Utilities and COVID-19: Some Early Lessons
We’ve now heard hundreds of times that we’re facing extraordinary times. As utilities face these events, how are they responding? What’s working and what’s not? Here is some of what we are hearing from our clients.
- Provide consistent communication. Formal updates are important, but personal outreach is invaluable. Calling managers and employees who are sick or have been exposed, strengthens alignment across the organization.
- Focus on the collective good. Making the hard calls early could provide needed financial and operational flexibility in the months to come.
- Lead with personal sacrifice. If employees are expected to work remotely, juggle family and work priorities, and face reductions in pay or furloughs, management needs to lead the way. Management needs to show they are willing to make the same sacrifices they are asking from everyone, often before anyone else.
- Resist temptation of a siege mentality. Prioritize activities, but to the extent possible, don’t cancel all projects and give the appearance the organization is adopting a “siege mentality.” Stay positive, focused, and to the best of the organization’s ability, business as usual and no excuses.
Watch this short video clip as Cristin Lyons, partner and energy practice leader, shares perspectives on what leaders should be thinking about.
- Isolate or sequester employees. Where employees are required by operations or regulatory requirements (i.e., NERC), ensure they are isolated where possible and sequestered if needed. This may include bedding and meals. The nuclear industry is well ahead on this topic.
- Know and manage who is coming on site. Utilities are turning away non-essential staff. Those who are coming on site are being screened, including, in some cases, temperature checks. Stagger shifts where possible to minimize contact. Ensure employees know exactly what to do if they are sick or need to be quarantined; let them know what resources are available to them.
- Use your backup centers. Assuming you have a hot standby for your primary operations centers, use back up facilities to sequester staff. If you can’t, determine the degree to which employees are suited to work in multiple facilities. Rotate staff to fill vacancies while exercising care not to increase exposure (a fine balance, granted).
- Prioritize and reprioritize work. Identify what absolutely must to be done by when. With loads down and likely to remain so for a while, can work be postponed to later in the year? Identify what is particularly critical going into the summer peak. Work with your contractors to jointly prioritize work and address staffing contingencies.
- Keep generation plants in service wherever possible. Avoid taking planned outages in the short-term. For generation units already in an outage, focus on getting them back online as quickly and safely as possible (before events potentially preclude you from doing so).
- Use your professional networks. A number of utility industry organizations have already set up peer to peer sharing opportunities. These will be critical in disseminating lessons learned. If you are not yet part of these discussions, join one or start one.
- Continue coordination with emergency response agencies. Utilities are an essential service, and they will remain critical throughout the pandemic response.
- Review mutual aid agreements. Understand how these agreements can be leveraged for pandemic response. Consider how best to integrate non-company resources to complete critical work.
- Suspend service cutoffs. Many companies have already taken measures to suspend service cutoffs during this period; many regulators are requiring it. This will likely become the norm, at least until things stabilize.
- Reduce physical customer contact. Closing service centers and suspending physical meter reading (relying on automated/wireless meter reading or estimated billing wherever tariffs allow or regulators will permit exceptions) have become the norm. Identify and understand other points of physical customer contact, but do not sacrifice the safety or reliability of your service.
- Engage with hospitals and other critical facilities. These will come under increasing stress in the coming days. Ensure backup facilities are tested and ready. Confirm all parties have current contact information in case of an event.
- Consider call center changes. Develop scripts for COVID-19 related issues. Activate mutual support options across operating companies, where possible.
- Increase customer engagement. Provide accessible answers to customers’ most pressing concerns via website, blog, or electronic outreach. Work proactively with the press. Ensure that previously created outgoing messaging is on point and relevant to the crisis.
- Increase community engagement. Identify local charities focused on addressing the immediate impacts of COVID-19, and channel corporate contributions accordingly.
Suppliers and Supply Chain
- Translate priorities of operations into critical materials and services. Identify suppliers of materials and services needed for the work priorities of operations. Ensure these suppliers understand and are prepared to meet your needs. Place orders early and pay smaller companies quickly. Support suppliers who need your concurrence to continue their business as providers of essential services.
- Identify and monitor critical suppliers and channels. Determine areas of high-risk exposure (i.e., international supply chain risk). Consider critical spares (i.e., transformers) and how these may be coordinated with industry consortia.
- Identify alternate suppliers and logistics. Review delivery schedules and payment terms, if possible; work with suppliers to adjust or accelerate to enable stockpiling. Ask what their contingency plans are and where they face risk.
- Be flexible to support urgent needs. Consider short-term suspension of competitive bid requirements for critical materials and services. For existing competitive solicitations that are not urgent, consider extensions or suspensions.
- Don’t lose sight of trusted partners. If absenteeism skyrockets, you will need a labor supply available to supplement your existing workforce.
- Model various scenarios. This will be needed to understand both risk and no regrets actions that should be taken in the short-term.
- Evaluate working capital needs. Assess short-term and longer-term impacts on capital and revenue/margins. Consider where receivables may decline and identify emergency sources of capital for contingencies. Model the impact of capex decisions on future earnings.
- Assume that regulatory calendars will be delayed. Work within existing mechanisms when possible and encourage regulators to stay the course. For outstanding or inflight proceedings, consider where this introduces financial risk.
- Communicate with regulators. Be proactive and helpful. Respond immediately to requests and mandates. Offer ideas from the frontline.
- Track the financial impacts of the disruption. Tracking the impact on expenses, revenues, and capex will prepare you to justify your position in your next proceeding.
If we can help you and your team think through these and the many other challenges presented by COVID-19, please let us know. We are all working through this a day at a time.
About ScottMadden’s Energy Practice
We know energy from the ground up. Since 1983, we have served as energy consultants for hundreds of utilities, large and small, including all of the top 20. We focus on Transmission & Distribution, the Grid Edge, Generation, Energy Markets, Rates & Regulation, Enterprise Sustainability, and Corporate Services. Our broad, deep utility expertise is not theoretical—it is experience based. We have helped our clients develop and implement strategies, improve critical operations, reorganize departments and entire companies, and implement myriad initiatives.
About ScottMadden, Inc.
ScottMadden is the management consulting firm that does what it takes to get it done right. We consult in two main areas—Energy and Corporate & Shared Services. We deliver a broad array of consulting services ranging from strategic planning through implementation across many industries, business units, and functions. To learn more, visit www.scottmadden.com | Twitter | Facebook | LinkedIn.
About the Author
Cristin Lyons is a partner with ScottMadden and leads the firm’s energy practice.
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