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Steps utility leaders can take to manage the COVID-19 journey to normalcy

Michael Sullivan's picture
Consultant PA Consulting

Mike Sullivan has over 35 years of broad Utility leadership experience first as a Senior executive for Pepco Holdings Inc (now part of Exelon) and then as a management consultant with PA...

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  • Apr 15, 2020
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By Mike Sullivan at PA Consulting

Utilities have always managed their priorities with the safety of employees and their customers occupying the front seat.  Beyond those priorities lie an uncertain, and without doubt a circuitous route to normalcy. We have counseled utility leaders operating across our nation during unprecedented storms, hurricane events, and economic issues, and are already using our time, expertise and experience to help industry leaders navigate these uncertain times, with a primary focus on protecting the health and welfare of employees, the public and the business.  As we navigate through this unprecedented event it can be useful to take a step back and reflect on where we are and where we are going:  

Outlined below are six broad steps that leaders can take to steer through this pandemic.

1) Initiating Crisis Management and Emergency Response Plans 

Utilities tend to be well prepared for many different types of business disruptions.  Part of this is born out of need to be ready for hurricanes, storms and the ability to restore communities under the very worst of circumstances.  Moreover, they typically have plans in place to deal with other kinds of events using the same Crisis management structure used for large scale power disruptions.  This “all hazards” approach is adaptable for cyber security threats, labor stoppages, financial crisis and a host of other disruptive events.   Business continuity plans and an overall Incident Command Structure are typically in place as part of Crisis management plans.

2) Moving to a New Normal - Adjusting your operating cadence

But every event is different, and adjustments and adaptations are necessary to continue to provide essential services to customer over a sustained period.  The immediate challenge of safeguarding workforce and the public for essential services is clear.  But with no certain time frame for a return to normal operations it is a good time to take stock in this temporary operating model.  By now most companies have settled into an operating cadence that is as close to normal as possible.  Specific actions like suspending disconnections, sequestering control room personnel, remote working, working with permitting agencies and builders, and managing work to minimize worker exposure are all measures being deployed by various utilities across the nation.  Given these conditions all work including construction, maintenance, customer and technology will likely need to be reprioritized. Given the breadth of impact on safety, reliability, customer service, financial and regulatory dimensions, that is no small effort!

3) Continual Reassessment - Implementing learnings and best practices in real time 

Situational awareness is key to adapting work methods to protect employees and customers alike and as we all know the situation is changing almost daily.  What does responsible social distancing look like for Utilities? What types of work (customer facing), reliability, etc. should be prudently suspended?  That definition has changed considerably over the past few weeks and will continue to do so.  With the new normal comes new “best practices” and protocols for managing work that minimizes worker exposure and yes can negatively impact productivity: distancing and hygiene protocols, crew staffing, minimizing reporting locations, teaming assignments etc. Working with local and state governments, contractors as well as maintaining a close working relationship with labor unions are all imperatives.  

Until quick and easy testing is readily available the health of the work force will be the dominant factor in rationalizing business productivity.  

4) Tracking the Impact – operating, financial, and regulatory check lists

To the extent that utilities are experiencing new service slowdowns, changes in the shape of load curves, reduced revenue, increased bad debt and a general productivity reduction – their will certainly be financial as well as regulatory impact. Regulators will likely want to understand the financial impact to the utility in terms of margins, expenses and capital expenditures and how the company has responded to those financial challenges. Utilities with multi-year rate plans may see regulators defer or eliminate planned rate adjustments, or if in the middle of rate cases may find schedules delayed indefinitely. And utilities with incentive ratemaking plans with customer service-focused components may find themselves in penalty situations due to resources constrained as a result of COVID-19 as call center wait times grow as a result of staffing issues and increased call volumes. On the other hand, companies with best practices in place may have an opportunity to shine, making both the company and regulators look good.

Moreover, creating tracking mechanisms will likely be needed for more than understanding, and communicating budget impacts. Other aspects of the business including employee health care costs, revenue lost due to lack of disconnection/collection capability and applications to FEMA/Other agencies for reimbursement processes will all need to be reconciled.

5) Preparing for what's next – preparing for a storm or other emergencies 

A major weather event while utilities are in this new normal will present unique challenges that require a reworking of current Emergency management plans. Over the past few weeks, several Utilities have already had to respond to severe weather and tornadoes. With so many people working from home, restorations priorities will likely need to be reworked, and new temporary public health care facilities should be identified and prioritized accordingly etc.  Work force readiness and availability will have to be assed as well as mutual assistance, safety considerations (travel etc.) and the availability of contractors. And this is just the tip of the iceberg ---there are many other considerations that need to be evaluated once the new normal is fully recognized.  

6) Recovery and return to normalcy 

Having a full accounting of the impacts during the pandemic will be key to returning to normal operations  but even then the transition will likely come with several long-standing impacts to operations – not the least of which will be a tsunami of customer bad debt (residential and commercial) that will hit once the disconnect moratoriums are lifted. Construction work, especially for new service hook ups, will require significant scaling of operations and call centers will experience heavy volume. Now is the time to begin planning for this increased customer interaction.  Modifications to web pages, IVR technology, mobile apps should all be considered. 

Conclusion

Given the nature of the utility business, you are better prepared to weather this pandemic than most businesses. It is in our DNA to weather storms and be prepared in all cases. But even then, the unprecedented and life-threatening nature of this pandemic requires keen situational awareness, flawless execution, tremendous agility and of course ingenuity. The necessary insights to manage through this event will come not only from the highly collegial utility industry and its partners but also from many other industries experiencing the same threat. Staying in lock step with other developing best practices from other essential service industries like fire, police, medical, telecommunications, food distribution etc. will only enhance our collective response. While managing through the pandemic certainly presents unique challenges for Utilities, it also presents an opportunity to showcase our unique preparedness, ability to manage through crisis and more broadly to adapt to changing circumstances. Time to shine!

 

Mike Sullivan is an energy and utilities expert at PA Consulting.

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Matt Chester's picture
Matt Chester on Apr 15, 2020

Having a full accounting of the impacts during the pandemic will be key to returning to normal operations  but even then the transition will likely come with several long-standing impacts to operations – not the least of which will be a tsunami of customer bad debt (residential and commercial) that will hit once the disconnect moratoriums are lifted. 

This impact of bad debt and reduced cashflow expected to come to utilities is a bigger one than I think many are anticipating-- do you have any thoughts on how it might impact the ability to invest in new projects and infrastructure in the coming year or two?

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