Utility Vegetation Management (UVM) has long represented one of the greatest opportunities for electric utilities. Not only is it the largest preventive maintenance expense in many of our nation’s utilities, but it is often the greatest contributor to system reliability and outage management. Electric utilities are now looking towards optimizing how they approach the management of their Vegetation Management programs primarily due to increased regulatory scrutiny, deregulation, mergers and acquisitions and a general discontent by executive management of the overall performance of their current programs. Traditional Vegetation Management operational practices have demonstrated to be ineffective and are rapidly becoming obsolete. Electric utilities are now focusing on leveraging lessons learned and practices found both in and outside the utility in pursuit of significant bottom line impact on both cost and reliability.
The Connection between UVM and System Reliability
Federal and state regulators and utility customers have long been frustrated by the lack of consistent and appropriate reliability performance results. Federal and state agencies have been proactive in their attempts to drive increased electric utility reliability performance. The two primary areas in which these agencies are currently focusing are that of standard development and Performance Based Regulation (PBR). UVM is now being looked at as the major contributing factor in both preventing and managing utility reliability performance.
As most utility managers are well aware, August 14, 2003 represented the worst blackout on record for the U.S. and Canadian utility industries. According to the U.S. – Canada Power System Outage Task Force Final Blackout Report, the outage that occurred that day affected an area with an estimated 50 million people and 61,800 megawatts (MW) of electric load in eight states and the Canadian province of Ontario. The total cost estimates in the U.S. ranged between $4 billion and $10 billion dollars. In the Final Blackout Report, the U.S. – Canada Power System Outage Task Force identified four major outage root cause areas that included inadequate tree-trimming.
The Creation of UVM Standards
As a result of the blackout of 2003, the North American Electric Reliability Council (NERC) worked with electric utility industry experts to develop a Transmission Vegetation Management Program standard. Standard FAC-003-1 - Transmission Vegetation Management Program was adopted and is currently proposed to be effective in the second quarter of 2006.
In January 2005, the Edison Electric Institute (EEI) commissioned Davies Consulting, Inc. (DCI) to conduct The State of Reliability Regulation in the United States study detailing reliability regulation in the United States. The purpose of the study was to investigate the current state of regulation and assess the future of reliability regulation in the U.S. Through its research DCI determined that thirty-nine states and the District of Columbia have at least reliability reporting as a minimum requirement. DCI sees a shift from Return on Equity PBR to Quality of Service PBR and focus on major event-related standards as an emerging trend. Research suggested that regulators will continue to focus on PBR penalties and that Reliability Centered Maintenance may become another area of focus for regulators. According to DCI, electric utilities are returning “back to the basics” driven by heightened regulator emphasis on reliability and quality of service. DCI states, “Utilities are focusing management and financial capital on the core business of delivering electricity, which includes improving customer information systems and developing more strategic infrastructure–related reliability investments. Furthermore, utilities have initiated strategic business process improvement initiatives aimed at sustainable cost reduction and service improvement.” Reliability improvements will be essential, both from a regulatory compliance perspective, and now, due to PBR, real bottom line shareholder returns.
It is natural that UVM standards would be given much needed attention. That said, many within the electric utility industry believe that national standards and PBR will in itself drive greater UVM reliability performance. The premise being that the new PBR standards will in turn drive greater investment in UVM and the resulting improvements in system reliability.
Intuitively, this makes sense. Over the years, conventional thinking has led many regulators and executives to believe that increased investment leads to higher performance. However, there exists a clear tradeoff between spending and effectiveness. If we need to improve performance, we must be willing to make the tough decision to make UVM spending and investment the priority.
The consistency of UVM investment has been difficult to maintain. UVM programs work best when they are properly funded over a sustained period of time. Historically however, UVM program budgets are often cut drastically at the worst of possible times, in order to meet company earnings per share commitments or other corporate priorities. This creates an interesting dilemma- how to maintain appropriate funding to meet new reliability standards, amidst numerous demands for corporate resources.
By shifting to an impact based VM investment strategy, utilities can capture the majority of reliability improvements at significantly lower spending levels. This is demonstrated in figure 1.
From Traditional Budgets to Strategic Spending
While there is little doubt that increased funding will drive better reliability results, it presents a serious problem for utilities from an operational and cash flow perspective. Rate restrictions and pressure from shareholders will likely prevent us from being able to fund these programs at levels necessary to remove reliability risk. One need only to look at the investment required to bring the New Orleans levee systems to Category 5 protection levels following Katrina. Investment will never be unconstrained. A better solution is needed if we are to balance reliability needs with resource constraints that will always be present. Leading organizations have begun using Asset Management principles to better tie our UVM budget to their strategic impact on system reliability.
Asset Management principles, in short, are all about how to best make use of a company’s strategic assets. Originally applied in other capital intensive industries such as Airlines, Petrochemical, and Nuclear Power, Asset Management has been a major force in the strategic deployment of capital. Electric utilities are only now beginning to understand and apply these principles to the cost and reliability of its asset base. At the core of best practice asset management is the process of developing an "asset strategy" and corresponding "investment plan". It requires the enterprise to define and understand the role of each mission-critical asset in terms of downstream asset performance and return on investment (ROI). Each investment is prioritized across key risk factors and performance drivers, and given associated prioritization based on the investment's ability to drive those results. Rather than make decisions based on historical spending, investments are tied to specific risks that will have the biggest impact on system wide results.
There are several progressive electric utilities who have embraced Asset Management based decision modeling to determine appropriate long-term UVM funding requirements by linking cost to reliability. One performance-driven budgeting Asset Management methodology and tool TTM™ developed by Davies Consulting, Inc., Chevy Chase, MD has been implemented at companies such as Duke, Northeast Utilities and OG&E. These companies utilize TTM™ to determine appropriate UVM program funding levels based on required reliability performance thus driving long-term funding stability through quantifiable data analysis outputs. TTM™ allows companies to prioritize work scope based on expected reliability; provide rational for long-term funding requirements; justify long-term business planning objectives; and ultimately drive UVM program performance to deliver the “biggest bang for the buck”. For example, a utility can use its actual historical cost and reliability data to develop statistically valid probability curves to determine when each specific circuit must be maintained to meet desired levels of reliability performance. Each circuit is prioritized and ranked based on its expected reliability payback resulting in annual work scope business plans. Figure 2 illustrates the TTM™ cost and reliability probability curves.
Tracking and Managing Performance
The UVM industry often lacks an appropriate Performance Management strategy that is adequate to drive performance in key business areas. Many UVM programs have performance metrics but what many lack is an integrated strategy linked tightly to corporate objectives. The new UVM business environment will be driven by increased utility executive, regulator and customer stakeholder performance expectations focused on reliability. Performance Management is a significant critical success factor in managing your UVM Program. The case for action to improve UVM Performance Management can be demonstrated in figure 3.
The ability of UVM programs to meet key stakeholder performance expectations consistently in the future will be based on a few performance management critical success factors. First, it is imperative that all UVM performance metrics be vertically linked to all levels of the organization, from corporate goals down through the field work force. Second, there must be a consistent, efficient and cost effective performance management process put into place and driven by fully connected data sources and consistent data analysis and reporting. This has been a historical challenge for the UVM industry. In 2005, Everest in partnership with Cyndrus, a subsidiary of NOLA Computer Services (NOLA), New Orleans, LA. and ePerformance Group International, LLC, (ePGI) New Orleans, LA. released Everest Performance, Analysis and Report (EPAR™) system. The EPAR™ system is a state of the art performance management system focused on Utility Vegetation Management. The technology used for the EPAR™ system is currently being used by the federal government to manage government performance based contracts. This system and associated strategy has the potential to drive UVM performance management to a higher level within the industry. Figure 4 shows how performance management systems such as EPAR™ can assist utilities in driving UVM cost performance.
Additionally, it is critical that vendor performance based contracts clearly links performance to compensation. This fact is often overlooked and not easily accomplished due to the changing annual work scope and associated budget. UVM programs must also remain flexible to periodically adjust metrics and their baselines based on changing business conditions and new information learned by both utility and vendor. The performance management process must be viewed as collaborative and evergreen in that the UVM business environment and performance objectives must be continuously assessed and refined.
Finally, one of greatest UVM performance management improvement opportunities is the ability to measure and assess operational performance through a benchmarking methodology that utilizes consistent and normalized data. Today’s UVM industry benchmarking processes are inherently flawed and produce poor comparative analysis primarily due to the inability to normalize data. An example of how these UVM benchmarking challenges are being overcome is demonstrated by ePGI. ePGI has developed BenchmarkCommunities, the next generation of performance management benchmarking with the development of a state-of-the-art online technology, enabling organizations worldwide instant access to performance data, information, reliable comparative databases and confidential communication to industry peers and thought leaders. It is clear that UVM performance management must include an integrated comprehensive strategy that includes appropriate systems and normalized benchmarking to assist electric utilities in driving greater UVM performance.
Project Management the Driver to Increase UVM Operational and Management Performance
One of the greatest barriers of cost effective UVM reliability performance enhancement is that of dependency on traditional UVM industry practices by UVM professionals. Many UVM programs across the country continue to operate with complex organizations delivering inconsistent performance. The key drivers in eliminating this UVM program complexity is the institution of strict Project Management practices and methodologies in conjunction with best practices found outside the UVM industry.
During 2005, Florida Power & Light’s (FPL) Distribution UVM program underwent a rigorous Project Management Maturity Assessment (PMMA) that was led by Project Management Solutions, Havertown, PA and Everest Management Consultants, Inc., Doylestown, PA. This UVM program PMMA was the first of its kind in the nation and established a defined action plan to enhance system reliability and vendor productivity while reducing overall UVM program costs.
The UVM industry can look to the nuclear industry for the value of implementing best practice performance managment. During the 1990’s, nuclear plant outage and maintenance duration times were significantly reduced to record number of days by instituting best practices including: Project Management; Asset Management; Cost Accounting; Performance Management; Vendor Partnerships; and First Time Quality. UVM programs must break through the traditional operational and management approches in order to perform at greater performance levels.
Next issue we will explore the UVM industry and the application of Project Management.
What does the Future Have in Store for UVM Reliability Performance?
Improving UVM industry reliability performance is complex. It involves eliminating traditional barriers, driving performance through Asset Management, incorporating new Project Management best practices and enhancing Performance Management systems and strategies. Many people thought that the 2003 Blackout would radically change the UVM Industry and serve as the catalyst for improved reliability. However, to date this has not been the case. If fact, according to the NERC third quarter of 2005 Vegetation Management Report (fourth quarter reporting is not available at the time of this writing), the following fifteen vegetation-related outages were reported for 200 kV and higher transmission lines can be viewed in figure 5:
Despite the recent UVM industry transmission reliability performance and specific distribution reliability challenges facing many utilities within their respective states, the industry remains vigilant. The UVM industry is working hard to meet the new UVM performance paradigm. Many have developed UVM programs that if given proper funding and governmental agency support will perform to the expectations of their greatest critics. However, it must be clear that national standards and PBR focused on improving electric reliability will not and can not be successful if implemented alone. Elimination of each UVM industry barrier identified represents the critical path to success. In closing, we remain cautiously optimistic that brighter days are ahead for the UVM Industry. In the end, if the UVM industry has the ability to successfully overcome its traditional challenges and is provided the support from key stakeholders the industry will meet the electric reliability challenges it is currently facing. In the next issue of Electric Energy T&D, we will explore how best practice Project Management applications will drive future UVM industry performance improvement.
About the Authors
Rick Hollenbaugh rick.hollenbaugh@everestmci.com
is the founder and President of Everest Management Consultants, Inc., (www.everestmci.com) an organization specializing in progressive business-driven electric Utility Vegetation Management solutions.
Bob Champagne, rchampagne@epgintl.com
is CEO of ePerformance Group International, LLC, (www.epgintl.com) an organization specializing in benchmarking, performance management, and best practice discovery. Its flagship product, BenchmarkCommunities has been used by several leading edge utility organizations in managing their UVM Programs.
The Connection between UVM and System Reliability
Federal and state regulators and utility customers have long been frustrated by the lack of consistent and appropriate reliability performance results. Federal and state agencies have been proactive in their attempts to drive increased electric utility reliability performance. The two primary areas in which these agencies are currently focusing are that of standard development and Performance Based Regulation (PBR). UVM is now being looked at as the major contributing factor in both preventing and managing utility reliability performance.
As most utility managers are well aware, August 14, 2003 represented the worst blackout on record for the U.S. and Canadian utility industries. According to the U.S. – Canada Power System Outage Task Force Final Blackout Report, the outage that occurred that day affected an area with an estimated 50 million people and 61,800 megawatts (MW) of electric load in eight states and the Canadian province of Ontario. The total cost estimates in the U.S. ranged between $4 billion and $10 billion dollars. In the Final Blackout Report, the U.S. – Canada Power System Outage Task Force identified four major outage root cause areas that included inadequate tree-trimming.
The Creation of UVM Standards
As a result of the blackout of 2003, the North American Electric Reliability Council (NERC) worked with electric utility industry experts to develop a Transmission Vegetation Management Program standard. Standard FAC-003-1 - Transmission Vegetation Management Program was adopted and is currently proposed to be effective in the second quarter of 2006.
In January 2005, the Edison Electric Institute (EEI) commissioned Davies Consulting, Inc. (DCI) to conduct The State of Reliability Regulation in the United States study detailing reliability regulation in the United States. The purpose of the study was to investigate the current state of regulation and assess the future of reliability regulation in the U.S. Through its research DCI determined that thirty-nine states and the District of Columbia have at least reliability reporting as a minimum requirement. DCI sees a shift from Return on Equity PBR to Quality of Service PBR and focus on major event-related standards as an emerging trend. Research suggested that regulators will continue to focus on PBR penalties and that Reliability Centered Maintenance may become another area of focus for regulators. According to DCI, electric utilities are returning “back to the basics” driven by heightened regulator emphasis on reliability and quality of service. DCI states, “Utilities are focusing management and financial capital on the core business of delivering electricity, which includes improving customer information systems and developing more strategic infrastructure–related reliability investments. Furthermore, utilities have initiated strategic business process improvement initiatives aimed at sustainable cost reduction and service improvement.” Reliability improvements will be essential, both from a regulatory compliance perspective, and now, due to PBR, real bottom line shareholder returns.
It is natural that UVM standards would be given much needed attention. That said, many within the electric utility industry believe that national standards and PBR will in itself drive greater UVM reliability performance. The premise being that the new PBR standards will in turn drive greater investment in UVM and the resulting improvements in system reliability.
Intuitively, this makes sense. Over the years, conventional thinking has led many regulators and executives to believe that increased investment leads to higher performance. However, there exists a clear tradeoff between spending and effectiveness. If we need to improve performance, we must be willing to make the tough decision to make UVM spending and investment the priority.
The consistency of UVM investment has been difficult to maintain. UVM programs work best when they are properly funded over a sustained period of time. Historically however, UVM program budgets are often cut drastically at the worst of possible times, in order to meet company earnings per share commitments or other corporate priorities. This creates an interesting dilemma- how to maintain appropriate funding to meet new reliability standards, amidst numerous demands for corporate resources.
By shifting to an impact based VM investment strategy, utilities can capture the majority of reliability improvements at significantly lower spending levels. This is demonstrated in figure 1.
From Traditional Budgets to Strategic Spending
While there is little doubt that increased funding will drive better reliability results, it presents a serious problem for utilities from an operational and cash flow perspective. Rate restrictions and pressure from shareholders will likely prevent us from being able to fund these programs at levels necessary to remove reliability risk. One need only to look at the investment required to bring the New Orleans levee systems to Category 5 protection levels following Katrina. Investment will never be unconstrained. A better solution is needed if we are to balance reliability needs with resource constraints that will always be present. Leading organizations have begun using Asset Management principles to better tie our UVM budget to their strategic impact on system reliability.
Asset Management principles, in short, are all about how to best make use of a company’s strategic assets. Originally applied in other capital intensive industries such as Airlines, Petrochemical, and Nuclear Power, Asset Management has been a major force in the strategic deployment of capital. Electric utilities are only now beginning to understand and apply these principles to the cost and reliability of its asset base. At the core of best practice asset management is the process of developing an "asset strategy" and corresponding "investment plan". It requires the enterprise to define and understand the role of each mission-critical asset in terms of downstream asset performance and return on investment (ROI). Each investment is prioritized across key risk factors and performance drivers, and given associated prioritization based on the investment's ability to drive those results. Rather than make decisions based on historical spending, investments are tied to specific risks that will have the biggest impact on system wide results.
There are several progressive electric utilities who have embraced Asset Management based decision modeling to determine appropriate long-term UVM funding requirements by linking cost to reliability. One performance-driven budgeting Asset Management methodology and tool TTM™ developed by Davies Consulting, Inc., Chevy Chase, MD has been implemented at companies such as Duke, Northeast Utilities and OG&E. These companies utilize TTM™ to determine appropriate UVM program funding levels based on required reliability performance thus driving long-term funding stability through quantifiable data analysis outputs. TTM™ allows companies to prioritize work scope based on expected reliability; provide rational for long-term funding requirements; justify long-term business planning objectives; and ultimately drive UVM program performance to deliver the “biggest bang for the buck”. For example, a utility can use its actual historical cost and reliability data to develop statistically valid probability curves to determine when each specific circuit must be maintained to meet desired levels of reliability performance. Each circuit is prioritized and ranked based on its expected reliability payback resulting in annual work scope business plans. Figure 2 illustrates the TTM™ cost and reliability probability curves.
Tracking and Managing Performance
The UVM industry often lacks an appropriate Performance Management strategy that is adequate to drive performance in key business areas. Many UVM programs have performance metrics but what many lack is an integrated strategy linked tightly to corporate objectives. The new UVM business environment will be driven by increased utility executive, regulator and customer stakeholder performance expectations focused on reliability. Performance Management is a significant critical success factor in managing your UVM Program. The case for action to improve UVM Performance Management can be demonstrated in figure 3.
The ability of UVM programs to meet key stakeholder performance expectations consistently in the future will be based on a few performance management critical success factors. First, it is imperative that all UVM performance metrics be vertically linked to all levels of the organization, from corporate goals down through the field work force. Second, there must be a consistent, efficient and cost effective performance management process put into place and driven by fully connected data sources and consistent data analysis and reporting. This has been a historical challenge for the UVM industry. In 2005, Everest in partnership with Cyndrus, a subsidiary of NOLA Computer Services (NOLA), New Orleans, LA. and ePerformance Group International, LLC, (ePGI) New Orleans, LA. released Everest Performance, Analysis and Report (EPAR™) system. The EPAR™ system is a state of the art performance management system focused on Utility Vegetation Management. The technology used for the EPAR™ system is currently being used by the federal government to manage government performance based contracts. This system and associated strategy has the potential to drive UVM performance management to a higher level within the industry. Figure 4 shows how performance management systems such as EPAR™ can assist utilities in driving UVM cost performance.
Additionally, it is critical that vendor performance based contracts clearly links performance to compensation. This fact is often overlooked and not easily accomplished due to the changing annual work scope and associated budget. UVM programs must also remain flexible to periodically adjust metrics and their baselines based on changing business conditions and new information learned by both utility and vendor. The performance management process must be viewed as collaborative and evergreen in that the UVM business environment and performance objectives must be continuously assessed and refined.
Finally, one of greatest UVM performance management improvement opportunities is the ability to measure and assess operational performance through a benchmarking methodology that utilizes consistent and normalized data. Today’s UVM industry benchmarking processes are inherently flawed and produce poor comparative analysis primarily due to the inability to normalize data. An example of how these UVM benchmarking challenges are being overcome is demonstrated by ePGI. ePGI has developed BenchmarkCommunities, the next generation of performance management benchmarking with the development of a state-of-the-art online technology, enabling organizations worldwide instant access to performance data, information, reliable comparative databases and confidential communication to industry peers and thought leaders. It is clear that UVM performance management must include an integrated comprehensive strategy that includes appropriate systems and normalized benchmarking to assist electric utilities in driving greater UVM performance.
Project Management the Driver to Increase UVM Operational and Management Performance
One of the greatest barriers of cost effective UVM reliability performance enhancement is that of dependency on traditional UVM industry practices by UVM professionals. Many UVM programs across the country continue to operate with complex organizations delivering inconsistent performance. The key drivers in eliminating this UVM program complexity is the institution of strict Project Management practices and methodologies in conjunction with best practices found outside the UVM industry.
During 2005, Florida Power & Light’s (FPL) Distribution UVM program underwent a rigorous Project Management Maturity Assessment (PMMA) that was led by Project Management Solutions, Havertown, PA and Everest Management Consultants, Inc., Doylestown, PA. This UVM program PMMA was the first of its kind in the nation and established a defined action plan to enhance system reliability and vendor productivity while reducing overall UVM program costs.
The UVM industry can look to the nuclear industry for the value of implementing best practice performance managment. During the 1990’s, nuclear plant outage and maintenance duration times were significantly reduced to record number of days by instituting best practices including: Project Management; Asset Management; Cost Accounting; Performance Management; Vendor Partnerships; and First Time Quality. UVM programs must break through the traditional operational and management approches in order to perform at greater performance levels.
Next issue we will explore the UVM industry and the application of Project Management.
What does the Future Have in Store for UVM Reliability Performance?
Improving UVM industry reliability performance is complex. It involves eliminating traditional barriers, driving performance through Asset Management, incorporating new Project Management best practices and enhancing Performance Management systems and strategies. Many people thought that the 2003 Blackout would radically change the UVM Industry and serve as the catalyst for improved reliability. However, to date this has not been the case. If fact, according to the NERC third quarter of 2005 Vegetation Management Report (fourth quarter reporting is not available at the time of this writing), the following fifteen vegetation-related outages were reported for 200 kV and higher transmission lines can be viewed in figure 5:
Despite the recent UVM industry transmission reliability performance and specific distribution reliability challenges facing many utilities within their respective states, the industry remains vigilant. The UVM industry is working hard to meet the new UVM performance paradigm. Many have developed UVM programs that if given proper funding and governmental agency support will perform to the expectations of their greatest critics. However, it must be clear that national standards and PBR focused on improving electric reliability will not and can not be successful if implemented alone. Elimination of each UVM industry barrier identified represents the critical path to success. In closing, we remain cautiously optimistic that brighter days are ahead for the UVM Industry. In the end, if the UVM industry has the ability to successfully overcome its traditional challenges and is provided the support from key stakeholders the industry will meet the electric reliability challenges it is currently facing. In the next issue of Electric Energy T&D, we will explore how best practice Project Management applications will drive future UVM industry performance improvement.
About the Authors
Rick Hollenbaugh rick.hollenbaugh@everestmci.com
is the founder and President of Everest Management Consultants, Inc., (www.everestmci.com) an organization specializing in progressive business-driven electric Utility Vegetation Management solutions.
Bob Champagne, rchampagne@epgintl.com
is CEO of ePerformance Group International, LLC, (www.epgintl.com) an organization specializing in benchmarking, performance management, and best practice discovery. Its flagship product, BenchmarkCommunities has been used by several leading edge utility organizations in managing their UVM Programs.
