Financial impact and improvement suggestions

Financial impact on UK DNOs – December 2013 

The severe weather of Christmas 2013 had a financial impact on all DNO companies. More than thirty-nine million pounds was spent by six DNO companies on the efforts to restore power and more than seventy per cent of these amounts were spent by SPN and SSE. In the figure below, extra costs are in three main areas – bringing in external staff, carrying out repair work and compensatory payments to consumers.

extra-coast-incursion

Fig.1 Cost incursion to restore power during Christmas 2013 (cited in Branston, 2014, p.46)

It is evident from Fig.1 that the poor risk management approach resulted in financial loss. The additional, widespread and sustained media attention on failure would also have an impact on company’s reputation.

Improvement suggestions:

Rather than focusing on the financial measures only, balanced score card approach should be adopted by UK DNOs management (Slack, 2014, P.434). Operational measures should include focus areas such as customer satisfaction, internal processes improvement, innovation and other improvement activities. Such measures should become key drivers for DNOs’ future financial successes. An improvement is divided into three stages; short, medium and long term.

As a short term measure to mitigating risk, SPN/SSE’s operation team should open additional communication channels e.g. social media networks, to increase consumer participation during power failure events. “Risk communication is the third (after risk assessment and mitigation) but key element in the traditional understanding of risk governance. Its task was initially defined as bridging the tension between expert judgment and the public perceptions of risks, which often vary to a large extent” (Aven, 2012). It is an imperative for SPN to communicate efficiently with its customers to reduce fault detection time and to arrange additional support to elderly and venerable customers. SPN/SSE should map its most vulnerable consumers and work with local authorities to ensure extra support is provided, when and where most needed, resulting in more positive media attention (Slack, 2012). In this way, the Tier ‘1’ risk of fatalities amongst the most vulnerable of SPN’s customers could be avoided. Under the NEWSAC agreement, UKPN/SSE should reach out to other DNOs to explore all available opportunities to mobilize/share resources during severe weather forecast. The ownership of the risk of major power cut event should be allocated to the senior management of UKPN/SSE.

In the medium term, focus should be directed on the maintenance and repair of major power lines and assets prior to winter months. Such activity could include tree cutting in the proximity of power lines and cleaning of overhead power lines and apparatus. These measures could be further enhanced by introducing ‘Condition-Based Risk Maintenance’ (CBRM); for major, critical power assets, CBRM is highly recommended for minimum interruption (Butler, 2014, P.6). Using sensor based remote monitoring technology; it is possible to detect likely zones of failure. DNOs are already using such technology; however it is not yet spread to all power asset types. Additionally, Operational staff in all three power distribution areas (SPN, LPN and EPN) should be trained to operate, maintain and restore critical asset types; as versatile manpower can be easily mobilized to meet most challenges during major events of power failure (Slack, 2012).

Finally in a long term, UKPN/SSE should nurture a ‘total productive maintenance’ (TPM) culture throughout their operation teams (Slack, 2012, P.482). The productive maintenance should be carried out by field crews and maintenance staff. This is defined as “TPM adopts team-working and empowerment principles, as well as a continuous improvement approach to “failure prevention” (Slack, 2013. P.482). During off-peak times of the year, operation teams should be trained to carry out maintenance activities in groups, not only skill based but also geographical location based teams should be formed, to improve productivity during planned TPM. ‘Asset Health Indices’ (AHI) of SPN/SSE should be measured for ageing power assets in order to identify criticality of failure. Based on such data, preventive maintenance activities should be prioritized. When replacing existing assets with new assets to power network, option to replace overhead power lines with underground cables (much less likely to be affected by severe weather conditions), should be considered. An increased use of underground power distribution network in recent years is due to various benefits such as; protection from elements of nature (Garcez and de Almeida, 2014, pp.624-32).

References:

Butler, I.; 2014. ‘Asset category – Modelling overview EPN UK Power Networks Ltd’. [Online] Available at: https://library.ukpowernetworks.co.uk/library/en/RIIO/Asset_Management_Documents/volume_justification/EPN/UKPN_EPN_Asset_Plan_Hi_Moddelling_Overview.pdf [Accessed on 10 DECEMBER 2014].

Slack, N. and Brandon-Jones, A. eds. (2012). Operations and Process Management (Principles and Practice for Strategic Impact), 3rd Edition. Harlow, Essex: Pearson Education Ltd.
Slegg, B.; Faiers, S.; 2014. ‘Stage 2 Review of Distribution Network Operators’ performance during the December 2013 storms’. Ofgem. [Online] Available at: https://www.ofgem.gov.uk/ofgem- publications/88914/energy people stage2stormreviewreportappendicesv1.0.pdf [Access on 22 DECEMBER 2014].
News.com.au. [Online] Available at: http://www.news.com.au/world/australian-ceo-basil-scarsella- of-uk-power-networks-leaves-300000-brits-in-dark/story-fndir2ev-1226798479712 [Access on 21 DECEMBER 2014].

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