Asset management risk in today’s electricity network businesses

Underneath view of an enormous transmission tower (energy prices down)
Image: Shutterstock

By Jeff Allen, EESA national president

This article argues the case for ensuring that the asset management experts within electricity transmission and distribution businesses can make appropriate, informed and timely decisions on the management of electricity infrastructure assets. I suggest that these decisions have to be based at times on imperfect data and thus will require a combination of engineering and business risk judgement. Asset managers require support with the right resources (people, systems and money) to ensure the optimum outcomes for all stakeholders.

Electricity network business owners, executive management, regulators and governments are facing some very challenging issues as these electricity businesses become much more of a high-risk business operation as a result of a more onerous and volatile operating environment due to two-way energy flows, new types of equipment being overlayed on existing assets as well as more onerous operating conditions due to increasing extreme weather events. De-skilling of the workforce as well as reduction in overall numbers of people working within the businesses are also contributing to the risks that these businesses are exposed to.

In the case of electricity transmission and distribution businesses we can say that ‘good management’ is about ensuring that:

  • the ‘right things’ are identified in the asset management process – the asset strategy decisions – and
  • ‘doing them right’ is about the asset manager ensuring that the service providers deliver value (quality, price and timeliness) and that the asset actions are appropriate to achieve the intended asset performance (performance as well as safety) for the intended life of the asset.

There are many competing objectives when you consider all the stakeholders in an electricity asset business that need to be satisfied. This requires management to achieve:

  • the commercial outcomes for the business (profitability, return on assets etc);
  • customer outcomes (capacity, voltage, quality and reliability) and
  • community needs (amenity and safety)

All of these can only achieved with a business capability created by having the right people, partners, processes, data, information and knowledge support systems. These attributes also need to be seen in the context of the long-term sustainability of the business.

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In a regulated environment, in order to secure appropriate income streams, an electricity infrastructure business must:

  • ensure its asset management strategies are delivering value for the customers and the community, and
  • manage capital and operating expenditure within the allowances provided and seek to drive better value from each investment dollar
  • successfully argue with regulators for sufficient income to manage the increasingly more complex range of assets for long-term adequate performance. (A particularly difficult argument due the ongoing changes imposed by ever increasing distributed generation and two way energy  flows creating voltage as well as quality of supply issues)

Through the revenue/pricing determination process the regulator exerts a powerful influence over an electricity distribution business’s ability to achieve its strategic objectives. The business must be able to justify to the regulator the need for the asset management programs and the operating and capital and thus revenue requirements to achieve them in a timely manner. This is now occurring in an operating environment of increasing distributed ‘generation’ creating variable demand for electricity, overlays of more complex monitoring, control and protection systems, aging infrastructure and in some cases insufficient experienced and knowledgeable people.

Electricity transmission and distribution businesses operate as a part of the community and that community has some clear expectations of the results and practices of such a business. Some key issues for consideration are:

  • The transport of electricity is in many ways an inherently dangerous business. Not only is the product itself capable of causing damage and injury, but so too is the distribution infrastructure. To be successful, an electricity distribution business must successfully manage the safety risks it poses for the community.
  • Working with electricity is also inherently dangerous and the community expects electricity transmission and distribution business to effectively manage the risks posed to employees and contractors.
  • Both the electrical infrastructure and the end product are capable of causing damage to the environment, particularly bush fires. The community expects an electricity business to successfully manage any impact it may have on the environment.
  • As a major economic entity and employer, the community also expects an electricity distribution business to participate as a good corporate citizen, by taking part in activities, discussions, and events, at times outside the strict boundaries of commercialism. Working with the community to mitigate the visual impact of some assets is one example.

In order to achieve the customer, community and owner’s objectives, the best possible asset decisions need to be made both for short and long term results.

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In summary, the management and operation of electrical assets of different types and ages spread over a large area and subject to extremes of weather as well as other changing external influences, is extremely complex and requires sophisticated business processes and information systems and expert, knowledgeable and experienced people able to balance the best engineering and commercial judgement to ensure prudent risk management is achieved to satisfy the customers, the communities and the owner. Not a simple task!

I suggest that managing asset related risks in electricity infrastructure related businesses has never been more challenging.

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