Utility vegetation management has long represented one of the greatest challenges to electric utilities. It often represents the largest preventive maintenance investment, while providing the greatest contribution to system reliability with significant impacts to every key stakeholder.
Some progressive U.S. electric utilities — such as American Electric Power (AEP, Columbus, Ohio), PECO Energy (Philadelphia, Pennsylvania), Commonwealth Edison (ComEd, Chicago, Illinois) and Southern California Edison (SCE, Rosemead, California) — are focusing on the management of their vegetation management programs as a result of deregulation, mergers and acquisitions, and asset management optimization challenges facing the industry.
Traditional vegetation management methodologies are fast becoming a thing of the past. Executive leadership teams recognize the need to administer vegetation management programs in a business-focused fashion to leverage the total long-term value with respect to cost and performance.
The foundational basis for a progressive transition begins with five key success factors:
- Executive sponsorship
- Strategic business planning
- Performance-based strategic alliances
- Asset management
- Project management.
Each of these critical success factors is easily defined but often difficult to implement. The process to leverage the total value from vegetation management foundationally begins with sustained proactive and accountable executive sponsorship. A comprehensively defined strategic and tactical business plan supports the entire process. It is critical that utilities implement long-term, performance-based strategic alliances to maximize the business-planning process. Finally, utilities must successfully implement key processes such as asset management and project management to ensure long-term sustainability and systematic execution.
The core critical success factor of the transition to a progressive vegetation management approach lies in executive sponsorship. Many electric utilities have often viewed their vegetation management programs from a decentralized perspective and utilized a tactical management approach. This has lead to fluctuating budgets, poor performance and frustration among utility leadership.
Utility operations often view vegetation management as a “plug or drain” during the yearly budgeting process. If the organization needs additional operation and maintenance (O&M) funds, it often transfers the funds from the vegetation management budget. Conversely, if the organization has additional funds, it sinks these funds into its vegetation management programs to vindicate itself for previous years of reducing funding levels. This traditional organizational behavior creates a tremendous burden on the vegetation management program with respect to its ability to create sustained cost and performance improvements.
To combat this cyclical occurrence, electric-utility industry leaders are centralizing the sponsorship role to an executive sponsor. PECO Energy implemented this critical success model during its 1997 restructuring activity. Today, the supply management vice president at PECO Energy assumes the role of this single executive vegetation management sponsor.
AEP is another example of the successful implementation of this model. In 2001, AEP reorganized its vegetation management program so that the asset management vice president would have direct accountability.
Both of these models yield a corporate focus on sustaining a long-term budget and strategic plan, achieving a higher level of predictable performance and driving the program towards continuously challenging itself for ongoing improvement.
Strategic Business Plan
A key role of the executive sponsor is to lead the vegetation management organization in designing, executing, monitoring and refining a comprehensive strategic business plan. This is the road map for success.
In 1999, PECO Energy captured all the key vegetation management business planning initiatives: vision; mission, goals and objectives; key historical information and results; tactical and strategic initiatives; lessons learned; risks; performance; and financial and alliance performance. PECO Energy was able to clearly link every major vegetation management process, plan and associated performance to the overall company business-planning objectives.
Utility vegetation management organizations can learn from the PECO Energy's example and transition from their current traditional paradigm to a progressive future state.
Trees and vegetation constitute a dynamic living system that requires long-term management and consistent programmatic control. Deferred maintenance of trees and vegetation results in an exponential cost increase and substandard reliability performance.
Performance-Based Strategic Alliance
One of the most under utilized yet most powerful tools available to an electric utility is the implementation of a vegetation management performance-based strategic alliance.
PECO Energy established its strategic alliance in 1992 and works proactively with its partner to continuously improve the total value of its vegetation management program.
Since the formation of the strategic alliance there has been significant improvements in the following areas: best practice implementation, tree crew productivity improvements, significantly improved tree reliability and implementation of a collaborative continuous improvement work culture.
|Current Utility Vegetation Management Paradigm||Progressive Vision of the Future|
|Overstaffed and Complex Organizational Structures||Lean and Highly Structured Organizations|
|➣ Result — Traditional operations and applied solutions have fostered tremendous operational overhead, weak accountability and inconsistent work practices.||➣ Result — Business-focused accountability that will optimize total value, sustain strategic vision and enhance operational performance.|
|Inconsistent Senior Management Sponsorship.||Dynamic Senior Management Sponsorship|
|➣ Result — Inadequate execution of sustained strategic vision, organizational accountability and perception that stimulate and yield continuous reactive change.||➣ Result — Highly interactive and supportive leadership linkage that creates a dynamic synergy and maintains business focus, strategic vision and proactive decision-making.|
|Tactical Operational Management||Strategic Based Business Management|
|➣ Result — Continuous reactive change that stimulates execution of short-term solutions that yield higher overhead costs, stagnated effectiveness and erosion of senior management confidence.||➣ Result — Focused return on investment and cost-benefit analysis, decision-making and implementation that have clear senior management sponsorship.|
|Traditional Supply Management “Bid and Buy” Methodology||Performance Based Strategic Alliance|
|➣ Result — Contributes and stimulates the evolving contractor apathy within the industry. Many contractors have no strategic incentive to perform any better than the level that the customer has specified. The results are higher costs, degrading performance, reactive responses to emerging problems and a continued lack of performance innovation.||➣ Result — Fully leveraged and dynamic mutually beneficial relationships will yield a powerful synergy that will reduce long-term costs and optimize performance through innovation, continuous improvement and consistent operations execution.|
|Low-Value Organizational Image and Perception||Recognized as Strategic Organizational Leaders|
|➣ Result — Many programs today are stereotypically referred to as the “Forestry Group,” “Line Clearance Department,” “Trees” or “Tree Trimming Department.” This over-simplistic generalization has created a stakeholder perception of low value and created negative “green” image that minimizes the organizations strategic importance to the corporation.||➣ Result — Stakeholders will view vegetation management organization as a dynamic and business-driven team of progressive and highly skilled professionals. They will represent the model that other departments will strive to match. The image will emulate business-savvy leadership of the highest competence.|
|Inadequate Business Planning||Comprehensive Strategic Business Plan|
|➣ Result — Significant fluctuations in funding levels, poor reliability performance and a spiraling work scope that lacks disciplined schedule adherence creates a justified perception of low value, lack of confidence and reactive corrective actions.||➣ Result — Strategic platform for all operational business decisions that summarizes historical and future performance data, funding levels, and strategic and tactical initiatives. This will ensure corporate and department goal and objective linkage, and create a document that senior management uses to ensure the corporate return on investment is optimized.|
Documentation published across many industry sectors demonstrates the total value of a strategic alliance. However, electric-utility purchasing departments and vegetation management personnel are reluctant to embrace this tool because of the belief that the “three bids and a buy” methodology yields the lowest cost. Ironically, they are correct in one sense that this methodology often yields the lowest cost initially. However, it only supports the fact that a company may be getting the lowest cost for a specific piece of work and completely discounts all other total cost opportunities.
Traditional vegetation management organizations have long felt the need to control the contractor and are usually overstaffed to accomplish this task. Many organizations focus on applying a “parent-child” relationship with the vendor, which yields an “us vs. them” mentality. Vendors will perform only to the level in which the “three bids and a buy” contract requires them to perform. The result to the electric utility is lower risk for the vendor, higher overall costs, inconsistent quality, higher utility vegetation management overheads and significantly redundant contract administration practices.
AEP, PECO Energy, ComEd and SCE have implemented performance-based strategic alliances with many others following suit. The main tangible result of these alliances is significant initial financial and productivity savings greater than 15%. Equally important is that it creates a long-term collaborative relationship with the vendor by significantly increasing the vendor risk and drives the entire vegetation management team on a daily basis towards optimizing and improving every major performance area, including cost, reliability, safety, quality and productivity.
The answer of how to link the vegetation management investments to the resulting performance has long been an illusive question within many electric utilities. The inability to quantify this answer has been one of the largest contributors to fluctuating vegetation management budgets and the inability to sustain long-term performance.
In 2001, AEP reorganized to an asset-management-focused corporate structure. The asset-management organization is solely responsible for executing the overall strategy that includes the funding levels, management and performance of the vegetation management program.
At a recent electric-utility asset-management conference, this emerging industry trend was discussed at length as a key conference agenda item. Attendees discussed the significant value strategic alliances present to the company and its alliance partner from tactical and strategic perspectives.
The conference group agreed that companies that are successful in implementing true asset-management organizations drive accountability and provide sustained budgets for specific and defined programs such as trimming, hazardous tree removal, herbicide and tree growth regulators. This allows the vegetation management organization to implement a disciplined, long-term strategic business plan that reduces long-term costs and creates sustainable and predictable performance.
Up to this point, the utilities have not been successful in focusing on the cost and performance relationship primarily due to the traditional focus of vegetation management organizations on the previously discussed intensive vendor contract administration. However, there are economic modeling tools that are rapidly becoming available.
One such model developed by Davies Consulting Inc. (Chevy Chase, Maryland, U.S.) clearly links reliability performance to expenditure levels. The model is based on actual historic cost and reliability data, analyzes different scenarios and provides a link to the overall asset-management prioritization.
Many industry sectors — especially information technology — have instituted a disciplined project management approach to managing the growing work scope. Project management has resulted in greater organizational discipline, increased the effectiveness of planning and allowed them to reduce overall life-cycle costs.
In 1997, leveraging its corporate project management philosophy, PECO Energy realized the high value this disciplined management approach would yield within its vegetation management organization. However, utility vegetation management has not openly embraced it up to this point. One reason could be that many utility vegetation management organizations continue to operate in a reactive and tactical perspective. Another is that many vegetation management personnel have not had to focus on managing their programs from a long-term business perspective. Instead, they have been focused on “fighting fires.”
The Project Management Institute offers a methodology and model for the industry to conduct business in this manner. Additionally, a structure that would assist electric utilities in accomplishing this is to institute a vegetation management project office.
PECO Energy has used this disciplined project management methodology to optimize key operational functions, such as scheduling, work management, customer relations, data warehousing, mapping and document management and work scope. This has yielded consistent and cost-effective management in a coordinated and centralized fashion. This has been demonstrated to reduce cost, improve customer satisfaction, improve planning and drive accountability.
Utility vegetation management offers electric utilities the single greatest opportunity for performance improvement, optimization of return on investment, improved system reliability and increased stakeholder value.
The key for electric utilities to successfully transition from the high cost and substandard performance resulting from the traditional methodologies to one of a progressive, disciplined and total value business approach is rooted in the commitment of the executive leadership to create, manage and support the change.
As regulators and customers expectations increase due to pressure from deregulation, mergers and acquisitions, electric utilities must proactively challenge their vegetation management programs and implement new, progressive and industry-leading methodologies that extend the vegetation management organizations comfort zones in order to raise the level of accountability and opportunity for continuous improvement.
Rick Hollenbaugh is the founder and president of Everest Management Consultants Inc. (www.everestmci.com), an organization specializing in business-driven electric-utility vegetation management solutions. His 16-year career has focused on assessing, designing and managing comprehensive vegetation management programs for major electric utilities. An International Society of Arboriculture Certified Arborist, he is also a member of IEEE, Project Management Institute, International Society of Arboriculture, Utility Arborist Association and American Society of Consulting Arborists. He has the MBA degree from Eastern College and the BS degree in forest management from the University of Maine.