Asset Management in Electricity Distribution Utility: "The Challenges of Getting Softer"
Guest post by
Abhishek Prasad Verma, Lead Consultant, Infosys
Power sector historically has been late in adopting IT to enable and streamline its business processes. The same is evident in its archaic operations and built in inefficiencies. However recently there has been a considerable effort by the utilities to look for all available options to improve operational efficiency in various field of operation like customer services, metering, billing etc. for improved customer services & tariff rationalization. So is the case with Asset Management System. In the first wave of transformation, the industry is looking forward to go softer and leaner i.e. it is exploring IT to replace its "Hard Book" based archaic manual systems.
This transformation is not easy and there are various challenges in getting softer. Few of them are -
- Streamlining the business processes: Processes in Power distribution company are archaic and often burdened with non-value add activities because of reliance on paper based transactions and over-emphasis on delegation of power in absence of lack of transparency and system. The software can be as effective as the business process. And hence it is very important to streamline the business processes related with asset and maintenance management before having a software design.
- Creating an Asset repository: Most of the distribution companies do not have a single view of the assets installed on the field because of the use of distributed paper based asset registers. Without a proper system it is practically impossible to track and maintain assets in this industry which is characterized by assets that are geographically scattered and involve frequent movement esp the ones like transformers and meters. Hence it is of utmost importance to create a realistic asset repository in terms of its technical, operational, location, network and financial parameters.
- Asset Modeling: Asset modeling involves asset classification and identification of relevant parameters for each asset type. Often asset modeling in an asset management system is guided by asset management and maintenance perspective. However for an effective business process cutting across the IT landscape, it is very important to see asset management system in integration with other dependent systems like billing, meter data management, meter data acquisition and energy audit system. The asset modeling in asset management should be holistic in a way that it can capture and provide asset information required by other systems.
- Asset Numbering: Asset numbering is a way of uniquely identifying an asset and tracking its entire life cycle. Often a debated issue related with asset numbering is intelligent vs dumb numbering. Both have their pros and cons and it is essential to discuss this out in the early stage of the implementation.
- Treatment of Linear Assets: Linear assets like conductors and cables, unlike point assets are continuous assets and hence modeling them in the system is a bit tricky. They can be treated as group assets based on length or companies may decide to treat each segment as separate Asset. There is a tradeoff between accuracy of information and ease of operation in the system in both the approaches that should be weighed upon.
- Variations in Depreciation Method: Any asset management system provides standard set of depreciation method like straight-line, No deprecation, Group depreciation, double declining balance etc. But sometimes depreciation method is mandated by the relevant regulatory body ex in India distribution companies follow the depreciation method as prescribed by CERC. It is a variant of a straight line depreciation method where for specific duration the asset is depreciated at fixed rate and hence forth the WDV is equally apportioned to the remaining useful life of the asset. Such methods need substantial customization in the standard packages.
- The Financial Value of Existing Assets: Most of the utilities value and depreciate assets in group without individual asset level information like asset serial number, installation date etc in their manual books. Therefore the transition from old book based system to IT enabled AM system, has challenges in terms of apportioning the asset value to individual assets on the field. This creates a need to develop an approach to have proper asset valuation from the system in the transition phase.
- Shift from distributed to collaborative roles and responsibilities: Traditionally asset management was an exercise distributed between O&M and Accounts department. However with advent of systems it becomes more of a collaborative task right from creation to the retirement of an asset. This is an important challenge to be catered to as part of change management exercise.
Though the challenges highlighted above are common for each implementation in a power distribution industry and there are best practices to resolve them, the actual solution may differ from company to company. Hence it is very important for the business and the IT implementation partner to discuss and have a solution map for them early in the implementation phase.
Note: I would like to specifically mention Abhishek Bhargava, Senior Consultant with Infosys for sharing ideas for this blog.
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