benchmarking an introduction to an approach within the context of the south african electricity...

BENCHMARKING

An Introduction to an Approach

within the context of the South African Electricity Distribution sector

Prepared and Presented by

Nigel Waters

AMEU 60th Convention

ICC Durban

17 October 2007

17 October 2007 Slide 2

Presentation Content

Introduction

What is Benchmarking?

An International approach within the Utility Industry

Benchmarking

Best Practices

A Way forward

EDI Holdings role


Introduction


What is Benchmarking in the Utility context?A basic definition

Measure performance against comparable utilities, using a predetermined set of indicators to understand relative

performance and initiate performance improvement through pursuit of applicable best practices


Benchmarking and Best Practices Introductory Premise

• Benchmarking performance against other similar business can provide some insights

• Best Practices offer a perspective of what the leaders in the industry internationally are doing

• The primary objection to comparing performance and practices against others is the argument of uniqueness. However:

• International utilities are remarkably similar in terms of business operations fundamentals

• Panels can be compiled to factor in certain differentiators such as geography, customer base, customer mix, density, climate, governance structure etc


The Context

A Benchmarking and Best Practices approach as applied internationally in the Utility Industry


Approaches to Measure Performance and Facilitate Improvement within the Benchmarking context

Although Companies use different approaches to understand and improve performance, two fundamental elements reflect consistently:

Set baseline performance metrics for the corporation and individual business units

Performance Metrics - a set of quantitative measures/targets that are

representative of the business results desired. A set of comprehensive

metrics would be balanced across all aspects of the business, commonly

referred to as a balanced scorecard, including customer/service levels,

costs, reliability and safety

Measured and Tracked Performance Levels

Rigorous Performance Management

Identify and implement industry best practices that may be appropriate to a particular company and helpful in improving performance

Best Practices - are business practices or methods that contribute to

superior performance. It is a relative term that usually describes

innovative business practices or methods that have been identified during a

benchmarking study.


The approach needs to have balance and context (Balanced Scorecard)

Vision Vision and and

StrategyStrategy

Vision Vision and and

StrategyStrategy

Internal Business ProcessObjectives Measures Targets Initiatives

“To satisfy our shareholders and customers, what business processes must we excel at ?”

Learning and GrowthObjectives Measures Targets Initiatives

“To achieve our vision, how will we sustain our ability to change and improve?”

CustomerObjectives Measures Targets Initiatives

“To achieve our vision, how should we appeal to our customers ?”

FinancialObjectives Measures Targets Initiatives

“To succeed financially, how should we appear to our shareholders ?”

Metrics support vision and strategy. Initiatives drive performance when measured.


. . . Across All Aspects of the Utilities Value Chain

Plan the business

Customer Connections

Service and Supply the Network

Operate the

Network

Manage Revenue

Manage Customer

Renew the Business

Manage Fleet Manage Supply Chain Manage Real Estate Manage Office Services

Manage HR Manage IT Manage Legal Manage Regulatory

Provide Operational Support Services

Provide Management Services

Energy Delivery Core Processes

Energy Delivery Support Processes

Other Support Processes

Manage Energy Supply and Delivery

Utilities Value Chain


An approach



Process Model Customer Service/Retail

Field Service• Field Order Management• Change of Account• High Bill Investigation • Res. Meter Installation / Maintenance• Gas Service• Water Service• FS Dispatch• FS Support

Field Service• Field Order Management• Change of Account• High Bill Investigation • Res. Meter Installation / Maintenance• Gas Service• Water Service• FS Dispatch• FS Support

Billing • Regular (includes Pre-Audit, Customer Initiated Exceptions)• Large C/I Billing (Summary, Interval)• Printing/Mailing• Billing Support

Billing • Regular (includes Pre-Audit, Customer Initiated Exceptions)• Large C/I Billing (Summary, Interval)• Printing/Mailing• Billing Support

Contact Center • Contact Center• Bus. Contact Center• Credit Contact Center• Internet/E-mail/Corres./Fax• Contact Center Support

Contact Center • Contact Center• Bus. Contact Center• Credit Contact Center• Internet/E-mail/Corres./Fax• Contact Center Support

Credit & Collections• Account Management (Office)• Field Collection/Disconnect/Reconnect• Field Credit Dispatch• Write-offs• Credit Support

Credit & Collections• Account Management (Office)• Field Collection/Disconnect/Reconnect• Field Credit Dispatch• Write-offs• Credit Support

Metering • Manual Meter Reading• Driving Meter Reading• Remote Meter Reading• Check Reads/Special Reads• Metering Support

Metering • Manual Meter Reading• Driving Meter Reading• Remote Meter Reading• Check Reads/Special Reads• Metering Support

Payment• Payment Processing• Pay Stations/Pay Agents• Payment Support

Payment• Payment Processing• Pay Stations/Pay Agents• Payment Support

Revenue Protection• Meter Tampering/Diversion• Low/No usage (RP generated)• Fraud• Usage on Unlinked Meter (Field)• Revenue Protection Support

Revenue Protection• Meter Tampering/Diversion• Low/No usage (RP generated)• Fraud• Usage on Unlinked Meter (Field)• Revenue Protection Support

Acct Mgmt*• Non-residential account management

Acct Mgmt*• Non-residential account management

Support Processes• IT Support (CIS)• Consumer Affairs• Customer Service Support Group:

Process Management, Training, Executive

Support Processes• IT Support (CIS)• Consumer Affairs• Customer Service Support Group:

Process Management, Training, Executive

Local OfficeLocal Office


Street & Area Lights• Purchase• Installation• Maintenance

Transformer Shop• Purchase• Maintenance

Vegetation Mgmt• Field• Administration

New Business• Design• Service Installation• Line Extensions

Engineering & Design• Planning• Design

Field Construction• New Load• Plant Betterment• Mandatory Relocations• Project/Work Mgmt• Related O&M

Field Maintenance/Operations (excludes Emergency)

• Inspect/Patrol/Test• Planned Programs• Corrective/Reactive Maint.• Field Switching • Project/Work Mgmt

Operations (Dispatch)• Dispatch• Control

Support• Joint Use• Line Locates• Mapping/Records• Shops • IT Technology• Telecommunications• Other

Meters• Purchase• Installation (3–phase)• Maintenance• Associated Services

Emergency• Routine Trouble• Storm Restoration

Administration Supervision/Mgmt Administration Other

Polaris cost model

Process Model Wires


Selecting an Appropriate Approach

The appropriateness of a particular approach depends on the objectives

Performance Metrics

Most appropriate for realizing specific results or characterizing relative performance

Most appropriate for comparative analysis between companies in peer groups

Some examples of commonly used industry metrics are:

Customer response and restoration times

Safety,i.e. recordable incident rate

Transmission and Distribution Expenditures per customer

Maintenance Expenditures per customer

Asset replacement rate

System Average Interruption Duration and Frequency Index (SAIDI/SAIFI)

Customer Average Interruption Duration and Frequency Index (CAIDI/CAIFI)

Staffing levels to customer ratios


Benchmarking Process (Participative Programme)

•Decide Critical Subject Areas•Establish Questions

•Clear Definitions

•Develop Questionnaire

•Verify Data Accuracy •Confirm All Question Interpretations

•Resubmit Incorrect Data

•Present and Discuss Key Findings•Best Practices and Idea Interchange

•Management Engagement•Communication of Critical Results

•Highlight Key Opportunity Areas•Plan and implement


The outcome



Sample overall T&D scorecard

Measure Pg# Mean 1st Q N= Mean 1st Q N= Mean 1st Q N= Pg#

Cost = 40% of Score; Mathematical Weighting: 40%/(6/19)=1.133

T&D Exp'd Per Dist Cust 1 $282 $232 17 $284 $229 29 $259 $223 17 10

T&D Cap Adds Per Dist Cust 20 $179 $131 18 $176 $133 29 $157 $124 17 29

T&D O&M Exp Per Dist Cust 41 $104 $87 17 $108 $85 29 $102 $87 17 50

T&D Expd Per Asset 6 8.12% 7.02% 17 8.50% 7.23% 28 7.72% 6.83% 17 13

T&D Cap Adds Per Asset 23 5.13% 3.93% 17 5.28% 3.99% 28 4.70% 3.76% 17 32

T&D O&M Exp Per Asset 46 2.99% 2.53% 17 3.22% 2.73% 28 3.02% 2.56% 17 53

Reliability = 30% of Score; Mathematical Weighting: 30%/(7/19)=0.729

SAIDI Inc Major Events & Planned Interruptions 202 259.50 94.33 21 176.17 94.30 34 351.17 140.72 20 203

SAIFI Inc Major Events & Planned Interruptions 204 1.51 1.04 21 1.41 0.98 34 1.57 1.14 20 205

CAIDI Inc Major Events & Planned Interruptions 206 163.83 90.28 22 128.20 81.49 33 202.27 96.46 21 207

SAIDI Ex Major Events & Planned Interruptions 209 111.67 64.13 22 106.89 62.72 34 110.91 60.53 21 210

SAIFI Ex Major Events & Planned Interruptions 211 1.20 0.91 22 1.07 0.76 34 1.14 0.89 21 212

CAIDI Ex Major Events & Planned Interruptions 213 91.58 65.80 23 96.22 74.48 33 94.53 69.86 22 214

Trans Contribution To SAIDI 380 8.06 0.00 19 8.38 0.84 24 6.07 1.16 14 381

Customer View = 10% of Score; Mathematical Weighting: 10%/(2/19)=0.850

Percent of Customer Interruptions >= 4 Hours 245 9.9% 4.9% 21 15.3% 7.7% 29

Customers with >3 Interruptions per year 243 11.2% 6.0% 12

Safety = 20% of Score; Mathematical Weighting: 20%/(4/19)=0.850

Lost Time Incident Rate - T&D 423 1.30 0.49 17 1.20 0.48 27 1.03 0.60 11 427

Recordable Incident Rate - T&D 415 3.64 1.89 17 4.14 2.40 27 3.59 2.61 11 419

Lost Time Severity Rate - T&D 431 58.16 20.03 16 51.23 19.39 21 29.15 20.84 9 435

Total Vehicle Incident Rate - T&D 440 8.50 4.73 13 7.56 4.23 21 7.91 6.56 6 444

2004YE2005YE 3-Year Average

Polaris sample reporting – scorecards


Sample overall Customer Service/Retail scorecard

COST Pg # Mean 1st Q N= Mean 1st Q N=* Customer Service Exp Per Adj Customer 1 $47.49 $37.61 25 $48.52 $37.44 29* Customer Service Exp (Ex Sppt Proc) Per Adj Customer 2 $42.25 $34.16 25 $44.26 $34.11 29* Customer Service Exp (Excluding Uncollectibles) Per Adj Customer 4 $38.08 $29.24 25 $40.61 $32.96 29* Customer Service Exp (Ex Uncoll & Sppt Proc) Per Adj Customer 3 $32.84 $24.88 25 $36.35 $27.61 29* Total Contact Ctr Exp Per Adj Customer 438 $8.10 $6.77 25 $8.51 $6.63 30* Total Meter Reading Exp Per Adj Customers 804 $7.88 $5.46 25 $7.44 $5.12 30* Total Field Service Exp Per Adj Customer 1006 $5.25 $2.50 24 $7.32 $3.20 29* Total Billing Exp Per Adj Customers 1206 $5.93 $4.66 24 $6.14 $5.13 30* Total Payment Services Expense per Adj. Customer 1364 $1.48 $0.92 25 $2.30 $1.23 29* Local Office Exps per Adj Customers 1438 $2.46 $0.21 16 $2.44 $0.70 25* Total Credit & Collections Exp (Inc Uncollectibles) per Adj. Customer 1475 $13.72 $6.58 23 $12.10 $7.67 29* Uncollectible Exp Per Adj Customer 1505 $9.41 $4.20 25 $7.92 $3.92 30* Total Revenue Protection Expense per Adj. Customer 1712 $0.62 $0.35 21 $0.56 $0.32 26* Total CS Support Process Per Adj Customers 55 $5.46 $3.28 24 $4.43 $1.69 27

SERVICE LEVELS* JD Power Overall Satisfaction Score - Electric Res'l 314 98.00 102.00 17 99.14 104.00 27* JD Power Overall Satisfaction Score - Gas Res'l 316 100.67 103.00 6 99.67 105.25 18* % of Calls Answered by CSRs Within 30 Seconds 573 69.1% 77.8% 17 69.8% 77.1% 27* % of Calls Abandoned Including Major Events 584 5.89% 3.00% 25 4.97% 3.10% 30* Overall Meter Reading Inaccuracy 832 0.30% 0.01% 18 0.30% 0.01% 29* % Reads Performed within the Scheduled Meter Read Window 858 97.47% 99.99% 24* AMR Missed Meter Reads 848 0.34% 0.00% 6 0.44% 0.02% 22* Bill Inaccuracy-% Bills Adj. After Mailing To Customer 1291 0.65% 0.19% 18 0.71% 0.15% 27

SAFETY* Lost Time Incident Rate - All CS 260 0.97 0.28 22 1.66 0.29 27* OSHA Recordable Incident Rate - All CS 267 3.57 1.95 21 3.54 0.99 27

Vehicular Accident Rate per 1,000,000 Miles - All CS 271 6.18 4.35 11 7.07 4.19 20

* Included in total score and process score

2005YE 2004YE


Best Practices



Identify Best PracticeCandidates

Identify Best PracticeCandidates

Compare Frequency of Practices

Between the “Best”

and the “Rest”

Compare Frequency of Practices

Between the “Best”

and the “Rest”

Identify andAnalyze

Practices That

“Make a Difference”

Identify andAnalyze

Practices That

“Make a Difference”

Best Practice Checklist

“Strawman”

Best Performer Presentations

Reality

Validate &

Update Best

PracticeChecklist

Validate &

Update Best

PracticeChecklist

Validate Best Performers

AnalyzePractices

“In Search of Best Practices . . .”

Best Practices candidates are compared to the practices of best performers.


Best Practice Categorisation

The selection of best practices involves looking for emerging practices which have potential advantage, but which are not yet fully adopted. Timing is critical.EXECUTION of practices - understanding the difference between Practices that are actual vs. perceived and gaining significant improvements via rigorous measurement and focusing on results……

% adoption

rate

Advantage over other practices

100% Standard Practices

Emerging Practices Practices w/ Barriers to Adoption

Outmoded Practices


Performance Metrics that focus on results rather than

activity, and metrics that have a clear line of sight from the

executive branch to the field manager should be the preferred

approach.

The performance metrics should be balanced so as to avoid

sub-optimization, i.e. balance cost goals/metrics with customer

goals

The use of Best Practices as insight on how to improve

business performance makes good business sense.

The use of Best Practices to establish performance

expectations is not advisable, as the solution may not fit a

particular business environment

In summary…


A Way Forward


Industry Aspires to…

A consolidated industry capitalising on economies of scales

Financially viable distributors

Competitive electricity distribution utilities

Rationalised and competitive tariffs

Efficient provision of service

Improved reliability of supply

Universal Access

Cross pollination of best practices between utilities


Towards a solution

Participation in a benchmarking initiative and the implementation of

learning's and best practices is one of the strategies that can support

the achievement of these goals


EDI Holdings approach and commitment to a way forward

EDI Holdings has the accountability to restructure the industry to ensure that the Blue

Print objectives are met and that performance in general is improved

As part of this accountability EDI Holdings will provide industry leadership in the

Benchmarking approach and programme for the EDI:

Develop a set of metrics that set a standard for the industry and which provide a

balanced insight into industry performance

Establish a baseline of current performance across the Electricity Distribution Industry

Facilitate participation of Legacy entities in a Benchmarking programme in the period

leading up to RED creation and ensure RED participation in the programme thereafter

Provide the opportunity for immediate performance improvement based on outcomes

and best practice application

EDI Holdings will work with all stakeholders to implement a programme that meets the

needs of the industry and that of individual stakeholders


THANK YOUTHANK YOUTHANK YOUTHANK YOU

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