Improving electrical distribution reliability and cost
ackground 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.