A D V EE RR TT II SS E M E N T TAKE BUDGET OUT OF PROJECTS, [ C A S E S T U D Y ] NOT PROJECTS OUT OF THE BUDGET The best way to balance all these disparate issues is by using a rigorous <strong>asset</strong> <strong>management</strong> approach to select the best matching set of programs and strategies, says KEMA’s Willis. “But the key point, based on the results I’ve seen, is that you can’t ignore equipment aging trends if you’re trying to do effective <strong>asset</strong> <strong>management</strong>. The two go hand in hand.” Zac Hager, Strategy and Total Quality Engineer with OG&E’s Asset Management team, notes that KEMA helped his team apply two other features that further improve <strong>asset</strong> <strong>management</strong>. “First, we think in terms of three budget areas, investment, maintenance, and operations, rather than two.” On KEMA’s advice, the traditional O&M area is viewed as two separate spending areas that buy different types of performance. Inspection and maintenance extend equipment lifetime and lower failure rate. Operations budget improves response and restoration to lessen the effects of escalating failure rates. “It can make better business sense to prepare and be able to react well,” he says, “than to try to lower breakdown rates. The key, always, is to balance and target spending and resources across those areas well. Second, OG&E’s <strong>asset</strong> <strong>management</strong> framework uses an optionbased approach which allows it create extra leverage as it balances activities and investment areas.” KEMA’s Willis notes that several utilities have reported rather disappointing results from <strong>asset</strong> <strong>management</strong>. “In every case they were using an <strong>asset</strong> <strong>management</strong> portfolio method to prioritize or optimize projects defined and scoped in the traditional manner. That just doesn’t work. If the traditional project paradigm goes in, traditional results come out. You have to set up a system that will take budget out of projects, not projects out of the budget.” The secret is creating a set of flexible, performance-based project options guidelines to replace the traditional engineering standards approach to the assessment of needs and specification of project design. “There are always several ways to do any project,” Willis adds, each with different costs and different results. Halfmeasures sometimes deliver far more than half results, and are a preferred approach. Other times ‘gold-plating’ will be justified based on what it brings. “The key is to let the portfolio optimization see those options, their cost and results differences, and make the decision about how to best balance all options from all considerations.” Do that, Willis says, and the utility will get the big impacts its upper <strong>management</strong> is expecting. Doug Patterson, Senior Planner at OG&E, and project manager for the effort, reports that a third of the project involved determining how to construct project and program options objectively, comprehensively, and efficiently. “Absolutely nothing can be untouchable when it comes to cost reduction. Remember, if you’re taking money from one place it’s because you want spend it where it will provide more value. It’s all to make the greatest contribution to overall company business goals.” OG&E also uses its portfolio optimization to select the penetration of maintenance and technology programs. “A big part of our planned performance improvement is based on what you might call optimized cherry picking,” Patterson adds. “We don’t have to inspect all breakers if we can target the ones that need service. Some feeder line switches produce six times the ‘bang’ when you automate them compared to others.” Patterson’s team entered such programs in targeted 10 percent increments and let the optimization determine penetration and timing. “The key is to let the portfolio optimization see those options, their cost and results differences, and make the decision about how to best balance all options from all considerations.” GOOD RESULTS “This project has gone a long way toward helping OG&E prepare for the future,” OG&E’s Henry reports. The biggest impact may not be the technical, but rather the institutional and team understanding OG&E gained. “This project helps us take a business basis in our decision-making and focus on coordinating our activities so all decisions are coherent.” And OG&E gained a firm handle on system aging and how to manage for the inevitable results of wear and tear on its system. “We better understand what we face. We know what we know and what we don’t know, along with the priorities we should put on improving areas of our knowledge base and our system. Most important, we have a good roadmap for the future, for both IT and process improvements, and for how to invest and manage our T&D system going forward.” www.energybizmag.com ENERGYBIZ MAGAZINE 61
62 ENERGYBIZ MAGAZINE July/August 2005