20150601Kensok Direct.pdf

DAVID J. MEYER VICE PRESIDENT AND CHIEF COUNSEL FOR
REGULATORY & GOVERNMENTAL AFFAIRS AVISTA CORPORATION P.O. BOX 3727 1411 EAST MISSION AVENUE SPOKANE, WASHINGTON 99220-3727
TELEPHONE: [phone] FACSIMILE: [phone] [e-mail]

BEFORE THE IDAHO PUBLIC UTILITIES COMMISSION

IN THE MATTER OF THE APPLICATION ) CASE NO. AVU-E-15-05
OF AVISTA CORPORATION FOR THE ) CASE NO. AVU-G-15-01 AUTHORITY TO INCREASE ITS RATES )
AND CHARGES FOR ELECTRIC AND ) NATURAL GAS SERVICE TO ELECTRIC ) DIRECT TESTIMONY AND NATURAL GAS CUSTOMERS IN THE ) OF
STATE OF IDAHO ) JAMES M. KENSOK )
FOR AVISTA CORPORATION
(ELECTRIC AND NATURAL GAS)

I. INTRODUCTION 1
Q. Please state your name, employer and business 2
address. 3
A. My name is James M. Kensok. I am employed by 4
Avista Corporation as the Vice-President and Chief 5
Information and Security Officer (CISO). My business 6
address is 1411 E. Mission Avenue, Spokane, Washington. 7
Q. Mr. Kensok, please provide information 8
pertaining to your educational background and professional 9
experience. 10
A. I am a graduate of Eastern Washington University 11
with a Bachelor of Arts Degree in Business Administration, 12
majoring in Management Information Systems, and a graduate 13
of Washington State University with an Executive MBA. I 14
have experience through direct application and management 15
of Information Services over the course of my 32-year 16
information technology career. I joined the Company in 17
June of 1996. Over the past 18 plus years, I have spent 18
approximately one year in Avista’s Internal Audit 19
Department as an Information Systems Auditor with 20
involvement in performing internal information systems 21
compliance and technology audits. I have been in the 22
Information Services Department for approximately 17 years 23
in a variety of management roles directing and leading 24
5/27/2015 3:29 PM Kensok, Di Page 1 Avista Corporation

information technology and systems, planning, operations, 1
system analysis, complex communication networks, cyber 2
security, applications development, outsourcing 3
agreements, contract negotiations, technical support, cost 4
management, data management and strategic development. I 5
was appointed Vice-President and CIO in January of 2007 6
and Chief Security Officer in January of 2013. 7
Q. What is the scope of your testimony? 8
A. My testimony will describe the costs associated 9
with Avista’s Information Service/Information Technology 10
(IS/IT) programs and projects. These costs include the 11
capital investments for a range of systems used by the 12
Company, including the replacement of the Company’s legacy 13
Customer Information and Work and Asset Management System 14
(“Project Compass”), Avistautilities.com WEB replacement, 15
and several more important applications. 16
I also describe the additional IS/IT expenses 17
required to support a range of new and updated 18
applications and systems for cyber security, such as the 19
operation of Project Compass, and the Asset Facilities 20
Management application. 21
22
Kensok, Di Page 2 Avista Corporation

A table of contents for my testimony is as follows: 1
Description Page 2
I. Introduction 1 3
II. IS/IT Operating Expenses 4 4
III. IS/IT Capital Projects 16 5
IV. Customer Information and Work and Asset 236
Management System Replacement 7 (Project Compass) 8
Q. Are you sponsoring an exhibit in this 9
proceeding? 10
A. Yes. I am sponsoring Exhibit No. 10, Schedules 11
1 through 6. A report providing an overview of the 12
Company project implemented to replace its legacy customer 13
information system (named Project Compass), is provided in 14
Schedule 1. Schedule 2 is an update report on the timing 15
and cost of Avista’s Project Compass. An overview of the 16
communication plan related to the “Go Live” of Project 17
Compass is provided as Schedule 3, and a timeline showing 18
the individual communication activities is provided as 19
Schedule 4. An example of the direct-mail communication 20
is provided as Schedule 5. Schedule 6 is a high-level 21
summary of the launch of Project Compass including 22
customer service metrics showing performance of the new 23
systems over the first five weeks of operation. 24
25
Kensok, Di Page 3 Avista Corporation

II. IS/IT OPERATING EXPENSES 1
Q. What are the primary business needs supported by 2
Avista’s Information Services Department? 3
A. With advancements in the utility industry, the 4
use of operating, information, and customer-application 5
technologies is increasingly prevalent in day-to-day 6
business operations. The Information Services department 7
provides the technology support required by all Company 8
operations, both internal as well as customer-facing. 9
Examples include field operations, engineering, 10
transmission & distribution operations, power supply, 11
finance, treasury, legal, human resources, customer 12
solutions, customer services, and regulatory functions. 13
Types of support include the design, engineering, 14
implementation, and support of cyber security, computer 15
hardware, application software, data and voice systems and 16
networks, application integration, business continuity and 17
disaster recovery, and data management and mobility. Our 18
customers are provided with mobile solutions for 19
transacting business with Avista that are available 24 20
hours per day, in addition to having more data and 21
information about their energy use and tools to manage 22
their consumption of energy. Records management is 23
increasing for both electric and natural gas 24
Kensok, Di Page 4 Avista Corporation

infrastructure, and Avista is experiencing continued 1
growth in the use of its networks by customers and our 2
employees who are increasingly using mobile, real-time 3
systems to transact business and deliver safe and reliable 4
energy services. These technologies are foundational to 5
Avista’s efforts to keep pace with the service 6
expectations of our customers, to fulfill our regulatory 7
requirements, and to achieve cost savings through prudent 8
technology deployments. 9
Q. What are the primary drivers of increasing IS/IT 10
expenses for 2016 and beyond? 11
A. There are four key areas, the first of which is 12
the expense associated with the replacement of obsolete 13
systems, such as the Company’s legacy Customer Information 14
and Work Management systems, which will be explained in 15
detail later in my testimony. 16
The second area is the increasing cyber and physical 17
security requirements to protect Company infrastructure. 18
Our industry is increasingly a target from malicious 19
entities, and in order to protect Avista and its 20
customers, we have been required to increase staffing, 21
deploy new security systems, advance employee training, 22
and deploy more sophisticated business-continuity recovery 23
programs. Meeting expanding regulatory requirements, such 24
Kensok, Di Page 5 Avista Corporation

as those supporting electric transmission reliability, is 1
also driving cost increases in security compliance. 2
A third focus is the sensor technology and the 3
associated data networks required by the industry’s 4
modernization of the electric grid and the improved 5
reliability of our natural gas distribution system. 6
Though there are many advantages for customers and the 7
Company associated with the deployment of these new 8
systems, the expenses to support them are an increasing 9
portion of the costs of providing efficient, safe, 10
reliable, and cost-effective energy services. 11
The fourth driver of Avista’s costs is related to the 12
growth in usage of applications, data, and our data 13
networks. As customer expectations and business and 14
compliance requirements continue to grow, they drive the 15
need for new and expanded technology solutions. Although 16
these new solutions provide the most cost-effective way to 17
meet these growing needs, they also increase costs for 18
application licensing, maintenance and support, and for 19
the computer hardware and networks required to enable 20
them. 21
Kensok, Di Page 6 Avista Corporation

Q. As Information Services requirements have 1
increased, has Avista focused on managing its overall 2
technology expenses for the benefit of its customers? 3
A. Yes. Over the past several years, Avista has 4
focused on reducing customer transaction costs through the 5
prudent deployment of technology. Along with meeting 6
customer needs, Avista works continuously to minimize its 7
costs and to maximize employee efficiency through the use 8
of appropriate technology and staffing. 9
As an example, labor cost reductions were achieved 10
through realignment of legacy custom application labor 11
skills with contemporary commercial application skills. 12
This resulted in a $924,000 reduction in contract labor 13
for applications operations and delivery, which was 14
partially offset by an increase of $711,000 as a result of 15
the conversion of nine contract positions to Avista 16
employee positions, for a net reduction in labor costs of 17
$213,000. See “Applications Systems – Net Labor 18
Reduction” section below for additional information on 19
these labor reductions. 20
Kensok, Di Page 7 Avista Corporation

Q. Please summarize the increases in expenses for 1
the 2016 rate year. 2
A. Table No. 1 below summarizes the net increase in 3
IS/IT expenses for 2016.1 A brief description of each item 4
is provided following Table No. 1. 5
6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 29 30 31 Asset Facilities Management Application Replacement 32 (Project Atlas) Support Costs – $68,437 33
Project Atlas will replace the Company’s obsolete 34
Facilities Management system, and will consist of three 35 applications with new commercial-off-the-shelf 36 applications. The project includes replacement of the 37
electric and natural gas Construction Design application, 38
1 Although the Company anticipates increased expenses in 2017 above those in 2016, Company witness Ms. Andrews has not included these expenses in her 2017 pro forma adjustments. See 2017 IS/IT capital
additions discussion later in my testimony.
System Expense
New Expense From Projects
Asset Facilities Management Application Migration Replacement 68,437$
Project Compass 663,188$
Embotics - Data Center Server Management Software Tool 16,940$
Enterprise Document Management 42,000$
Financial Forecast Model 21,000$
iFactor - Outage Reporting and Viewing, and Mobile Capabilities 304,360$
Mobility in the Field - Gas Compliance 60,000$
Visibility - Gas Compliance 36,120$
NetInsight Refresh 93,000$
Next Generation Radio System (Dispatch Radio System)139,062$
Radio Telephone Communications Console System Refresh 8,658$
Security Systems - Non Labor Additions 80,000$
Data Analytics Software Application 60,000$ Total New Expense From Projects 1,592,765$
Other Expenses: (incremental expense)
Applications Systems - Net Labor Additions (213,092)$
Adobe Creative Cloud Suite Software-as-a-Service 52,176$
ESRI Geographic Information System 188,796$
Microsoft System Maintenance 301,449$
Network Systems - Non-Labor Additions 317,905$
Network Systems - Net Labor Additions 186,472$
Oracle System (Financial Application & Data) Maintenance 113,043$
Security Systems - Net Labor Additions 125,383$ Total Other Expenses: (incremental expense)1,072,132$
TOTAL (New Expense from Project and Other Expenses)2,664,896$
TABLE NO. 1Information Services Incremental Expense Increases (2016 vs. Test Period)
Kensok, Di Page 8 Avista Corporation

Edit Tool Application, and the Company’s proprietary 1 Outage Management Application. There will be new 2
incremental on-going technology support costs associated 3 with the new applications. These applications aid in the 4 engineering and design of Avista’s electric and natural 5 gas infrastructure, which costs would increase without the 6 aid of this technology. In addition to supporting design, 7
the Outage Management Application allows the Company to 8 quickly isolate the likely cause of system outages, to 9 communicate proactively with customers, and to quickly and 10
accurately dispatch Avista crews for service restoration. 11 12 Project Compass Support Costs - $663,188 13 There will be a net increase of $663,188 over current 14 operating expenses associated with the deployment of the 15 Company’s new Customer Service and Work and Asset 16 Management Systems implemented as part of Project Compass. 17
The total for new operating expenses required to support 18 these new Systems is $3,020,858, however, there is a 19
corresponding offset in the amount of $2,357,670, which 20 reflects the annual expense reduction in contract services 21 and mainframe computer costs associated with the 22
retirement of the Company’s Legacy Customer Service and 23 Work Management Systems. The new costs are for the annual 24
license and maintenance fees associated with the new 25 replacement applications (IBM Maximo and Oracle Customer 26 Care & Billing) and ancillary supporting applications. 27
Costs also include the professional services associated 28 with the real-time operation and maintenance of the 29
applications, and the labor expense supporting management 30 reporting for the new systems. A brief description of 31 each of these costs is provided below: 32
33 Oracle Customer Care & Billing (CC&B) and IBM Maximo 34
Applications 35
• Application Maintenance Fee paid to IBM. This fee 36 supports ongoing application maintenance, 37 enhancements and updates. 38
• Application Maintenance Fee paid to Oracle for 39
system maintenance, enhancements and updates. 40
• Application Maintenance Fee for IBM’s Tivoli batch 41 scheduling software, which automates, aggregates 42
and executes batch system functions each day (e.g. 43 customer billing, credit and collections, letters 44 and notices). 45
• License and Maintenance Fee for the Oracle Database 46
System. 47
Kensok, Di Page 9 Avista Corporation

• License and Maintenance Fee for the Oracle Data 1
Integrator (ODI) Application, which performs the 2 extraction, transfer and loading of data for 3
management reporting. 4
• License and Maintenance Fee for the WebLogic 5 Application, the middleware application layer that 6 is the underlying Java application engine that CC&B 7
and Oracle Utility Analytics (OAU) require to 8 operate. 9
10 Shared Support 11
• License and Maintenance Fee for HP’s “Quality 12 Center” Application, which is used to automate the 13
routine user testing of the integrated software 14 systems. 15
• Outside services (labor) supporting management 16
reporting for the Maximo and Customer Care & 17 Billing Applications. 18
• IBM Application Management Services, providing 19 technical resource support for maintaining and 20
managing the real-time availability and performance 21 of the Customer Care & Billing and Maximo 22
application systems for Avista. 23
• License and Maintenance Fee for the GoldenGate 24 Application, a component of the Oracle Utility 25 Analytics (OUA) reporting solution for both Oracle 26
CC&B and IBM Maximo. 27 28 Embotics – Data Center Server Management Software Tool 29 Support Costs - $16,940 30
The current corporate virtual environment is 31
underutilized. Many servers are allocating memory they 32 are not using causing us to buy more resources to meet the 33
memory requirements. The Embotics software tool can help 34 us right-size the memory, thus allowing us to reduce our 35 current resources and avoid purchasing future resources, 36
making our virtual environment more efficient. This is 37 the software support cost of the Embotics software tool. 38 39 Enterprise Document Management Support Costs – $42,000 40
This cost is for software maintenance for a new 41 application used in managing invoice processing and 42 archiving. Currently, documents (i.e., invoices) in 43
various departments are maintained on paper, and are 44 processed manually. The new application allows Avista to 45 scan invoices for electronic storage, processing, and 46
Kensok, Di Page 10 Avista Corporation

approval, providing for more efficient and timely 1 processing and access to stored documents. 2
3 Enterprise Voice Portal Application Upgrade Support Costs 4 – $242,417 5 Avista’s current automated telephone system is no longer 6 supported. The system manages all customer calls for 7
reporting outages, automated bill pay and billing 8 inquiries, and other types of customer self-service 9 options for our customers. These expenses support the 10
services agreement, providing for software maintenance and 11 management for the replacement voice portal system. 12
13 Financial Forecast Model Support Costs – $21,000 14
Avista has chosen to replace the Impact software, which is 15 no longer supported, with the UIPlanner financial model. 16 UIPlanner will provide all existing capabilities as well 17
as efficiency gains and enhancements. The software will 18 help the financial forecasting group accurately and 19
efficiently forecast the financial position of the 20 company, including complex “what-if” scenarios which aid 21 senior management and others in their decision-making. 22
This cost supports the application maintenance for the 23 replacement software. 24
25 iFactor – (Outage Reporting and Viewing, and Mobile 26 Capabilities) Application Support Costs – $147,325 27
For certain customer-facing web and mobile technologies 28 Avista has decided to not customize as part of its 29
customer web portal refresh of Avistautilities.com 30 (Project Phoenix), but rather integrate to a commercial 31 software platform from iFactor Consulting using two of 32
their modules. The first, called iFactor Storm Center, is 33 a web and mobile GIS map-based outage communications 34
software for utilities. Storm Center communicates power 35 outage information to the public using a map interface for 36 web and for mobile natively on iPhone and Android smart 37 phone devices. The second, called Notifi, is a proactive 38 and interactive customer communications platform designed 39
specifically for utilities, with standard interfaces to 40 utility back-end systems (i.e., Customer Care and Billing 41 CC&B). With automated outbound event processing and 42
preference management for customers, Notifi pushes 43 information to Avista customers, over the channel they 44
want to receive it, including mobile text, email, social 45 media and voice natively on iPhone and Android smart phone 46 devices. 47
Kensok, Di Page 11 Avista Corporation

Mobility in the Field Gas Compliance Support Costs – 1 $60,000 2
The Mobility in the Field program is designed to increase 3 the Company’s use of field mobile dispatch for service 4 employees equipped with mobile devices. This cost 5 supports the software maintenance agreements that will 6 need to be in place in order to maintain the new system. 7
8 Visibility Gas Compliance Project On-Going Support Costs – 9 $36,120 10
The Visibility Project was completed as part of the 11 Mobility in the Field program to reduce paper processes in 12
the field through implementing mobile technology. This 13 expense is for data cost and maintenance of hardware and 14 software used for new mobile technology deployed to over 15 20 Leak Surveyors in the field. This new technology 16 improves processes through reducing a previous paper 17
process and enabling the data collection to occur 18 electronically. A data plan is activated for each tablet 19
computer to operate the software application in order to 20 collect the data in the field electronically. 21 22 NetInsight Refresh Support Costs – $93,000 23
Web analytics is the measurement, collection, analysis and 24
reporting of web data for purposes of understanding and 25 optimizing web usage and customer transactions. Web 26 analytics is not just a tool for measuring web traffic but 27
can be used as a tool for business and customer research, 28 and to assess and improve the effectiveness of a website. 29
Avista is refreshing its current web analytics system as 30 it has come to end of life by its vendor (IBM). Web 31 analytics will be applied to Avista’s upgraded customer 32
web portal and its upgraded Intranet portal, which is used 33 by Avista employees. 34
35 Next Generation Radio System (Dispatch Radio System) 36 Hardware and Software Maintenance – $139,062 37 These costs support the maintenance contract for the 38 hardware and software infrastructure required to 39
effectively own and operate Avista’s Land Mobile Radio 40 System (LMR) (Next Generation Radio system). Avista 41 maintains a private LMR system because no public 42
communications provider is capable of covering all of our 43 service territory including the rural and remote areas. 44
Our LMR system is also designed to operate independent of 45 public providers and to be resilient in the event of 46
Kensok, Di Page 12 Avista Corporation

disasters that affect other means of communication. The 1 LMR system ensures efficient and effective communications. 2
3 Radio Telephone Communications Console System Refresh 4 Support Costs – $61,048 5 Deployment of this refreshed console equipment is a 6 prerequisite for the successful implementation of the Next 7
Generation Radio project, described above in my testimony. 8 The integrated console system provides access to the 9 narrowband communication network being deployed in the 10
Next Generation Radio project. These costs are for 11 maintenance fees required to assure the system meets our 12
availability and security requirements for service. In 13 particular, the maintenance fees also provide the Company 14 access to technical support, problem resolution, software 15 patches that address security vulnerabilities, and enable 16 features and enhancements that extend the functionality of 17
the deployed console system, and provide replacement 18 hardware for equipment that fails. 19 20 Security Systems – Non Labor Additions – $80,000 21
This incremental expense is for software maintenance, 22
third party vulnerability and penetration testing and for 23 new application services that monitor high-risk utility 24
targets (including both physical and cyber), software to 25 maintain compliance with changing regulations, and 26 phishing email awareness testing. 27
28 Data Analytics Software Application Support Costs – 29 $60,000 30 This expense is for maintenance and support fees for 31 predictive analytics software related to the Trove 32
Sunstone Platform and Energy Pre-schedule Load Forecasting 33 Application. There are third party data access fees 34
included in the Sunstone Platform as it uses weather data 35 and other third party data as part of its predictive 36 analytics and data science technology. The Pre-Schedule 37 Forecast application provides a precision forecast for the 38 next day energy consumption needs to help make daily 39
resource balance decisions. The application compares its 40 forecasts against actual performance for continuous 41 forecast improvement. The Monthly Forecast predicts 42
monthly consumption up to 36 months in advance. It is 43 used to determine how much energy to buy in advance. 44
Kensok, Di Page 13 Avista Corporation

Applications Systems – Net Labor Reduction – ($213,092) 1
We continue to employ a hybrid (in-source/outsource) labor 2
sourcing model that maximizes business value and delivers 3 consistent customer satisfaction. As such we are 4 transitioning these positions to more closely align with 5 the technology being managed. Nine key application 6 systems contract positions were converted to Avista 7
employee positions in 2015: 1) Operational Technology 8 Lead, 2) Customer Technology Lead, 3) Back Office 9 Technology Lead, 4) Systems Analysts (x4), 5) Product 10
Owner, and 6) Program Manager. In addition, a Product 11 Owner will be added for oversight of application demand in 12
Avista’s new Customer Information System (CIS) and Asset 13 Management platforms (Oracle Customer Care and Billing and 14 IBM Maximo). 15 16 ESRI Geographic Information System Software Maintenance – 17 $179,183 18 ESRI is the core product suite for Avista’s geospatial 19
system. In 2015 we are planning on a refresh of this 20 platform. Throughout the system refresh process and 21 beyond we will need access to ESRI development staff, via 22
a more robust support agreement. This improved support 23 agreement grants us access to level 2 and level 3 ESRI 24
developers to assist us with incident and problem 25 resolution across the ESRI suite of tools. Further, 26 Avista plans to increase access to its own geospatial 27
information system (GIS) data, through the use of ESRI’s 28 client / server software model. This model requires 29
additional licensing for server software but allows easier 30 access to GIS data through browser based custom and 31 commercial applications. An example of value this 32
increased access will bring to our customers is public 33 publishing of waterway access, closures and repairs. 34
35 Adobe Creative Cloud Suite Software-as-a-Service - $52,176 36
Creative Cloud by Adobe is a subscription based suite of 37 graphic design tools and is the only upgrade path for 38 Avista’s current Adobe Creative Suite perpetual licenses. 39
Avista’s creation and use of digital multi-media for 40 print, advertising, web, signage for both internal and 41 external communications relies on sharing files with 42
outside agencies and for internal Avista print and graphic 43 design personnel to all be on the same platform. Most of 44
these agencies have refreshed to Creative Cloud forcing 45 Avista to follow suit and move to Adobe’s required 46 software as a service model (SaaS). 47
Kensok, Di Page 14 Avista Corporation

Microsoft System Maintenance – $301,449 1
The incremental increase in maintenance fees reflects 2
vendor price increases for existing systems, as well as 3 costs associated with the deployment of new systems. One 4 such new system is “desktop virtualization,” which 5 provides a highly flexible and much-more secure desktop 6 computer environment. In addition, this approach supports 7
a more complete desktop disaster recovery strategy, as all 8 components are essentially saved in the data center and 9 backed up through traditional redundant maintenance 10
systems. In addition, because no data is saved to the 11 user's device there is much less chance that any critical 12
data can be retrieved and compromised in the event a 13 device is lost. 14 15 Network Systems – Non-Labor Additions Support Costs – 16 $317,905 17
This cost is for service and maintenance fees paid to 18 network providers such as AT&T and Verizon for increased 19
network capacity and system support. As network capacity 20 is increased the electronics that move data/voice traffic 21 over the networks must be upgraded. The upgraded 22
electronics require maintenance and service contracts to 23 keep them current on security patches, firmware upgrades 24
and general performance tuning and support. 25 26 The increased utilization of Company networks has 27
resulted, in part, from the increased data associated with 28 customer access to billing and energy use data and new 29
technology supporting Avista’s electric grid 30 modernization, notably feeder automation, smart 31 transformers, and faulted circuit indicator projects. 32
33 Network Systems – Net Labor Additions - $186,472 34
The Communications Technician Apprenticeship role is 35 designed to allow individuals to move into a new field and 36 gain the training required to be proficient in a craft. 37 We currently have three existing technicians that are 38 within four years of full eligibility for retirement. It 39
has been our practice to hire an apprentice and invest in 40 their training so they will be fully competent in the role 41 by the time the Sr. Tech retires. 42
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Oracle System (Financial Application & Data) Maintenance – 1 $113,043 2
Avista uses Oracle products to provide, maintain and 3 manage its primary business databases, supporting 4 financial, supply chain, operations, customer service, and 5 real-time infrastructure data. This cost covers increases 6 in recurring maintenance fees as well as incremental costs 7
associated with new Oracle databases that are being 8 licensed. In 2015 we will be introducing a new Oracle 9 tool that will allow us to keep our Java environment 10
updated to the most current supported version minimizing 11 customer complaints related to system availability. 12 13 Security Systems – Net Labor Additions – $125,383 14
Due to increasing physical security threats, Avista has 15 made a strategic decision to convert an existing physical 16 security contract position to a fulltime employee. This 17
long-term position has responsibility for physical 18 security at all Avista properties. 19
20 Smart Circuits Distribution Automation Support Costs – 21 $287,756 22
This incremental cost is for non-labor software and 23 hardware maintenance fees associated with Avista’s 24
modernization of its electric grid. These fees were paid 25 previously from funds associated with the Company’s 26 SmartGrid Investment Grant awarded under the American 27
Recovery and Reinvestment act of 2009. This cost-sharing 28 grant expired in January 2015, at which time the necessary 29
hardware and software maintenance fees reverted to an 30 ongoing Company expense. 31
32
III. IS/IT CAPITAL PROJECTS 33
Q. Please describe each of the IS/IT capital 34
projects planned for 2015 - 2017. 35
A. The IS/IT capital costs for projects to be 36
completed during the period from January 1, 2015 through 37
December 31, 2017 total $220.8 million on a system basis. 38
These investments are identified by project in 39
Kensok, Di Page 16 Avista Corporation

Table No. 2, below, and each project is briefly described 1
in the following testimony. 2
3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 AvistaUtilities.com Upgrade – 2015: $5,145,000; 2016: 26 $2,000,000; 2017: $0 27
Like many businesses today, the Company is experiencing 28 continued growth in the use of its customer website, 29 Avistautilities.com. The website was originally built in 30
2006-2007, but because the technology landscape has 31 advanced so quickly, the site does not meet current web 32
best practices for customer usability and security. This 33 project will update and improve the technology, overall 34 web usability, security and customer satisfaction. The 35 website is part of the Company’s strategy to provide 36 customers a more effective channel to meet their 37
expectations for self-service options, including mobile, 38 energy efficiency education, and to drive self-service as 39 a means to lower transaction costs. The Company is also 40
upgrading its AvaNet System (Avista Intranet), however, 41 those costs are included in the IS/IT Technology Refresh 42
to Sustain Business Process project, described below. 43 44
Business Case Name 2015 $ (000's)2016$ (000's)2017$ (000's)
145,517$ 31,082$ 44,202$
TABLE NO. 2
IS/IT Capital Projects (System)
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Enterprise Business Continuity Plan - 2015: $1,043,000; 1 2016: $450,000; 2017: $450,000 2
Avista has developed and maintains an Enterprise Business 3 Continuity Plan (Plan) to support the Company’s emergency 4 response, and to ensure the continuity of its critical 5 business systems under crisis conditions. The framework 6 includes the key areas of technology recovery, alternate 7
facilities, and overall business processes. The effort of 8 developing and continuously improving the Plan ensures the 9 readiness of systems, procedures, processes, and people 10
required to support our customers and our communities any 11 time we are required to operate under critical emergency 12
conditions. 13 14 Mobility in the Field – 2015: $420,000; 2016: $320,000; 15 2017: $0 16
This program is designed to increase the Company’s use of 17
field mobile dispatch for service employees equipped with 18 mobile devices. Avista has documented 30 field 19
opportunities to apply mobile technology, and has selected 20 those with the greatest benefit and savings for 21 implementation in a five-year program, named “Visibility 22
in the Field.” This effort primarily supports the 23 functions of Leak Survey and Gas Service Dispatch by 24
enabling the use of facility maps on a mobile device. 25 26 Technology Refresh to Sustain Business Process – 2015: 27 $21,379,000; 2016: $16,095,000; 2017: $16,095,000 28 The Company manages an ongoing program to systematically-29
replace aging and obsolete technology under “refresh 30 cycles” that are timed to optimize hardware/software 31 system changes or industry trends. An example of 32
technology managed under this program is the fleet of 33 personal computers and other computing devices used by 34
field operations, power plant operators, call centers, and 35 our general office employees. 36 37 The technology refresh business case is organized by 38 technology type. The major categories are Applications, 39
Network Systems, Communication Systems, Central 40 (Compute/Storage) Systems, Distributed Systems and 41 Environmental (Power, HVAC, Fire, etc.) Systems. Each 42
category of technology has a steering committee for 43 governance. The steering committees are members of Avista 44
leadership team. Steering committee members not only 45 provide oversight on program scope, schedule and budget, 46 they also monitor project priority for business value and 47
Kensok, Di Page 18 Avista Corporation

the risk associated with product obsolescence. Funding 1 approval by the Capital Planning Group is routinely set 2
below the business case requested level. 3 4 The business case program generally has over one hundred 5 active projects each year. The scope spans technology 6 solutions for back office, customer facing, energy 7
operating and control systems. A sample of the 2015 8 project scope is as follows: Enterprise Voice Portal 9 (IVR), Office Communicator & Voicemail, Communication 10
Management System, Metropolitan Area Network Transport, 11 Avista Intranet, Financial Forecast Model, Claims System, 12
Java 1.7x, Nucleus, Oracle Database 12c, Internet Explorer 13 11, Citrix Platform, HP CAE/Radia, MS Office 2013, Rugged 14 Computers, and TWACS telemetry. Each project has formal 15 project management and adheres to our Project Management 16 Office (PMO) process. 17
18 Customer Information and Work and Asset Management System 19 – 2015: $96,685,000 20 The Company’s legacy Customer Information and Work and 21 Asset Management System had been in service for twenty 22
years and has been replaced in a multi-year effort named 23 “Project Compass.” The major applications replaced 24
include the Company’s Customer Service System, Work 25 Management System, and the Electric and Gas Meter 26 Application. The primary replacement systems are Oracle’s 27
Customer Care & Billing application and IBM’s Maximo work 28 and asset management application. A portion of the Maximo 29
system was enabled in the fall of 2013, and the full 30 System entered service in February 2015. I describe the 31 detail of this significant technology project later in my 32
testimony. 33 34 Enterprise Security – 2015: $5,400,000; 2016: $3,200,000; 35 2017: $3,200,000 36
There are three primary drivers of the increasing costs 37 for Enterprise Security: cyber security, physical security 38 and regulatory standards. Each plays a critical role in 39
supporting our delivery of safe and reliable energy to our 40 customers. 41 42
Cyber Security 43 The security of our electric and natural gas 44
infrastructure is a significant priority at a 45 national and state level, and is of critical 46 importance to Avista. Threats from cyber space, 47
Kensok, Di Page 19 Avista Corporation

including viruses, phishing, and spyware, continue to 1 test our industry’s capabilities. And while these 2
malicious intentions are often unknown, it is clear 3 the methods are becoming more advanced and the 4 attacks more persistent. In addition to these 5 threats, the vulnerabilities of hardware and software 6 systems continue to increase, especially with 7
industrial control systems such as those supporting 8 the delivery of energy. For these reasons, Avista 9 continues to advance its cyber security program by 10
investing in security controls to prevent, detect, 11 and respond to these increasingly frequent and 12
sophisticated attacks. Examples of projects that 13 fall under this category include a secure electronic 14 file transfer system for inbound and outbound files; 15 network access control to monitor, detect, and 16 enforce rules for wired and wireless devices 17
connecting to the network; and a website filtering 18 solution to reduce intentional and unintentional 19
malware found on internet sites. 20 21 Physical Security 22
While considerable attention is focused on cyber 23 security, physical security also remains a concern 24
for our industry. Physical security encompasses the 25 aspects of employee safety and the protective 26 security of our facilities and critical 27
infrastructure. Acts of theft, vandalism, and 28 sabotage of critical infrastructure not only result 29
in property losses, but can also directly impact our 30 ability to serve customers. Securing remote unmanned 31 or unmonitored critical infrastructure is difficult, 32
especially when traditional tools such as perimeter 33 fencing by itself are not adequate. In response to 34
these challenges, the Company has focused its 35 resources on additional physical security protection 36 (i.e., lighting and crash barriers), remote detection 37 and response technology, which is creating the need 38 for additional physical security items, expertise and 39
technology. 40 41 Regulatory Obligations 42
Advancing cyber threats continue to drive change in 43 the regulatory landscape faced by the Company. Early 44
in 2013, President Obama issued the Executive Order 45 “Improving Critical Infrastructure Cyber security.” 46 The Order directed the National Institute of 47
Kensok, Di Page 20 Avista Corporation

Standards and Technology to work with stakeholders in 1 developing a voluntary framework for reducing cyber 2
risks to critical infrastructure. The framework 3 consists of standards, guidelines, and best practices 4 to promote the protection of critical infrastructure. 5 The Federal Energy Regulatory Commission also issued 6 Order 791 on November 22, 2013, approving the North 7
American Electric Reliability Corporation Critical 8 Infrastructure Protection Standards, Version 5. 9 Therefore, we continue to invest in capital assets to 10
comply with these requirements and continue to 11 improve the security of our infrastructure. 12
Additionally, these activities will increase our 13 security-related operating costs (as discussed 14 earlier in my testimony) because they require the 15 Company’s security controls and processes to conform 16 to new standards, guidelines, and best practices. 17
Examples of projects that fall under this category 18 include improvements to physical security at the 19
Noxon Rapids facility and the refresh of our Security 20 Incident and Event Management System, which is an 21 analytic system that alerts and reports on security 22
incidents and anomalous activity. 23 24 Technology Expansion to Enable Business Process – 2015: 25 $7,431,000; 2016: $5,552,000; 2017: $5,799,000 26
This program facilitates technology growth throughout the 27
Company, including technology expansion for the entire 28 workforce, business process automation and increased 29
technology to support efficient business processes. For 30 example; when trucks are added to the fleet, communication 31 equipment needs to be added to the truck; as the Company 32
hosts more customer data, disk storage needs to be 33 expanded, as customers expand their use of the website, 34
additional computing capacity is needed. 35 36 AFM COTS Migration – 2015: $0; 2016: $0; 2017: $15,608,000 37 The project replaces the Company’s obsolete, custom 38 Facilities Management system (Project Atlas) with a 39
commercial, off-the-shelf application. The project 40 includes replacement of the natural gas and electric 41 Construction Design Tool, Edit Tool, and the Company’s 42
proprietary Outage Management Tool. These applications 43 aid in the engineering and design of Avista’s electric and 44
gas infrastructure, which costs would increase without the 45 aid of this technology. In addition to supporting design, 46 the Outage Management allows the Company to quickly 47
Kensok, Di Page 21 Avista Corporation

isolate the likely cause of system outages, to communicate 1 proactively with customers, and to quickly and accurately 2
dispatch Avista crews for service restoration. Also 3 included in the project scope are field mobility 4 applications including a version upgrade to the Ventyx/ABB 5 mobile workforce management system and the addition of 6 mobile tools. These applications will work with the 7
Construction Design, Edit and Outage Management 8 applications to deliver work electronically to field 9 personnel and return completion results electronically to 10
the initiating systems improving the timeliness and 11 accuracy of the work results. 12
13 High Voltage Protection Upgrade – 2015: $1,252,000; 2016: 14 $415,000; 2017: $0 15 Telecommunication facilities, including Phone, 16 Communication Switches, SCADA, and Metering & Monitoring 17
systems, are commonly co-located inside the Company’s high 18 voltage substations. This requires communications 19
technicians to work in close association with our high-20 voltage electrical equipment. The Company has implemented 21 new high-voltage protection & isolation standards designed 22
to lower potential risks to our personnel and equipment. 23 This project will implement the clearance changes required 24
to meet the new standards. 25 26 Next Generation Radio Refresh – 2015: $4,007,000; 2016: 27 $0; 2017: $0 28 This project refreshes Avista’s 20-year-old Land Mobile 29
Radio system. The Company maintains this private system 30 because no public provider is capable of supporting 31 communications throughout our rural service territory. 32
And, since our systems comprise a portion of our nation’s 33 critical infrastructure, Avista is required to have a 34
communication system that will operate in the event of a 35 disaster. This project fulfills a mandate from the 36 Federal Communications Commission that all licensees in 37 the Industrial/Business Radio Pool migrate to spectrum 38 efficient narrowband technology. 39
40 Microwave Refresh – 2015: $2,755,000; 2016: $3,050,000; 41 2017: $3,050,000 42 The company manages an ongoing program to systematically-43 replace aging and obsolete technology under “refresh 44
cycles” that are timed to optimize hardware/software 45 system changes. This project will replace aging microwave 46
communications technology with current technology to 47
Kensok, Di Page 22 Avista Corporation

provide for high speed data communications. These 1 communication systems support relay and protection schemes 2
of the electrical transmission system. Reducing Avista's 3 risk of failure of these critical communication systems 4 will have a significant beneficial impact on Avista's 5 transmission capacity and ability to serve our customers 6 electrical needs. 7
8
IV. CUSTOMER INFORMATION AND WORK AND ASSET MANAGEMENT 9
SYSTEM REPLACEMENT – PROJECT COMPASS 10
Q. Please summarize the replacement project for 11
Avista’s Customer Information and Work and Asset 12
Management systems. 13
A. In 2010, Avista began the research and planning 14
for replacing its legacy Customer Information and Work 15
Management System. Named “Project Compass,” the Project 16
replaced the Company’s legacy applications with Oracle’s 17
‘Customer Care & Billing’ solution, and IBM’s ‘Maximo’ 18
work and asset management application. An overview of 19
Project Compass, containing a detailed project narrative 20
of the early stages of implementation, as well as 21
supporting documentation, is attached as Exhibit No. 10, 22
Schedule 1. 23
Q. Can you provide a synopsis of the importance of 24
these systems and the magnitude of the replacement effort 25
undertaken by the Company? 26
Kensok, Di Page 23 Avista Corporation

A. Yes. While it’s common for a business to 1
install one major enterprise software system at a time, 2
such as a customer service, financial management, supply 3
chain, or asset management system, through Project Compass 4
Avista installed two major systems simultaneously. This 5
was necessary because our legacy system contained a 6
customer service module and a work management module that 7
were highly integrated and both were in need of 8
replacement. The effort required not only that these two 9
systems be installed and integrated, but that together, 10
they be integrated with approximately 100 other 11
applications and systems required to perform the Company’s 12
integrated business operations. Some of these systems 13
include the Avista customer website, the Company’s various 14
internal systems (such as financial applications, varied 15
databases, supply chain, crew dispatch, outage management 16
reporting), systems of outside financial institutions used 17
by the Company and our customers, and the many vendors who 18
support our delivery of electric and natural gas service, 19
such as bill printing and presentment. 20
Customer information and work and asset management 21
systems are central to enabling an organization’s daily 22
operations. For Avista, they support functions ranging 23
from customer calls, to automated service on the phone 24
Kensok, Di Page 24 Avista Corporation

system or web, storage and access of electric and natural 1
gas asset information, customer billing, outage 2
management, customer work scheduling, ordering 3
construction materials, and managing customer account 4
information. Together, these two systems enable over 200 5
individual work processes requiring over 3,500 individual 6
process steps. They support the work of over 700 7
individual employees, and the new work processes and tools 8
required a significant training effort. Avista’s training 9
staff delivered over 40 different instructor-led courses 10
(each delivered several times to different groups of end 11
users), in training sessions that ranged from two hours to 12
175 hours per course. Avista employees received over 13
30,000 hours of training for the new systems under this 14
program. At the close of April 2015, Avista employees had 15
worked just over 299,500 hours on Project Compass; this is 16
in addition to the staff effort of the 37 contract 17
companies that supported the Project. 18
Q. Have these new systems been placed into service? 19
A. Yes. The first day of service for the new 20
systems (the “Go Live”) was February 2, 2015, and, as 21
explained later, the deployment of these new systems was 22
very successful. 23
Kensok, Di Page 25 Avista Corporation

Q. Please describe the Company’s legacy Customer 1
Information System? 2
A. Avista’s legacy Customer Information System 3
(System) served the Company and our customers well from 4
1994 to 2015. That longevity was unusual in the industry, 5
and was achieved by linking the system over time with 6
commercial and Avista-developed applications that added 7
functionality to the original architecture. This 8
technology strategy was the foundation of Avista’s 9
customer service program for many years. While extending 10
the life of the System delivered value for customers, our 11
ability to continue to add new functionality was 12
constrained, and there was mounting business and service 13
risk associated with the many older technologies on which 14
the system depended. Technical assessments of the System 15
highlighted these risks and identified the need for its 16
replacement. 17
Q. Please describe the systems that were replaced 18
as part of Project Compass. 19
A. Avista’s legacy Customer Information System was 20
composed of three highly-connected applications, which 21
included: 22
• Customer Service System – this application supported 23 the traditional utility business functions of meter 24 reading, customer billing, payment processing, 25
Kensok, Di Page 26 Avista Corporation

credit, collections, field requests and customer 1 service orders; 2
• Work Management System – this application was used to 3 create orders for service and emergency calls and for 4 construction jobs for customers and Company 5
operations; and 6
• Electric & Gas Meter Application – this application 7
hosted the data for the Company’s in-service electric 8 and gas meters. 9 10
Together, these three applications, also referred to 11
as the Avista “Workplace”, were connected over time with 12
many other applications and systems required to conduct 13
all aspects of our customer service and gas and electric 14
business operations. 15
Q. What were the factors driving the need for 16
replacement of Avista’s Customer Information System? 17
A. The rapid evolution of information science 18
technologies impacts the life cycle availability of older 19
software and hardware products and services, and eroded 20
the underlying capabilities of our legacy technology. At 21
the same time, each new generation of technology gives 22
software systems more flexibility and functionality than 23
our legacy system could have easily provided. This dual 24
impact added cost, complexity and risk to the ongoing 25
operation of our legacy technology, and helped drive the 26
ever-increasing service expectations of customers for all 27
businesses they use, including their utility. 28
Kensok, Di Page 27 Avista Corporation

The Company’s legacy system was supported by a 1
network of older technologies, many of which were 2
expensive to operate and/or were no longer sold, 3
maintained or supported. As a result, Avista and its 4
primary support contractor (Hewlett-Packard) employed many 5
technical ‘workarounds’ required to continue using the 6
legacy System. Key limitations associated with those 7
technologies are briefly described below: 8
Platform – The Company’s Customer Information System 9
was dependent on a mainframe-computing platform because it 10
used databases and program applications developed for that 11
environment. While a mainframe was the only platform with 12
enough power to support the System when it was designed, 13
it is more expensive to operate today than mid-range 14
computers having ample capability. Because mainframe 15
platforms had become far less common, the available 16
expertise required to manage, maintain and update these 17
systems had become more limited. In addition to the 18
realtime execution of programs on the mainframe, required 19
by the Workplace applications, the programs and data 20
stored there had to be updated every night in what was 21
known as a ‘batch’ program. The batch updated base data 22
and performed other functions such as producing customer 23
bills. 24
Kensok, Di Page 28 Avista Corporation

Computer Languages – Avista’s Workplace applications 1
were written in COBOLv2, a version of the programming 2
language that had not been used in applications, or sold 3
or supported for many years. 4
Another computer language key to Avista’s legacy 5
system was known as Smalltalk. This language was used to 6
generate the display information on network computers used 7
by our customer service representatives. And like 8
COBOLv2, Smalltalk was also no longer commercially sold or 9
supported. 10
Supporting Applications –Avista’s legacy applications 11
were generated using a case tool known as ADW (Application 12
Development Workbench), and the applications were 13
difficult to change without using the ADW tool. Avista’s 14
version of ADW was no longer manufactured or supported, 15
and, in addition, it could only run on an OS/2 operating 16
system that likewise had not been sold or supported for 17
many years. 18
Technical Resources – Maintaining the Company’s 19
legacy system required training and support of technical 20
staff competent in these older programming languages, 21
applications, and computer operating systems. The Avista-22
Hewlett-Packard support staff, many of whom grew up with 23
those legacy technologies when they were mainstream, had 24
Kensok, Di Page 29 Avista Corporation

either retired, or were anticipated to do so in the next 1
few years. Replacing knowledgeable staff had become 2
extremely difficult because there was no longer technical 3
training or schooling available for these old languages, 4
applications and systems. Younger technicians had to be 5
trained in-house, and in addition, it was difficult to 6
channel these employees into career tracks that had very-7
limited and diminishing future application. 8
Q. Were there risks associated with the continued 9
operation of the Company’s legacy system? 10
A. Yes, as described above, many of the obsolete 11
elements of the Customer Information System were supported 12
by very-specialized applications, which themselves were 13
obsolete and no longer supported, or by complex technology 14
workarounds. Each of these introduced a level of risk 15
that was greater than that associated with contemporary 16
hardware, operating systems, technical support, and 17
business applications. And because these risks increased 18
as the technology continued to age, the cumulative risk to 19
the Company grew as the longevity of the System was 20
extended. 21
Q. Were these risks unique to Avista’s legacy 22
system? 23
Kensok, Di Page 30 Avista Corporation

A. No, this discussion illustrates the general 1
technology principle shared by many legacy systems like 2
the Company’s. Even though they may continue to perform 3
their intended functions, they are subject to greater and 4
greater risk over time, and consequently, are considered 5
to be problematic. 6
Q. Beyond increasing business risks, were there 7
other considerations for replacing the system? 8
A. Yes, there were several which I describe below: 9
System Modifications – The legacy architecture of the 10
Company’s System made it cumbersome and expensive to 11
modify or to add new functionality. That arose because 12
the linkages between the applications of Avista’s 13
Workplace, along with the software applications that 14
connected Workplace with the many other applications and 15
systems required to support the Company’s operations, were 16
‘hardwired’ together. The result was that a programming 17
change made to one application often required 18
complementary changes in both the connecting software and 19
the other applications themselves. Because the system had 20
been stretched over time so far beyond its original design 21
considerations, these layers of changes had geometrically 22
increased the complexity of the entire system. Finally, 23
because the legacy System was used only by Avista, these 24
Kensok, Di Page 31 Avista Corporation

application development costs had to be borne entirely by 1
our customers. 2
System Replacement Costs – Continuing to add 3
complexity to the legacy System could have made its 4
eventual replacement more expensive. This was because the 5
functionality that was programmed into the legacy System 6
also had to be programmed or ‘configured’ in the new 7
replacement applications when they were installed. 8
Generally, as the complexity of the legacy System 9
increased, then the cost, complexity and technical 10
competence required to install the replacement system 11
increased as well. 12
Constrained Capability – In addition to the risks and 13
costs of extending its service life, the ultimate 14
flexibility of the platform had been largely exhausted. 15
Designed as a meter-based billing system, the Company had 16
cost-effectively expanded its capability by seamlessly 17
integrating technologies barely imagined when the system 18
was designed; home computers were uncommon, the internet 19
was in its infancy, there were no e-mail services, few 20
cell phones, no text or SMS messaging, and no mobile 21
computing, as supported by contemporary smart phones and 22
tablets. However, while the System had been able to 23
accommodate many significant developments over time, it 24
Kensok, Di Page 32 Avista Corporation

still lacked the fundamental capabilities required today 1
to support the new service options viewed by customers as 2
‘basic service’, or the many utility product offerings 3
becoming more common in our region and around the Country. 4
Q. Did the Company consider other options to 5
reinforce its legacy System, short of replacement? 6
A. Yes. Periodically, Avista and its support 7
partner, EDS/Hewlett-Packard, evaluated the System’s 8
capabilities as well as options for its possible 9
modernization. In 2002, as some of the technologies 10
supporting Avista’s System, such as ADW, were becoming 11
unsupported, an assessment was made of the feasibility of 12
moving the Company’s system from the mainframe platform to 13
a contemporary mid-range platform and operating system. 14
The benefits of such a process, commonly known as 15
‘replatforming’, were forecast over time and were compared 16
with the estimated costs for completing the work. Results 17
of this work indicated that replatforming the System at 18
that time was not cost-effective, and as a result, this 19
work did not proceed. 20
The next assessment was made in 2003 and focused on 21
ways to reduce the risk associated with the ADW 22
application, at the time running on aging desktop 23
computers using the OS/2 operating system. The project 24
Kensok, Di Page 33 Avista Corporation

report recommended Avista purchase specialized software to 1
emulate the OS/2 system on contemporary computers and 2
operating systems. This recommendation was implemented. 3
The legacy System was reviewed again in 2006 as part 4
of a larger information technology review conducted for 5
the entire Company. The report noted the Company’s 6
Customer Information System as a ‘high risk’ application 7
that was a candidate for either replacement or 8
“refactoring.” The latter refers to a process of changing 9
the internal structure of the existing application code to 10
reduce its complexity and improve its readability. While 11
this process helps reduce the risk associated with legacy 12
software, it does not markedly change its basic properties 13
or performance. Refactoring of the Customer Service System 14
was not evaluated further at that time. 15
Most recently, in 2010, the Company again considered 16
reinvesting in its legacy System as a means to delay its 17
ultimate replacement. As a prelude to requesting vendor 18
proposals to support such an effort, the Company sent a 19
Request for Information to several major information 20
technology vendors to describe the legacy System, and to 21
gauge their interest in participating in next steps. As 22
Avista continued to weigh the possibility of this approach 23
being feasible, as a way to delay the replacement of its 24
Kensok, Di Page 34 Avista Corporation

System, it ultimately determined that commencing with the 1
research and planning for the replacement project was a 2
prudent course of action. 3
Q. Why did Avista consider the timing of the 4
replacement project to be appropriate? 5
A. The decision on timing was influenced by many 6
factors, including, among other considerations: the window 7
of availability of employee and contract technical 8
resources; the timing of the expiration of the long-term 9
services contract with Hewlett – Packard for System 10
support; the continued accumulation of business and 11
service risks associated with operating the legacy System; 12
the increasing complexity and replacement costs associated 13
with its continued operation, and the very-limited 14
capability of the legacy System to deliver additional 15
customer service options, both present, and into the 16
future. 17
Q. Was the Company’s replacement project unique 18
among peer utilities? 19
A. No. Nationwide, many utilities had undertaken 20
the same effort in replacing their Customer Information 21
Systems, and many were replacing systems installed around 22
the year 2000, a technology ‘generation’ newer than 23
Avista’s. Several utilities in the Northwest were among 24
Kensok, Di Page 35 Avista Corporation

those engaged in some phase of a major replacement 1
project. 2
Q. Did the Company assess the experience of others 3
to help avoid some of the pitfalls associated with 4
replacing these large information technology Systems? 5
A. Yes. The Company took advantage of shared 6
industry knowledge, reviewed case studies, and conducted 7
its own in-depth interviews with several peer utilities to 8
gather a base of ‘lessons learned.’ This pre-project 9
research helped Avista identify and incorporate key 10
measures into the design and management of its replacement 11
project, to both circumvent and help mitigate these 12
challenges. 13
Q. What initial steps did the Company take in 14
researching and evaluating potential replacement software 15
solutions? 16
A. An early step involved retaining a firm with 17
proven expertise in this discipline to assist the Company 18
with the complex process of developing a detailed list of 19
business requirements and then evaluating and selecting 20
the right combination of products and vendors to best meet 21
them. A detailed request for proposals was developed from 22
this initial work and sent to leading application and 23
Kensok, Di Page 36 Avista Corporation

services vendors in September 2010. Avista selected Five 1
Point Partners2 from those firms submitting proposals. 2
Q. What additional activities were required to 3
support this evaluation? 4
A. Avista and Five Point spent two months working 5
with employee teams to develop a detailed inventory of the 6
range and complexity of the Company’s business processes. 7
This inventory was used to develop the “Current State Map” 8
that included every work process in the business, and 9
every technology requirement needed to support it. These 10
results were included in the technical specifications that 11
accompanied the Request for Proposals sent to vendors. 12
The current-state map included over 200 work processes and 13
approximately 3,500 individual process steps or system 14
requirements. 15
Q. Please list the vendors who responded to the 16
Request for Proposals 17
A. Avista received responses from vendors on 18
October 28, 2011, and immediately began the review and 19
evaluation process. Below is a list of the vendors who 20
responded and the solutions and roles they proposed for 21
2 Five Point Partners is a consulting organization serving the utility, mining, revenue management, and transportation industries, offering a full life cycle of highly-focused enterprise consulting services from IT assessment and analysis, to implementation and post go-live support
services.
Kensok, Di Page 37 Avista Corporation

delivering a solution set to Avista. A detailed 1
description of the proposal solicitation and review 2
process, as well as the final evaluation and selection of 3
vendors is provided in Exhibit No. 10, Schedule 1, 4
beginning on page 27. 5
6
7
8
9
10
11
12
13
14
15
16
17
18
19
20
Q. How were the proposals evaluated? 21
A. In its initial review, Avista’s Project Compass 22
team evaluated and scored each proposal according to 23
Vendor
Product or Service
Offering
Customer
Information System
Application
Enterprise Asset
Management
Application
Mobile Work
Management
Application
Other
Vendors
IBM Systems Integration
SAP Customer
Relationship &
Billing (CR&B)
SAP Enterprise Asset
Management (EAM)
ClickSoft Mobile
Work Management
(MWM)---
IBM
Systems Integration &
Software Applications SAP CR&B
IBM Maximo Asset
Management ------
EP2M Systems Integration
Oracle Customer
Care & Billing
(CC&B)
Oracle Asset
Management Oracle MWM ---
Wipro Systems Integration Oracle CC&B IBM Maximo
Ventyx Service
Suite ---
HCL AXON Systems Integration SAP CR&B SAP EAM ClickSoft MWM
Technology
Associates
HCL AXON Systems Integration SAP CR&B
Meridium Asset
Management ClickSoft MWM
Technology
Associates
HCL AXON Systems Integration SAP CR&B IBM Maximo ClickSoft MWM
Technology
Associates
Sparta Integration Services SAP CR&B SAP EAM
Ventyx Service
Suite Vesta Partners
Logica Software Application ---
Logica Asset
Management ------
Meridium Software Application ---
Meridium Asset
Management ---
Partners with
Wipro
HPES Systems Integration ---------
General
Services Only
Kensok, Di Page 38 Avista Corporation

detailed criteria, grouped under four global Project 1
criteria: 2
Functionality – Assessment of the proposals as meeting 3
Avista’s Minimum Requirements, Functional Capabilities, 4
Project Drivers, Customer Service Fit, Enterprise Asset 5
Management Fit, Mobile Work Management Fit, and 6
Technical Fit. 7
8
Technology – Evaluation of the technical hardware and 9
software needs and costs, and technology implications of 10
the proposals, with respect to Avista’s core information 11
technology strategies. 12
13
Implementation Partner – Assessment of the vendor’s 14
implementation strategy, installation approach, 15
capabilities, timeliness, staffing, and compatibilities 16
with Avista’s project plans. 17
18
Cost – Evaluation of the vendor’s proposed cost as an 19
element of the initial screening. 20
21
Q. What replacement applications did Avista select? 22
A. Avista continued its detailed evaluation of 23
proposals, interviewed prospective vendors, and evaluated 24
various possible combinations of application solutions and 25
vendors, in the process of making its final selections. 26
Oracle’s Customer Care & Billing application was chosen to 27
replace Avista’s legacy Customer Service module, and IBM’s 28
Maximo asset and work management application was selected 29
Kensok, Di Page 39 Avista Corporation

to replace the Company’s Work Management System and its 1
Electric and Gas Meter Application. In addition to the 2
applications, Avista retained the services of EP2M and IBM 3
to support the installation and integration of the new 4
Systems. Having completed the selection/procurement phase, 5
Avista commenced with the activities of implementing the 6
new Systems. 7
Q. What were the early activities of the 8
Implementation Phase? 9
A. They focused on installing and configuring the 10
new Oracle and IBM applications, and the custom 11
programming required to support application extensions and 12
integrations. Before this work could begin, however, 13
Avista had to complete an eight-month effort known as 14
“design,” in which the business processes inventoried in 15
the Current State Map were mapped into the new Systems. 16
This was performed by cross-functional teams of employees 17
who were also responsible for identifying the 18
applications, data and integrations with all other systems 19
that were required to perform each step of every business 20
process. This work produced a detailed list of technical 21
system requirements for each process step. The technical 22
capabilities of the Customer Care & Billing application 23
and the Maximo application were then evaluated against 24
Kensok, Di Page 40 Avista Corporation

these detailed lists of technical requirements. In the 1
majority of cases, the applications were able support the 2
requirements of a process step within their off-the-shelf 3
capabilities. For these processes, the Company was able to 4
move directly to the work of application configuration. 5
Q. Please describe the work of configuring the 6
applications. 7
A. Configuring the application initially involves 8
selecting parameters, embedding algorithms, or entering 9
data to enable the logic of the application to perform the 10
functions in sequence required by the Company’s various 11
work processes. The applications are designed with a 12
series of input tables that organize the process of 13
setting configuration parameters. Each input table, which 14
could represent one particular type of customer service 15
agreement, for example, may have up to 100 individual, 16
flexible, and configurable fields. Configuring each field 17
requires entering from one to several individual values, 18
instructions, or algorithms to establish the future of the 19
new base System. Each field in each table is often cross-20
linked with content in dependent fields in complementary 21
tables, creating a complex of dependencies between many 22
multiples of tables and fields. This initial work 23
requires the person entering the configuration settings on 24
Kensok, Di Page 41 Avista Corporation

a particular table to work iteratively and sequentially in 1
configuring the dependent fields in the other tables in 2
one integrated work flow. As one example of the workload 3
involved, it required one technician working full-time 4
over six months to configure the existing rate tariff 5
settings into the new System for each of the 142 different 6
Avista service agreements across our jurisdictions. 7
Considering the Customer Care & Billing application has 8
1,686 configuration tables, containing 12,158 configurable 9
fields, the magnitude and complexity of this task is 10
quickly evident. 11
Q. What was the value of using off-the-shelf 12
applications when they required so much specialized 13
configuration? 14
A. Today’s commercial off-the-shelf computer 15
applications offer many advantages to the alternative of 16
developing proprietary, customized software. First, even 17
though configuration is labor intensive, it is only a 18
fraction of the labor that was expended by the vendor to 19
develop the programming code of the base application 20
itself. The next significant advantage, is that the cost 21
of developing the base application is shared among all of 22
the vendor’s user client companies, like Avista. These 23
applications are also compatible with the “enterprise 24
Kensok, Di Page 42 Avista Corporation

service bus” architecture of today’s information 1
technology systems, and are designed to be integrated with 2
other enterprise applications and systems (e.g. customer 3
service, financial, and supply-chain applications). 4
Client users are also part of a “users community” where 5
they can share their experience with the application, 6
identify problem areas and glitches, and suggest system 7
modifications and enhancements. Finally, the vendor 8
provides periodic technical updates of the applications 9
for its client users, driven in part by the input shared 10
in the user forums, and at a very reasonable shared cost. 11
While these periodic system updates provide high value at 12
low cost, the value can be substantially diluted by the 13
additional complexity and work required to support 14
customized programming for system extensions. 15
Q. What is meant by “Customization” and 16
“Extensions”? 17
A. As described above, while there is considerable 18
flexibility within the application’s off-the-shelf 19
capabilities to accommodate a range of business processes, 20
many were complex enough that they required programming of 21
software code outside the application itself. This 22
programming is referred to as “customization,” and the 23
work-process capability enabled by this custom code is 24
Kensok, Di Page 43 Avista Corporation

referred to as an “enhancement” or “extension.” All of the 1
customized programming required to support Avista’s use of 2
the vendor applications was referred to as application 3
“development.” The process of development is complex and 4
labor intensive, and began with a description of the 5
process steps that a particular extension would perform 6
(its system requirements). Each set of requirements 7
proceeded to the contractors’ offshore development staff 8
where it was translated into a technical specification 9
used to guide the development of the actual programming 10
code for the extension. Once the development staff has 11
written the code, the contractor performed what is known 12
as unit testing. The code, along with defects identified 13
in unit testing, were returned to the development staff 14
for analysis and repair. When those defects were 15
repaired, the code was again subjected to unit testing and 16
the next tranche of defects was identified and returned 17
for repair. Because the initial base program code was 18
extremely complex, this iterative process was very labor 19
intensive and time consuming. 20
Q. Did Avista anticipate that extensions would be 21
necessary at the time it decided to purchase the Customer 22
Care and Maximo applications? 23
Kensok, Di Page 44 Avista Corporation

A. Yes. Even though the Company went through an 1
exhaustive process, as described above, to ensure the 2
selected applications had the capabilities necessary to 3
support Avista’s business needs, the Company was fully 4
aware that any application it selected would require the 5
development of extensions. 6
Q. Did Avista make an effort to manage the number 7
of extensions required? 8
A. Yes. The Company was committed to capturing the 9
value delivered by implementing off-the-shelf 10
applications, and accordingly, our goal was to optimize 11
the number of extensions required. To accomplish this, 12
the Company evaluated each circumstance where the need for 13
an extension was identified, and determined if it could be 14
avoided by changing Avista’s work process. In some 15
instances, it was either impossible or not cost effective 16
to change the work process. But in others, the need for 17
an enhancement was eliminated by redesigning the work 18
process so the steps could be accomplished within the 19
capabilities of the application. The effort required to 20
change work processes was significant, however, because 21
each process often impacted the workflow of many 22
departments across the Company. For each process that was 23
changed, Avista organized individual employee teams, 24
Kensok, Di Page 45 Avista Corporation

representing the multiple departments affected, to 1
redesign the structure to be effective for customers and 2
the Company, and compatible with the applications. 3
Q. What were some of the other key Implementation 4
activities? 5
A. In addition to configuring the applications, and 6
developing the coding required for the extensions, the 7
Project team engaged in the work of integrating the 8
applications, and began performing conversions of all 9
necessary data. 10
Q. What is involved in the work of applications 11
integration? 12
A. Integration requires the development of custom 13
programming code that functionally connects the Maximo and 14
Customer Care & Billing applications with each other, and 15
with the approximately 100 systems that support the 16
Company’s customer service and business operations. An 17
‘integration’ refers to the connection between separate 18
computer applications that allows them to work in concert 19
to perform allied functions. Integrations involve 20
exchanges of data, transmission of instructions or changes 21
in state, performance of computations and other 22
algorithms, and myriad other shared functions. In addition 23
to integration connections between applications, this work 24
Kensok, Di Page 46 Avista Corporation

also encompassed the development of the Company’s 1
“enterprise service bus.” The latter is essentially an 2
integration network shared by the integrated applications. 3
Some of the systems integrated with the Maximo and 4
Customer Care & Billing applications, include the Avista 5
customer website, the Company’s various internal systems 6
such as financial applications and databases, supply 7
chain, crew dispatch and outage management reporting, 8
systems from a range of financial institutions used by the 9
Company and our customers, and the many vendors who 10
support our delivery of natural gas and electric service, 11
such as bill printing and presentment. 12
Q. What was involved in the data conversion 13
process? 14
A. All of the Company’s existing data, whether 15
customer account information, energy use history, electric 16
and natural gas facilities data of all types, mapping 17
system information, and regulatory and compliance 18
information, etc., had to be transferred from existing 19
computer hardware and data bases, such as the Company’s 20
mainframe systems, to new data formats, databases, and 21
computer platforms that are connected with the new 22
applications. First, the data in Avista’s existing 23
databases was mapped according to where it would 24
Kensok, Di Page 47 Avista Corporation

eventually reside in the new database systems. The data 1
were then extracted and loaded into the new systems, and 2
the integrity of the loaded data was validated for 3
accuracy. Defects in data conversion were identified in 4
the process, defects were repaired, and the data 5
load/validation exercise was repeated. 6
Q. Please describe the work of testing the new 7
application Systems. 8
A. There are three major areas of System testing 9
that all played a critical role in the successful 10
implementation of the new applications. These are known 11
as “System Testing,” “Systems Integration Testing,” and 12
“User Acceptance Testing.” 13
When the work of configuration was complete, Avista 14
and its contractors commenced with System Testing. The 15
purpose was to ensure the applications performed properly 16
as they had been configured to support Avista’s business 17
processes. Testing focused on identifying and repairing 18
the technical defects that arose during configuration of 19
such a large and complex System. The process simulated 20
individual business functions, each known as a “test 21
case,” and tracked the defects reported during the 22
exercise. System Testing for the Customer Care & Billing 23
application required Company employees and contractors to 24
Kensok, Di Page 48 Avista Corporation

write and test over 4,300 individual test-case scenarios. 1
A similar set of approximately 3,800 test cases unique to 2
the Maximo application also had to be developed and 3
tested. In the testing process, defects were identified 4
and analyzed, the root cause was isolated and repaired, 5
and the test case was run again until it was defect free. 6
Systems Integration Testing occurred next in the 7
sequence and was similar to the process used in System 8
Testing. But instead of focusing on configurations, it 9
tested the custom integration code to ensure the new 10
applications performed properly with all of the other 11
integrated systems. The number of System Integration test 12
cases developed for the Customer Care & Billing 13
application was over 2,400. These test cases were 14
completely different from those developed for the System 15
Testing. Approximately 800 unique test cases were 16
developed for testing the system integrations with the 17
Maximo application. The process of identifying and 18
remediating defects and conducting re-testing was similar 19
to the process used for System Testing. 20
In the final testing phase, User Acceptance Testing, 21
Avista employees who would be using the new System to 22
serve our customers, performed mock business transactions 23
on the completed System as it would function when 24
Kensok, Di Page 49 Avista Corporation

implemented. User Acceptance Testing had the twin 1
objectives of scrubbing the Systems further to identify 2
and repair any critical defects, and to identify and 3
implement changes to the Systems that would make them more 4
user friendly and function more smoothly and efficiently. 5
Over 11,000 individual test cases were developed and 6
executed during the course of testing for the Project. 7
Q. Very briefly, what was the purpose of creating 8
the reporting templates? 9
A. A diverse set of management reports is produced 10
by departments across the Company, on a daily, weekly, 11
monthly, quarterly, and annual basis, to meet a broad 12
range of financial, regulatory, and managerial 13
requirements. A specific application is required to 14
produce each of these reports. Because Project Compass was 15
changing the organization and storage of the Company’s 16
data, its customer, asset and work management applications 17
and systems, and the ways these systems were integrated, 18
all of the applications that produced these management 19
reports had to be re-developed. There were 155 separate 20
reports that had to be produced relying principally on 21
information from the Customer Care & Billing application, 22
and 60 reports that had to be produced using data 23
primarily from Maximo. The program coding required to 24
Kensok, Di Page 50 Avista Corporation

produce each individual report, along with the 1
verification of the data conversion, had to be tested and 2
repaired in the same iterative manner described for the 3
other configuration and enhancement testing procedures. 4
Q. Please describe the training programs associated 5
with Implementation. 6
A. Like testing of the new Systems, timely and 7
comprehensive employee training for the new applications 8
and new work processes was critical to successful 9
implementation. Avista and its contractor designed the 10
content of the training modules, and training sessions 11
commenced in the second quarter of 2014. 12
Q. What was Avista’s initial capital budget for the 13
overall replacement project? 14
A. A budget of $80 million was approved on December 15
6, 2012 for the capital replacement costs associated with 16
Project Compass. That initial budget allocation among key 17
Project activities is provided in Exhibit No. 10, 18
Schedule 1, Attachment 15. 19
Q. Why didn’t the Company authorize an initial 20
project budget at the time it decided to replace its 21
legacy System? 22
A. Although Avista discussed potential costs of the 23
project early in its inception, and approved preliminary 24
Kensok, Di Page 51 Avista Corporation

budgets through the course of Project development, it did 1
not establish a formal capital budget until the Project 2
was more defined. Avista had learned through its peer 3
utility interviews, and from the support and advice of 4
outside experts, that organizations commonly undermined 5
the success of their software projects by making cost 6
commitments too early in the development stages. This 7
mistake undermines predictability, increases risk and 8
project inefficiencies, and generally impairs the ability 9
to manage a project to a successful conclusion. 10
Q. Is this typical of enterprise software projects? 11
A. Yes. Typically, early in the scoping of a 12
software project, particular details of the application 13
being designed/installed, detailed knowledge of the 14
Company’s specific business requirements, details of the 15
solution sets, as well as the management plan, identified 16
staffing needs, and many other variables are simply 17
unclear. Accordingly, estimates of the potential cost of 18
the project are highly variable. As these sources of 19
variability are further investigated and resolved, the 20
uncertainty in the project decreases; likewise, so does 21
the variability in estimates of the project cost. This 22
phenomenon, widely discussed in the literature and often 23
Kensok, Di Page 52 Avista Corporation

associated with author Steve McConnell3, is known as the 1
“Cone of Uncertainty”, presented in Illustration No. 1,4 2
below. 3
Illustration No. 1 4
5
6
7
8
9
10
11
12
As illustrated above, significant narrowing of the 13
uncertainty generally occurs during the first 20-30% of 14
the total calendar time for the project. The uncertainty 15
will only decrease, however, through deliberate and active 16
project research and design, required to further define 17
the scope, requirements, implementation details and 18
estimates of component costs. And, this uncertainty must 19
continue to be constrained throughout the course of the 20
project by the use of effective project controls. 21
3 Software Estimation: Demystifying the Black Art. Steve McConnell, Microsoft Press, 2006 4 id. Figure 4.2, 96.1/751.
Kensok, Di Page 53 Avista Corporation

Q. In light of this cost uncertainty, how could 1
Avista determine that replacing its legacy system was 2
‘cost effective’ for customers well before the formal 3
project scope and budget were developed and the actual 4
final costs could be known? 5
A. The decision point for the Company in 2010 was 6
whether to significantly reinvest in its legacy technology 7
as the means to defer its ultimate replacement, or 8
instead, to invest in the planning and exploration of 9
options needed to support its replacement. The Company 10
determined, as explained in detail in Exhibit No. 10, 11
Schedule 1, that the timing was appropriate to replace its 12
legacy Customer Information System. The Company’s focus 13
then was to assess its needs, evaluate options, and select 14
a set of solutions that would meet the long-term needs of 15
the Company and its customers at the lowest possible cost. 16
At that point, the Company engaged in the progressive 17
stages of project design needed to prudently define the 18
likely scope and potential cost of the replacement 19
project. Through this work, uncertainty around the project 20
was narrowed and potential costs were further refined, to 21
the point that Avista was confident purchasing the 22
selected applications and proceeding with the work of 23
implementation. Even though this was several months before 24
Kensok, Di Page 54 Avista Corporation

the budget was approved, Avista had by that time built the 1
foundation needed to initiate a successful project: the 2
ability to deliver a solution that would meet its long-3
term customer service and business requirements in an 4
optimized approach, and in a manner that would achieve the 5
least cost for its customers. 6
While Avista believed its initial estimates of scope, 7
timeline and budget for the project were reasonable, and 8
was committed to control the Project to best meet each 9
estimate, it was also cognizant that the success of the 10
project would not be defined by whether or not each 11
estimate, including the budget, was precisely met. In 12
contrast with a ‘not-to-exceed’ metric, the software 13
budget is a management tool that allows senior leaders to 14
make informed enterprise-level decisions, and that 15
provides an effective tool for the project manager to 16
control project activities in an effort to meet the 17
estimates of each deliverable (timeline, scope, 18
functionality, and cost). In describing the relationship 19
between software project estimates and final results, 20
McConnell states: 21
“The primary purpose of software estimation is 22 not to predict a project’s outcome; it is to 23
determine whether a project’s targets are 24 realistic enough to allow the project to be 25
Kensok, Di Page 55 Avista Corporation

controlled to meet them.”5 “Typical project 1 control activities include removing noncritical 2
requirements, redefining requirements, replacing 3 less-experienced staff with more-experienced 4 staff, and so on.”6 “In practice, if we deliver 5 a project with about the level of functionality 6 intended, using about the level of resources 7
planned, in about the time frame targeted, then 8 we typically say that the project "met its 9 estimates," despite all the analytical impurities 10
implicit in that statement. Thus, the criteria 11 for a "good" estimate cannot be based on its 12
predictive capability, which is impossible to 13 assess, but on the estimate’s ability to support 14 project success…7 15
Avista believes it designed and developed such an 16
implementation plan and budget for Project Compass. By 17
this, we mean that the overall Project record would 18
demonstrate its proper research and design, robust 19
planning and estimating, effective management and 20
controls, and that its delivered scope, timeline and cost, 21
would be reasonable, cost effective and prudent. 22
Q. When did Avista initially expect to place these 23
new Systems into service? 24
A. A portion of the Maximo asset management 25
application was placed into service in the fall of 2013, 26
and Avista initially targeted September 2014 (which was 27
later revised to July 2014) for the “Go Live” of the 28
5 id. At 42/751. 6 id. At 39/751. 7 id. At 41/751.
Kensok, Di Page 56 Avista Corporation

remainder of the Maximo application and the Oracle 1
Customer Care & Billing System. 2
Q. Did Avista believe that it might ultimately have 3
to push out the Go Live to a later date? 4
A. Yes, it did. While the Go Live target date was 5
an important project planning and management tool, its 6
successful accomplishment was dependent on every major 7
project activity reaching a critical and timely state of 8
completion. As described above, the major implementation 9
activities, which are highly-interdependent and were being 10
executed in parallel tracks, were in and of themselves 11
large and complex undertakings. In setting the Go Live 12
target date, Avista was cognizant of the compounding 13
nature of the challenges associated with launching such a 14
large and complex system, and of the consequences of 15
proceeding to Go Live before all systems were ready. 16
Accordingly, in the event Avista were to determine there 17
was a critical lag in any of the primary implementation 18
activities, including employee training, data conversion, 19
management reporting, System Testing, Integration Testing, 20
User-Acceptance Testing, application hosting, post-Go Live 21
technical support, or customer communications, it would 22
move out the Go Live to ensure a successful launch of the 23
System. 24
Kensok, Di Page 57 Avista Corporation

Q. Would it be uncommon for one of the key 1
activities to be delayed? 2
A. Not at all. In any complex technology 3
initiative such as Avista’s Project Compass, issues were 4
constantly emerging that impacted the estimated completion 5
dates of the many project activities. When this happened, 6
the Compass team had to take deliberate steps to make up 7
time or reduce costs to keep the overall Project on its 8
intended course, scope, estimated timeline, and estimated 9
budget. 10
Q. Would Avista have considered a decision to push 11
out the Go Live date, or to approve spending beyond the 12
estimated project budget to be a failure in the delivery 13
of the new System? 14
A. No. The basis for this conclusion lies in the 15
Company’s efforts to research and understand the root 16
causes of the failed projects of other utilities, in its 17
systematic application of those learnings to the design of 18
the Project, and the efforts it made to aggressively 19
control the project toward its target scope, timeline and 20
budget. In short, as stated earlier in this testimony, 21
Avista was confident it has selected the best-optimized 22
solution for the Company and its customers, and that it 23
would be delivered at the least cost, irrespective of 24
Kensok, Di Page 58 Avista Corporation

whether the project planning targets for the timeline and 1
budget were explicitly met. 2
Q. Did Avista ultimately extend the Go Live Date 3
during Project implementation? 4
A. Yes. As mentioned, the Company initially 5
targeted September of 2014 for the Go Live of the 6
remainder of the Maximo application and the Customer Care 7
& Billing system. In June of 2014, the decision was made 8
to extend the Go Live operation for the Project to the 9
first quarter of 2015. 10
Q. Did the Company also revise the project budget 11
in conjunction with the re-forecasted timeline? 12
A. Yes it did. In June of 2014, the Company 13
revised the capital cost for the Project to $100 million. 14
In November 2014, the Project budget was revised to 15
approximately $107 million. The Company’s Board of 16
Directors supported that budget amount and authorized a 17
spending limit of $110 million. 18
Q. Has Avista described the factors responsible for 19
adjustments to the Go Live date and project budget? 20
A. Yes. The discussion is contained in a June 2014 21
report attached to this testimony as Exhibit No. 10, 22
Schedule 3. As explained in the report, the process of 23
coding extensions for the applications was more complex 24
Kensok, Di Page 59 Avista Corporation

than initially expected. Because of this complexity and 1
the volume of code that had to be tested, the process of 2
remediating defects in the code also required more time 3
than was estimated in the initial project plan. 4
Q. As the Project approached the February 2015 Go 5
Live date, what preparations did the Company make to 6
ensure a successful launch of the new systems? 7
A. The process of taking new application systems 8
live involves the execution of hundreds of highly-9
coordinated tasks that must be accomplished within a very 10
short window of time, typically two to three days. In the 11
first steps, the legacy systems are locked from use and 12
the new applications are initialized in what’s referred to 13
as the “production” or operating environment. The new 14
applications and their many integrations are then 15
subjected to a final round of comprehensive system tests. 16
Then, the process of extracting, transforming, and moving 17
data from the legacy databases and systems to the new 18
application systems begins, along with the process of 19
validating the data. During this process, referred to as 20
the “Cutover,” neither the Company’s legacy systems nor 21
the new applications are available to support its normal 22
business operations. As a result, and as customers 23
continue to conduct business with Avista during this 24
Kensok, Di Page 60 Avista Corporation

period, several thousand transactions have to be logged 1
manually for later entry into the new systems. Finally, 2
the new systems are enabled and available for service in 3
the Go Live step, while the Company’s legacy systems are 4
disabled from service. 5
Q. Please provide an overview of the communication 6
program Avista developed to familiarize its customers with 7
the new systems? 8
A. The process began with the identification of 9
changes associated with the new systems (such as the 10
assignment of a new account number) that had the potential 11
to impact customers. An employee team was chartered to 12
accomplish this assessment and it identified 61 points of 13
change, grouped under 13 different categories. The team 14
also developed initial recommendations for each change 15
area that included the need for and timing of customer 16
communications, as well as communication channels. An 17
initial customer communication plan was developed and 18
included key project messages and strategies and timelines 19
for communicating with customers. The Company then 20
organized a customer focus group for participants to 21
review and provide input on the draft communication plan 22
and customer materials. The plan was refined using this 23
feedback and was executed through diverse communication 24
Kensok, Di Page 61 Avista Corporation

channels that included residential and 1
commercial/industrial customer newsletters, a bill insert, 2
a direct mailing to all customers with special envelope 3
messaging, a billing envelope for two months with special 4
messaging, on-bill messages, social media including 5
Twitter and Facebook, and additional communications to 6
targeted customer segments via email and direct mail. A 7
key communications channel is Avista’s website 8
(avistautilities.com), which provides flexibility in 9
disseminating information to customers in a dynamic 10
environment prior to, during, and following the Cutover 11
and Go Live. The website messaging included a home page 12
banner and targeted landing page with special content, 13
including a video for customers on how to read their new 14
bill. Other customer communication channels included the 15
automated phone system with on-hold messaging. An 16
overview of the communication plan is provided as 17
Exhibit No. 10, Schedule 3, and a timeline showing the 18
individual communication activities is provided as 19
Exhibit No. 10, Schedule 4. An example of the direct-mail 20
communication is provided as Exhibit No. 10, Schedule 5. 21
Kensok, Di Page 62 Avista Corporation

Q. Please give a high-level overview of the 1
activities associated with Post-Go Live support. 2
A. Post-Go Live Support is composed of two 3
principal activities that begin immediately following the 4
Go Live to help ensure the successful implementation of 5
the new systems. Project stabilization refers to the work 6
of making needed changes to the application 7
Configurations, Extension code, and Integration code, and 8
then updating the operating applications through new 9
releases to production. Project support is focused on 10
providing technical assistance to new users of the new 11
applications, and on processing any application or work 12
process issues that are identified during the course of 13
operations. 14
Q. Briefly describe the work of project 15
stabilization? 16
A. During the course of testing the new 17
applications and working through the process of Code 18
Defect Management, the emphasis is focused on repairing 19
defects that are known as “critical” or “blocking.” These 20
defects have priority because the applications and 21
integrations cannot perform properly until the defects are 22
removed. While most of the minor defects (those that do 23
not impair the application’s core business performance), 24
Kensok, Di Page 63 Avista Corporation

are also repaired during the testing phase, it is common 1
for some to be held for releases to production that occur 2
after the Go Live. 3
In addition to these, there are inevitably some new 4
defects that emerge during the early operation of the 5
systems that were not identified during the application 6
testing phase. Plus, the live operation of the new 7
applications identifies some work process improvements 8
that require modification of the application 9
configurations or code. Through this process, the 10
efficiency and performance of the new applications is 11
improved, and important technical knowledge is transferred 12
from the application developers to those who will have 13
responsibility for the long-term maintenance of the 14
systems. 15
Q. What are the tasks associated with the work of 16
project support? 17
A. Several integrated technical teams were 18
organized to support new users of the new applications. 19
The support process begins when a user has a question or 20
reports a problem to a group composed of subject matter 21
experts/mentors who can address a range of technical and 22
work process-related questions. This group can in turn 23
rely on two technical support teams representing the 24
Kensok, Di Page 64 Avista Corporation

Maximo and Customer Care & Billing applications. These 1
support teams answer technical questions as well as 2
identify the source of a reported problem (e.g. a defect 3
in the application, the need for a work process change, or 4
a training issue). These issues are reported to either 5
the project stabilization group, or the team responsible 6
for managing the Post-Go Live applications, where they are 7
ultimately resolved. 8
Q. Did the Company anticipate the possibility of a 9
diminution in some service levels associated with the 10
transition? 11
A. Yes. Even with its comprehensive preparations, 12
Avista understood from the experience of others that such 13
a transition is, at best, associated with at least a 14
short-term decline in some service levels (e.g. call 15
center grade of service). Even with sufficient 16
preparation, the transition involves employees moving from 17
very familiar practices to new work processes, using new 18
software tools, and employing temporary manual work 19
processes. In addition to changes for employees, 20
customers were required to make changes to their accounts, 21
to become familiar with a new bill format, and experience 22
some process changes from those with which they were 23
familiar. This combination can result in more customer 24
Kensok, Di Page 65 Avista Corporation

calls and longer call-handle times as everyone becomes 1
more familiar and efficient with the new tools and 2
processes. 3
Q. Did the Company prepare for these effects? 4
A. Yes. Avista estimated potential customer call 5
volumes and changes in employee productivity, to 6
anticipate and provide for likely staffing needs. In 7
addition to staffing changes, the Company developed 8
metrics to track its performance following the Go Live, as 9
well as employing new tools (such as virtual hold8) to help 10
ease and streamline transactions for customers during the 11
transition. 12
Q. How would you characterize the overall success 13
of the Cutover activities? 14
A. In short, this process was very successful. The 15
comprehensive plan developed to coordinate the Cutover 16
activities was very complete and was extremely useful in 17
managing the time and resources needed to complete each of 18
the hundreds of required tasks on a very tight timeline. 19
The learnings from the three previous full dress 20
rehearsals were also invaluable in completing and refining 21
8 Virtual hold is the option an on-hold customer can select to retain their position in the call queue and receive a call back from the next
available customer service representative.
Kensok, Di Page 66 Avista Corporation

the plan. Over 300 employees were engaged in support of 1
the Cutover activities. 2
Q. Were you pleased with the first day of operation 3
of the new systems following the Go Live operation? 4
A. Yes, very much so. The new systems and work 5
processes, along with Avista’s employees, performed very 6
well on the first day of service to our customers. I 7
believe the Company’s comprehensive and prudent 8
preparations for a successful transition to the new 9
systems were reflected in the very successful Go Live 10
operation. 11
Q. What were some of the indicators of the 12
successful launch of the new systems? 13
A. At the enterprise level, the new systems 14
performed well, not only in directly enabling the required 15
work processes (such as accurately printing customers’ 16
bills), but also in their smooth integration and operation 17
with over 100 other allied applications and systems. The 18
“system performance,” the measure of the capacity of the 19
computer hardware and network systems to support the new 20
applications “under load,” was also very positive. In 21
addition to these measures, there were no blocking defects 22
identified, and there were fewer overall defects than had 23
been anticipated; many of those were resolved before the 24
Kensok, Di Page 67 Avista Corporation

second day of operation. Finally, there were far fewer 1
employee calls to the technical support teams than had 2
been expected – an indicator that the employee training 3
program had been highly effective. 4
From the customer’s perspective, Company employees 5
were well-equipped to answer questions, resolve issues and 6
concerns, and perform the desired transactions. As 7
anticipated, the high volume of calls to our contact 8
centers, combined with the additional time spent on each 9
call (associated with the new web format, revised 10
transactions, new account numbers, and new tools and new 11
work processes), resulted in a lower than normal grade of 12
service, longer hold time, and longer average handling 13
time. Even with these expected reductions in service, 14
however, Avista was pleased with its overall performance 15
on the first day of operation, in particular because our 16
actual results were better than the forecast, even though 17
the volume of calls was heavier than had been expected. 18
Results from the second day of operation were 19
exceptionally positive. The Company’s grade of service 20
exceeded our standard (pre-Go Live) benchmark of 80%, and 21
average handling time, which also improved from the first 22
day, was better than had been forecasted. Performance 23
during the remainder of the first month of operation was 24
Kensok, Di Page 68 Avista Corporation

essentially on par with the Company’s pre-Go Live business 1
operations, a truly outstanding implementation 2
performance. A high-level summary of the launch of the new 3
systems, including customer service metrics for the first 4
five weeks of operation, is provided in Exhibit No. 10, 5
Schedule 6. 6
Q. When do you expect the capital investment 7
required to implement the new systems to be complete? 8
A. The last major implementation release of the new 9
applications was completed on May 17, 2015. The close out 10
of the capital investment for the Project is expected to 11
be complete in the third quarter of 2015, following 12
receipt of final invoices associated with the project. 13
Q. What is the expected final cost for the Project? 14
A. The Company expects the total capital investment 15
for the Project to be approximately $107 million. 16
Q. Are there any Project development costs that 17
will continue after the new Systems are in service? 18
A. Yes. As described in the foregoing testimony and 19
schedules, the scope for Project Compass at Go Live was to 20
replace the functionality of the Company’s legacy System. 21
Once the new systems were stabilized, the Company planned 22
to make additional investments to add new functionality, 23
such as the option for customers to choose their preferred 24
Kensok, Di Page 69 Avista Corporation

communication channel. Opportunities will continue to be 1
identified, over time, for adding functionality to serve 2
the evolving needs of customers, to improve the efficiency 3
or effectiveness of the new System for employees, or to 4
integrate new or modified applications and systems. As was 5
the case with the Company’s Legacy System, there was 6
essentially a continuous capital development effort 7
required to support the System from its inception, to 8
accommodate changing technology, the growing needs of our 9
customers, new regulatory requirements, and the perpetual 10
effort to optimize the value of the investment. 11
Q. Does this conclude your pre-filed direct 12
testimony? 13
A. Yes. 14
Kensok, Di Page 70 Avista Corporation