Improving electrical distribution reliability and cost
The company analyzed it's competitive position
relative to the other large investor owned utilities in the US.
It became clear to survive in a deregulated environment that significant change
was needed in 3 key areas:
- Reduce operating and maintenance expenditures to be at or near the best companies
in cost per kWh. Improve generating efficiencies and implement
load control programs so that no new generating plants would be
needed to meet forecasted demand through the end of the century.
- Maintain overall system reliability, and focus on improving the
reliability for the largest commercial and industrial "at risk" customers,
and fund this effort by redeploying cost reductions.
- Develop a sense of competition on its people.
Developing Customer requirements
An effort was undertaken to obtain the reliability expectations of all customer
segments. Of primary concern were the large commercial/industrial (C/I)
customers. This effort yielded a clear picture of customer expectations and the
recognition that significant improvement was necessary for a portion of large
C/I customers if the company was to retain them in a deregulated environment.
Other pertinent information was collected during this phase that would provide
the basis for new product and service offerings geared to customers who required
"premium power quality".
Systematic process improvement
The existing methodologies were not dynamic enough to focus resources on the
most significant problems and target specific customer segments. Past
improvement efforts were directed at system-wide projects that resulted in
slight reliability gains.
A more focused approach was needed in this new environment of cost reduction.
This process assessed the relative revenue contribution to company margins of
specific customers, and the current level of reliability they were experiencing.
In addition, their individual expectations, or reliability thresholds which were
obtained in the surveys, were used in developing a scoring index.
All large commercial customers were evaluated in this way. This resulted in a
ranked scoring, or prioritized list of all C/I customers and enable the company
to focus improvement efforts.
Implementing reliability improvements
After the C/I customers
were ranked in order of needed improvement, a field analysis was
conducted at the feeder level for each high priority account to
identify needed corrective actions. This analysis resulted in a
number of system improvements that were scheduled as part of the
operation and maintenance work to be completed.
A deployment
strategy was developed based on sound PDCA principals. These projects were
included in the budget allocation process and were integrated as priorities in
the local business plans.
Total expenditures in the improvements were tracked to assess the benefit of the
investment These projects were worked before the heavy outage season and early
enough in the year to see reliability improvement gains by year end.
Results
Operations and maintenance expenditures in the distribution area were reduced by
34% from 1992 through 1996 in terms of cost per kWh. Capital expenditures were
reduced by 32% during the same time frame. Overall reliability degraded slightly
during this time frame.
While reliability was slightly worse, overall customer satisfaction with
reliability improved by 9%. This seems counterintuitive however, the focus on
eliminating extreme reliability problems actually shifted customer satisfaction.
In terms of price per kWh the company improved from one of the high price energy
producers in the region to one of the lowest.
Recommendations
The approach this organization has taken to
reduce operating expenses while improving reliability for the
most significant customers, is a real success story. It is not
unique however and with commitment on the part of any electric
utility, is replicable.
The following were some of the
recommendations to embark on this approach to improve
reliability and competitive position:
- The initial step is to
assess the organizations relative position with its natural
competitors, and develop a sound strategic plan to improve
operations and reliability while reducing costs.
- Determine
customer requirements for all segments and understand their
reliability expectations using QFD techniques.
- Develop
strategies to address significant reliability problems and focus
improvement on the most important customers.
- Benchmark with best
in class companies to understand the basis for their performance
and analyze their processes for improvement ideas Be prepared to
change the management structure of the business unit based on
the most effective way to achieve customer satisfaction and low
cost. This will involve downsizing or elimination unproductive
work processes, flattening management layers, and realigning
functions to get closer to the customer and provide seamless
service delivery.
- Manage customer relationships based on a
sincere commitment to meet their requirements.
- Develop sound
statistical measures of customer satisfaction and initiate
actions to reduce and eliminate dissatisfaction.
About the author:
Managing Partner, Management Resources Inc.
Back to Articles Page |
