Operations Study alternatives

Posted: Oct. 5, 2012

Operations Study provides alternatives for discussion

by Randy Wilkerson

A new study released Aug. 9 represents the culmination of a year-long study of Western’s operations. The Western Operations Study report offers a range of more than 30 alternatives that could improve how we operate.

In summer 2011, senior managers decided the time was right to take a detailed look at Western’s operations to ensure we are being good stewards of the resources entrusted to us by operating as efficiently and effectively as possible.

Chief Operating Officer Tony Montoya explained, “The senior managers recognized that this is a very dynamic time in the electric power industry. We knew that the Federal Energy Regulatory Commission was proposing several changes and that more changes, such as an Energy Imbalance Market, were on the horizon. We wanted to have a very detailed assessment of where we were at so we would be able to make better decisions.”

Study looks at Western, industry operations

The study was designed to look at:

Power system operations
Transmission services
Transmission planning
Transmission operations and Balancing Authority functionsSettlements related to transmission operations and Balancing Authority functions Compliance
Identification of Information Technology tools used by these functions

Western selected Miracorp as the contractor to conduct the study with specific guidance to provide an independent look at Western’s transmission and operations related to business efficiency, industry best practices and industry trends. There were no predetermined outcomes.

Miracorp’s process to complete the study included internal benchmarking, external benchmarking and an analysis of future industry changes and initiatives. They also added two retired Western employees, Ed Hulls and Bob Riehl, to the study team to better understand the complexity of Western’s operations and transmission systems and gain perspective on the industry-wide issues.

Western Operations documented

The study team began the internal benchmarking phase by gathering data about Western’s operations through questionnaires and site visits, which included more than 70 interviews with Western management and staff. The assessment looked at Western’s Power System Operations and Transmission Services (including Transmission System Planning, Open Access Transmission Tariff Administration and after-the-fact Transmission Settlement activities).

The study report details the team’s observations of Western’s current operations, grouped into four categories: Standardization, Compliance, Strategic Participation in External Organizations, and East-West Separation and Consolidation Challenges.

Study examines industry practices

The study also looked at how other companies in the industry are handling the same operations functions. Since it was important to compare organizations as similar to Western as possible, the team developed a short list of six companies that operate systems with large geographic areas, have multiple operations centers or deal with multiple regional reliability organizations. Three of these companies agreed to participate in the study. The team looked at the Balancing Authority, Transmission Operator, Transmission Provider and Transmission Planning functions, as those terms are defined in the North American Electricity Reliability Corporation functional model. The team also looked at Transmission Settlements activities.

The external benchmarking analysis revealed several different organizational models. Western has the most autonomous structure with employees who perform transmission functions reporting to regional managers, who are in turn responsible for all of the NERC functions in that region. This model tends to promote independent decision making.

At the other end of the spectrum lies the least autonomous option, where both management and employees are centralized. This option is better suited for areas that have strict procedures and criteria and that don’t require significant independent decision making.

In the middle ground, the study finds, “… the supervision is centralized, but the positions are not. Employees are still located on the ‘front lines’ and have first-hand knowledge of the issues that are important to customers. However, a centralized authority is present that can decide what standardization is the best alternative.”

The options described do not represent all-or-nothing alternatives. The companies participating in the study tended to use a combination of the centralization models, depending on the functional area.

Future trends considered

The, the team looked at trends in the electric utility industry as a whole, including potential changes and strategic initiatives that specifically affect Western. The major change looming is FERC Order 1000, which became effective in October 2011 and requires every public utility to participate in regional transmission planning processes, develop interregional cost allocation methods for new interregional transmission and amend its Open Access Transmission Tariff. Western is in the process of implementing FERC Order 1000, but there are still decisions that remain to be made. Other notable changes include emphasis on using Western’s new transmission authorities, improving rate designs to eliminate rate pancaking, integrating more renewable generation and a possible Energy Imbalance Market.

Alternatives begin the discussion

Finally, all of the information gathered from the various analyses was combined to develop a list of potential alternatives for Western to consider. For each alternative presented, the study examined how the alternative would affect customers and the regions, its effect on compliance, the effect on Balancing Authorities, human resource impacts, how the alternative would affect the integration of renewables and how it would help address changes in the industry. The study team provided a list of pros and cons for each alternative. At this point, no cost-benefit analysis has been performed for any of the alternatives.

Next step ... your move

Montoya summed up the study report saying, “The study does get to the heart of some of the issues. One of the major issues we face is determining what the most effective, most efficient way to provide management oversight across multiple territories. This study is one source of information among many as Western addresses these issues, but it’s important information because of the detail it provides.”

Western hosted webinars on Aug. 15 for employees and Aug. 16 for customers to answer questions about the study and listen to comments. Western is accepting comments on the study from employees, customers, Native American tribes and other stakeholders through Sept. 28. Comments should be sent to wapaopsstudy@wapa.gov.

In describing the next steps, Montoya said, “Understanding the information in this report, along with the comments we receive; will provide the starting point for robust dialogue with our employees, customers and others.”