Asset Management: What is it? Why do I need it?

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Asset Management: What is it? Why do I need it?

Asset management can be expressed in both broad and narrow terms. For the power and utilities industry specifically, asset management can cover everything from people to facilities, equipment to information. Power stations, poles and crossarms, pipelines, data, substations, and transformers are all assets that make up the components to deliver power to a community. Asset […]

Asset management can be expressed in both broad and narrow terms. For the power and utilities industry specifically, asset management can cover everything from people to facilities, equipment to information. Power stations, poles and crossarms, pipelines, data, substations, and transformers are all assets that make up the components to deliver power to a community. Asset management is as simple as it sounds: managing your assets. The term is descriptive enough, but lacks a sense of significance, even urgency, that the concept itself embodies. Asset management is one of the most essential tasks a power/utility company will perform.

Hazards of the natural and economic variety create unique challenges in today’s business climate, particularly within the energy industry where failure can impact not only the company and its shareholders, but an entire region that depends on the goods and services the company offers as well as jobs and employment opportunities that impact the region’s economy and its tax base.

The ability to continue to provide mission-critical services to the client, and to generate revenue with minimal interruption depends on the ability to maintain against, prepare for, and recover from disruptions ranging from minor (a car crashes into a transformer, damages equipment, knocks out power to several thousand homes and businesses which is returned within an hour or so), to major. The 2007 ice storm that coated Tulsa, Oklahoma in a thick layer of ice felled thousands of trees, blew up transformers, and shut off power for half a million people throughout the state, including 80% of Tulsa residents for 10-12 days.

The Insurance Institute of Business and Home Safety states that 25% of small businesses that close their doors during a disaster never reopen. That is 25% fewer small business customers for the power and utilities companies.

Why do we need asset management?

There are a number of motivating factors to creating a strong asset management program. Those factors may include:

  • Risk (what can happen, and what will be the short-term and long-term impacts on your company, your customers, and your community?)
  • Customer satisfaction
  • Loss of revenue
  • Compliance with federal law, state law, and local rules and regulations. This requires staying abreast of the complex, ever-changing, inescapable universe of regulatory standards around the protection of workers and the general public.
  • Liability

Steve Baker, PSO Vice President for Distribution Operations brings asset management down to the bottom line. “If the power is off, the company loses money,” he said.

And not just from the loss of revenue. “There is a huge cost to the company for the response and recovery,” Baker said. Asset management can help to mitigate that cost.

“All your physical equipment providing power to customers are fixed assets. They have to be cared for,” he explained. “And it’s all aging. Look at it like a financial portfolio. Are your assets performing?”

A cost/benefit analysis can tell you if you are putting your resources into what best benefits the company and the customers. Does it require more resources to maintain a piece of equipment than to replace it? And what about the cost if it breaks down?

A strong asset management program will include periodic monitoring of equipment such as poles, transformers, and miles and miles of line to ensure against failure. It will implement modern technology such as smart meters, which provide an ability to remotely gather information in real time that wasn’t available before. It will include looking at public safety hazards, ensuring that all fixed assets can withstand weather, wind, and perform underground, and then recover quickly if there is a disruption. It will include a hardening and resiliency program to help mitigate against potential damage of assets and to ensure a smooth and speedy recovery when something does happen. Because no company escapes disruptions, Baker reminds us.

“Energy companies will have interruptions, equipment failure, things that impact the flow of business. What can you do?”

A good example of maintaining against potential risks is PSO’s tree trimming program. “Trees are not part of the system, but they directly impact the system if they are covered in ice or if they fall,” he said.

Today’s business community faces challenges entirely unlike those faced by previous generations. Constant changes in government regulations, keeping up with ever-increasingly new technology, and finding talented staff with both the long-term experience needed while still possessing the most up-to-date skills required to compete in a global economy are all hurdles faces by small and large businesses alike.  A strong asset management program is one of a power/utility company’s greatest tools to ensure continuity of service and revenue throughout disruptions large and small.

By Crystal Kline, Energy Writer

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