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 up-front, and for variable costs to be recovered as they are incurred.

• Suggests something like a cost-reimbursable 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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