Utilities face escalating operational
expenses due to rising fuel costs
and increasing investment costs
for environmental regulation while simultaneously
being limited in their ability to
improve revenues through rate cases. As
a result, utility companies are challenged
to continuously reduce operating costs
while simultaneously maintaining reliability
standards. Installing technology
alone will not deliver the cost savings;
the investment must be accompanied
by a change in the way we think about,
organize, and execute our business. This
paper explores the concepts of asset and
work management that complement technology
in achieving the goal of reduced,
consistent, predictable operational costs.

Background

Historically, utility owners established
capital and O&M budgets, and utility
workers were responsible for spending
the budgets. Performance was defined as
spending exactly the amount budgeted.
Variance was measured throughout the
organization on a monthly basis and was
treated as a performance problem that
had to be managed. First-line supervision
was more concerned with “budget variance”
reconciliation than unit costs or
volume production variances, if these factors
were considered at all. When determining
the budget for the following year,
momentum played the largest role in the
decision. For many of the business units,
last year’s budget was simply escalated
for inflation, and the cycle of “budgetbased
performance” was repeated. This is
particularly problematic for routine, shortcycle
operations and maintenance work,
where budgetary performance has little
correlation with results achieved.

At senior leadership levels, little consideration
was given to unit cost performance,
focusing instead on “how much
can we get back from our next rate case”
and “how much capital do we need to
spend to improve our position in the rate
case.” Field work performance was unimportant,
unless the expense became too
great, affecting cash flows and, thereby,
financing.

The Asset Management Model

Utilities, like most asset-intensive industries,
can be thought of as having four
primary internal stakeholders:

• Asset Owners – represent the shareholder.
  They obtain funding for operations
  and capital investment and establish
  the required return on investment
  for the owned assets and investments.
  They also have primary responsibility
  for business performance management,
  tracking objective measures of
  performance (unit cost, total volume,
  customer satisfaction, etc.) and reporting
  these metrics to foster a discussion
  between the other stakeholders.
• Asset Managers – analyze business and
  operating environmental conditions
  and direct investment to deliver the
  required return defined by the asset
  owner.
• Utility Operations – execute the business
  plans of the asset managers in the
  most cost-effective manner. They are
  accountable to the asset managers.
• Relationship Managers – manages communications
  and information shared
  within the utility, and between the
  internal and the primary external stakeholders
  (i.e., customers and regulators).
  They are equally accountable to three
  internal stakeholders (asset owner,
  asset manager, utility operations) and
  the external stakeholders (customers
  and regulators).

Asset Management

As is done with airlines, chemical companies,
large manufacturing and other
capital, asset-intensive industries, capital
assets should be considered investments
and be justified through expected
returns. The “obligation to serve” and
commensurate right to a return through
rate case adjustment (though less certain
as we go forward) modifies the equations
by reducing some risk to investment,
and thereby the effective cost of capital.
However, the overall business remains
the same – invest in that which returns
net value for the business. As such,
investments must be focused to meet the
objectives of a strategic plan. The plan
must recognize and operate within the
constraints of the prevailing business
reality, and risks to operations must be
considered and mitigated. The business
must know the details of the assets it currently
owns (no small task for some traditional
utilities) and be able to access this
information as needed for plan development
or reaction to emerging conditions
such as environmental regulation.

To this end, the asset manager develops
a systemwide strategy to meet the goals
established by the asset owners, taking
the form of a system master plan. This
plan defines funding constraints for both
the capital investment and routine operations
and maintenance expenses. The riskadjusted
benefits of both types of work
are evaluated, and only that work scope
with the highest return on investment
receives funding (as constrained by the
financial limitations of the organization
e.g., debt to equity, cost of capital). The
subtle conclusion inherent in this statement
is that not all O&M should be considered
worthwhile, and the long-term riskadjusted
benefit of routine maintenance
needs to be evaluated and consciously
decided upon. Momentum-based decisions
have no place here.

Work Management

Operations are an expense. The science
of management focuses on removing the
waste created by complexity to get the
defined task completed with the desired
quality for the least cost on an ongoing
basis. For utilities, this comes down to
taking all of the moving parts associated
with operating resources and making
them dance together. In the past, we could
thrive with individual business units doing
things their own way; it was not uncommon
for overhead and underground crews
to have little in common beyond the logo
on their company badges. The name of the
game now is consistency and standardization,
and that comes from having a plan.

One important discipline of work
management must be followed: All work
must be recorded. This is a critical link to
measuring and controlling the resources
planned for and used in performing work.
Without this information, the resources
cannot be accurately planned and performance
accurately measured.

Job Initiation

Given that all work must be recorded, a
system for intentionally and correctly initiating
work orders for all types of work to
be performed must be created. Broadly,
work orders fall into one of two categories:
planned work and unplanned work.

The enterprise initiates planned work.
That includes all routine maintenance and
capital construction. The asset manager
governs this scope of work to meet the
goals defined by the asset owners.

Unplanned work is that which is in
response to a customer request or a
system disruption, such as requests for
meter inspections, temporary disconnection
of service for construction and restoration
following weather-related service
interruption. This work is reactive and
typically initiated from within the service
provider organization.

At best-practice utilities, the asset management
organization initiates all capital
projects and determines what routine
maintenance and compliance maintenance
will be performed. Utility operations
initiates emergent (unplanned) work.

The key to managing new customer
connections and routine repair and
replacements is standardization. Best
practices include standard work plans that
are applied to the majority of jobs and
rigorous performance management.

Job Design

As stated previously, the name of the
game is consistency. A well-planned,
compatible unit hierarchy with a modest
number of individual elements combined
to form larger standard assemblies will
not only minimize design efforts throughout
a franchise, but will also help to
standardize maintenance and operation
plans that can be executed consistently
at minimum cost.

In an example of pushing this concept
to the limit, one utility company limited its
new high-voltage substation options to a
single, scalable design, reducing design
and construction time for any new substation
from months to weeks, while substantially
reducing construction and routine
maintenance costs. They noted that any
operator could go to any of the new substations
and operate it with only a quick
reference to feeder alignment diagrams
because all substations are the same, thus
minimizing training costs and the potential
for operator error.

Job Planning

Job planning brings together resources
(materials, equipment and labor) to
accomplish the work required by the
work order. Again, the goal is standardization.
To the greatest extent possible,
planned work (routine maintenance and
capital construction) should be repetitive
according to a standard plan. This job plan
should be “assembled” from standard
plan components tried and proven many
times before. Valves are tested using the
same tools and according to the same procedures
throughout the franchise. Capital
construction crews can put together a
high-voltage substation quickly and easily,
as they have done the same thing with the
same equipment a hundred times.

This also applies largely to unplanned
work. Although the timing and details
of the customer request to relight a gas
appliance or remove and reinstall an over-
head service for home improvement is not
known, the required resources (material,
equipment, labor) are nearly identical
for each repetition of the task. One need
only look at the trend in volume of this
work over the past few years to realize
the volume can be predicted based on
environmental events, such as the first
time overnight temperatures drop below
freezing for three consecutive days. As
such, template work plans should be created
and available for application to this
work, minimizing planning and maximizing
standardization.

Job Scheduling

Scheduling work brings all the pieces
together at the right time. That sounds
simple enough, but anyone who has tried
to orchestrate scarce resources within a
framework of competing priorities recognizes
the inherent complexity. There
are many ways to perform the scheduling
function. Here are a few best practices
worth considering.

• Optimize work schedules of time-insensitive
  work over a multimonth period,
  smoothing peaks and valleys of labor
  and equipment demand, and minimizing
  the impact of constrained resources;
• Schedule activities and resources over
  larger geographic areas. This improves
  the flexibility for resource sharing
  rather than artificially constraining
  labor and equipment to a single “operations
  center” or territory; and
• Improve material staging to eliminate
  impact on other resources. The “tail”
  of supply chain should never “wag the
  dog” of operations.

Emergent work can be the spoiler as it
robs the organization of the efficiency
and cost-effectiveness of well-planned
and executed work, replacing it with the
haphazard returns of reactionary “last
minute” execution. The success of scheduling
depends upon the ability to “lock
in” the work in time to orchestrate it with
crew, material and operational considerations.
Best-in-class work managers
monitor and anticipate problems, minimize
“sponsored work” and utilize sophisticated
scheduling tools and processes.
With trouble calls staffed by dedicated
resources, virtually all other work should
be “fixed and scheduled” 48 to 60 hours
in advance.

Work Execution and Completion

Once the standard job plans are scheduled
to be performed with available
resources, and there is little variation
as the work execution date approaches,
execution translates to field crews carrying
out the plan. Here are a few more
best practices worth incorporating into
the way of doing business.

• Consider all resource alternatives (i.e.,
  contractors or employees) based on
  availability and cost. When the volume
  of work associated with a task is constant,
  it is an ideal task to outsource on
  a fixed-fee basis;
• Utilize remote dispatch, job site reporting
  and home dispatching to reduce
  travel time and improve response to
  emergent work;
• Reduce nonproductive time (late out,
  early return, extended breaks) to
  improve field force utilization;
• Utilize field forces to close work plans at
  the time of work completion, eliminating
  additional administrative cost; and
• Identify/process follow-on work immediately
  – eliminating delays and costs.

Performance Management

Asset management focuses on investments
to ensure the proper return is
achieved. Work management organizes
performing work to track and ultimately
optimize the resources expended in executing
operations. Performance management
is the method of ensuring the successful
completion of these programs. The
term performance management has been
loosely applied for a long time, and it now
has multiple meanings. For our purposes,
we define performance management as
the mechanism for measuring and communicating
results of asset and work management
efforts. Consider this question:
Who is responsible for performance management
in your organization? Whether
the answer is “everyone” or “no one,” the
results are probably the same – mediocre
at best. In the asset management model,
the asset owner is responsible for:

• Extracting the primary data of operations
  (from work management systems,
  financial and revenue systems, outage
  management systems, etc.);
• Analyzing this data against stated
  goals, formatting the results into easily
  digested tables and charts (often called
  “dashboards”); and
• Conveying the information to leadership
  for communication with their
  direct reports.

In the best circumstances, the asset
owner is present at routine status meetings
between the C-level executive and
his lieutenants and fosters the discussion
about performance.

There is an important subtle statement
here: Performance management is key to
success. It should not be a part-time or
spare-time job. It includes distributing data
that clearly indicates how the enterprise
is performing against goals, and looking
at the rest of the data, comparing it with
benchmark organizations and determining
what the enterprise should be striving
for after it achieves its current goals. This
should include areas such as reduced
routine maintenance on noncritical components
– something utilities loathe, but upon
which they expend inordinate resources.
It also includes establishing unit cost and
volume targets for routine work instead of
budgetary targets, and determining which
activity based management work should
be focused on next to optimize savings
from improvement. These activities cannot
be performed while putting out the
daily fires associated with operating a live
system. The asset owner is normally not
a large group, but should be the individuals
who both know the business (including
where the “skeletons” are) and know the
industry (benchmarks and best practices).

The Parts Move in Harmony

Expectations of investors must be met with
results, which means performance at cost.
These expectations are carefully captured
and communicated by the asset owner.
The asset manager translates them into a
business strategy. Strategies are executed
by the utility operators through standard,
repeatable, and cost-effective tasks. The
relationship manager represents customers
and regulators, and the cycle repeats.

A strategic network of information is
leveraged to enable the process. An
asset register containing details of the
infrastructure is integrated with work management,
analytical and risk assessment
tools. Design standards are aligned with
master plans and strategies with appropriate
compliance programs are established.
Forecasting capability is enhanced to
assure reliability and prevent/reduce
emergent work. Maintenance programs
utilize a reliability-centered maintenance
approach to optimize identification and
continual improvement of maintenance
tactics. Materials for procurement projects
are integrated and optimized to reduce
investment and operating cost.

Finally, best practices are captured,
communicated are capitalized on to facilitate
better scheduling and cost estimating.
Individual jobs are measured and tracked
– holding field forces accountable for completing
work as planned/scheduled. Actual
parameter data are captured and made
available to anyone with access to the
work management system. Performance
metrics are evaluated centrally in a consistent
manner across all OCs. The result is
a coordinated system of people and tools
that can res-pond to any threat or opportunity
while simultaneously performing
routine operations in a consistent, predictable
and cost-effective manner.