Since its formation, 24seven has received much attention from the U.K. utility community and has been recognized as an innovative, groundbreaking company. Last January, 24seven was included in the Vision 100 list of most visionary U.K. companies, an award sponsored by Cranfield Business School, and it has received interest from several mainland European, Australian and North American companies.

Formed initially as a joint venture between LE Group and TXU Europe in April 2000, and now wholly owned by LE Group, 24 Seven Utility Services Ltd. operates as an independent provider of network asset-management services to utility network owners. 24seven's current clients are LPN (formally London Electricity) and EPN (formally Eastern Electricity). It also has a Memorandum of Understanding with Stadtwerke Kiel to form a joint venture to manage the electricity, water and gas networks for the city of Kiel, Germany.

T&D World: Can you describe the 24seven business model?

Harpley: 24seven's business model provides operating cost and service benefits to asset owners through work agreed with the client through a long-term network management plan. Tying revenues to meeting the asset owners' strategic objectives has caused a culture change from the legacy traditional utility approach. The contracts also include a comprehensive set of Key Performance Indicators (KPIs), spanning network reliability, customer service, safety and environmental measures. Failure to satisfy these KPIs results in 24seven paying penalties to its clients. Conversely, there is an incentive for surpassing the KPIs: Failure to complete the plan or completion of work not in the plan goes unrewarded.

T&D World: What has been the impact to your customers?

Harpley: Both LPN and EPN have seen a dramatic reduction in their operating costs and have met very challenging quality targets for the net-works as a result of the effectiveness of 24seven.

24seven has initiated the formation of an asset-management services market and has undertaken a great deal of marketing and business development activity to position the company for further contracts in the electricity, gas and water sectors.

T&D World: Since it's formation, 24seven has undergone several ownership changes. What prompted these changes and have the company's objectives remained the same?

Harpley: 24seven was formed as a joint venture between TXU Europe and LE Group, who, in turn, are wholly owned by Electricité de France. In January 2002, LE Group purchased TXU Europe's distribution business. At the same time, LE Group bought out TXU's 50% share of 24seven. The ownership change has not altered our objective to become the leading multinational, multi-utility network management services provider.

T&D World: What range of services does 24seven provide for EPN and LPN?

Harpley: We provide an end-end service. This includes development of investment plans and operational policies, network design and development, network control, trouble call handling, project management, field services (inspection, maintenance, fault response and repair) and network construction.

T&D World: How large are the EPN and LPN networks, and how many customers do these networks supply?

Harpley: 24seven has 2500 employees based in 12 major sites across London and the east of England — in an area of 20,000 sq km (7722 sq miles) — managing electricity distribution networks that serve a population of 15 million people (approximately 25% of the U.K. population). We operate 119,000 km (73,960 miles) of cable and overhead circuits and 45,000 substations.

LPN and EPN, the asset owners and distribution licence holders, each have a staff of around 45 responsible for asset financing, relations with the regulator, use of system charging and managing the contract with 24seven.

T&D World: 24seven requires staff with industry experience and unique skills. Do you have a staff recruitment and training scheme?

Harpley: We inherited excellent people from London and Eastern. We have supplemented these with a number of staff with commercial skills suitable for a service business. We now have graduate recruitment and apprenticeship schemes in operation to ensure our technical skills are at the forefront. As a people business (we do not own network assets), we invest heavily in training and development of existing managers and staff, from tailored executive management development programs to customer service training for trouble call handlers.

T&D World: What is the form and length of contracts? Are there performance incentives?

Harpley: Our existing contracts are for six years, but proposals for other utility contracts tend to be in the 5- to 10-year range, although we are bidding for some private network schemes that involve 20-year concessions.

The contracts are output and regulatory compliance based; we are not a regulated entity but our clients are. Performance is measured through KPIs and milestone delivery of projects against the agreed asset-management plan. 24seven is rewarded (up to a capped amount) for the out performance against the KPIs; similarly, it is penalized (no limit) for underachievement. There are gain share incentives built into the fee structure for project work to promote capital efficiency.

T&D World: What is 24seven's position with respect to customers? Does it have direct involvement as a third party?

Harpley: We manage the customer relationship on behalf of the asset owner. Our single integrated network control center takes customer trouble calls. We deal with general enquiries regarding our works and handle all interfaces regarding provision of new or altered connections for customers. As with all U.K. electricity companies, LPN and EPN are separate from the retail (supply) business and, therefore, are not involved in customer energy billing and related queries.

T&D World: 24seven manages in total the asset owner's network. What role do the asset owners play in decision making that involve investments in new technology, or does 24seven assume a consultancy position?

Harpley: Each year we provide our clients with a comprehensive asset-management plan covering the next 5 to 10 years. Our strategic asset-management team takes the business drivers of the client and converts them into measurable outputs. We assess the condition and performance of the client's network and develop investment and operational strategies to match the business drivers. The plan is an iterative process involving the client, during which we discuss alternative strategies and attendant risk assessments. 24seven then delivers work programs against the agreed plan.

T&D World: Are you compensated for meeting this plan?

Harpley: The contractual process between client and service provider results in a higher proportion of delivery against plan than within a traditional utility. This is because 24seven is only paid for delivering to plan. If we undertake work not in the plan (just because it seems a good idea), then we don't get paid. Similarly, if we don't complete the plan, we don't get a full fee. In comparison with other U.K. electricity companies, we have estimated that 24seven has a 40% cost advantage, approximately half of this derives from scale benefits and half from our contract methodology.

T&D World: Utilities formerly invested in R&D. As asset managers, do you invest in R&D, or is it still an asset owner responsibility?

Harpley: Our technical development and strategic asset-management teams are always seeking out latest developments and opportunities to transfer those technologies into network applications. We are not a research company and strongly believe manufacturers have the best resource in this area. However, we do get involved in developments in network management. We also have strong links with academic institutions researching the impact of embedded (distributed) generation on distribution networks.

T&D World: The U.K. electricity distribution sector is regulated. Does 24seven have direct involvement with Office of Gas and Electricity Markets (Ofgem), or are interests and responsibilities limited to satisfying system performance and guaranteed standards?

Harpley: The asset owner, as license holder, is responsible for the relationship with the regulator. However, in order to provide our service, we need to be fully aware of all regulatory developments. Separate from the licence holder's relationship, we do maintain contact with Ofgem and other regulatory and government bodies in order that they fully appreciate the 24seven business model.

T&D World: 24seven has been in business for two years now. Asset management and outsourcing are key drivers. Do you foresee your business expanding by obtaining contracts with more U.K. utilities?

Harpley: Yes. We see our market as network management and not confined to any one utility. The company was created as a growth vehicle for its shareholders. This is a great motivator to people involved in running networks. It is my job to find those new contracts. Over the last two years, we have built strong relationships with U.K. utilities in electricity, water and gas, and we are getting closer to securing our first non-electricity deal.

T&D World: As a result of 24seven's experience in the United Kingdom, do you now have the expertise and business confidence to market your asset manager's in Europe and on an international basis?

Harpley: Very much so. We are convinced our asset-management methodology and contractual business model translates to other territories. We have identified Western Europe and North America as our first markets outside the United Kingdom. Our business model can bring great benefits to thousands of community utilities in Europe that can only improve performance through full merger, an option not always palatable to community leaders. We are particularly interested in developing the German Stadtwerke market through local relationships, potentially through country specific joint ventures.

In our first year, we worked on a potential deal in the United States. For a number of reasons, it did not progress, but we learned much from the process and intend to approach the North American market once our U.K. agenda is well under way.

T&D World: Can you forecast the time when 24seven will be in a position to offer similar services to gas and water utilities?

Harpley: We are already bidding for non-electricity contracts and have some experience providing bundled multi-utility offerings to a newly emerging “brown field” infrastructure development market in the United Kingdom.

Prior to joining 24seven at start up, Richard Harpley was vice president of network management at TXU Europe and was responsible for asset-management planning, technical development and regulatory affairs. Harpley led the team that negotiated TXU Europe's distribution price control with the regulator, Ofgem. At the same time, in 1999, he worked with London Electricity representatives to develop the business model that ultimately became 24seven.

Previously, Harpley held several senior management, organizational change management and technical roles within Eastern Electricity, starting his career as an electricity distribution engineer.

Now as sales and marketing director, Harpley is responsible for business development, marketing and corporate communications.