Network Fault Restoration Objectives issues strategies May

Network Fault Restoration Objectives, issues & strategies May 1999

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Contents • • Objectives & assumptions. Issues to be considered. Structuring the contract. Making it happen.

Objectives & assumptions

Objective • Objective is to safely restore electricity to customers within a reasonable time whilst controlling costs.

Historical assumptions • A lot of historical assumptions that have probably gone unchallenged…. • The need for zero response time. • The relative unimportance of cost, and its trade-off against supply restoration time. • Poor productivity of fault persons. • The new commercial environment will require these assumptions to be revisited.

Issues to be considered

Safety of fault person • Primary consideration under the Health & Safety In Employment Act 1992. • Requires the network operator to have a generally safe network in the first place (“creation of a safe working environment”). • Requires faults restoration organisation to have safe work procedures in place.

Safety of fault person • Fault restoration work will generally be done under dangerous conditions wind, rain, cold, darkness etc. • Important that staff are regularly relieved from duty to avoid fatigue, and possible prosecution in the event of an accident.

Safety of consumers • Public safety is required under various key pieces of legislation. • Good network design can be a key feature of consumer safety. • Generally arises from a network fault, such as a fallen line, burnt-out neutral connection, or broken earth lead.

Safety of consumers • Consumer and public safety is as much a public education issue for the network operator as it is for the fault restoration organisation.

Response time • Often assumed that zero response time is required, or about 5 minutes at night (long enough to get out of bed). • Is a zero response time really necessary to provide good fault restoration - will a 5 or 10 minute response time suffice ? ? • Zero response tends to limit other work that can be performed.

Response time • Major industrial customers may want rapid supply restoration eg. 2 minutes this obviously cannot be done by manual restoration, rather automated back-feeds etc are required.

Travel time • Most faults require some travel - up to an hour or more for rural areas. • Tends to be the limiting factor, rather than response time - does an extra 5 or 10 minutes response time really matter when there is an hour or more travelling time (and possibly several hours work to restore the fault) ? ?

Scope of work • Scope of fault restoration should be to restore supply by switching or simple repairs, or isolate supply for safety. • Major repairs should be performed by a line gang - broken cross-arms etc. • Storm damage may require a line gang to follow the fault persons to repair major damage.

Scope of work • Fault work should also interact with the network asset management function recurring faults should be studied and regularly offending equipment modified or removed.

Productivity • On the balance of probability, most faults will occur outside of normal working hours. • Fault people could be employed on other work that can be suspended at a few minutes notice. • This work can be in the field - on the balance of probability, the depot may not always be close to the fault.

Productivity • Depending on maintenance strategies, fault persons can perform valuable data gathering, testing and inspection work.

Cost structure • Important to clearly identify and separate fixed and variable costs. • Fixed costs will be incurred from setting up the resources - vehicles, tools, spares, personnel etc. • Variable costs will arise from vehicle running and after-hours labor. • Vehicle running costs must not include fixed costs considered elsewhere.

Labor practices • Requires give & take - after-hours call outs are part of the job and must be recognised in both the employment contract and in daily supervision and rostering. • Remuneration must reflect the actual costs of providing the fault restoration service - the days of a 3 hour minimum call out need to be reviewed.

Local knowledge • Local knowledge is extremely valuable in fault restoration - knowing back country roads and power lines saves a lot of time. • Treat local knowledge with respect as it is very expensive to reproduce - this includes change management, and ensuring that fault persons remain motivated toward the network operators best interests.

Contractors • Contractors are in business to make a profit, and will want to charge more to cover risks and undefined work. • Perception-wise, fault restoration is a difficult one to contract out, but this perception can be broken down by a careful analysis of the issues.

Contractors • Also includes moving an in-house contracting group to a more arms-length footing.

System availability • Recent high-profile infrastructure failures have increased regulatory scrutiny of system availability. • Whilst significant losses of availability have to be prevented by proper design, installation and maintenance, good fault restoration can assist in improving availability.

Structuring the contract

Contract objective • Objective is to minimise the variables so that a contractor can provide a price that contains a minimum of risk premium and variable costs.

Structuring the contract • Preliminary step is to challenge the assumptions outlined previously. • Most fault restoration involves about 10 to 12 well-defined tasks such as “replace pole fuse” or “re-bind conductor”. • The key variables are the number of each task, and the location of each task (which effects the travel time and distance).

Contract options • Various types of contracts that allocate risks and costs differently amongst the parties. • Important to choose a contract structure that reflects the costs of service provision and allows fair recovery of those costs.

Contract options • Fixed price contract…. • Provides very certain cashflow for the contractor and the principal. • Allows the contractor to cover set-up costs with certainty. • Requires the contractor to carry all the risk, which will be passed back to the principal as a premium over and above the known costs. • May leave the contractor out of pocket if more work than planned must be done.

Contract options • Rates-based contract…. • Pays the contractor for actual costs, but may not allow full recovery of fixed set-up costs if a low volume of work eventuates. • Risk also lies with the principal because the price is not capped. • Little cashflow certainty for either party. • Little incentive for contractor to make process improvements.

Contract options • Cost-reimbursable contract…. • Contains a fixed and a variable cost component that allows fair recovery of fixed set-up and operating costs, and variable costs as they occur. • Provides some certainty of cashflow to both parties. • Reduces the risk borne by the contractor, and hence the premium charged.

Contract options • The commonly understood nature of fault work suggests that a contract should allow for fixed costs to be recovered upfront, and for variable costs to be recovered as they are incurred. • Suggests something like a costreimbursable contract. • However, the ideal contract structure is a fixed price contract.

Fixed price contract • Fixed price contract should scope the work very accurately to minimise the risk premium paid. • Risk premium means the principal is paying for work that may not be done obvious case to minimise this premium. • Previously stated that most fault work generally comprises 10 or 12 well-defined tasks.

Fixed price contract • Variables in this approach are…. • The number of each tasks required. • The location of task, which effects travel time and vehicle running. • Historical fault data should enable the number of each tasks to be approximated for each month (note seasonal cycles due to winter storms etc. ) eg. 120 blown pole fuses.

Fixed price contract • Historical fault data should enable the location of each task to be identified - a useful approach may be to break the network area into 10 or so zones. • This enables approximate travel times and vehicle running to be attached to each zone eg. Zone 1 requires about 40 minutes travel and 65 km vehicle running for a return trip to the zone.

Fixed price contract • The result will be the total number of each type of fault along with the total number of fault calls from each zone. • A contractor should then be able to put a price on each task, and hence give a fixed price for the total number of fault repairs. • The contractor should also be able to put a fixed price on the travel time and vehicle running based on the totals for each zone.

Fixed price contract • The end result will be a fixed price that contains a minimum of risk premium.

Response time • Again, it is important to address the issue of response time - zero response time will limit the sort of work that contractors can perform when not on fault work. • May be necessary to use the fault contractors for other network duties such as line inspections and earth testing during the day.

Response time • A useful approach is to define a similar set of tasks to the fault work such as “line inspection”, “earth test” etc. • Fixed prices can then be attached to these activities along with the associated travel time and vehicle running, and added into the overall price.

Resourcing • In order to determine the overall level of resourcing required, the contractor will need to know how the fault work is spread in time - obviously if 120 blown pole fuses all occur over 3 nights, a higher level of resourcing will be required than if they are spread uniformly over the month.

Making it happen

Structuring the service • A decision must be made whether the incumbent fault service provider will be retained under a new arrangement, or whether competitive tenders will be sought. • The costs involved in establishing a vehicle fleet and depot will require a contract for about 3 to 5 years - certainly not a 1 year contract !!!

Structuring the service • Consider the risks - a 3 to 5 year contract awarded to a largely unproven contractor is a huge gamble !!! • The incumbent contractor has the competitive advantage of local knowledge. • Consider transferring this knowledge to the fault dispatcher over a period of time, possibly through an expert system.

Structuring the service • Consider opening up a certain geographical region for competition to develop competitor expertise eg. a small town within a large rural network area.

Contract structure • Key components of the contract must be. … • Clear definition of the work scope and other requirements. • Allocation of risks. • What insurance cover is required. • How will performance be measured, and how will shortfalls be corrected. • How will disputes be resolved.

Calling tenders • To obtain competitive bids, contractors must be supplied with enough information to accurately estimate costs. • Contractors must be given a reasonable amount of time to prepare their bids. • The overall calling of bids and award of the tender must be fair and honest in all respects.

Implementing change • Principles of change management must be applied - a lot of individuals will have a vested interest in the status quo. • These individuals must be convinced that the rewards and benefits of change are greater than those of the status quo. • Individual buy-in is critical for the success of the whole process.

Performance monitoring • The contract must specify performance levels for response time, quality of work, courtesy to customers etc. • The principal must enforce these levels to maintain customer satisfaction. • Regular meetings with the contractor need to held to address concerns and to maintain relationships.

Information feedback • Using the faults contractor to perform line inspection, earth testing etc will generate huge amounts of information which is invaluable for network planning and maintenance. • Correct information feedback must be an integral part of the performance requirements.

Conclusions • Fault work can be accurately measured, and made more efficient, even to the point of a fixed price contract. • The incumbent operator will have an advantage over other contractors. • The issue of response time will impact on productivity levels. • Correct change management is essential.

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