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Adaptation of Operations Management in Distribution Companies: Challenges & Focus Areas from 1955-2008

Explore the changing landscape of operations management in distribution companies over the past decades, focusing on key challenges and areas of focus from 1955 to 2008. Learn about the evolution of strategies in response to regulatory changes, customer expectations, infrastructure management, and energy efficiency. Discover how businesses balance safety, cost management, and regulatory compliance while striving for increased income over time.

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Adaptation of Operations Management in Distribution Companies: Challenges & Focus Areas from 1955-2008

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  1. What is Operations Management @ NU $1,311M Cap 4 Distribution Companies 32,000 Interruptions PSNH 40,000 miles of infrastructure 2 + million customers WMECo CL&P & YG 67,000 Trouble Calls $428M Exp Transmission

  2. Diagram of Integrated Electric System Transformer12,500 – 25,000v Transmission Lines115,000 – 345,000 v Substation Electric Generation Distribution Lines2,400 to 34,500 v Residential User120 - 240 v Commercial User120 – 480 v Industrial User120 – 34,500 v

  3. Diagram of Integrated Gas System Gate

  4. Key Macro-Level Operations Management Functions @ NU Planning Engineering Design Maintenance Customer Service Construction Operations • Many other support/logistics functions help make this work e.g…… • Purchasing/inventory/stores • Human Resources • Accounting • IT • etc., etc.

  5. Key Operations Management Terminology Peak Demand (kW) Customer Usage (kWHr) Delivery Efficiency Delivery Cost Delivery Revenues Capital Operations and Maintenance Expense Customer Satisfaction

  6. How Does Operations ManagementFit Into NUBusiness/Financial Model ? Revenues - Expenses = Net Income Operations Management Sales X rates PSNH & WMECo + + “other” - = YG + CL&P + Transmission Operations Expenses Maintenance Expenses Capital Expenses Other Expenses

  7. NU Uses Operational Performance Indicators (KPIs) to Measure and Drive Operations Management • High level KPIs are consistent across Operating Companies • 4 Main Areas of Focus • Safety • Operations • Customer • Financial • Total of 71 KPIs • Targets set annually …. results reviewed monthly • Lower level KPIs exist with Operating Companies and functions • Short term and long term corrective actions expected where performance falls below targets.

  8. NU Operational KPIs/February 2008 CL&P Yankee WMECo PSNH Transmission Utility Services Consolidated

  9. Strategic Priority An Individual KPI (i.e. SAIDI)

  10. Each Year “Operational Plans” are Developed and Executed at NU by Operating Company/Business Unit to Manage Operations Performance 5 Year Enterprise Plan 1 Year Operational Plan Execution of Operational Plan • Spring development • 5 Year focus • Strategic/major initiatives • 5 year initiatives to • identify major risks • address business environment changes • major KPI trend issues • Fall development • “Next Year” focus • Compatible with 5 year Enterprise Plan • Tactical • Set Operational KPIs • Initiatives to achieve KPIs

  11. CL&P Main Priorities for 2008

  12. Major Events & Changes for Electric Utilities in New England/Last 50 Years Energy Efficiency Emphasis Power Pool Development/FERC Influence Intensified “D” regulation Mostly stand alone utilities M & As Nuclear Construction No Nuclear Construction Integrated G & T planning T planning only Changes in Utility Environment Vertically integrated utilities Utilities Segmented ? Dropping energy costs Rising energy costs High sales growth Low sales growth Year 1955 1965 1967 1973 1979 1985 1990 2003 2008 Major Events Northeast (NU Oil 3 Mile Hurricane Hurricane Northeast Global Blackout 1 Formed) Embargo Island Gloria Bob, Blackout 2 Warming/ Restructuring RGGI

  13. So ….. Operations Management Areas of Focus Have Had to Change With The Times (1955 – 2008) • Adapt to growing influence of power pools and FERC • Adapt to lack of integrated generation and transmission planning • Cope with increasing regulation (especially D segment) • Higher total energy costs = higher customer expectations • Manage an aging infrastructure (post WWII expansion) • Control delivery costs to offset higher energy costs and slower revenue growth • Take the lead in energy efficiency • Become “players” in legislative/regulatory decisions

  14. Key Operations Management Challenges Facing Distribution Utilities Today • Safety • Meeting increasing customer performance expectations • Managing an aging distribution delivery infrastructure • Managing increasing costs between rate cases • Managing areas of environmental risk • Planning for worker attrition • Reacting to changing laws and regulations • The goal is to accomplish items above while meeting Shareholder expectations for increased income over time

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