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Squeezing Juice from Plants

Asset optimization is a favored utility strategy in an economic downturn.
Fortnightly Magazine - December 2002

a single value. For example, postponing a turbine overhaul may save millions of dollars, but increases the likelihood of turbine problems, which causes de-rate and can cost a lot more than the overhaul would have.

As a case study, Grier points to a plant that needed three different pumps to operate. Typically one pump would stop working in the hottest part of the summer, when the plant was most "in the money." The question his company worked on was whether or not a fourth pump should be purchased as a backup. He explains that because it could take two days to replace a pump that went out in the summer, it was worth so much more to purchase the fourth pump, despite the cost. "Asset optimization may also mean identifying the real critical systems and the impact on the cost if one of those systems does go out," Grier says. He adds that in essence, "you can be penny-wise and pound-foolish" and that plant management needs to take into account the likelihood of a "big, bad event."

For example, Potomac Electric Power recently experienced manhole covers blowing up into the air above streets in Washington, and while the event itself may not have been so bad, there is a resulting, traumatic effect on public perception. That in turn can impact the amount of dollars to be spent to regain the public confidence. "We see that in nuclear plants all the time," he says. For example, two nuclear plants in Nebraska-Fort Calhoun and Cooper-were operated by two different entities, the Omaha Public Power District and the Nebraska Public Power District (NPPD), respectively. Fort Calhoun was very well run, but the Cooper plant was struggling from an operations capacity factor and cost standpoint. It resulted in an all-around lack of public confidence, Grier says. So NPPD hired an outside firm to run the Cooper plant. "If you get in a situation where you lose control, you will spend millions of dollars to regain the confidence of the public, and will probably make investments that don't add much value," Grier concluded.

Staffing levels also greatly affect asset optimization. Cutting employees, while it does impact the bottom line, is not what drives value in power plants, Grier explains. The only real place to save the way to success, he says, is with fuel. "If you look at all the things that drive the value of the plant, 95-plus percent is locked up in five or six things," Grier adds. So if you can manage those five or six key levers of your business, it creates value, and it helps people understand how the work they do creates or destroys value.

In another example, Grier worked with a utility company that operated in multiple jurisdictions. One of the key cost drivers was the timing of adding a transformer in a substation. The policies were different in each jurisdiction-each MVA or KVA of capacity would be added when one jurisdiction got a 40 percent margin on that capacity. But another company would add capacity when the margin reached