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Renoir Consulting Limited May 2006 ‘Improving Efficiency and Profitability’ POWER SECTOR - DISTRIBUTION.

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Presentation on theme: "Renoir Consulting Limited May 2006 ‘Improving Efficiency and Profitability’ POWER SECTOR - DISTRIBUTION."— Presentation transcript:

1 Renoir Consulting Limited May 2006 ‘Improving Efficiency and Profitability’ POWER SECTOR - DISTRIBUTION

2 2006 © Renoir Consulting Limited Contents About Renoir Current Indian Scenario in Distribution Case Study – TNB Distribution –Project History –Project Goals –Project Results –Project Approach Next Steps

3 2006 © Renoir Consulting Limited The Renoir Group Founded in UK in 1994 Operating in India since 1995 Implementation Specialists Vertical Specialisation in Generation and Distribution Experience in UK, USA, Germany, Malaysia, Philippines and India Excellent references Facilitate change in culture and management behaviours Focus on bottom line improvement Commit to delivering a Return-On-Investment Don’t write reports and don’t develop theoretical solutions

4 2006 © Renoir Consulting Limited References Worldwide

5 2006 © Renoir Consulting Limited Contents About Renoir Current Indian Scenario in Distribution Case Study – TNB Distribution –Project History –Project Goals –Project Results –Project Approach Next Steps

6 2006 © Renoir Consulting Limited Estimated level of billing efficiency of 55% Estimated collection efficiency of 41% SEB losses of Rs crore = 1.5% GDP SEB lose 110 paise for every unit of electricity sold (SOURCE: MINISTRY OF POWER APDRP OVERVIEW) Indian Scenario – Distribution

7 2006 © Renoir Consulting Limited Commercial losses ( Excluding Subsidies) Commercial Losses (Including Subsidies) Rate of Return % % % % ( for losses without subsidy) Current Indian Scenario ProvisionalProvisional Revised Estimates Financial performance of state electricity boards ( In Rs. billion )

8 2006 © Renoir Consulting Limited “There is a lack of accountability in distribution, outdated rules, regulations, management structures, and practices…..unless you establish accountability at all levels, you can never improve performance”. Union Minister Source: Financial Express 18 March 2002 Current Indian Scenario – Distribution

9 2006 © Renoir Consulting Limited Contents About Renoir Current Indian Scenario in Distribution Case Study – TNB Distribution –Project History –Project Goals –Project Results –Project Approach Next Steps

10 2006 © Renoir Consulting Limited Contents About Renoir Current Indian Scenario in Distribution Case Study – TNB Distribution –Project History –Project Goals –Project Results –Project Approach Next Steps

11 2006 © Renoir Consulting Limited Background : Power Sector in Malaysia Government Policy not to fully privatize electricity power industry. –TNB (Tenaga Nasional Berhad) continues to generate & distribute power Ongoing effort to restructure the electricity distribution to achieve competitive prices for end-consumers Tenaga Nasional, the largest company in Malaysia had recorded financial losses for the year ended 1997/8. Its image with the general public was being tarnished due to –Supply reliability problems –Inefficiencies in customer management

12 2006 © Renoir Consulting Limited Project History On successful projects in Generation and Transmission, the TNBD- Renoir Business Performance Improvement Program (BPI) began in January 1999 as a contract between Tenaga Nasional Berhad (Distribution), Malaysia and The Renoir Group, an international implementation consulting company, based in the United Kingdom. Renoir would be the catalyst for change, introducing the business improvement methodology the ‘Technology of Change’, “transferring” this knowledge to a core team of change leaders, within the TNBD structure.

13 2006 © Renoir Consulting Limited Contents About Renoir Current Indian Scenario in Distribution Case Study – TNB Distribution –Project History –Project Goals –Project Results –Project Approach Next Steps

14 2006 © Renoir Consulting Limited Project Goals` The issues in TNB were commonly known as the “four big rocks”. Network Services 25% Reduction in breakdowns. 15% Reduction in projects WIP. Customer Services 15% Reduction in non-technical losses (towards total losses target of 5% nationally). 15% Reduction in debtors (towards an ACP target of 27 days nationally).

15 2006 © Renoir Consulting Limited Change the culture of the organisation from ‘passive, problem-oriented’ to ‘results-focused, performance-driven, action-orientated culture’ and develop change leaders. Project Goals

16 2006 © Renoir Consulting Limited Contents About Renoir Current Indian Scenario in Distribution Case Study – TNB Distribution –Project History –Project Goals –Project Results –Project Approach Next Steps

17 2006 © Renoir Consulting Limited Non Technical Losses Project Headlines As At End October 2000 Reduction In Losses: (Total losses % measurement). (15% improvement). StateBase (Date)CurrentTarget Imp Metropolitan Region15.5% (03/99) %60.9% Negri Sembilan8.85% (03/00)5.40%5.00%38.9% Melaka13.% (03/00)8.55%5.00%34.3% Johor12.8% (03/00)8.60%5.00%32.65%

18 2006 © Renoir Consulting Limited Cash Flow Management Project Headlines As At End October 2000 Reduction Debtors/ACP: (ACP days measurement). (15% improvement). StateBase (Date)CurrentTarget Imp Wilayah Persekutuan 47.5 (03/99) % Negri Sembilan39.4 (03/00) % Melaka36.8(03/00) % Johor33.3 (03/00) %

19 2006 © Renoir Consulting Limited System Performance – LV Breakdowns Project Headlines As At End October 2000 Reduction In Breakdowns (No. LV Breakdowns). (25% improvement). StateBase (Date) CurrentTarget Imp Wilayah Persekutuan 270 (03/99) % Negri Sembilan 64 (03/00) % Melaka 46 (03/00) % Johor218 (03/00) %

20 2006 © Renoir Consulting Limited Reduction in WIP – Value Project Headlines As At End October 2000 Reduction in WIP (WIP Value). (15% improvement). StateBase (Date)Current Imp Metro1,123m (03/99) 770m31.4% Negri Sembilan 127m (03/00) 62m51.1% Melaka 160m (03/00) 89m44.4% Johor 114m (03/00) 62m45.6%

21 2006 © Renoir Consulting Limited Project Results

22 2006 © Renoir Consulting Limited Contents About Renoir Current Indian Scenario in Distribution Case Study – TNB Distribution –Project History –Project Goals –Project Results –Project Approach Next Steps

23 2006 © Renoir Consulting Limited Definiti on 6 stage process Develo pment Installa tion Change Manage ment Results Sustain ing Results Technology of Change

24 2006 © Renoir Consulting Limited Definiti on Develo pment Installa tion Change Manage ment Results Sustain ing Results Training Creative Tension 4 Stages Minds Path Measurement Time Frame Behaviour 6 stage process Technology of Change Process System Structure The Issues

25 2006 © Renoir Consulting Limited Definiti on Develo pment Installa tion Change Manage ment Results Sustain ing Results Process System Structure Training Creative Tension 4 Stages Minds Path Measurement Time Frame Behaviour 6 stage process Technology of Change The Issues

26 2006 © Renoir Consulting Limited The Issues Illustrated ( Where The Money Was Lost) Non-Technical Loses Cash flow ? Lost in CIBS Theft/Faulty Meter Outstanding Records do not exist Not followed up Opportunity

27 2006 © Renoir Consulting Limited Many customers details were not in customer information billing system (CIBS). Many customers were in the billing system but no bills were sent. The customer address information was sometimes incorrect. Formal procedures for disconnection were not always observed and practices varied by zone. There were differing practices in the zones concerning the selection of accounts to disconnect. Disconnectors spent time waiting for disconnection and reconnection notices to be produced. There was extensive daily planning, but little weekly or monthly planning to control work. Customer Services

28 2006 © Renoir Consulting Limited Meter readers had stopped completing Irregularity Reports (IRs) for faulty and tampered meters because they were not being used to take action. Meter readers were seen as solely responsible for customer billing. There were many customer contact points that the MRs did not control where customer billing should have happened. No-one else was being held accountable. In Tenaga Shops, tellers used to ask ‘how much do you want to pay’ providing the customer with the opportunity not to pay the full bill. There was a substantial debtors problem across all customer types. The enforcement mechanisms laid down by the Electricity Act were not being followed and this was resulting in customers building up debts sometimes in excess of 1 year and millions of ringgits. Customer Services

29 2006 © Renoir Consulting Limited The supply network and maintenance systems in place were not adequate to provide the levels of supply reliability demanded by the nation. A lack of information, particularly at middle management level upon which to make business decisions. A lack of accountability/ownership, particularly at supervisory level for problems that arose. A breakdown was always someone else’s fault and someone else’s problem. Critical elements were missing from the maintenance management framework. There were no measures of mean- time between failure (MTBF) at a component level to facilitate effective preventative maintenance. Network Services

30 2006 © Renoir Consulting Limited There was a lack of accountability for restoration performance unnecessarily increasing customer outages. Tenaga had a substantial number of projects in progress at the same time and needed to reduce these numbers to improve lead times for new supply and improve cash flow. There was no established discipline of carrying out root cause analysis of re-occurring problems. A lack of co-ordination across departments. There was a general culture of lack of accountability and performance orientation. Network Services

31 2006 © Renoir Consulting Limited Definiti on Develo pment Installa tion Change Manage ment Results Sustain ing Results Training Creative Tension 4 Stages Minds Path Measurement Time Frame Behaviour 6 stage process Technology of Change Process System Structure The Issues

32 2006 © Renoir Consulting Limited “ Doing what you have always done and thinking somehow magically performance will improve” Behaviour Change What is the definition of madness?

33 2006 © Renoir Consulting Limited Systems Education Behavioural Change Behavioural Change Processes Information Activities Training Results Structures People Internal Business Framework Stage 2 - Development

34 2006 © Renoir Consulting Limited Disconnection Faulty Meter Cross Meter Government Accounts Found Supply Disconnected Counter Clerk Counter Clerk Special Letter Unpaid & Vacated Metered Illegal Restoration Slap-on Notice W/O 30 No Access JBE W/O 90UPJ Back billing NTL Unpaid & Vacated Clerk W/O 40 Close Account Deduct Deposit Higher Level Disconnectionn Disconnection Expense Address Not FoundTake to MRENext MR To Check Direct Illegal Restoration Theft Clerk Higher Level Disconnection Disconnected Account Status Unbilled Team Follow-up Access No Access Sub Process Example: Disconnection Issue Management

35 2006 © Renoir Consulting Limited Process Planning

36 2006 © Renoir Consulting Limited Process Planning

37 2006 © Renoir Consulting Limited Process Planning

38 2006 © Renoir Consulting Limited Management Control System Development

39 2006 © Renoir Consulting Limited Performance Measurement KPI Format (Weekly Report)

40 2006 © Renoir Consulting Limited Standard Operating Procedures

41 2006 © Renoir Consulting Limited Definiti on Change - Stage 3 Develo pment Installa tion Change Manage ment Results Sustain ing Results Training Creative Tension 4 Stages Minds Path Measurement Time Frame Behaviour Process System Structure The Issues Project Management Process

42 2006 © Renoir Consulting Limited Stage 3- Installation Training Tools - Skills Matrix Figure indicates the % Multiskill attained by a area/ division/ region. Figure indicates the %skill attained by individual. The individual to be trained The skill required by individual % people trained for particular skill

43 2006 © Renoir Consulting Limited Stage 3- Installation Training Modules Technology of Change Active Supervision Managing with numbers Training Skills Communication Skills Time Management Team Building Management Systems

44 2006 © Renoir Consulting Limited Information Transparency Procedures Accountability Confrontation Positive Confrontation To provide accountability To change behaviour Confrontation Positive Confrontation To provide accountability To change behaviour Effective Meetings Structure and set up Action solving root causes Individuals responsible Effective Meetings Structure and set up Action solving root causes Individuals responsible Problem Analysis Root Cause, not symptoms 5 Why analysis Determination, not deferral Problem Analysis Root Cause, not symptoms 5 Why analysis Determination, not deferral Systems Creative Tension Stage 3- Installation

45 2006 © Renoir Consulting Limited Definiti on Change - Stage 4 Develo pment Installa tion Change Manage ment Results Sustain ing Results Training Creative Tension 4 Stages Minds Path Measurement Time Frame Behaviour Process System Structure The Issues Technology of Change

46 2006 © Renoir Consulting Limited The lack of awareness and understanding that a successful change process has to go through ‘four changes in mindset’ is a common reason why many strategic change programmes fail… We also make false assumptions about peoples ability to adhere to new ways of working, and to manage and accept change. Where Most Things Go Wrong! Change Assessment Management System (CAMS)

47 2006 © Renoir Consulting Limited Conscious Unconscious IncompetentCompetent Direct Delegate SupportCoach The Four States of Mind! Conscious Unconscious IncompetentCompetent Compliance Culture UnderstandingUsage Renoir Minds Path Matrix …No shortcuts possible... The Four States of Mind! Change Assessment Management System (CAMS)

48 2006 © Renoir Consulting Limited The four mindsets must be measured by auditing. Auditing is a quantitative measure of a qualitative thing! The secret to successful change management is to be able to assess and measure your progress through the ‘minds path’. “ If you can’t measure it, you can’t manage it.” The Key to Success! Change Assessment Management System (CAMS)

49 2006 © Renoir Consulting Limited Audit questionnaires are developed to assess the mindset levels using a structured approach: 1.Closed ended questions for compliance. 2.Open ended questions for understanding. 3.Demonstrative questions for usage. Measuring the Four Mindsets The audit questionnaire answers get converted into a scoring scheme… 0 for wrong or not done. 1 for partially right or partly done. 3 for correct or demonstrated. The percentages of each system performance category are plotted The target is 100%. Change Assessment Management System (CAMS)

50 2006 © Renoir Consulting Limited Installation Status 0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100% Current Period Achievement InstalledPartially InstalledNot Installed System Utilization Status 0% 20% 40% 60% 80% 100% Current Period Achievement MechanicalUnderstandingUsage Installation Status Change Assessment Management System (CAMS)

51 2006 © Renoir Consulting Limited Definiti on Change - Stage 5 Develo pment Installa tion Change Manage ment Results Sustain ing Results Training Creative Tension 4 Stages Minds Path Measurement Time Frame Behaviour Process System Structure The Issues Technology of Change

52 2006 © Renoir Consulting Limited Section 1 System Performance

53 2006 © Renoir Consulting Limited LV Breakdowns South

54 2006 © Renoir Consulting Limited Section 3 Projects

55 2006 © Renoir Consulting Limited Project Average Closing Duration - Days % Improvement 72 %

56 2006 © Renoir Consulting Limited Section 2 Non Technical Losses

57 2006 © Renoir Consulting Limited Unbilled Customers SDE % Improvement 93%

58 2006 © Renoir Consulting Limited Faulty Meter WP 5.74 mil 9.12 mil* Total Recovery To Date : RM 5.74 m

59 2006 © Renoir Consulting Limited Tampered Meter WP

60 2006 © Renoir Consulting Limited Definiti on Change - Stage 6 Develo pment Installa tion Change Manage ment Results Sustain ing Results Training Creative Tension 4 Stages Minds Path Measurement Time Frame Behaviour Process System Structure The Issues Technology of Change

61 2006 © Renoir Consulting Limited Project Results “I appreciate the discipline that you have put into the workforce, as it was severely lacking in the traditional TNBD culture....Everyone used to promise to do things, but rarely delivered.... Now people promise, and they deliver... People don’t like to loose face in TNBD, so if they have promised and everyone knows they have promised, they will deliver. Everyone’s job is now very transparent, so everyone else knows what you should be doing as well” - Yazid Adon (GM South). “I used to be concerned that my people spent too much time in meetings, as I did not think that the meetings were of any real benefit. Now I realize that they were of benefit. Now with a KPI and action focused meetings at all levels, I know that the meeting is at least a focused one. As a result, meetings conducted are generally a lot shorter and more focused, so on the whole, meeting time is reduced, but more effective” - Abu Hasan (COO South).

62 2006 © Renoir Consulting Limited Contents About Renoir Current Indian Scenario in Distribution Case Study – TNB Distribution –Project History –Project Goals –Project Results –Project Next Steps

63 2006 © Renoir Consulting Limited Conclusion - Next Steps India has an estimated level of billing efficiency of 55% and collection efficiency of 41% SEB losses of Rs = 1.5% GDP (SOURCE MINISTRY OF POWER APDRP OVERVIEW). The Power Sector can never be financially viable until these issues are addressed. The only precondition is addressing the issues we have illustrated.

64 2006 © Renoir Consulting Limited Queries Saumil Shah, Head of Operations - India, Renoir Consulting (India) Limited 2 nd. Floor, Raheja Chambers, 213 Nariman Point, Mumbai, India Tel: Mobile: (0) Website:

65 2006 © Renoir Consulting Limited Conclusion - Next Steps Pilot project to demonstrate best practice with empirical evidence. Need to select a geographical area for preliminary business audit.


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