at SCE. Some of the work was already underway given that
10 SCE had evaluated potential benefits from earlier system and process integration efforts prior to the
11 commencement of the business case review. These pre-ERP efforts supported the development of our
12 ERP benefit estimates. BPI, for example, had already considered and evaluated conceptual benefits
13 from an end-to-end process perspective. These conceptual benefits indicated that efficiency gains could
14 be realized if process “pain points” between multiple departments could be eliminated. But as discussed
15 in Section II.A.1.a, BPI alone can not provide the improvements necessary to eliminate these process
16 pain points. Rather, to realize the benefits requires better system integration, ERP will provide the
17 integrated application platform necessary to enable end-to-end process business management, thus
18 creating process efficiency gains.
19 The ERP Project is expected to generate process efficiencies that will result in reduced
20 capital and O&M costs. We expect to achieve $75.6 million (constant 2006$) of annual savings once
21 ERP reaches steady-state operation in 2015. As described in more detail below, these benefits will be
22 phased-in as the project moves forward. All benefits projected for the rate case period have been
23 reflected in the business units’ GRC O&M and capital estimates. Appendix B shows the business units
24 and accounts where each of the estimated benefit adjustments has been made for the benefit of our
25 customers. All benefits in this section are stated in constant 2006 dollars unless specifically stated
26 otherwise. The ERP Project’s annual steady-state benefits, by category and lower level groupings, are
27 shown in the following Table II-8:
72
Table II-8
Annual, Steady-State Benefits in 2015
(Constant 2006 $ millions)
Benefit Category Benefit Area Benefit Description Annual Benefit
Maverick Spend 0.2
Sourcing and Purchasing Material and Services
Supply Chain 24.4
Rationalization
Productivity Improvement Procurement 0.5
Software Application Support 11.9
Information Productivity Improvement
Contractor Support 7.3
Technology
Licenses Vendor Licenses 9.9
Accounting, Performance Management 11.7
Reporting, and Productivity Improvement
Analytics Core Accounting and Finance 1.0
TDBU Operations Scheduling 2.3
Productivity Improvement Graphical Design Tool / CUs 1.7
GBU Operations Productivity
Planning and Operations 0.8
Improvement
Work
First Call Resolution 0.7
Management
Online Inquiry Automation 0.2
CSBU Operations
Exceptions Processing and
Productivity Improvement 1.5
Analysis
Scheduling 0.4
Employee Performance 0.8
Human Resources Productivity Improvement Scheduling Employee Tests 0.1
Test Administration 0.1
Total Annual 75.6
1 2. Methodology
2 Our ERP benefits were estimated based on process categories spanning department and
3 business unit functional boundaries. The methodology used to determine the benefit categories, plus the
4 amounts and timing of such benefits, was fairly consistent across all benefit categories. First, we
5 compiled all the benefit estimates of existing projects targeted for inclusion within the ERP scope. We
6 then performed a value engineering exercise76 to assess both our existing benefit estimates and those
7 business processes that were not previously analyzed. This company-wide analysis resulted in
8 preliminary efficiency targets across five major benefit categories: (1) Supply Chain; (2) Information
9 Technology; (3) Accounting, Reporting and Analytics; (4) Work Management; and (5) Human
10 Resources.
76 Please see workpaper entitled “SAP Value Engineering Exercise.”
73
1 Next, we engaged SCE’s management to review the preliminary efficiency targets to
2 determine whether they were realistic. This was a pivotal step in the development of our ERP benefits,
3 as SAP provided their utility industry experience and internal management provided specific expertise
4 within the constraints of SCE. For example, the value engineering exercise initially targeted a five
5 percent reduction in materials and services spending based on the increased pricing leverage SCE could
6 obtain by reducing the number of suppliers and vendors that SCE uses. SCE’s Supply Chain
7 Management, however, was aware that our strategic sourcing process had already consolidated the
8 number of suppliers and vendors we use. This, coupled with our diversity sourcing program, indicated
9 that a five percent across-the-board reduction could not be achieved. As discussed in the next section,
10 further analysis of the supply chain processes identified other process inefficiencies that, once
11 eliminated and/or improved, could lead to a two to three percent reduction in prices.
12 We performed additional internal reviews, similar to the example above, including
13 benchmarking against other utilities who had implemented ERP systems.77 Finally, the estimated
14 benefits were aligned to our ERP rollout schedule and adjusted for learning curve effects to determine
15 how and when each benefit would be phased-in. The results of this methodical approach produced
16 $75.6 million of annual, steady state benefits. The benefits associated with each of the five major
17 categories are described in more detail in sections 3 through 6 below.
18 3. Supply Chain Benefit Category

19 As previously discussed, SCE’s “supply chain” refers to the logistics of planning for,
20 procuring and controlling the efficient storage, flow and delivery of materials and contract services. The
21 function of SCE’s Supply Chain Management organization is to plan, organize, and coordinate all the
22 activities within SCE related to the Supply Chain.78 The Supply Chain benefit category is based on
23 improving SCE’s supply chain processes and consists of three areas:
24 • Maverick Spend
77 Please see the ERP benchmarking, site visit and best practice documentation in our ERP workpapers under the
78 Please see SCE-10, Part I, Chapter IX for a more expansive discussion of our Supply Chain Management organization.
74
1 • Material and Services Rationalization
2 • Procurement
3 The Maverick Spend benefit is based on improving purchases that are outside of the
4 normal procurement process. Maverick Spend refers to spending related to indirect goods, such as
5 office supplies, where corporate contracts are in place but goods are purchased through other suppliers.
6 The ERP Project will improve the efficiency of purchasing processes and provide improved controls,
7 through the standard SAP workflow, that will result in reduced maverick spending. For example, SAP’s
8 Supplier Relationship Management (SRM) modules will enable SCE to connect directly to specific
9 public, private or consortium-operated marketplaces, improving SCE’s ability to negotiate lower prices.
10 The ERP system will also contain all terms and conditions, automate internal approvals and integrate
11 with the financial modules to accelerate the supply chain cycle. This benefit is targeted to yield non-
12 labor savings of $180 thousand annually. We expect to realize 50 percent of these savings in 2008 and
13 100 percent by 2009.79
14 The Material and Services Rationalization benefit is based on improving the following
15 supply chain processes:
16 • Manage strategy and sourcing
17 • Manage suppliers and contracts
18 • Manage supplier collaboration
19 • Order goods and services
20 • Manage and fulfill material requirements

21 • Process requisitions and purchase orders
22 • Manage returns
23 SCE, as previously discussed, currently supports its supply chain processes using
24 multiple legacy systems. These legacy systems have created supply chain processes that require
25 multiple hand-offs and data input redundancy, provide limited visibility of a system-wide view of
79 See work paper entitled “SC – Control Maverick Spend” for calculations and supporting data.
75
1 material and service demands and are dependent on multiple stand alone Microsoft Excel and Access
2 files to bring about information not readily available in the existing legacy systems. The ERP system
3 will provide the integrated application tools needed to improve the supply chain processes listed above.
4 This will enable more effective contract management and compliance discipline in developing vendor
5 agreements, taking advantage of vendor discounts and rebates, planning for contract expirations and
6 improving the cycle time from contract initiation to finalized terms and conditions.
7 Efficiencies will also be created through automation of SCE sourcing activities for
8 frequently used materials and through leveraging supplier side automation such as supplier self service,
9 purchase order notifications and the digitization of documents for online delivery. Furthermore, we will
10 reduce process activities with our suppliers related to expedited and errant shipments, material defects
11 and returns. For this benefit, we estimated roughly $977 million of annual material and services spend
12 that is routinely procured through competitive bids. Based on the anticipated efficiency improvements
13 described above, we targeted a 2.5 percent reduction for recurring competitive bid spending. This
14 resulted in our estimated material and services savings of $24.4 million annually. We expect to realize
15 25 percent of these savings in 2008, 50 percent in 2009, 75 percent in 2010 and 100 percent by 2011.80
16 The Procurement Benefit is based on labor efficiencies we expect to achieve related to
17 procurement activities as part of the same supply chain processes described above. The primary drivers
18 for this category of benefits are the consolidation, integration and visibility of sourcing and procurement
19 data and processes. Procurement employees will be able to evaluate suppliers, procure services and
20 materials, and perform clerical and administrative functions more efficiently as a result of SAP. The
21 Supply Chain Management group identified 78 FTEs who perform procurement work throughout SCE’s
22 supply chain. We expect to achieve roughly six percent efficiency gain, resulting in annual labor
23 reductions of approximately $450,000. We expect to realize 50 percent of these savings in 2008 and
24 100 percent in 2009.81
80 See work paper entitled “SC – Material and Services Rationalization” for calculations and supporting data.
81 See work paper entitled “SC – Core Procurement” for calculations and supporting data.
76
1 4. Information Technology Benefit Category
2 SCE’s Information Technology Business Unit is responsible for developing, operating
3 and managing SCE’s application software portfolio. The Information Technology Benefit Category is
4 based on efficiencies we expect to achieve related to this function and is focused in the following areas:
5 • Software Application Support
6 • Contractor Support
7 • Vendor Licenses
8 The Software Application Support benefit is based on reducing the number of
9 applications IT’s Software Development and Maintenance (“SDM”) division supports.82 The SDM
10 division currently supports approximately 600 applications, of which roughly 300 are targeted for full
11 replacement by the ERP system. The approach to determine the process efficiencies in this area takes
12 into consideration the number of separate applications expected to be eliminated, the complexities of
13 these systems, the timing related to decommissioning these systems, support required to maintain the
14 applications within ERP and management reviews. We expect to achieve roughly 14 percent reduction
15 in staffing (98 FTEs) which will yield SCE labor reductions of $11.9 million annually. We expect to
16 realize 20 percent of these savings in 2008, 28 percent in 2009, 48 percent in 2010 and 80 percent in
17 2011 for system replacements associated with Releases 0 through 3.83 The remaining 20 percent is
18 expected to be realized over the 2012-2015 period when Release 4 deploys our SAP-based Customer
19 Care System.84
20 The Contractor Support benefit is based on improving the same software development
21 and maintenance processes discussed above, however this benefit is limited to the activities contractors
22 perform. Contractors have played a constant role in IT, as a portion of our development work is directed
23 to our strategic sourcing vendors. The ERP Project, through the replacement of over 300 IT-supported
82 Please see SCE-5, Volume I, Chapter 1, Section 2 for a more expansive discussion of our SDM group as the testimony
here is a high level view of their work responsibilities.
83 See workpaper entitled “IT – Software Application Support” for calculations and supporting data.
84 Id.
77
1 applications, will reduce the amount of development work related to those systems, which in turn will
2 reduce the application development work required of our vendors. These improved efficiencies will
3 yield non-labor reductions of $7.3 million annually. We expect to realize 20 percent of these savings in
4 2008, 28 percent in 2009, 48 percent in 2010 and 80 percent by 2011 for system replacements associated
5 with Releases 0 through 3.85 The remaining 20 percent is expected to be realized over the 2013-2015
6 period when Release 4 deploys our SAP-based Customer Care System.86
7 The Vendor Licenses benefit is based on eliminating license costs for mainframe
8 operating software and hardware maintenance. As discussed in Section II.C.2.a.3, SCE’s mainframe
9 computing environment is expected to be replaced with a UNIX server environment when Release 4
10 deploys our SAP-based Customer Care System. We identified an annual spend of roughly $9.9 million
11 for mainframe licenses that is expected to be eliminated as a result of the UNIX environment. These
12 savings are targeted to begin in 2015, the end of transitioning off of the mainframe environment.87
13 5. Accounting, Reporting And Analytics Benefit Category

14 “Accounting, reporting, and analytics” refers to the multitude of activities that SCE
15 employees perform on a daily basis regarding basic accounting, financial, budgetary, and operational
16 performance reporting and ad hoc analyses necessary to support management decisions. Although the
17 individual activities are generally straightforward, in aggregate these processes are complex. Many have
18 been organized around our legacy systems and require multiple hand offs, duplicate data entry and can
19 take several years for employees to master. ERP will provide integrated accounting and reporting tools
20 that will improve efficiencies within these processes. Accounting, Reporting and Analytics benefits
21 have been estimated for the following areas:
22 • Performance Management
23 • Core Accounting and Finance
85 See workpaper entitled “IT – Contractor Support” for calculations and supporting data.
86 Id.
87 See workpaper entitled “IT – Vendor Licenses” for calculations and supporting data.
78
1 The Performance Management benefit is based on SCE’s financial and operational
2 planning, reporting and analytic processes. The ERP System will increase efficiencies related to
3 defining performance measures, O&M and capital budgeting, internal performance reporting and
4 external reporting. In our benefit determination analysis, we identified roughly 1,700 employees
5 throughout SCE who are engaged in analyst-type activities and tasks related to these process areas. We
6 expect to achieve a six percent efficiency gain across all 1,700 employees engaged in this work. The six
7 percent efficiency gain will yield labor savings of $11.7 million annually. We expect to realize 33
8 percent of these savings in 2008, 83 percent in 2009, 92 percent in 2010 and 100 percent by 2011.88
9 The Core Accounting and Finance benefit is related to employees who carry out
10 transactions within our accounting and finance processes. The transactions targeted for improvement
11 are performed in the Corporate Center and include the Controllers, Budget, Tax, Audit Services and
12 Treasurers departments. The ERP System will increase efficiencies related to performing and tracking
13 receivables and payables, plant and work order accounting, function accounting and trial balance and
14 general ledger accounting. We expect to achieve a 2.5 percent efficiency gain across 347 employees
15 engaged in this work. The 2.5 percent efficiency gain will yield labor savings of $1.0 million annually.
16 We expect to realize 50 percent of these savings in 2009, 75 percent in 2010 and 100 percent by 2011.89
17 6. Work Management Benefit Category

18 Work Management refers to the initiation, planning, designing, scheduling, management
19 and completion of maintenance, construction and service related work across the enterprise. The Work
20 Management Benefit Category is based on improving SCE’s work management processes that directly
21 support the services SCE provides to its customers and consists of improvements in the following areas:
22 • TDBU Operations
23 • GBU Operations
24 • CSBU Operations
88 See workpaper entitled “ARA – Performance Management” for calculations and supporting data.
89 See workpaper entitled “ARA – Core Accounting and Finance” for calculations and supporting data.
79
1 The TDBU Operations benefits are based on increasing the capacity of design, work
2 scheduling and field crew processes within TDBU. Such improvements will allow more work to be
3 performed with the same resources, helping TDBU meet its growing work requirements.90 The primary
4 drivers for this category of benefits are: (1) streamlining and automating manually intensive steps; (2)
5 improving design accuracy; (3) obtaining visibility to all work; (4) improving TDBU’s ability to assign
6 the right resources to the work; and (5) reducing false starts and rush work orders. The combination of
7 SAP and the Scheduling and GDT/CU Bolt-on applications will provide automation of data and
8 processes required to realize capacity improvements within TDBU.
9 The Scheduling Bolt-on is expected to yield a 12.5 percent capacity gain in TDBU’s
10 work scheduling operation, a 1.5 percent capacity gain in TDBU’s design organization and a 0.5 percent
11 capacity gain in TDBU’s field operations, resulting in annual unit cost savings of $2.3 million. We
12 expect to realize 25 percent of these savings in 2008, 50 percent in 2009, 75 percent in 2010 and 2011,
13 and 100 percent in 2012.91
14 The GDT/CU Bolt-on is expected to yield a 2.5 percent capacity gain across TDBU’s
15 designers, a 10 percent capacity gain across TDBU’s design administration and a 10 percent capacity
16 gain in training TDBU’s designers, resulting in annual unit cost savings of $1.7 million. We expect to
17 realize roughly 30 percent of these savings in 2010, 65 percent of these saving in 2011 and 100 percent
18 in 2012.92
19 The GBU Operations benefits are based on productivity improvements to the work
20 scheduling and planning, asset management and plant operations processes within our Generation
21 Business Unit. As previously discussed, these work management processes comprise about 400
22 activities. Because there are numerous regulatory compliance requirements related to carrying out work
23 within our Generation Business Unit, this benefit category is highly dependent on the improved
24 compliance features of SAP. We anticipate that the central repository of SAP will not only accelerate
90 See Witness Litzinger’s testimony, SCE-03, Volume 1, Part 1, which describes TDBU’s growing work requirements.
91 See workpaper entitled “WM – TDBU Scheduling” for calculations and supporting data.
92 See workpaper entitled “WM – TDBU GDT/CUs” for calculations and supporting data.
80
1 the completion and approval of these work activities but will also make it easier to comply in these
2 areas. In addition, GBU employees engaged in these work management processes will gain greater
3 access to project details, which will improve the accuracy and timeliness of completing work. For this
4 benefit category, we expect to achieve a 10 percent efficiency gain, resulting in annual labor savings of
5 approximately $770,000. We expect to realize 50 percent of these savings in 2009 and 100 percent in
6 2010.93
7 The CSBU Operations benefits are based on productivity improvements to call center,
8 billing and work scheduling processes within our Customer Service Business Unit. The primary driver
9 for these benefits is the improved integration and automation features of SAP’s Customer Care modules.
10 The CSBU Operations benefits consist of four benefit estimates: (1) First Call Resolution; (2) Online
11 Inquiry Automation; (3) Exceptions Processing and Analysis; and (4) Scheduling.
12 First Call Resolution refers to resolving customer inquires during the first contact with
13 the customer. The Customer Care modules are expected to improve the data and processes required to
14 resolve our customers’ inquires more effectively. Our Customer Service Business Unit responds to over
15 12 million calls annually. More than 8 million of these calls are taken by an SCE Customer Service
16 Representative. Nearly 40 percent of these calls can not be resolved during the first contact with the
17 customer. For this benefit, we estimated a five percent improvement to first call resolutions which will
18 yield annual labor savings of roughly $700,000 thousand. We expect to achieve 50 percent of these
19 savings in 2014 and 100 percent in 2015.94
20 The Online Inquiry Automation benefit is based on automating responses for customer
21 inquiries submitted through SCE’s online web address (www.sce.com). The SAP application will
22 improve our efficiency with responding to online inquires through enhanced automated responses. For
23 this benefit, we identified 12 full-time employees within CSBU that currently respond to online inquiries
24 on an annual basis. We expect to achieve roughly 25 percent efficiency gain, which will yield labor
93 See workpaper entitled “WM – GBU Planning and Operations” for calculations and supporting data.
94 See workpaper entitled “WM – CSBU First Call Resolution” for calculations and supporting data.
81
1 reductions of roughly $220,000 annually. We expect to realize 50 percent of these savings in 2014 and
2 100 percent in 2015.95
3 The Exceptions Processing and Analysis benefit is based on improved data accuracy and
4 process automation capabilities of SAP. This benefit consists of labor efficiencies in exception
5 processing, analyzing and handling billing information and rate change work. We identified roughly
6 150 employees performing this type of work. We expect to achieve roughly 17.5 percent efficiency gain
7 across these processes, which will yield labor reductions of roughly $1.5 million annually. We expect to
8 achieve 50 percent of these savings in 2014 and 100 percent in 2015.96
9 The Scheduling benefit is based on improving the information and integration aspects of
10 scheduling field service representatives to carry out meter service work. The ERP System will better
11 store, access, and validate the information that is essential to scheduling work. Capabilities such as
12 built-in decision rules, for example, will improve the detection of potential supply and demand
13 imbalances and alert the field service representatives, preventing wasted trips. The Scheduling benefit is
14 expected to yield a 1.25 percent efficiency gain in CSBU’s field services group resulting in annual labor
15 savings of roughly $420,000. We expect to realize 50 percent of these savings in 2014 and 100 percent
16 in 2015.97
17 7. Human Resources Benefit Category

18 Human Resources refers to a variety of labor-related functions such as employee
19 recruitment and testing, labor relations, employee performance, the compilation of benefit packages, and
20 timekeeping, as well as a variety of other vital functions that are carried out by the Human Resources
21 Business Unit. The Human Resources Benefit Category is based on improvements to employee
22 performance and administration and scheduling of employee tests. The primary drivers of this benefit
23 category are the enhanced features and automation of SAP’s Human Capital Management modules
95 See workpaper entitled “WM – CSBU Online Inquiry Automation” for calculations and supporting data.
96 See workpaper entitled “WM – CSBU Exceptions Processing and Analysis” for calculations and supporting data.
97 See workpaper entitled “WM – CSBU Scheduling” for calculations and supporting data.
82
1 (HCM). The HCM modules will automate, for example, the scheduling of employment and promotional
2 tests.
3 The Employee Performance benefit is based on automating the manually intensive
4 performance review process. Currently, administering this process includes communication of
5 timelines, performing mid-year reviews, developing action plans and providing year-end assessment of
6 performance. These plans and reviews are conducted using Microsoft Word and Excel templates.
7 These templates require multiple data inputs without the advantage of a central repository. For this
8 benefit, we estimated cost reductions of approximately $850,000 annually. The efficiencies created by
9 the automation of employee performance reviews will not reduce SCE’s labor and instead will reduce
10 the demands on supplemental workers. We expect to realize 100 percent of these savings beginning in
11 2009.98
12 The Scheduling Employee Tests benefit is based on productivity improvements related to
13 scheduling employment and promotional tests that we anticipate will result from the automated self-
14 service test capabilities of the HCM modules. Human Resources’ Talent Management group is
15 responsible for the administration of end-to-end testing services in support of acquisition, promotion,
16 and internal movement of employees by administering and scoring tests and performing record-keeping
17 functions. SAP’s HCM modules will automate the scheduling for a number of tests employee take, thus
18 improving the productivity of this group. For this benefit, we identified approximately 11,000 tests that
19 are scheduled on an annual basis. We expect to achieve roughly 30 percent efficiency gain related to
20 scheduling tests that will yield labor savings of roughly $50,000 annually. We expect to realize 100
21 percent of these savings in 2009.99
22 The Test Administration benefit results from automating certain employee testing
23 functions as described above. The improved integration across SCE’s testing processes will also result
24 in reduced administration support. For this benefit, we identified approximately 11,000 tests that are
25 administered on an annual basis. The efficiencies created by the improved integration will reduce
98 See workpaper entitled “HR – Employee Performance” for calculations and supporting data.
99 See workpaper entitled “HR – Scheduling Employee Tests” for calculations and supporting data.
83
1 material and contract costs. We expect to achieve a 12.5 percent improvement, which will yield non-
2 labor savings of roughly $120,000 annually. We expect to realize 100 percent of these savings in
3 2009.100
4 8. Other Benefits
5 The benefits included in the Other Benefits category are based on capital expenditures
6 and expenses that would have been incurred had SCE chosen to continue operating under its pre-ERP
7 software portfolio strategy. As discussed in detail in SCE’s 2006 GRC, the legacy applications in SCE’s
8 existing portfolio would have required ongoing replacements and upgrades over time. The avoided
9 costs attributable to implementing the ERP Project instead of these system changes fall into three
10 groups: (1) the avoided capital expenditures of replacing roughly 50 percent of SCE’s legacy
11 applications; (2) the avoided capital expenditures of purchasing infrastructure otherwise required to
12 support software replacements; and (3) the avoided labor expenses associated with the SCE employees
13 required for our ERP Project.
14 a) Avoided Software Expenditures
15 In the 2006 GRC Software Asset Management (“SAM”) testimony, we described
16 16 candidate projects for near-term application replacements or major overhauls at a combined capital
17 cost of roughly $170 million (nominal $). For example, replacement of SCE’s Corporate Accounting
18 and Records System (CARS) was a goal set forth in prior SAM testimony.101 This objective will be
19 accomplished with SAP. In addition, SCE currently uses PeopleSoft in conjunction with numerous
20 other systems and manual processes to manage our human resource functions. In SCE’s previous
21 PeopleSoft testimony for the 2006 GRC, we testified to upgrading to PeopleSoft version 8.9. SAP’s
22 HCM modules will replace the PeopleSoft application and thus avoid the need to upgrade to version 8.9.
23 Our decision to deploy an enterprise-wide ERP system is consistent with the
24 Software Asset Management function as envisioned, and largely accomplishes the specific candidate
25 replacements previously proposed. However, as described in detail above, ERP will provide substantial
100 See workpaper entitled “HR – Test Administration” for calculations and supporting data.
101 TY2006 GRC, SCE-5, Vol. 3, pp. 240-245.
84
1 benefits that piecemeal replacement of our legacy systems could not. Based on SCE’s reassessment of
2 system needs, ERP represents our deliberate and prudent prioritization of SAM funding. For 2006
3 through 2008, SCE will use the authorized SAM capital from the 2006 GRC to partially offset the
4 incremental ERP Project capital expenditures. The ERP Project will replace all of the major obsolete
5 systems identified in the 2006 SAM testimony.
6 SCE’s business case incorporates avoided software expenditures for the 2006 to
7 2009 period for replacements associated with Releases 0 through 3 and for the 2013-2016 period for
8 systems that will be replaced by Release 4.102 Because of SAP’s comprehensive nature, we expect
9 avoided software replacement expenditures to continue through 2020. However, because of the
10 challenges of projecting system replacement costs for over 300 systems, we have chosen only to include
11 those avoided costs identified in our 2005 annual budgeting process, assuring that our analysis is
12 conservative. The systems that will be replaced by Release 4 were shifted to the 2013-2016 period and
13 escalated. The avoided software expenditures included in our cost-effectiveness analysis are shown in
14 the following table.
Table II-9
Avoided Software Expenditures
(Nominal $millions)
Description 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 Total
PeopleSoft Upgrade $ 8.8 $ 5.5 $ 4.0 $ 5.5 $- $- $- $ - $ - $ - $ - $ 23.8
Software Asset Management $ 62.3 $ 47.4 $ 54.0 $ 55.5 $- $- $- $ - $ - $ - $ - $ 219.2
Release 4 Deferral to 2013
$(17.4) $(12.0) $(10.0) $(10.0) $ - $- $- $ 21.4 $ 14.8 $ 12.3 $ 12.3 $ 11.4
(CSS Replacement)
Total $ 53.7 $ 40.9 $ 48.0 $ 51.0 $- $- $- $ 21.4 $ 14.8 $ 12.3 $ 12.3 $ 254.4
15 b) Avoided Infrastructure Expenditures
16 By implementing an ERP system, SCE will also avoid the cost of purchasing
17 infrastructure otherwise required to support legacy software replacements or upgrades. Table II-10
18 identifies avoided hardware costs for UNIX, Windows and Non-UNIX servers as well as additional disk
19 space for these environments included in the 2005 annual budgeting process to support the legacy
20 software applications described above. We also included avoided costs associated with Release 4 by
102 See SCE-5, Volume III, Chapter II for justification of the 2006 to 2009 and 2013 to 2016 avoided expenditures.
85
1 shifting the savings to the 2013-2016 period. These avoided expenditures have been held constant per
2 our assumption of technological progress in server performance as discussed in Section II.C.3.a. Other
3 infrastructure expenditures that are avoided due to the ERP project include funds for the Enterprise
4 Portal and Enterprise Decision Support Infrastructure projects as well as expenditures planned for
5 mainframe operating software and middleware. Infrastructure additions and refresh would also have
6 been necessary if not for ERP. The SAP Portal, for example, replaces the need to implement the
7 previously proposed Enterprise Portal project. Consistent with our decision to include only 2006 to
8 2009 avoided software expenditures in our analysis, although the avoided infrastructure expenditures
9 would continue through 2020, the ERP business case only includes avoided infrastructure expenditures
10 identified in the 2005 annual budgeting process.103 The avoided infrastructure capital expenditures
11 included in our cost-effectiveness analysis are shown in the following table.
Table II-10
Avoided Infrastructure Expenditures
(Nominal $millions)
Description 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 Total
Enterprise Portal $ 5.6 $ 2.1 $ 1.2 $ 1.1 $- $- $- $ - $ - $ - $ - $ 10.0
Windows Servers $ - $ - $ 2.4 $ 1.9 $- $- $- $ - $ - $ - $ - $ 4.3
Non-UNIX Disk Storage $ - $ - $ 1.2 $ 1.0 $- $- $- $ - $ - $ - $ - $ 2.3
Enterprise Decision Support
Infrastructure Replacement $ 6.7 $ 6.0 $ 2.7 $ 0.8 $- $- $- $ - $ - $ - $ - $ 16.2
(EDSI)
UNIX Servers $ - $ - $ 1.9 $ 1.9 $- $- $- $ - $ - $ - $ - $ 3.8
UNIX Disk Storage $ - $ - $ 0.8 $ 0.5 $- $- $- $ - $ - $ - $ - $ 1.3
Release 4 Deferral to 2013
Disaster Recovery for
$ - $ - $ - $ - $- $- $- $ 0.8 $ 0.4 $ 2.2 $ 1.5 $ 4.9
Mainframe Environment
Mainframe Servers $ - $ - $ - $ - $- $- $- $ 0.4 $ 0.5 $ 0.7 $ 1.0 $ 2.5
Mainframe Disk Storage $ - $ - $ - $ - $- $- $- $ 0.2 $ 0.2 $ 0.2 $ 0.2 $ 1.0
Mainframe Tape Storage $ - $ - $ - $ - $- $- $- $ 0.4 $ 0.4 $ 0.4 $ - $ 1.2
Mainframe Operating
$ - $ - $ - $ - $- $- $- $ 1.6 $ 0.9 $ 0.9 $ 1.6 $ 4.8
Software & Middleware
Total $ 12.3 $ 8.1 $ 10.2 $ 7.3 $- $- $- $ 3.4 $ 2.4 $ 4.4 $ 4.3 $ 52.4
12 c) Avoided Labor Expenses
13 Because of the extent of systems replaced and the business processes involved,
14 ERP has required extensive effort by SCE employees. Active participation in the project by employees
15 with in-depth knowledge of the company’s business and regulatory requirements is necessary if the
103 See SCE-5, Volume II, Chapter II and Volume III, Chapter I and Chapter II for justification of these estimates.
86
1 benefits envisioned are to be achieved. In order to mitigate the cost and human resource impacts of
2 replacing these employees for the relatively short duration of the ERP project, SCE has backfilled only a
3 limited number of positions for employees temporarily working on ERP. SCE’s business case includes
4 the ongoing O&M labor SCE would have incurred, net of temporary backfills, absent the ERP Project.
5 Avoided O&M labor was determined for 2006 to 2009 associated with Releases 0 through 3 and for the
6 2012-2013 period associated with Release 4. These avoided O&M expenses are based on SCE labor
7 previously charging O&M accounts in their home organizations now supporting ERP and charging to
8 ERP capital work orders and O&M accounts.
9 The limits on position backfills imposes a challenge for SCE to fully resource the
10 project and minimize the accumulation of work backlogs within our business units. To meet these
11 challenges we adopted an enterprise-wide system applications freeze to free-up resources, minimize the
12 accumulation of work backlogs, and to maintain a stable technology environment as each phase of the
13 ERP project is implemented. A system freeze refers to a period during which minimal changes to our
14 technology environment can take place. This includes changes to all applications that will be replaced,
15 interfaced or could be impacted by ERP. Exceptions to the system freeze include critical break fix,
16 regulatory mandated, or major risk mitigation items.104
17 The avoided labor expenses included in our cost-effectiveness analysis are shown
18 in the following table.
Table II-11
Avoided Labor Expenses
(Constant 2006 $ millions)
Description 2006 2007 2008 2009 2010 2011 2012 2013 Total
Avoided O&M Labor $ 6.6 $ 16.8 $ 15.9 $ 7.5 $- $ - $ 1.6 $ 4.8 $ 53.2
19 The methodology used to determine the avoided labor expenses, as shown in
20 Table II-11, was based on (1) estimating the annual SCE labor that would work full time on the ERP
104 Please see workpaper entitled “System Freeze.”
87
1 Project for 2006 through 2013,105 (2) estimating the annual SCE labor that would have charged to O&M
2 accounts in their home organization if not for the ERP Project, (3) working with SCE’s Corporate
3 Budgets department to allocate a fixed percentage of temporary backfills, and (4) shifting the CSBU and
4 IT avoided labor expenses associated with Release 4 to 2012 and 2013.106
5 As a result of the positions not backfilled, SCE’s base year recorded O&M
6 expense is lower than it would have been under ordinary operations. In order to properly account for the
7 ongoing O&M costs of SCE labor that will be returning to their home organizations over this rate case
8 period we used the avoided labor expenses in 2006 and 2009 to derive a net forecast adjustment that
9 appropriately adjusts the business unit O&M Test Year forecasts. This adjustment will account for
10 returning employees and also reflect the ongoing nature of SCE labor working on ERP. The net result is
11 a positive adjustment totaling roughly $4.0 million in 2009 for all SCE departments combined.107
12 9. Performance Management
13 This section describes our approach to realizing the benefits prescribed in the ERP
14 business case. The primary objective of Performance Management is to ensure that the business
15 processes designed will result in the benefits that were identified in the business case. Additionally, we
16 need to establish that we have the right metrics for each Release of the ERP system to measure progress
17 towards achieving the benefits, and that we have the performance management mechanism in place to
18 support on-going continuous improvement initiatives.
19 Initially, each of the benefit areas will be mapped to the business processes that are
20 expected to deliver the benefits. This is particularly important for those areas of the business such as
21 Supply Chain where the benefits are derived from the improvement in our ability to improve our
22 contract bidding processes, and to shorten-up the procurement cycle time. This mapping exercise will
23 identify those business processes that will need to be measured. An analysis will be conducted to
105 The methodology used for 2006 was based on recorded data whereas 2007 to 2009, and 2012-2013 were based on
management estimates.
106 Please see workpaper entitled “Avoided Labor Expenses” for calculations and supporting data.
107 Please see workpaper entitled “2009 ERP Labor O&M Net Forecast Adjustment” for calculations, supporting data and
references to the FERC accounts where these adjustments were made.
88
1 determine the appropriate measures, to establish the current baseline for those measures, and to design
2 the reports that will be required to monitor progress on those measures.
3 For those benefit areas that are focused on FTE reductions, additional work is required to
4 fully understand the impacts of proposed business process changes on the organization. Work will be
5 done with the Process Team Leads, the Organization Readiness Team, and the Process Owners to
6 understand in detail the scope of the proposed reductions and the corresponding impact on certain work
7 groups. We expect that certain roles will no longer be necessary in the ERP processes and likewise new
8 roles may be required.
9 Once the new ERP processes are in place, new roles are established, and reports are
10 routinely generated for monitoring progress towards realizing the benefits, each organization will be
11 accountable for achieving the benefits in the time frame established. This approach will establish the
12 mechanism for managers to develop continuous improvement initiatives to take full advantage of the
13 capabilities of the ERP system.
14 10. Summary Of Benefits

15 Improving process efficiencies that result in capital and O&M cost reductions is a
16 primary objective of ERP. The following tables summarize our estimated ERP O&M and capital
17 benefits for the period 2006 through 2020.
Table II-12
ERP O&M Benefits by Category
(Constant 2006 $ Millions)
Benefit Category 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 Total
Supply Chain $ - $ - $ 2.7 $ 5.3 $ 7.7 $10.0 $10.0 $10.0 $10.0 $10.0 $10.0 $10.0 $10.0 $10.0 $10.0 $ 115.7
Information
$ - $ - $ 3.9 $ 5.4 $ 9.2 $15.4 $15.4 $16.8 $17.7 $29.2 $29.2 $29.2 $29.2 $29.2 $29.2 $ 258.9
Technology
Accounting,
Reporting, and $ - $ - $ 3.9 $ 8.9 $ 9.4 $10.0 $10.0 $10.0 $10.0 $10.0 $10.0 $10.0 $10.0 $10.0 $10.0 $ 122.1
Analytics
Work
$ - $ - $ 0.2 $ 0.8 $ 1.5 $ 1.6 $ 2.0 $ 2.0 $ 3.4 $ 4.8 $ 4.8 $ 4.8 $ 4.8 $ 4.8 $ 4.8 $ 40.0
Management
Human Resources $ - $ - $ - $ 1.0 $ 1.0 $ 1.0 $ 1.0 $ 1.0 $ 1.0 $ 1.0 $ 1.0 $ 1.0 $ 1.0 $ 1.0 $ 1.0 $ 12.2
Avoided Labor
$ 6.6 $16.8 $15.9 $ 7.5 $ - $ - $ 1.6 $ 4.8 $ - $ - $ - $ - $ - $ - $ - $ 53.2
Expenses
Total ERP O&M
$ 6.6 $16.8 $26.5 $28.8 $28.8 $38.0 $39.9 $44.6 $42.1 $55.0 $55.0 $55.0 $55.0 $55.0 $55.0 $ 602.1
Benefits
89
Table II-13
ERP Capital Benefits by Category
(Nominal $ millions)
Benefit Category 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 Total
Supply Chain $ - $ - $ 4.0 $ 8.2 $12.7 $17.5 $18.0 $18.5 $19.1 $19.7 $20.2 $20.9 $21.5 $22.1 $22.8 $ 225.2
Information
$ - $ - $ - $ - $ - $ - $ - $ - $ - $ - $ - $ - $ - $ - $ - $ -
Technology
Accounting,
Reporting, and $ - $ - $ - $ 1.5 $ 2.3 $ 3.2 $ 3.3 $ 3.4 $ 3.6 $ 3.7 $ 3.8 $ 3.9 $ 4.0 $ 4.2 $ 4.3 $ 41.3
Analytics
Work
$ - $ - $ 0.4 $ 0.9 $ 1.8 $ 2.4 $ 3.4 $ 3.5 $ 3.6 $ 3.7 $ 3.8 $ 4.0 $ 4.1 $ 4.2 $ 4.3 $ 40.2
Management
Human Resources $ - $ - $ - $ - $ - $ - $ - $ - $ - $ - $ - $ - $ - $ - $ - $ -
Avoided Capital
$66.0 $49.0 $58.2 $58.3 $ - $ - $ - $24.8 $17.2 $16.7 $16.6 $ - $ - $ - $ - $ 306.7
Expenditures
Total ERP Capital
$66.0 $49.0 $62.6 $68.9 $16.9 $23.0 $24.7 $50.3 $43.5 $43.8 $44.5 $28.7 $29.6 $30.5 $31.4 $ 613.4
Benefits
1 E. Cost-Effectiveness Analysis
2 This section describes the ERP cost-effectiveness analysis performed by SCE that compares
3 customer benefits from implementation of ERP to the costs resulting from implementation. The 2006
4 present value of revenue requirements (“PVRR”) of customer benefits were calculated at $791 million.
5 The 2006 PVRR of project costs were calculated at $716 million. SCE found that benefits exceed costs
6 with a resulting benefit-to-cost ratio of 1.10.
7 1. Methodology
8 SCE’s ERP cost-effectiveness evaluation is a life-cycle benefit-to-cost analysis from a
9 customer perspective. SCE’s life-cycle perspective measures total benefits and costs from 2006-2020.
10 SCE used net present value (“NPV”) analysis to bring all benefits and costs to base year 2006.
11 Measuring benefits and costs from a customer perspective means that SCE valued all benefits and costs
12 using the revenue requirement that customers would incur or avoid.
13 a) Benefit-To-Cost Analysis
14 NPV is the discounted monetized value of expected net benefits (i.e., benefits
15 minus costs). NPV assigns monetary values to benefits and costs, discounts future benefits and costs
16 using an appropriate discount rate, and subtracts the sum total of discounted costs from the sum total of
17 discounted benefits. Discounting benefits and costs transforms gains and losses occurring in different
18 time periods to a common unit of measurement. The ratio of the PV of benefits to the PV of costs is the
90
1 benefit-to-cost ratio. Values above 1.0 indicate projects that benefit customers. Table II-14 shows the
2 PVRR for customer net benefits.
3 b) Revenue Requirement Model
4 To quantify customer benefits resulting from ERP, it is necessary to determine the
5 avoided and incremental costs that customers will incur from ERP Implementation. To do this, SCE
6 converts the avoided and incremental costs into the customers’ revenue requirement.
7 For the ERP benefit-to-cost analysis, SCE converted each revenue requirement
8 into a single PV that assumes 2006 as the base year. Therefore, the purpose of the revenue requirement
9 model is two-fold. First, the model converts SCE’s costs (either avoided or expected) into a revenue
10 requirement, which customers would expect to pay. Second, the model changes these streams of
11 revenue requirements paid over a number of years into a single PV.
12 2. ERP Will Benefit Customers

13 Table II-14 below shows the results of SCE’s ratepayer cost-effectiveness analysis for
14 ERP implementation. This analysis demonstrates that the ERP Project will benefit customers since life-
15 cycle, revenue requirements ultimately decrease due to the project. Equally important, our ERP Project
16 provides benefits that, although not quantified, resolve the many risks and core business needs
17 previously described in this volume.
91
Table II-14
Net Present Value of the Revenue Requirements of
ERP Costs and Benefits ($000)
Revenue Requirements
Nominal Present Value

Benefits
ARA $296,387 $98,589

Supply Chain $881,380 $199,837
IT $354,421 $143,446
Work Mgmt $185,039 $44,490
Human Resources $15,984 $7,254
Avoided Costs $480,239 $296,892
Total Benefits $2,213,449 $790,509
Costs
Infrastructure/Network $223,506 $109,120

SAP License $72,413 $47,529
Rollout/Implementation Costs $718,619 $403,791
O&M $283,324 $155,106
Total Project Costs $1,297,861 $715,545
Net Benefits $915,587 $74,964
Benefit Cost Ratio 1.10
1 3. Cost-Effectiveness Impact Of Additional Avoided Software Expenditures

2 The business case cost-effectiveness analysis, as shown in Table II-14 above, includes
3 estimated avoided software expenditures identified in the 2005 annual budgeting process.108 In the
4 process of validating the avoided software expenditures, IT used a function point analysis109 that
5 approximated the avoided software expenditures associated with replacing roughly 300 applications
6 through 2020. IT’s function point analysis approximation is $539 million higher than the avoided
7 software expenditures assumed in the business case. We have chosen to exclude these avoided costs
8 beyond the system replacements previously identified through 2009 from our business case, assuring
108 See Section II.D.8.a.

109 See SCE-05, Vol. 3, IT Capitalized Software, Section II.G.
92
1 that our analysis is conservative. However, if the business case were to include these incremental
2 avoided costs in the cost-effectiveness analysis, the Net Benefits would increase by $261 million, with
3 an associated increase in the benefit-to-cost ratio from 1.10 to 1.47.
4 F. Summary
5 We have discussed in this Exhibit our reasons for concluding that installing an ERP system now
6 at SCE is the best overall solution to meet our current business challenges, which include (1) simplifying
7 and integrating our complex business processes, (2) updating and maintaining an aging application
8 portfolio, (3) dealing with an aging workforce, and (4) meeting increasing regulatory and reporting
9 requirements. We have shown that installing an ERP system will benefit SCE and its customers alike by
10 eliminating current inefficiencies that result from disparate systems and manual workarounds. As
11 discussed above, the fully-integrated SAP modules enable applications to communicate easily with one
12 another, share and update information, form an integrated view of business processes and lessen
13 dependence on manual processes that result from breaks in connectivity. Our ERP system will also
14 allow us to more efficiently meet regulatory requirements because, among other things, SAP provides a
15 built-in, automated controls environment to mitigate erroneous reporting and can be configured to
16 automatically alert, inform and request authorization along the end-to-end workflow process.
17 Our conclusion that ERP is the best overall solution is based on a thorough business case
18 analysis that considered alternatives to installing an SAP-based ERP system and that found that the
19 benefits of our ERP Project exceed its costs, with a resulting benefit-to-cost ratio of 1.10 to 1.
93
Appendix A
Witness Qualifications
1 SOUTHERN CALIFORNIA EDISON COMPANY
2 QUALIFICATIONS AND PREPARED TESTIMONY
3 OF MAHVASH YAZDI
4 Q. Please state your name and business address for the record.
5 A. My name is Mahvash Yazdi, and my business address is 2244 Walnut Grove Avenue, Rosemead,
6 California 91770.
7 Q. Briefly describe your present responsibilities at the Southern California Edison Company (SCE).
8 A. I am the Senior Vice President of Business Integration and Chief Information Officer of Edison
9 International and Southern California Edison Company. In that capacity, I have the responsibility of
10 providing strategic direction to drive business performance and growth through information
11 technology. I also oversee SCE’s Information Technology and Enterprise Resource Planning Project
12 resources that enhance the overall business agility.
13 Q. Briefly describe your educational and professional background.
14 A. I received my Bachelor of Science degree in Industrial Management from California Polytechnic
15 University, Pomona and my Master of Business Administration degree from University of Southern
16 California. I also completed the Management of Information Technology program at Harvard
17 Business School. I joined SCE in May 1997 as the Vice President and Chief Information Officer
18 and was promoted to Senior Vice President in December 1999. In March 2006, I assumed
19 responsibility for the Enterprise Resource Planning Project. Before joining SCE, I spent 17 years
20 with Hughes Aircraft Company, most recently as Vice President and Chief Information Officer. I
21 have also held leadership positions in marketing and strategic planning for IBM World Trade
22 Corporation.
23 Q. What is the purpose of your testimony in this proceeding?
24 A. The purpose of my testimony in this proceeding is to sponsor the portions of Exhibit SCE-09,
25 entitled Enterprise Resource Planning (ERP), as identified in the Table of Contents thereto.
26 Q. Was this material prepared by you or under your supervision?
27 A. Yes, it was.
A-1
1 Q. Insofar as this material is factual in nature, do you believe it to be correct?
2 A. Yes, I do.
3 Q. Insofar as this material is in the nature of opinion or judgment, does it represent your best judgment?
4 A. Yes, it does.
5 Q. Does this conclude your qualifications and prepared testimony?
6 A. Yes, it does.
A-2
3 OF KEVIN M. PAYNE
5 A. My name is Kevin M. Payne, and my business address is 4777 Irwindale Avenue, Irwindale,
6 California 91706.
7 Q. Briefly describe your present responsibilities at Southern California Edison Company.
8 A. I am Vice President of the Enterprise Resource Planning Project. I am responsible for leadership of
9 the organization, providing strategic direction and integration across the major business functions of
10 SCE, and overall implementation of the project.
12 A. I have a degree in mechanical engineering from the University of California, Berkeley and over 20
13 years experience working in electric utilities and related businesses. I have over 17 years of
14 experience at Southern California Edison (SCE). My experience at SCE has included performing
15 and managing the design and analysis of power plants and cogeneration plants as a project engineer
16 and project manager, managing an account management organization in the Major Customer
17 Division of Customer Service, managing a large technical organization in the Major Customer
18 Division of Customer Service, and managing the QF Resources Department.
21 entitled Enterprise Resource Planning (ERP), as identified in the Tables of Contents thereto.
23 A. Yes, it was.
25 A. Yes, I do.
27 A. Yes, it does.
A-3
2 A. Yes, it does.
A-4
3 OF LORENE MILLER
5 A. My name is Lorene Miller, and my business address is 4777 Irwindale Avenue, Irwindale, California
6 91706.
7 Q. Briefly describe your present responsibilities at the Southern California Edison Company (SCE).
8 A. I am the Director of the Program Management Office of the Enterprise Resource Planning Project. I
9 am responsible for project management oversight and integration of the project team and
10 deliverables to maintain focus on executing project scope within established timelines and budget.
12 A. I have a Bachelor of Science degree in Computer Science from California State University at Los
13 Angeles and have over seventeen years of experience at Southern California Edison (SCE). My
14 experience at SCE includes systems analysis and leading application development projects in the
15 Information Technology department and over twelve years of project and operations management in
16 the Customer Service area. In March 1997, I was named Project Manager responsible for SCE’s
17 Direct Access Implementation Project. From June 1999 through March 2000, I was Manager of the
18 Process Management Organization, responsible for Customer Service Training and Process
19 Improvement activities. From April 2000 through December 2003, I was Director of the Billing
20 Organization responsible for metering, billing, payment, and credit management of SCE’s end-use
21 customers. Most recently, I was Director of the Business Process & Technology Integration division
22 of the Customer Service Business Unit (CSBU) responsible for integration of business processes and
23 oversight of technology related investments for CSBU. I assumed my current position in June 2006.
A-5
2 A. Yes, it was.
4 A. Yes, I do.
6 A. Yes, it does.
8 A. Yes, it does.
A-6
3 OF BENJAMIN DAVID HODGES
5 A. My name is Benjamin David Hodges, and my business address is 2244 Walnut Grove Ave,
6 Rosemead, CA. 91770.
7 Q. Briefly describe your present responsibilities at the Southern California Edison Company.
8 A. I am Manager of Financial Analysis in the Corporate Financial Planning & Analysis group within
9 the Treasurer’s Department.
11 A. I earned a Bachelor of Science Degree in Business Administration and a Masters in Business
12 Administration with an emphasis in corporate finance from the University of Southern California
13 Marshall School of Business, and was a recipient of the Marshall Certificate in Financial Analysis
14 and Valuation. I hold the Chartered Financial Analyst (CFA) designation and am a member of both
15 CFALA and the CFA Institute. Prior to joining Edison, my professional background included
16 working in the Corporate Restructuring practice at Arthur Andersen. Since joining Edison in 2002, I
17 have developed revenue requirement models and performed a number of cost-effectiveness analyses.
22 A. Yes, it was.
24 A. Yes, I do.
26 A. Yes, it does.
A-7
1 A. Yes, it does.
A-8
Appendix B
Map To Costs And Benefits In Other SCE Testimonies
1. Cites To Costs In Other Testimony
Cost Category Description ERP Testimony Business Unit Testimony

Ongoing Capital Hardware Refresh - Section II.C.3.a SCE-5, Vol. 02, IT O&M and Capital,
Non-LABOR Section II.A.2
Ongoing O&M SAP Maintenance - Section II.C.3.b.2 SCE-5, Vol. 02, IT O&M and Capital,
Non-LABOR Section I.D.1.b.1
Ongoing O&M UNIX-server support Section II.C.3.b.1 SCE-5, Vol. 02, IT O&M and Capital,
- LABOR Section I.D.1.b.1
2. Cites To Benefits In Other Testimony110
O&M Benefits
Business FERC Benefits Aligned to Test Year Savings

Business Unit Testimony
Unit Acct. Business Units (Constant 2006 $000)
SCE-5, Vol. 02, IT O&M and Capital, Section
920/921 SC, IT, and ARA – LABOR 5,248
I.D.1.b.3
IT
SCE-5, Vol. 02, IT O&M and Capital, Section
920/921 SC, IT, and HR – Non-LABOR 5,200
I.D.1.b.3
SCE-3, Vol. 02, Part 2, T&D FERC 560-573, Section
566.810 ARA – LABOR (Transmission) 210
VII.G.7
SC, WM, and HR – Non- LABOR SCE-3, Vol. 02, Part 2, T&D FERC 560-573, Section
566.810 1,145
(Transmission) VII.G.7
TDBU
SCE-3, Vol. 02, Part 3, T&D FERC 580-598,903,
588.810 ARA – LABOR (Distribution) 425
Section IX.H.6
SC, WM, and HR – Non- LABOR SCE-3, Vol. 02, Part 3, T&D FERC 580-598,903,
588.810 2,325
(Distribution) Section IX.H.6
SC and WM – LABOR and Non- SCE-4, Vol. 02, Customer Service Operations, Section
580.300 322
LABOR IV.I.4; See also Section I.C.1
SC, ARA, and HR – LABOR and Non-SCE-4, Vol. 02, Customer Service Operations, Section
CSBU 901 1,326
LABOR IV.D.4
ARA and HR – LABOR and Non- SCE-4, Vol. 03, Customer Service Information,
907 1,004
LABOR Section IV.C.10.d
SC, ARA, and HR – LABOR and Non-SCE-2 Vol. 02, SONGS 2 & 3 O&M, Part 1, Section
SONGS 524 706
LABOR IV.D.3
SC and WM – LABOR and Non- SCE-2 Vol. 02, SONGS 2 & 3 O&M, Part 1, Section
SONGS 532 1,185
LABOR IV.D.3
GBU
SCE-2, Vol. 02, SONGS 2 & 3 O&M Part 3, Section
SONGS RFO SC – Non-LABOR 720
XVII.E.1
SCE-2 Vol. 08, Part 1 Hydroelectric O&M, Section
Hydro 539 SC – Non-LABOR 373
III.F.6
SC, ARA, and HR – LABOR and Non-
920/921 SCE-7, Vol. 01, A&G, Section I 3,730
LABOR
Corporate Center
Pensions and Benefits (Capital and SCE-6, Vol. 02, HR – Total Compensation, Section
925/926 5,234
O&M) VI.A
110 Please see section “Benefits Calculations and Assumptions” in the ERP workpapers for calculation of benefits by business
unit and FERC Account.
B-1
Capital Benefits
2006 -2011 Savings
Business Unit Benefits Aligned to Business Unit Business Unit Testimony
(Nominal $000)
Avoided UNIX and Mainframe Hardware Expenditures SCE-5, Vol. 02, IT O&M and Capital, Section III.A.2.f 5,147
Avoided Non-UNIX Hardware and Enterprise Portal SCE-5, Vol. 02, IT O&M and Capital, Section
Expenditures III.A.3.d
16,517
SCE-5, Vol. 03, IT Capitalized Software, Section
Avoided Infrastructure (EDSI) Expenditures 16,200
IT VI.C.4
Avoided Software Expenditures SCE-5, Vol. 03, IT Capitalized Software, Section II.G 193,600
SCE-5, Vol. 02 O&M and Capital, Section II, see
SC – Non-LABOR capital workpapers, PID # 06137132 039051, WP pg. 551
16
SCE-2 Vol. 03, SONGS 2 & 3 Capital, Part 1, Section
SC – Non-LABOR (SONGS)
III.A, pg. 10
2,702
GBU
SCE-2, Vol. 08, Part 2, Hydroelectric Capital, Section
SC – Non-LABOR (Hydro)
IV.B
700
SCE-3, Vol. 3, Part 1 T&D Capital Expenditures
TDBU SC, ARA, WM – LABOR and Non-LABOR
Section I.B.11
48,374
SCE-4, Vol. 02, Customer Service Operations Section
CSBU SC – Non-LABOR
V.B.4.C
581
B-2

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Application No.

2009 General Rate Case

Enterprise Resource Planning (ERP)

Public Utilities Commission of the State of California

• Section I defines “Enterprise Resource Planning,” referred to throughout as ERP, as the

use of multiple components of computer software and hardware to integrate an

Section I, include achieving efficiencies first described in SCE’s Business Process

• Section II describes our ERP implementation in detail. There, we discuss:

through the implementation of our ERP system;

business processes across the Company, including Energy Generation, Energy

Delivery, Customer Services, Corporate Financial Management, and Corporate

and Operations Support;

o the estimated costs of our ERP Project—we estimate one-time capital

process integration; and

resulting benefit-to-cost ratio of 1.10.

I. ENTERPRISE RESOURCE PLANNING (ERP) POLICY.......................................1 M. Yazdi

A. Overview Of Enterprise Resource Planning ..........................................2

1. The History Of ERP Systems ....................................................2

2. The History Of ERP Systems At SCE .......................................3

3. Key Changes From Status Quo..................................................5

4. How An ERP System Meets SCE’s Business

B. BPI And The Evolution To ERP............................................................8

II. OUR ERP PROJECT ..............................................................................................10 K. Payne

1. Why Install An ERP System At SCE?.....................................10

a) An ERP System Will Assist SCE In Its

b) An Aging Application Portfolio...................................13

c) Installing An ERP System Makes Sense

d) Installing An ERP System Will Also Make

2. SCE Established A Business Case Team To

a) The Business Case Team Evaluated

b) Why SCE Selected SAP As Its Primary

c) The Project Approach And Project

d) SCE Has Retained A System Integrator To

e) SCE Has Attempted To Identify And

B. Scope And Schedule ............................................................................25 L. Miller

1. Scope Of ERP ..........................................................................25

a) Detailed Evaluation Of SCE’s Business

b) The Business Process Scope Is Defined At

(2) Human Resources ............................................31

(3) Operations Support ..........................................32

(4) Enterprise Asset Management

(5) Customer Services ...........................................34

(6) Reporting And Analytics .................................34

c) Other Areas Of The Project Scope Are

(1) Organizational Readiness (OR) .......................35

(2) Technology ......................................................36

(3) Portal ................................................................37

(4) Security And Controls......................................38

d) Deployment Of SAP Modules Will Meet

(1) SAP ERP..........................................................39

(2) SAP SCM (Supply Chain

(3) SAP CRM (Customer Relations

(4) SAP PLM (Product Life-Cycle

(5) SAP SRM (Supplier Relationship

(6) SAP’s Work Efficiency Component

(3) TDBU Graphical Design

a) SCE Will Use A “Phase-In” Approach To

(1) Release 0: GBU SONGS Document

(2) Release 1: Company Financials,

(3) Release 2: Additional Finance And

(4) Release 3: Additional Asset

(5) Release 4: Additional Asset

C. ERP Costs ............................................................................................53

2. Recorded And Estimated Project Costs 2006-2009.................54