Sempra Finds RFID Energizing Its Revenue

By Beth Bacheldor

The company's utilities group expects to save money by improving its ability to monitor the installation of gas meters.

Sempra Energy is expecting to reap a return on its $2 million-plus RFID investment in a little more than three years. For a company accustomed to getting payback on technology initiatives in about five years, "this is pretty darn good," said Terry Mohn, technology strategist for Sempra's utilities group, at this week's RFID Journal LIVE! 2007 conference in Orlando, Fla.

The group consists of Southern California Gas Co. and San Diego Gas & Electric, and provides service to business and residential customers within a 25,000-square-mile region. The company is employing passive RFID tags to track gas meters being received from Elster American Meter, a manufacturer in Nebraska City, Neb. The system tracks the meters as they arrive at Sempra's warehouse in Pico Rivera, Calif., near Los Angeles, then are transported to various distribution depots and ultimately placed at customers' sites.

The RFID technology includes EPC Gen 2 UHF tags, interrogator portals and handheld readers. It is expected to help Sempra Energy—which reported nearly $12 billion in revenues for 2006—to save money by reducing the number of gas meters unaccounted for due to installations either mistakenly recorded or not recorded at all. The group's two utility companies have more than 100 years' experience combined, Mohn said, adding that "a lot of the processes are the same processes we've been using for the last 50 to 80 years." These include a number of manual, labor-intensive steps. For example, every gas meter is shipped with a piece of paper that travels with that meter from receipt to installation. When the meters are installed at customer sites, technicians are supposed to record each meter's ID number on the papers.

"Sometimes," Mohn explained, "they write those numbers in ink on their hands, because the piece of paper is back in the truck, and then they transfer that number to the paperwork later. Errors are sometimes made." In fact, he noted, in a 2003 study of the meter-installation process for commercial and industrial customers, Sempra determined that it was losing about $1 million in expected revenue because the installation of approximately 320 meters had not been recorded.

"We want to reduce loss of revenue and make our inventory more visible," Mohn noted, enabling Sempra to monitor which items are at the warehouse, at each distribution depot and even in each delivery truck. In addition, greater visibility could help prevent employees at the distribution depots from hoarding special-purpose meters—a practice that has caused Sempra to order more than it actually needed.

Sempra began investigating and planning for RFID about two and a half years ago. After evaluating numerous tags and conducting tag placement tests, the firm began an RFID pilot at the Pico Rivera warehouse and two distribution depots. Conducted at the end of 2006, the pilot incorporated a ruggedized portal at the warehouse and depots, as well as handheld interrogators used by the technicians installing the meters at customer sites. Sempra spent about $1 million on the pilot, Mohn told the audience, including installation of new Wi-Fi hardware, which the company is using to network the readers in the depots and warehouse.

During the pilot, Elster American Meter affixed the RFID tags to each gas meter, packed 60 to 100 of the devices onto a tagged pallet and then shrink-wrapped the pallet. Each tag had been encoded with a unique ID number associated with the serial number of the meter to which it was attached. Elster then shipped the pallets to Sempra's Pico Rivera warehouse.

When the warehouse received the pallets, workers used forklifts to pick them up and move them through the portal, where the tags were scanned and then reconciled against an advance shipping notice. A light indicator at the portal flashed green if all tags were successfully read and reconciled; in the event of a red light, the forklift driver stopped, backed up and moved through the portal again. If a green light still did not result, the shipment was set aside for checking. The same portal application was used at the distribution depots.

According to Mohn, it is important for companies considering RFID to conduct site surveys at each location where the technology is to be installed, to check for RF interference. "You cannot assume that you can create a template or a model and apply that to every distribution point," Mohn said. "There might be a cell tower next to one distribution point that affects the ability to read tags."

Mohn also stressed that even though Sempra firmly believes in the technology, "this is still hard to do." But with strong project management, great systems integrators and great technology providers, he maintained, success can be achieved.

In fact, Sempra has received some of its strongest endorsements from employees on its warehouse and distribution depot floors. "Some of the people who we thought would be difficult to encourage to use this technology, Mohn stated, are actually saying, 'Why didn't we do this sooner?'"

Perhaps a more salient endorsement—at least, to Sempra's shareholders, who continue to ask the company to eke out more profits—is that this RFID deployment will create an uptick in revenues. Sempra plans to expand its RFID capability to 50 distribution depots during the first quarter of 2008. Once that happens, it expects to gain full visibility into the inventory and installation of its gas meters, and to recapture about $500,000 in annual revenue.