$20M in Reduced Annual Capital and Operating Spending

ACA PROACTIVE CASE STUDY

Client

United States Utility

Business Issue

We were engaged by the client to prepare its fossil business unit for success in the competitive market.

Solution

The process began with a rapid and detailed assessment of value, which concluded that the fossil operations were well below the industry average, and non-competitive in comparison with the Independent Power Producers (the main competition in the marketplace). The comprehensive assessment also included a detailed review of the organization’s change readiness, which spanned culture, IT systems, and organizational structure, all of which highlighted significant gaps in the organization’s enabling infrastructure, as well as a restrictive labor agreement.

Upon the completion of the assessment, business processes were redefined along Asset Management lines, and significant culture change initiatives were implemented.

The new processes were designed and installed in a matter of months, with the culture and labor initiatives being conducted in parallel.  The Senior Leadership Team took deliberate steps to assess the magnitude of the transformation efforts and worked actively to strengthen their leadership and alignment building skills.

Benefits/Results

As a result of the transformation, the company was able to remove $40 M US from its capital and operating plans during the ensuing 12 months. During that time, the company’s power plants dramatically increased operating and reliability performance. Although the labor force at the plants was reduced significantly, there were no forced redundancies among the union ranks, as the company created a Variable Work Force, which was accountable for securing outside work for the labor force.

The project was successful in covering their fully loaded costs within the first year and have been earning a profit on its work since.  Following the transformation of the Fossil Business unit, we were again engaged by the client to support the transformation of the Transmission and Distribution Business unit along Asset Management lines.

We followed the same approach as had been applied in the Fossil Business unit.  The company was facing significant threats from changes in regulation and its non-competitive position.

Benefits/Results

Upon completion of the transformation, the company has reduced its capital and operations spending by $20M annually. Other benefits derived from the asset management approach include:

  • Improvements in productivity;
  • More rational decision making; and
  • Prioritization of spending needs.

As with the Fossil Business unit, there were no forced redundancies among the unionized ranks. The Variable Work Force concept was extended to cover the Transmission and Distribution Business.

The Utility has been successful in keeping its labor force fully employed in work that leverages their core skills.

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