Accenture Consulting Agreement - DOC

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2                             CHAPTER 1

4    A. Introduction
5           The purpose of this chapter of testimony is to describe in detail how Pacific
6       Gas and Electric Company’s (PG&E or Company) Business Transformation
7       Program (BTP or program) effort is organized, directed and managed. The
8       chapter is arranged as follows:
9       Program Structure;

10      Day-to-Day Operations;

11      Initiatives Development;

12      Principles of Integration;

13      Accenture Consulting Contract Structure; and

14      Appendix of Transformation Initiatives.

15   B. Program Structure
16          Given the comprehensive nature and scope of the BTP effort as described in
17      Exhibit (PG&E-1), Chapter 1, a program structure has been put in place to ensure
18      efficient management of all BTP work activities and participants, while still
19      accommodating the dynamic and evolving nature of the effort. Roles,
20      responsibilities, and delegation of authority for decision-making within the program
21      structure have been defined accordingly.
22          The Transformation Program structure currently in place is shown in Figure 3-1.
23      The transformation effort uses PG&E employees from across the company, both
24      geographically and by line of business. Some PG&E employees involved in
25      transformation are full-time, while others, primarily at the initiative level, are part-
26      time. The Program Management Office (PMO) and transformation work stream
27      ―boxes‖ shown in Figure 1-1 contain both PG&E and Accenture Consulting
28      (Accenture) personnel to complement their respective capabilities and
29      backgrounds and carry out the necessary day-to-day work activities.

1                                                                FIGURE 1-1
2                                                    PACIFIC GAS AND ELECTRIC COMPANY
3                                              BUSINESS TRANSFORMATION PROGRAM STRUCTURE

     A. Operating Committee
             VP                 Sr. VP &           Sr. VP           Sr. VP                        Executive VP &
                                                                               VP General                             Sr. VP Human        Sr. VP, CFO             VP
          Regulatory            General         Transmission      Customer                        Chief Operating
                                                                                                                                                                                  VP & CIO
                                                                                Services              Officer          Resources          & Treasurer
          Relations             Counsel         & Distribution    Srvc & Rev

          Law / External      Law / External                                                                                            Benefit Realization
                                                                                                                        HR/Labor /
          Stakeholder /       Stakeholder /       ED / AM         Customer     Supply Chain           Chair            Change Mgmt
                                                                                                                                         & Performance        Communications         IT
           Regulatory          Regulatory                                                                                                     Mgmt

     B. Program Management Office (PMO)
                                                                                                                                     Program Mgmt
                                                                                              Program Management

                               Business              Benefit Realization &                                          Information
                                                                               Enabling Team                                                 Change Management &
                             Architecture/              Performance                                                 Technology
                                                        Management              Coordination                                                   Communications
                              Integration                                                                           Architecture

     C. Transformation Work Streams

                                                                                                                                               Advanced Metering                 Technology
                           Asset Management             Energy Delivery
                                                                               Supply Chain                           Customer                Infrastructure (AMI)*            Transformation
                                  (AM)                       (ED)

     D. Enabling Teams
                                                                                     External Stakeholder Management




      (        ) Matrix to the PMO, directly reporting to Sponsoring Officer                                  * AMI is considered part of BTP, but is not included in this GRC proceeding

4                      A description of the roles and responsibilities of each of these groups and
5         teams involved in the Transformation Program follows.

6     1. Operating Committee
7                              The BTP’s overall strategic direction is set by PG&E’s Operating
8                      Committee (OC), which is comprised of senior PG&E utility officers. The OC
9                      is chaired by PG&E’s Executive Vice President and Chief Operating Officer.
10                     In addition to providing overall strategy and direction to the program as a
11                     group, each OC member also individually serves as a sponsoring officer to a
12                     particular program management team, transformation work stream, and/or
13                     enabling team. The OC meets regularly, generally weekly, to review, discuss
14                     and approve items of importance associated with the Transformation Program.
15                             The current OC officer membership, including their corresponding
16                     sponsorship roles, is shown in Table 1-1.

1                                           TABLE 1-1
2                              PACIFIC GAS AND ELECTRIC COMPANY

     Line                                                     Program Management/Work Stream/
     No.                    Officer Title                       Enabling Team OC Sponsor For:

      1      Vice President, Regulatory Relations        Law/External Stakeholder/Regulatory
      2      Sr. Vice President and General Counsel      Law/External Stakeholder/Regulatory
      3      Sr. Vice President, Transmission and        Energy Delivery/Asset Management (ED/AM)
      4      Sr. Vice President, Customer Service and    Customer Management
      5      Vice President, General Services            Supply Chain
      6      Sr. Vice President, Human Resources         HR/Labor/Change Management
      7      Sr. Vice President, CFO and Treasurer       Benefit Realization/Performance Management
      8      Vice President, Communications              Communications
      9      Vice President and Chief Information        Information Technology

4         2. PMO
5                 The Operating Committee established a PMO to serve as a centralized
6            program management department, with coordinating, monitoring, and
7            reporting functions. The PMO is the key focal point for joint PG&E and
8            Accenture management of the BTP on a day-to-day basis. The PMO ensures
9            that the work stream initiatives and activities are integrated. It also manages
10           the scope of issues undertaken by the work streams, captures and accounts
11           for the costs and benefits associated with BTP initiatives, and ensures that
12           changes in Company practices resulting from BTP are implemented. The
13           PMO conducts regular meetings with work stream team leads and leads the
14           discussion of issues before the OC that require OC consideration. In order to
15           manage the BTP initiatives from design through implementation and ensure
16           appropriate approvals, the PMO has developed processes and controls.

17        3. Transformation Work Streams
18                The BTP focuses on three key areas of PG&E’s core business: energy
19           delivery (including gas and electricity)/asset management; supply chain; and
20           customer management. In addition, as shown in Figure 1-1, Information
21           Technology Transformation (ITT) is designated as a transformation work
22           stream. Work stream team leads from PG&E and Accenture were selected to
23           oversee these areas, as well as manage the multiple initiatives associated with

1           each. At the initiative level, a designated PG&E initiative team lead manages
2           the day-to-day activities of the team members.
3                 The relationship between the team leads of the transformation work
4           streams shown in Figure 1-1 and the initiative team leads reporting to them is
5           illustrated in Figure 1-2 using the energy delivery work stream as an example.

6                                        FIGURE 1-2
7                          PACIFIC GAS AND ELECTRIC COMPANY

                                                              Energy Delivery
                                                               Energy Delivery

                                                           PG&E Work Stream
                                                            PG&E Work Stream
                                                              Team Lead
                                                               Team Lead

                                             Supervisor in Field /
                                             Supervisor in Field /         Electric Operation
                                                                           Electric Operation
               Work Design and
               Work Design and                                                                       Workforce Flexibility
                                                                                                     Workforce Flexibility
                                         Field Force Transformation
                                         Field Force Transformation           Optimization
               Resource Mgmt
                Resource Mgmt
                                                                                                   PG&E Initiative Team Lead
                                                                                                   PG&E Initiative Team Lead
           PG&E Initiative Team Lead
           PG&E Initiative Team Lead     PG&E Initiative Team Lead
                                         PG&E Initiative Team Lead     PG&E Initiative Team Lead
                                                                       PG&E Initiative Team Lead

                                       Compatible Units and
                                       Compatible Units and                        New Business
                                                                                   New Business
                                        Design Templates
                                         Design Templates

                                   PG&E Initiative Team Lead
                                   PG&E Initiative Team Lead                 PG&E Initiative Team Lead
                                                                             PG&E Initiative Team Lead

9                 The work stream teams plan, design and implement the Business
10          Transformation initiatives (see Appendix, Table A1-1 to Table A1-5, for listing
11          of initiatives by work stream) and are the key focal point for the interaction of
12          Accenture and PG&E for executing the underlying initiatives. There are
13          currently six transformation work streams.
14          (1) Energy Delivery (ED);[1]
15          (2) Asset Management (AM);[1]
16          (3) Supply Chain/Corporate Real Estate/Fleet;
17          (4) Customer Management;

     [1]   Given the close and overlapping nature of so many of the initiatives under the
           energy delivery and asset management work streams, the two are sometimes
           referred to as one under the nomenclature of ―ED/AM.‖

1              (5) Information Technology; and
2              (6) Advanced Metering Infrastructure (AMI).[2]

3          4. Enabling Teams
4                  The enabling team is drawn from PG&E’s Public Affairs, Human
5              Resources and Law Departments to support the activities of the BTP. These
6              teams play a critical role in providing specialized guidance and support to the
7              individual work stream and initiative teams. The enabling team coordination
8              group in the PMO works to ensure effective integration between assigned
9              enabling team members and the work stream and initiative team members.

10   C. Day-to-Day Operations
11             The day-to-day operations of the Transformation Program are coordinated
12         primarily by the PMO. As shown in Figure 1-1, the PMO is actually composed of
13         six teams reporting either directly or by matrix to the PMO senior director.
14         Collectively, the teams reporting to the PMO senior director are considered the
15         program management work stream. The PMO senior director reports directly to
16         the chair of the OC, PG&E’s Executive Vice President and Chief Operating Officer.
17             The PMO senior director provides leadership and direction to the
18         transformation efforts. This comprises ensuring that all roles and responsibilities of
19         the PMO are fulfilled, including development of the structure, process and controls
20         to ensure overall success of transformation. Key areas of responsibility for the
21         PMO senior director position are:
22         Lead the development and ensure proper administration of process and
23             procedures;

24         Ensure team leads, PMO leads, and enabling leads are fully aware of, and are held
25             accountable for, using the processes and tools to track, monitor, manage and
26             control the program;

27         Ensure integration across the program;

28         Hold all program leads accountable for cost tracking and monitoring;

     [2]     Advanced Metering Infrastructure (AMI) is considered a part of the Business
             Transformation Program, but is not included in this GRC proceeding because it
             is covered in other CPUC proceedings.

1    Provide effective communications to the program. Ensure that a communications
2        strategy is developed for the program that incorporates the needs of the
3        teams, sponsoring officers, the OC, and other stakeholders across the
4        company;

5    Effectively lead and direct all aspects of PMO function, including but not limited to:
6        cost, schedule, scope, change control, contingency, issue, resources, quality,
7        risk, procurement and contract, performance measurement and reporting;

8    Provide guidance and direction to all program leads, including holding regular
9        meetings for status review and issue capture/resolution. A key component of
10       directing and supporting the work stream and enabling teams is to address
11       questions, concerns, and issues that might arise;

12   Develop a timeline and strategy for issues to be brought to the OC to ensure timely,
13       effective feedback and decisions necessary to ensure success of the program.
14       This includes review and approval of all materials that are presented to the OC
15       and accountability for the quality, accuracy, and proper sign offs of the
16       information that is presented. Develop materials that present information in a
17       discussion/decision making form. Also ensure that the OC has the materials
18       needed for review, discussion, and decision-making; and

19   Communicate decisions by the OC and ensure they are fully understood and
20       adhered to by leads.

21       The objectives, roles, and responsibilities of the six teams reporting to the
22   PMO senior director are:

23   1. Program Management Support
24           The program management support team is responsible for designing,
25       implementing, and coordinating a series of management processes to ensure
26       a successfully run program. The program management support function
27       manages the program activities by providing the tools, processes, and support
28       necessary for the program office to effectively control, measure, and report the
29       program activities.

30   2. Business Architecture/Integration
31           The primary objective of the business architecture/integration team is to
32       coordinate and align the overall business architecture (people, processes and

1       technology) with PG&E’s operating strategy, corporate governance and
2       initiative business cases. The responsibilities of the business
3       architecture/integration function include:
4          Coordinating and aligning the overall business architecture with PG&E’s
5           operating strategy, corporate governance and initiative business cases;

6          Developing and maintaining the integrated, enterprise process
7           architecture;

8          Facilitating and coordinating integration across initiatives;

9          Assisting in the identification and resolution of cross work stream impacts
10          resulting from business capability changes, decisions, or approaches
11          defined in an individual work stream;

12         Assisting in the identification and resolution of risks/issues/conflicts across
13          business capability components of work streams;

14         Leading and facilitating the identification, evaluation and selection of
15          enterprise operating alternatives and organization(s);

16         Leading and facilitating capability delivery planning and the overall
17          business capability delivery approach and milestones; and

18         Providing assistance to the enabling teams.

19   3. Benefit Realization and Performance Management
20          The primary objective of the Benefits Realization and Performance
21      Management team is to design and execute the processes and tools which
22      monitor and report on the program’s overall financial status, program business
23      case benefits realization, operational performance metrics, and overall
24      performance of the program. In addition, this function is responsible for
25      developing and updating the program business case at specific milestones,
26      and performing financial analysis to support decision making. A more detailed
27      description of the roles and responsibilities of the Benefits Realization and
28      Performance Management function can be found in Exhibit (PG&E-10),
29      Chapter 5.

1    4. Enabling Team Coordination
2           The primary objective of the enabling team coordination group is to ensure
3       that the work streams and enabling teams are effectively integrated on an
4       ongoing basis as the work stream initiatives proceed through the
5       deliverable/milestone review, approval and implementation process.

6    5. Information Technology Architecture
7           The primary objective of the Information Technology Architecture team is to
8       provide the appropriate foundation and technical architecture required for the
9       business transformation initiatives as a whole to meet their objectives. The
10      approach is to maximize integration between application systems to support
11      more data sharing, and to lower overall IT support costs by minimizing
12      customization of application systems. More detail regarding IT Architecture
13      objectives and initiatives can be found in Exhibit (PG&E-10), Chapter 4.

14   6. Change Management and Communications
15          Change Management is a key component of the Transformation process
16      and focuses on the many cultural and organizational changes which need to
17      take place. Communications is responsible for developing communication
18      plans and coordinating the production of key messages and materials to
19      prepare key stakeholders (both internally and externally) for business and
20      cultural transformation changes. In addition, Change Management and
21      Communications is responsible for providing the competency development
22      materials and programs (e.g., leadership, skills training, individual
23      performance management) necessary for transformation. Change
24      Management & Communications works within the work streams and extremely
25      closely with the enabling team and other PMO teams to manage change
26      associated with the Transformation efforts.
27          The change management team is focused on the following six initiatives:
28         Change Planning: This initiative is designed to evaluate change
29          impacts and stakeholder support requirements necessary to guide and
30          develop communications, sponsorship, training and required changes in
31          human resource practices. It involves the design, implementation, and
32          management of the complete set of change management activities across
33          the work streams and also provides overall direction and guidance for all

1               change management related initiatives unique to each individual work
2               stream.

3              Leader and Sponsor Development: This initiative focuses on working
4               with the OC executive sponsors to develop strategies to effectively transfer
5               their knowledge and support for Business Transformation Program
6               initiatives to others.

7              Communication: This initiative focuses on the design, development and
8               implementation of a communication strategy and plan to support
9               implementation activities during the term of the transformation program. It
10              will include coordination of related work from initiative teams across work
11              streams with internal and external communications efforts.

12             Change Agent Network Management: This initiative focuses on the
13              development and management of a network of change agents established
14              to help ensure consistent messages are provided to employees and to
15              provide a channel for monitoring the preparation for changes in the
16              organization.

17             Training and Organization Development: This initiative focuses on the
18              design and development of necessary training and organization
19              development approaches for initiatives. This also includes the
20              development of a Leadership Academy for PG&E supervisors and
21              managers.

22             Human Resources: This initiative focuses on the redesign of PG&E’s
23              HR organization, programs, policies, plans, and guidelines necessary to
24              institutionalize a new organization culture, including guidance and creation
25              of templates necessary to support initiative job design.

26   D. Initiatives Development
27          As described in more detail in Exhibit (PG&E-1), Chapter 1, PG&E undertook
28      a thorough examination of its core business in 2004. Teams of employees
29      reviewed the following key areas of the business: Customer Operations, Energy
30      Delivery (gas and electric) and Asset Management, and Supply Chain. While other
31      areas of our business will eventually be evaluated in a similar fashion, the effort

1    started with those parts of the business that are closest to the customer, while
2    being careful not to take on or implement too much change too fast.
3        PG&E identified and evaluated factors for success in each of the lines of
4    business. An important input in this process was a series of site visits to other
5    utilities (and some non-utility businesses) so PG&E personnel could see first hand
6    how other companies performed a particular process or aspect of the business
7    better. This initial work culminated in the development of a number of proposed
8    initiatives for improving the service business model, with the ultimate goal of
9    attaining our vision of industry leadership.
10       The proposed initiatives and their supporting business cases were preliminary
11   and not yet fully developed, evaluated and ready to implement, nor could the costs
12   and savings of the initiatives be reliably estimated until detailed design was
13   complete. At year end 2004, PG&E management decided to move forward with
14   the Business Transformation Program reflected in the potential initiatives
15   developed by the teams. The next step was to undertake detailed design of the
16   first phase of initiatives.
17       To assist in the initial assessment described above and in the design of the
18   initiatives, PG&E hired Accenture Consulting, a business consulting firm with
19   significant experience and a positive track record in improving and transforming
20   utilities and companies in other major industries.
21       The Phase 1 initiatives are listed in Tables A1-1 to A1-5 in Appendix A.
22   Phase 1 of the Transformation Program focuses on the refinement of the business
23   case for certain initiatives and the design of the specific plans, processes, and
24   requirements to implement them. Although PG&E intends the Business
25   Transformation Program to be broad, individual initiatives will be subject to
26   periodic checkpoints, business case reviews, and approvals to ensure that the
27   benefits of the program are maximized while meeting the demands of PG&E’s
28   business and regulatory requirements.
29       PG&E plans to proceed with the program through a series of measured steps
30   and executive decision points. Decisions to proceed with specific initiatives will be
31   taken on a case-by-case basis having regard to overall program objectives, the
32   guiding principles described above, and the requirements of PG&E’s business and
33   regulatory environment.

1    E. Principles of Integration
2           The financial and operational performance benefits of the program will be fully
3       realized only if there is successful integration of program initiatives and effort
4       across all of PG&E’s operating units. Figure 1-3 below presents an excellent
5       example of cross-work stream integration required for one important process, New
6       Business.
7           While new business transformation efforts are being led by the ED/AM work
8       stream, there are key integration points all along the way with component activities
9       and interactions under the direction of the supply chain and customer management
10      work streams—from start to finish. A carefully integrated approach to the design
11      and implementation of the improved new business process is clearly a prerequisite
12      for success.


1                                          FIGURE 1-3
2                              PACIFIC GAS AND ELECTRIC COMPANY

                                                                          1, 3

                          Start Here
                                           Resource                    Service
                            1, 2, 3                                   Initiation                           1, 2, 3                        Integration
                                         Forecasting &
                                         Planning / Mtls                                                                                  Points:
                                        Demand Planning
                                                                                                 Schedule                               1 – ED/AM
                                                                 Call Center,
                                                Integrated       Web Takes          Accurate                                            2 – Supply Chain
                                                Materials &      Application       Schedules
            1, 2, 3                             Resource                           Available                                            3 – Customer
                       Closeout /                Planning                                                          Work
                        Account                                                        Simplified, Standard      Design /
                      Management Automated                                                Templates,             Reserve
                                                    • Reduce Cycle Time                 Compatible Units;                        1, 2
                                  Closeout if                                                                    Materials/
                                  Within                                                   Sourcing;             Customer
                                                      (Months to Weeks)                      Permits;
                                  Tolerances        • Lower Cost / Connect                                      Fund Mgmt
                                                    • Improve Customer Sat
                                                      (Commitments Met)
                                                                                            Contractor /
                        Account                                                           Materials / Crew
                                       Links to
            1, 3        Set-up                                                               Availability
                                       CDx                                                                 Schedule
                                                Completed Units,                                            Crew /
                                                 Labor/Payroll,                      Integrated            Material /
                                                Materials Usage,                     Dispatch /            Vehicles           1, 2, 3
                                                 Returns, GIS      Field Force        Material
                                                    updates      Transformation/      Delivery
                                                                Supervisor in Field/
                                                                   Mobile Tech
                                       As Built

                                                              Construction,                    Dispatch
                             1, 2, 3                           Meter Set,
                                                              Inspections,                          1, 3

                                                               1, 3

                                                   Performance Management

                                                        Customer Contact

                                                  Universal Employee Access

4    F. Accenture Contract Structure
5          The contractual agreement between PG&E and Accenture for the Business
6      Transformation Program allows services to be performed under the following
7      arrangements: (1) time and materials; (2) modified time and materials; and
8      (3) fixed price. The provisions for each of these forms of project services billing is
9      covered in Schedule C of the Master Services Agreement (MSA). It is important to
10     note that this agreement also allows PG&E to terminate at any time without cause.
11     In addition, the agreement specifies that a portion of Accenture’s payment is at
12     risk, subject to a performance assessment framework which includes the success
13     of the program using PG&E’s Performance Incentive Plan methodology, and
14     PG&E’s satisfaction with Accenture’s contribution to the success of the program
15     using a survey-based evaluation methodology.

1        The components of the Accenture contract include:
2    Master Services Agreement. This includes the general terms and conditions
3        covering a 5-year period beginning January 17, 2005;

4    Schedule A – Business Transformation Program and Governance Framework and
5        Processes;

6    Schedule B – Performance Assessment Framework. This schedule provides the
7        framework and process for PG&E and Accenture to regularly assess
8        Accenture’s contribution to the success of the Business Transformation
9        Program through assessing both PG&E’s satisfaction with the quality of
10       Accenture’s contribution and the success of the program. The Framework
11       shall also be used as a basis to assess any program credits due from
12       Accenture;

13   Schedule C – Compensation;

14   Schedule D – Reserved for Future Use;

15   Schedule E – Acceptance Process for Deliverables;

16   Schedule F – Reserved for Future Use;

17   Schedule G – Reserved for Future Use;

18   Schedule H – Security Requirements;

19   Schedule I – Accenture Competitors;

20   Schedule J – Approved Subcontractors; and

21   Schedule K – Accenture Insurance Coverage.

1                                            APPENDIX A

2                                        TABLE A1-1
3                            PACIFIC GAS AND ELECTRIC COMPANY

5                                   (See Exhibit (PG&E-10), Chapter 2)

    No.         Ref #(a)              Initiative Name                          Description
      1       AM1            Asset Information                   The Asset Information Transformation
                             Transformation                      initiative will take PG&E’s numerous
                                                                 written and electronic data sources and
                                                                 gather them together in one easily and
                                                                 electronically accessible location. This
                                                                 electronic data source will provide asset
                                                                 information (performance and
                                                                 maintenance history, location,
                                                                 requirements, etc.) necessary to
                                                                 optimize investment decisions, facilitate
                                                                 system operations, and optimize
                                                                 job/work grouping and crew scheduling.

      2       AM2            Asset Optimization                  The Asset Optimization initiative will
                                                                 result in fact-based, data-driven
                                                                 decision-making to promote efficient
                                                                 capital and expense spending on the
                                                                 gas and electric delivery system. The
                                                                 key objectives of this initiative are to
                                                                 enhance PG&E’s capabilities for
                                                                 planning and budgeting, both long and
                                                                 short term, to improve the predictability
                                                                 of asset performance for various levels
                                                                 of investment and operating expenses,
                                                                 and to focus investments to levelize
                                                                 asset performance to match the
                                                                 expectations for that asset/facility. The
                                                                 ultimate goals of the initiative are to
                                                                 develop a highly structured approach to
                                                                 managing utility investments, with
                                                                 consistent treatment and consideration
                                                                 of regulatory, safety, reliability and
                                                                 economic factors, and to enable PG&E
                                                                 to allocate discretionary capital and
                                                                 expense spending to those specific
                                                                 areas and items where it will have the
                                                                 most impact.

    (a)    Reference to initiative designations found in Exhibit (PG&E-10), Chapter 5.


1                                         TABLE A1-2
2                             PACIFIC GAS AND ELECTRIC COMPANY

4                                   (See Exhibit (PG&E-10), Chapter 2)

    No.         Ref #(a)              Initiative Name                           Description
      1       ED1            Work and Resource                   The Work and Resource Management
                             Management, Including New           initiative is focused on improving energy
                             Business Improvement                delivery work processes, in particular
                             Opportunity                         the design and estimating of facilities,
                                                                 scheduling of work, the dispatching
                                                                 (assignment) of work to crews and/or
                                                                 employees, the management of large
                                                                 projects, and the organizational
                                                                 alignment of work processes. It will
                                                                 introduce fully-integrated work
                                                                 scheduling tools and processes that will
                                                                 enable improved work initiation,
                                                                 resource management and job closing.
                                                                 The initiative’s goal is to enable crews
                                                                 to arrive at a work site with all the
                                                                 necessary materials already there and
                                                                 with a complete and consistent job

      2       ED2            Field Force Transformation,         The Field Force Transformation initiative
                             Including Supervisor in the Field   is focused on improving field workforce
                             Immediate Opportunity               productivity, facilitating the consistent
                                                                 delivery of field services, improving
                                                                 emergency response times, and
                                                                 improving safety. The initiative has two
                                                                 parts. The first part is the supervisor in
                                                                 the Field Immediate Opportunity, which
                                                                 is designed to enable front-line
                                                                 supervisors to spend more of their time
                                                                 in the field working with their employees
                                                                 to focus on customer satisfaction,
                                                                 productivity, quality and safety. The
                                                                 second part is the introduction of mobile
                                                                 computing tools throughout field

    (a)    Reference to initiative designations found in Exhibit (PG&E-10), Chapter 5.


    No.         Ref #(a)              Initiative Name                           Description
      3       ED3            Work Force Flexibility              This initiative will improve the use and
                                                                 effectiveness of PG&E employees and
                                                                 contractors by optimizing work
                                                                 assignment, job duty, and work
                                                                 scheduling flexibility through existing
                                                                 and modified labor contract provisions.
                                                                 Additionally, the initiative will develop
                                                                 critical contract management
                                                                 capabilities and rigorous performance
                                                                 management (service level agreements)
                                                                 of contractors to maximize the value of
                                                                 our contracting relationships.

      4       ED4            Electric Operations                 The Electric Operations Optimization
                             Optimization                        initiative focuses on consolidation of
                                                                 transmission and distribution control
                                                                 centers. The key objectives of the
                                                                 initiative are: (1) industry-leading
                                                                 operational effectiveness; (2) increased
                                                                 customer satisfaction; (3) continued
                                                                 safety conscious environment; and 4)
                                                                 reduced operational risk for the electric

    (a)    Reference to initiative designations found in Exhibit (PG&E-10), Chapter 5.


1                                             TABLE A1-3
2                                 PACIFIC GAS AND ELECTRIC COMPANY

4                                     (See Exhibit (PG&E-10), Chapter 3)

    No.         Ref #(a)               Initiative Name                            Description

      1       SC1             Strategic Sourcing/Phase 1            Strategic sourcing is a rigorous
                                                                    process for making sourcing decisions
                                                                    in order to reduce costs and sustain
                                                                    high-quality materials and services. It
                                                                    involves aligning the Company’s
                                                                    sourcing strategy with the Company’s
                                                                    operating strategy. Phase 1 focuses
                                                                    on the strategic sourcing of
                                                                    five spending categories: office
                                                                    supplies, meters, wire and cable, staff
                                                                    augmentation, and travel.

      2       SC2             Strategic Sourcing/Phase 2            Phase 2 focuses on six large spending
                                                                    categories: Transmission and
                                                                    Distribution (T&D) electrical equipment,
                                                                    engineering and technical services,
                                                                    environmental and testing services,
                                                                    freight, Maintenance, Repair and
                                                                    Operations (MRO) materials, and
                                                                    construction/generation services.

      3       SC3             Procurement Opportunity Spend         The Procurement Opportunity Spend
                              Assessment                            Assessment initiative is a
                                                                    comprehensive analysis of PG&E’s
                                                                    historic purchasing habits for materials
                                                                    and services. The focus of the initiative
                                                                    will be on segmenting 2004 spending
                                                                    into logical groupings based on
                                                                    material or service type, and on the
                                                                    purchasing technique used to procure
                                                                    those materials or services. In
                                                                    addition, the initiative will focus on
                                                                    building a global strategy on ―non-
                                                                    strategic procurement spending,‖ which
                                                                    is characterized by materials or
                                                                    services that are common to many
                                                                    businesses, but for which the spending
                                                                    volume/savings potential does not
                                                                    warrant strategic relationships or
                                                                    partnerships with suppliers.

    (a)    Reference to initiative designations found in Exhibit (PG&E-10), Chapter 5.

No.         Ref #(a)               Initiative Name                            Description

  4       SC4            Materials Demand & Supply             The Materials Transformation
                         Planning                              component of the Supply Chain work
                                                               stream is charged with optimizing the
                                                               way PG&E plans, procures, and
                                                               manages direct materials (those
                                                               commonly consumed materials that
                                                               are stocked in warehouses as
                                                               inventory and which currently flow
                                                               through three distribution centers). It
                                                               includes initiatives in support of
                                                               Materials Demand and Supply
                                                               Planning and Materials Distribution
                                                               The Demand & Supply Planning
                                                               initiative will design the capability
                                                               required for PG&E to develop improved
                                                               materials demand planning, and
                                                               integrate that plan with supply
                                                               capacity. The design activities will
                                                               focus on process design, organization
                                                               design, and technology selection.

  5       SC5            Materials Distribution Optimization    The Materials Distribution Optimization
                                                                initiative is tasked with exploring
                                                                various alternatives for materials
                                                                transportation and order fulfillment
                                                                across the Company.

  6       SC6            Supply Chain Organization &            The Supply Chain Organization and
                         Process Design                         Process Design initiative will define the
                                                                capabilities and design the processes
                                                                required to support the transformed
                                                                company. Capabilities requiring
                                                                development include: Demand
                                                                Planning, Supply Planning, Strategic
                                                                Sourcing, Category Management, and
                                                                Strategic Relationship Management.
                                                                The Supply Chain Organization and
                                                                Process Design Initiative will result in
                                                                recommended high-level, end-to-end
                                                                processes and organizational
                                                                structure(s) to support the transformed
                                                                supply chain organization, and

(a)    Reference to initiative designations found in Exhibit (PG&E-10), Chapter 5.

    No.         Ref #(a)               Initiative Name                             Description

      7       SC7            Corporate Real Estate (CRE)            Corporate Real Estate (CRE) provides
                                                                    a building asset management function
                                                                    for the majority of PG&E’s common
                                                                    utility plant facilities, and provides
                                                                    facilities and land rights-related support
                                                                    services to business partners in the
                                                                    Utility. The primary functions of CRE
                                                                    are developing the Company Real
                                                                    Estate strategy, managing building
                                                                    projects to construct and maintain
                                                                    buildings, managing day-to-day
                                                                    building maintenance and operations
                                                                    activities, and providing land rights
                                                                    support for gas and electric
                                                                    transmission and distribution assets.

      8       SC8            Fleet Asset Management                 The Fleet Transformation strategy will
                                                                    require the development of new asset
                                                                    management strategies and fleet
                                                                    service capabilities. Maintaining fleet
                                                                    assets at the optimal age based on the
                                                                    recommended replacement strategy
                                                                    maximizes fleet asset utilization and
                                                                    allows PG&E to eliminate excess
                                                                    vehicles and associated costs. The
                                                                    initiatives in this category include:
                                                                    (1) Fleet Asset Management
                                                                    Excellence, (2) Fleet Asset Scheduling
                                                                    and Delivery, and (3) Garage
                                                                    Operations Efficiency.

    (a)    Reference to initiative designations found in Exhibit (PG&E-10), Chapter 5.


1                                       TABLE A1-4
2                           PACIFIC GAS AND ELECTRIC COMPANY

4                                    (See Exhibit (PG&E-5), Chapter 1)

    No.        Ref #(a)               Initiative Name                            Description
      1       CS1           Back Office                           The objective of the Back Office
                                                                  initiative is to improve customer service
                                                                  through improved ―exception
                                                                  processing,‖ which equates to more
                                                                  timely bills. The initiative will help to
                                                                  decrease time spent reviewing billing
                                                                  exceptions on ―no-bill‖ research and
                                                                  increase billing accuracy. This will
                                                                  decrease contact cost per customer
                                                                  and meter-to-cash days for exceptions.
                                                                  The initiative will also enable efficiency
                                                                  gains in the back office.

      2       CS2           Credit & Collections                  Changes will be made to the automated
                                                                  collection processes in the Customer
                                                                  Care and Billing system (hereinafter
                                                                  referred to as ―CC&B system,‖ but also
                                                                  formerly known as CorDaptix) to
                                                                  support improved collection efficiencies.
                                                                  The current collection processes will be
                                                                  expanded to provide additional
                                                                  collection streams and steps for
                                                                  customer contact based upon risk
                                                                  factors and internal collections policies.
                                                                  As part of this process, customer
                                                                  segmentation and risk analysis for
                                                                  customers will be reviewed and
                                                                  expanded in the CC&B system.

      3       CS3           Customer Satisfaction                 One of the key objectives of the
                                                                  Business Transformation Program is
                                                                  the improvement in overall customer
                                                                  satisfaction with PG&E. This initiative
                                                                  will create a ―customer view‖ of the
                                                                  Business Transformation Program by
                                                                  coalescing the customer impacts of all
                                                                  initiatives and defining an operating
                                                                  model for improving customer’s
                                                                  satisfaction with PG&E’s delivery of

    (a)    Reference to initiative designations found in Exhibit (PG&E-10), Chapter 5.

No.        Ref #(a)               Initiative Name                           Description
  4       CS4           Customer Care and Billing (CC&B)     This initiative will include a detailed
                                                             review of the technical application
                                                             software (Applications) and supporting
                                                             technical platforms for those
                                                             Applications that are primarily used by
                                                             Customer Service and Revenue. The
                                                             main goal of this initiative is to
                                                             recommend an approach (with a
                                                             business case) for moving to an
                                                             improved overall solution in these areas.

  5       CS5           Account Services                     The objective of the Account Services
                                                             initiative is to increase the customer
                                                             satisfaction of medium-sized business
                                                             accounts while at the same time
                                                             maintaining the high level of customer
                                                             satisfaction for ―key‖ accounts. The
                                                             initiative will lay the groundwork for
                                                             improving service delivery efficiencies by
                                                             optimizing internal support and
                                                             redirecting resources such that the
                                                             funding that would have been otherwise
                                                             spent can be reallocated towards
                                                             enabling the improved service for
                                                             medium size business customers.

  6       CS6           Customer Fund Management             The objective of the Customer Fund
                                                             Management initiative is to improve
                                                             customer satisfaction around the new
                                                             business process primarily by helping
                                                             to reduce the end-to-end new business
                                                             cycle time. This initiative combined
                                                             with Energy Delivery’s new business
                                                             related initiatives will increase efficiency
                                                             and standardization in the end-to-end
                                                             new business process as well as
                                                             improve the availability of data to all
                                                             parties involved in the process. It will
                                                             also provide a centralized tool to enter
                                                             data and reduce the redundancy of data

  7       CS7           Local Offices                        The objective of this initiative is to
                                                             ensure a high level of service through
                                                             local customer payment channels.

(a)    Reference to initiative designations found in Exhibit PG&E-10, Chapter 5.

    No.        Ref #(a)               Initiative Name                            Description
      8       CS8           Contact Center                        The goal of the Contact Center initiative
                                                                  is to improve overall effectiveness by
                                                                  maintaining or incrementally improving
                                                                  customer service levels while reducing
                                                                  operating costs. This will be
                                                                  accomplished by improving the
                                                                  acceptance and satisfaction levels of
                                                                  customer self service options,
                                                                  increasing first contact resolution,
                                                                  reducing repeat calls and improving
                                                                  overall performance.

    (a)    Reference to initiative designations found in Exhibit (PG&E-10), Chapter 5.


1                                        TABLE A1-5
2                            PACIFIC GAS AND ELECTRIC COMPANY

4                                    (See Exhibit (PG&E-10), Chapter 4)

    No.         Ref #(a)              Initiative Name                            Description

      1       ITT1          IT Governance                         This initiative will design a PG&E IT
                                                                  governance model and related
                                                                  processes to enable effective IT
                                                                  decision making and management
                                                                  functions, aligned with the overall
                                                                  program governance model and the IT
                                                                  Architecture initiative.

      2       ITT2          Definition of Baselines               This initiative will research the current
                                                                  state of the IT business within PG&E
                                                                  and use this information to design
                                                                  appropriate plans for the other

      3       ITT3          Consolidate/Reorganize IT Staffing    This initiative will consolidate and
                                                                  reorganize the IT staffing within PG&E.
                                                                  Industry benchmarking shows that
                                                                  standardization is more effectively
                                                                  applied when it is directed by a central
                                                                  IT organization.

      4       ITT4          Transform IT Strategy &               This initiative will expand the emphasis
                            Architecture Capabilities             of enterprise standards across all lines
                                                                  of business, and will centralize all
                                                                  strategic planning to ensure appropriate
                                                                  support of the business transformation

      5       ITT5          Solution Development – Center of      Business transformation will require
                            Excellence                            extensive investment in IT. In order to
                                                                  support the business, the application
                                                                  development processes must be
                                                                  improved to handle large volume of
                                                                  change in a rapid and consistent
                                                                  fashion. To achieve this capability
                                                                  quickly, PG&E will be creating a
                                                                  ―center of excellence‖ (COE) for its
                                                                  application development. A COE can
                                                                  be defined as a virtually centralized
                                                                  organization that leverages multiple
                                                                  products and services in the delivery of
                                                                  specific, focused business solutions.

    (a)    Reference to initiative designations found in Exhibit (PG&E-10), Chapter 5.


No.     Ref #(a)             Initiative Name                           Description

 6     ITT6        Transform Service Level              Service delivery organizations such as
                   Management                           IT must be able to measure and monitor
                                                        agreed to service levels in order to
                                                        ensure the business is receiving the
                                                        highest value added service for the
                                                        cost. This initiative includes the
                                                        following three activities: (1) Service
                                                        Level Agreements Definition and
                                                        Management, (2) Reset Existing
                                                        Service Levels, and (3) Account
                                                        Management Enablement.

 7     ITT7        Rationalize and Consolidate          This initiative bundles multiple
                   Devices                              infrastructure consolidation and
                                                        rationalization projects. Standardizing
                                                        on a minimal number of hardware
                                                        platforms leads to economies of scale,
                                                        minimization of support costs and
                                                        complexity, and an increase in the
                                                        speed of delivery of IT services.

 8     ITT8        Solution Maintenance and Service     This initiative will include the evaluation
                   Delivery Sourcing                    of sourcing options for staffing IT
                                                        functions in context with the other
                                                        initiatives in order to provide the highest
                                                        level of value.

 9     ITA1        Enterprise Application Integration   This initiative will refine the company’s
                   (EAI)                                IT integration architecture by
                                                        standardizing to one operating platform
                                                        and involve the development of an
                                                        Enterprise Application Integration (EAI)
                                                        strategy, standards and architecture.
                                                        This integration will enable several
                                                        Transformation initiatives, including:
                                                        Work/Design Transformation, Asset
                                                        Optimization, and Materials Distribution

10     ITA2        Enterprise Internet Platform –       This initiative will create a consistent
                   Phase 1                              technology platform for all Internet and
                                                        Intranet applications. This initiative
                                                        (Phase 1) involves planning and the
                                                        selection of a technology platform.
                                                        Phase 2 will involve implementation of
                                                        the Internet platform

11     ITA3        Enterprise Data Management/          This IT infrastructure system will provide
                   Warehouse                            a foundational directory service which
                                                        will allow business applications to
                                                        readily find the primary source of data,
                                                        and eliminate the need for individual
                                                        applications to keep duplicate data.

 No.    Ref #(a)                   Initiative Name                           Description
(a)    Reference to initiative designations found in Exhibit (PG&E-10), Chapter 5.

No.         Ref #(a)               Initiative Name                           Description

 12       ITA4          Application Rationalization –         This initiative will review the applications
                        Phase 2                               which are not affected by the business
                                                              transformation initiatives, and develop
                                                              business cases for the consolidation or
                                                              retirement of them.

(a)    Reference to initiative designations found in Exhibit (PG&E-10), Chapter 5.


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