Happy summer. I hope you are enjoying the amazing weather and have made plans to make the most of it. In this month’s informational article about the utility industry, I’d like to shift our focus from power supply and transmission to a facet of utility operations that is easy to take for granted. That is utility planning and the crucial role it plays in operating efficiently and avoiding risk. Let me set the stage.
When you see a KEC line crew installing a new power line alongside a roadway, you are most likely witnessing the culmination of a multi-year planning process. The line being installed will be in service for decades to come. It will be exposed to harsh changes in weather and the materials used must be able to survive without failure. The line also needs to be able to meet the demands placed on it today and well into the future. It’s uneconomical to construct an expensive line today only to upgrade it in a few short years due to load growth. On the other hand, it’s similarly uneconomical to overbuild a line with capacity that will never be used. Ensuring that the construction of new lines is timed right, located and sized correctly, constructed with the right materials and subjected to the proper maintenance demands a very thoughtful choreography and continuity of planning, including:
- The Load Forecast: Foundational to planning is understanding load and load growth. Long-term load forecasting is performed to help inform everything from future power supply requirements, sizing and location of substations, and whether existing lines have ample capacity. The product of the effort is a forecast of future loads under several scenarios which create a range of outcomes that inform several studies and utility processes. Long-term load forecasting therefore underpins almost every other planning endeavor of the cooperative. It typically looks 10 or more years into the future and is updated annually.
- The Long-Range Plan: About once a decade, the cooperative’s engineering group prepares a long-range plan. This plan analyzes our current electrical system’s ability to serve the most extreme load growth envisioned by the load forecast with load that may be experienced 10 years in the future. By modeling the current system in this manner, engineering can “see into the future” and predict when and where future substations, major power lines and other significant investments will be needed.
- The Construction Work Plan: More frequently, the engineering department conducts an analysis very similar to the long-range plan except that only five years of load growth under anticipated conditions are applied to identify areas on the system where the current electrical system does not perform in accordance with acceptable standards. This includes lines where voltage falls below the minimum acceptable performance threshold, or the load being carried by a piece of equipment is approaching its capacity or rating, and whether the system can be reconfigured to continue serving load in the event of the failure of any component.
Once these situations are identified, the engineers analyze several ways to correct each. Each alternative is evaluated for cost and compared to the Long-Range Plan to ensure that the approach takes into consideration the longer term needs envisioned in that plan. The most economical and effective way of correcting the issue is selected. Then, the engineers determine when the work needs to be completed so the problems identified through the analysis do not materialize in the current and subsequent five-year work plan period. The product of this study is a listing of construction projects that are necessary in each of the following five years, the anticipated cost for each and the total cost of construction determined necessary.
- Maintenance Planning: It’s equally important to ensure that currently installed facilities are well maintained. To ensure that happens, the cooperative prepares a System Maintenance Plan, a Vegetation Management Plan, a Wildfire Mitigation Plan and others. The plans specify the actions the cooperative needs to take annually as well as the costs associated with those efforts.
- Financial Forecasting: Armed with the product of these other analyses, the cooperative’s finance department prepares a 10-year financial forecast. This forecast evaluates the capital requirements of operations over the next 10 years and how effectively rates cover those costs. This forecast also informs the cooperative of when new long-term debt may need to be secured. From this financial forecast, we sometimes identify years where capital spending is inordinately higher than other years and produces budgetary challenges or creates rate strains. In these situations, finance and engineering return to the drawing board to explore how construction plans can be revised to avoid those strains. We call this “iterative planning.”
- Human Capital Planning: The effective execution of all these plans requires we maintain a workforce that is appropriately sized, skilled and organized to do the work. To ensure this occurs, our human resources department in collaboration with managers and supervisors throughout the workforce, prepares and maintains a succession development plan, a leadership development plan, staff training plans and a compensation analysis.
- Budgeting: Annually, the cooperative prepares a budget that relies on all of these studies. The cooperative then lives by that budget.
While the studies and plans listed above are the most evident and tangible examples of utility planning, they really reflect the tip of the iceberg. Many other supporting plans are developed behind the scenes which also play an important role. As a case in point, it probably comes as no surprise that utilities are risk averse. So, we have a plan that assesses every conceivable risk the cooperative faces and cross-references those risks with every activity the cooperative engages in to mitigate that risk, with many of the studies listed above serving in that capacity. Then, those mitigating factors are assessed to determine if they are reasonably sufficient or if additional measures need to be taken.
In closing, I’d like to leave you with this perspective. There is nothing haphazard about utility operations and those in our industry have a passion for planning. We must. The consequences of inadequate planning can result in unnecessary service interruptions, avoidable costs and even the loss of life. Understandably, we have no tolerance for those outcomes and work tirelessly to avoid them. So, the next time you drive past a new line under construction, recognize that this line was likely the product of a planning effort years in the making and involved engineers, accountants, human resources, IT, line crews, mechanics, member service reps, purchasing agents and many others.