Dr. Himadri Banerji gave a presentation on asset management and performance-based regulation in electric utilities. He discussed the definition and goals of asset management, including optimizing asset performance and life cycle costs. He also covered the PAS 55 standard for asset management, which takes a holistic life cycle approach. Finally, he explained how performance-based regulation can be used to incentivize utilities to improve reliability through mechanisms like service standard targets and penalties.
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Performance Based Regulation, Implementing an Asset Management Standards and Systems
1. Presented by Dr.Himadri Banerji Ex CEO in Reliance Energy and Leader GLG at the PlanTech 2010 Mumbai, 4th and 5th Feb Performance-Based Regulation in Electric Utilities: Reliability Improvement Using Integrated Asset Management Standard PAS 55. Dr. Himadri Banerji PlanTech 2010 Mumbai 4 th and 5 th February
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3. Targeted PBR and Targeted Incentives: Service Standards Presented by Dr.Himadri Banerji Ex CEO in Reliance Energy and Leader GLG at the PlanTech 2010 Mumbai, 4th and 5th Feb If distribution were a competitive market, providers would compete on the basis of price, service quality, and customer service. But there is no meaningful competition for distribution services. Consequently, the quest for lower costs and higher profits will drive utilities to cut service quality and customer service. Setting standards with built-in incentives (rewards and penalties) will encourage utilities to find acceptable lower cost ways to provide a specified level of service.
4. Background: Electricity Industry Restructuring Presented by Dr.Himadri Banerji Ex CEO in Reliance Energy and Leader GLG at the PlanTech 2010 Mumbai, 4th and 5th Feb The restructuring and liberalization of electricity industry worldwide have increased the incentives for a cost effective and efficient use of available assets in all segments of the power industry.
5. What is performance-based regulation Presented by Dr.Himadri Banerji Ex CEO in Reliance Energy and Leader GLG at the PlanTech 2010 Mumbai, 4th and 5th Feb The term – performance-based regulation – is the most recent in a long line of vocabulary used to describe regulatory approaches that rely on financial incentives and disincentives to induce desired behavior by a regulated firm. The desired behaviors, or outcomes, are generally 1) lower costs, 2) improved service, and 3) more rational allocation of risks and rewards. The renewed interest in PBR largely reflects dissatisfaction with cost-of-service or rate-of-return regulation, especially the perception that cost-of-service regulation stifles utility innovation and causes utility managers to be more responsive to regulators than to customers. PBR may also be pursued by utilities seeking higher profits, more flexibility, or less risk.
6. PBR Structures : Price and Revenue Caps Presented by Dr.Himadri Banerji Ex CEO in Reliance Energy and Leader GLG at the PlanTech 2010 Mumbai, 4th and 5th Feb The major structural options are price caps and revenue caps. Both options create the same incentives to cut costs, but revenue caps create much better incentives for investment in distributed resources. Also, revenue and price caps merge as rate design for distribution utilities moves toward fixed monthly fees. Revenue caps provide an opportunity to achieve many of the purposes of fixed charge rate designs while avoiding the substantial economic and public acceptance problems associated with such rate designs. However Most regulators start with Target Based PBR.
7. Service Standards: Service Reliability Presented by Dr.Himadri Banerji Ex CEO in Reliance Energy and Leader GLG at the PlanTech 2010 Mumbai, 4th and 5th Feb 1. Reliability. This includes a long list of specific standards including the extent and duration of outages, service restoration time, frequency of planned outages, performance of worst circuits, and voltage variations. 2. Call Center Performance. This addresses how quickly and how fully calls to the utility are answered and how well consumer questions or complaints are resolved. 3. Field Service. This covers a wide range of situations in which utility employees make visits to the customers location. Standards may include how well appointments are kept and time to connect new service, test meters, and replace street lights. 4. Billing and Complaints. This includes billing accuracy, metering accuracy, complaint rates to the utility and regulator, overall customer satisfaction, and power quality complaints.
8. Presented by Dr.Himadri Banerji Ex CEO in Reliance Energy and Leader GLG at the PlanTech 2010 Mumbai, 4th and 5th Feb It is important to make the penalty large enough that it will receive and keep management’s attention PBR mechanisms may include service quality penalties of no less than one percent (100 basis points) of equity. The calculations are based on cost of ENS or energy not served. Service Reliability Cost of ENS and Penalties
9. Presented by Dr.Himadri Banerji Ex CEO in Reliance Energy and Leader GLG at the PlanTech 2010 Mumbai, 4th and 5th Feb Service Reliability Measures Top US Utilities
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11. Asset Management Myths and Realities Presented by Dr.Himadri Banerji Ex CEO in Reliance Energy and Leader GLG at the PlanTech 2010 Mumbai, 4th and 5th Feb 4. In line with the maintainers seeking greater corporate credibility, the large number of software vendors selling asset information management systems (including asset registers, GIS systems, work management, history gathering, materials control & cost reporting etc) have often relabeled their products as “Enterprise Asset Management Systems”. This has given rise to a misconception that Asset Management is an technology initiative to sort out the data and IT infrastructure (often leading to great expense and the ‘tail wagging the dog’). 5. If we dig deeper into the information systems world, we even find “Asset Management” interpreted as simply the bar-code labeling of computers and peripherals, and the tracking of their location/status (i.e. ‘asset tracking’). 6. Finally, a few critical infrastructure or plant owners and operators have adopted the term ‘Asset Management’ to describe their core role in life - both caring for, and making best sustained use of, physical plant, infrastructure and its associated facilities. This is the interpretation that the new British Standard, PAS-55 is focused upon, and is the subject of this presentation.
16. Characteristics of PAS 55 Asset Management BS Standard: Integrated and Life Cycle Centered Presented by Dr.Himadri Banerji Ex CEO in Reliance Energy and Leader GLG at the PlanTech 2010 Mumbai, 4th and 5th Feb It requires a life cycle view and optimal mixture of investments operations maintenance resourcing , risks performance sustainability Source: BSI PAS 55:2008
17. Presented by Dr.Himadri Banerji Ex CEO in Reliance Energy and Leader GLG at the PlanTech 2010 Mumbai, 4th and 5th Feb Degree of implementation: Degree to which asset management strategies, objectives and plans are in place. Source: BSI PAS 55:2008
18. Presented by Dr.Himadri Banerji Ex CEO in Reliance Energy and Leader GLG at the PlanTech 2010 Mumbai, 4th and 5th Feb Characteristics of PAS 55 Levels of an Asset Management System Source: BSI PAS 55:2008 Part 1 contains the core requirements against which an organization's Asset Management capabilities can be assessed. Part 2 expands on these requirements with examples and guidance designed to aid the understanding of the intent of the Part 1 requirements. PAS 55 is a two-part specification.
19. Presented by Dr.Himadri Banerji Ex CEO in Reliance Energy and Leader GLG at the PlanTech 2010 Mumbai, 4th and 5th Feb Characteristics of PAS 55 Asset Management BS Standard: Integrated Source: BSI PAS 55:2008
20. Presented by Dr.Himadri Banerji Ex CEO in Reliance Energy and Leader GLG at the PlanTech 2010 Mumbai, 4th and 5th Feb PAS 55 Asset Management BS Standard: Scope and Interfaces Source: BSI PAS 55:2008
21. Presented by Dr.Himadri Banerji Ex CEO in Reliance Energy and Leader GLG at the PlanTech 2010 Mumbai, 4th and 5th Feb PAS 55 Asset Management BS Standard: Stakeholder Requirements Source: BSI PAS 55:2008 Source: BSI PAS 55:2008
22. Presented by Dr.Himadri Banerji Ex CEO in Reliance Energy and Leader GLG at the PlanTech 2010 Mumbai, 4th and 5th Feb PAS 55 Asset Management BS Standard: OSP, Planning and Implementation Source: BSI PAS 55:2008
23. Presented by Dr.Himadri Banerji Ex CEO in Reliance Energy and Leader GLG at the PlanTech 2010 Mumbai, 4th and 5th Feb PAS 55 Asset Management BS Standard: Management System Structure Source: BSI PAS 55:2008
24. Presented by Dr.Himadri Banerji Ex CEO in Reliance Energy and Leader GLG at the PlanTech 2010 Mumbai, 4th and 5th Feb Asset Manager : Work Control To Life Cycle Analysis Source: BSI PAS 55:2008
25. Presented by Dr.Himadri Banerji Ex CEO in Reliance Energy and Leader GLG at the PlanTech 2010 Mumbai, 4th and 5th Feb Asset Management Process Asset Manager: Work Control To Evaluations, Investigation, Problem Identification Analysis
26. Presented by Dr.Himadri Banerji Ex CEO in Reliance Energy and Leader GLG at the PlanTech 2010 Mumbai, 4th and 5th Feb Development in Asset Management Processes
27. Information Systems Development in Asset Management Presented by Dr.Himadri Banerji Ex CEO in Reliance Energy and Leader GLG at the PlanTech 2010 Mumbai, 4th and 5th Feb
28. Presented by Dr.Himadri Banerji Ex CEO in Reliance Energy and Leader GLG at the PlanTech 2010 Mumbai, 4th and 5th Feb Risk Management Processes Design and Development Phase
29. Presented by Dr.Himadri Banerji Ex CEO in Reliance Energy and Leader GLG at the PlanTech 2010 Mumbai, 4th and 5th Feb Risk Management Processes Compliance to Standards, Procedures, Culture
30. Probabilistic Risk Management Operational Phase Presented by Dr.Himadri Banerji Ex CEO in Reliance Energy and Leader GLG at the PlanTech 2010 Mumbai, 4th and 5th Feb Probabilistic risk assessments have the following characteristics: • explicitly consider a broad set of potential challenges to safety; • logically prioritize these challenges; • consider a wide range of options to mitigate these challenges; • assess sensitivity of results to key assumptions; • identify and potentially quantify uncertainties in results. Performance requirements have the following characteristics: • based on measurable, quantifiable parameters that are directly related to safety; • timing of measurements is specified; • numerical performance criteria are set for each parameter; • corrective actions are required to be taken if performance criteria are not met; • performance trends are monitored; • performance criteria and/or corrective actions are adjusted based on performance trends.
31. Presented by Dr.Himadri Banerji Ex CEO in Reliance Energy and Leader GLG at the PlanTech 2010 Mumbai, 4th and 5th Feb Questions Discussions Thank You
Editor's Notes
Performance benchmarks may be set at the most recent three-year average performance. Such benchmarks should be established for a limited number of broad measures that are easily tracked and important to customers, including: • customer complaints • outage duration, • outage frequency (five minutes or longer), • frequency of momentaries, • storm outage response time, and • hours lost due to accidents.
A multi-sector initiative in Europe, backed by the British Standards Institute has now published PAS-55, to clear the air a bit and define what a joined-up physical asset management system needs to include. Adopted by industry regulators as a checklist of good governance. (As per advise of OFGEM the British Regulator all electricity and gas distributors must be PAS 55 by 2010 to reduce regulatory oversight). Certification to the PAS 55 specification is a very significant achievement and confirms the connection between corporate goals and asset management activity at all levels