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Energy Industry Challenges: Lines Companies
Lines company operations have traditionally been managed
as one aspect of an integrated energy delivery, retail
and generation or trading business.
Commercially, lines company operations have been treated
as cost rather than profit centers. Revenue has been
derived from the retail operations with operating expenditure
being budgeted for network maintenance and management.
Primary commercial drivers have been to create an acceptable
financial return from the integrated business with minimal
reference to the value of the assets employed.
Network asset management which has tended to be rather
more reactive than planned has traditionally been performed
on a 'cost plus' basis. Asset maintenance and capital
work programs have tended to be driven by annual expenditure
budgets which do not necessarily reflect the income
derived from the use of the asset.
The impact of industry deregulation on network management
operations has been significant and has included:
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Retail and lines
company operations separated into autonomous business
units. |
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Lines company operations
required to operate as profit rather than cost
centres. |
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Distribution use
of System (DuoS) charges required to be provided
as a transparent component of delivered energy
cost. |
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Statutory constraints
imposed on the return on investment (ROI) allowed
on the asset value of the distribution network
with permissible ROI often reducing annually. |
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Imposition of performance
metrics (e.g. SAIDI, CAIDI and SAIFI) with possible
financial implications when targets are not met. |
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Formal
contractual obligations to connected customers
and/or retailers. |
In addition to evolving statutory requirements some
lines companies have also found that connected customers
become more discriminating in a competitive deregulated
market.
A Kinetiq industry paper, New Opportunities &
Challenges, discusses some of the issues that lines
companies around the world are having to face as the
energy industry continues to change.
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