Renoir Consulting Limited
May 2006
‘Improving Efficiency and Profitability’
POWER SECTOR - DISTRIBUTION
2006 © Renoir Consulting Limited
Contents
• About Renoir
• Current Indian Scenario in Distribution
• Case Study – TNB Distribution
– Project History
– Project Goals
– Project Results
– Project Approach
• Next Steps
2006 © Renoir Consulting Limited
The Renoir Group
• Founded in UK in 1994
• Operating in India since 1995
• Implementation Specialists
• Vertical Specialisation in Generation and Distribution
• Experience in UK, USA, Germany, Malaysia, Philippines and India
• Excellent references
• Facilitate change in culture and management behaviours
• Focus on bottom line improvement
• Commit to delivering a Return-On-Investment
• Don’t write reports and don’t develop theoretical solutions
2006 © Renoir Consulting Limited
References Worldwide
2006 © Renoir Consulting Limited
Contents
• About Renoir
• Current Indian Scenario in Distribution
• Case Study – TNB Distribution
– Project History
– Project Goals
– Project Results
– Project Approach
• Next Steps
2006 © Renoir Consulting Limited
• Estimated level of billing efficiency of 55%
• Estimated collection efficiency of 41%
• 2001-2002 SEB losses of Rs 33000 crore = 1.5% GDP
• SEB lose 110 paise for every unit of electricity sold(SOURCE: MINISTRY OF POWER APDRP OVERVIEW)
Indian Scenario – Distribution
2006 © Renoir Consulting Limited
Commercial losses 213.82 203.79 235.58 239.24( Excluding Subsidies)
Commercial Losses 83.86 92.98 130.8 136.7(Including Subsidies)
Rate of Return -31.64% -28.32% -31.94% -26.13%( for losses without subsidy)
Current Indian Scenario
2002-03 2003-04 2004-05 2005-06 Provisional Provisional
Revised Estimates
Financial performance of state electricity boards ( In Rs. billion )
2006 © Renoir Consulting Limited
“There is a lack of accountability in distribution, outdated rules, regulations, management structures,
and practices…..unless you establish accountability at all levels, you can never improve performance”.
Union Minister
Source: Financial Express 18 March 2002
Current Indian Scenario – Distribution
2006 © Renoir Consulting Limited
Contents
• About Renoir
• Current Indian Scenario in Distribution
• Case Study – TNB Distribution
– Project History
– Project Goals
– Project Results
– Project Approach
• Next Steps
2006 © Renoir Consulting Limited
Contents
• About Renoir
• Current Indian Scenario in Distribution
• Case Study – TNB Distribution
– Project History
– Project Goals
– Project Results
– Project Approach
• Next Steps
2006 © Renoir Consulting Limited
Background : Power Sector in Malaysia
•Government Policy not to fully privatize electricity power industry.
– TNB (Tenaga Nasional Berhad) continues to generate & distribute power
•Ongoing effort to restructure the electricity distribution to achieve
competitive prices for end-consumers
•Tenaga Nasional, the largest company in Malaysia had recorded
financial losses for the year ended 1997/8. Its image with the general
public was being tarnished due to
– Supply reliability problems
– Inefficiencies in customer management
2006 © Renoir Consulting Limited
Project History
• On successful projects in Generation and Transmission, the TNBD-
Renoir Business Performance Improvement Program (BPI) began in
January 1999 as a contract between Tenaga Nasional Berhad
(Distribution), Malaysia and The Renoir Group, an international
implementation consulting company, based in the United Kingdom.
• Renoir would be the catalyst for change, introducing the business
improvement methodology the ‘Technology of Change’, “transferring”
this knowledge to a core team of change leaders, within the TNBD
structure.
2006 © Renoir Consulting Limited
Contents
• About Renoir
• Current Indian Scenario in Distribution
• Case Study – TNB Distribution
– Project History
– Project Goals
– Project Results
– Project Approach
• Next Steps
2006 © Renoir Consulting Limited
Project Goals`
The issues in TNB were commonly known as the “four big rocks”.
Network Services
• 25% Reduction in breakdowns.
• 15% Reduction in projects WIP.
Customer Services
• 15% Reduction in non-technical losses (towards total losses target of 5%
nationally).
• 15% Reduction in debtors (towards an ACP target of 27 days nationally).
2006 © Renoir Consulting Limited
Change the culture of the organisation from ‘passive, problem-oriented’ to ‘results-focused, performance-driven, action-orientated culture’
and develop change leaders.
Project Goals
2006 © Renoir Consulting Limited
Contents
• About Renoir
• Current Indian Scenario in Distribution
• Case Study – TNB Distribution
– Project History
– Project Goals
– Project Results
– Project Approach
• Next Steps
2006 © Renoir Consulting Limited
Non Technical Losses
Project Headlines As At End October 2000
Reduction In Losses: (Total losses % measurement). (15% improvement).
State Base (Date) Current Target Imp
Metropolitan Region 15.5% (03/99) 6.06 5.00% 60.9%
Negri Sembilan 8.85% (03/00) 5.40% 5.00% 38.9%
Melaka 13.% (03/00) 8.55% 5.00% 34.3%
Johor 12.8% (03/00) 8.60% 5.00% 32.65%
2006 © Renoir Consulting Limited
Cash Flow Management
Project Headlines As At End October 2000
Reduction Debtors/ACP: (ACP days measurement). (15% improvement).
State Base (Date) Current Target Imp
Wilayah Persekutuan 47.5 (03/99) 38.1 27 19.8%
Negri Sembilan 39.4 (03/00) 35.4 27 10.1%
Melaka 36.8 (03/00) 30.5 27 17.1%
Johor 33.3 (03/00) 29.9 27 10.1%
2006 © Renoir Consulting Limited
System Performance – LV Breakdowns
Project Headlines As At End October 2000
Reduction In Breakdowns (No. LV Breakdowns). (25% improvement).
State Base (Date) Current Target Imp
Wilayah Persekutuan 270 (03/99) 115 135 57.4%
Negri Sembilan 64 (03/00) 53 11 17.2%
Melaka 46 (03/00) 47 14 -0.1%
Johor 218 (03/00) 71 54 67.4%
2006 © Renoir Consulting Limited
Reduction in WIP – Value
Project Headlines As At End October 2000
Reduction in WIP (WIP Value). (15% improvement).
State Base (Date) Current Imp
Metro 1,123m (03/99) 770m 31.4%
Negri Sembilan 127m (03/00) 62m 51.1%
Melaka 160m (03/00) 89m 44.4%
Johor 114m (03/00) 62m 45.6%
2006 © Renoir Consulting Limited
Project Results
TNBD-Renoir BPI - Monthly Evaluation At December 2000
66,369,461
95,209,077
11,980,000
0
10,000,000
20,000,000
30,000,000
40,000,000
50,000,000
60,000,000
70,000,000
80,000,000
90,000,000
100,000,000
Jan
ua
ry
Fe
bru
ary
Ma
rch
Ap
ril
Ma
y
Jun
e
July
Au
gu
st
Se
pte
mb
er
Oct
ob
er
No
vem
be
r
De
cem
be
r
Jan
ua
ry
Fe
bru
ary
Ma
rch
Ap
ril
Ma
y
Jun
e
July
Au
gu
st
Se
pte
mb
er
Oct
ob
er
No
vem
be
r
De
cem
be
r
Month [1999-2000]
Va
lue
in
RM
Project Commited SavingsActual Savings (Till Date)Invoiced Amount
Current ROI (Actual) = 7.95 : 1.
2006 © Renoir Consulting Limited
Contents
• About Renoir
• Current Indian Scenario in Distribution
• Case Study – TNB Distribution
– Project History
– Project Goals
– Project Results
– Project Approach
• Next Steps
2006 © Renoir Consulting Limited
Definition
6 stage process
Development InstallationChange
ManagementResults
Sustaining Results
Technology of Change
2006 © Renoir Consulting Limited
Definition Development InstallationChange
ManagementResults
Sustaining Results
• Training
• Creative Tension• 4 Stages
• Minds Path• Measurement
• Time Frame
• Behaviour
6 stage process
Technology of Change
• Process
• System
• Structure
• The Issues
2006 © Renoir Consulting Limited
Definition Development InstallationChange
ManagementResults
Sustaining Results
• Process
• System
• Structure• Training
• Creative Tension• 4 Stages
• Minds Path• Measurement
• Time Frame
• Behaviour
6 stage process
Technology of Change
• The Issues
2006 © Renoir Consulting Limited
The Issues Illustrated(Where The Money Was Lost)
Non-Technical Loses Cash flow?
Los
t in
CIB
S
The
ft/F
ault
y M
eter
Out
stan
ding
Rec
ords
do
not e
xist
Not
fol
low
ed u
p
Opp
ortu
nity
2006 © Renoir Consulting Limited
•Many customers details were not in customer information billing system (CIBS).•Many customers were in the billing system but no bills were sent.•The customer address information was sometimes incorrect.• Formal procedures for disconnection were not always observed and practices varied by zone.• There were differing practices in the zones concerning the selection of accounts to disconnect.• Disconnectors spent time waiting for disconnection and reconnection notices to be produced.• There was extensive daily planning, but little weekly or monthly planning to control work.
Customer Services
2006 © Renoir Consulting Limited
• Meter readers had stopped completing Irregularity Reports (IRs) for faulty and tampered meters because they were not being used to take action.• Meter readers were seen as solely responsible for customer billing. There were many customer contact points that the MRs did not control where customer billing should have happened. No-one else was being held accountable.• In Tenaga Shops, tellers used to ask ‘how much do you want to pay’ providing the customer with the opportunity not to pay the full bill.• There was a substantial debtors problem across all customer types. The enforcement mechanisms laid down by the Electricity Act were not being followed and this was resulting in customers building up debts sometimes in excess of 1 year and millions of ringgits.
Customer Services
2006 © Renoir Consulting Limited
• The supply network and maintenance systems in place were not adequate to provide the levels of supply reliability demanded by the nation. • A lack of information, particularly at middle management level upon which to make business decisions.• A lack of accountability/ownership, particularly at supervisory level for problems that arose. A breakdown was always someone else’s fault and someone else’s problem.• Critical elements were missing from the maintenance management framework. There were no measures of mean-time between failure (MTBF) at a component level to facilitate effective preventative maintenance.
Network Services
2006 © Renoir Consulting Limited
• There was a lack of accountability for restoration performance unnecessarily increasing customer outages.• Tenaga had a substantial number of projects in progress at the same time and needed to reduce these numbers to improve lead times for new supply and improve cash flow.•There was no established discipline of carrying out root cause analysis of re-occurring problems.• A lack of co-ordination across departments. • There was a general culture of lack of accountability and performance orientation.
Network Services
2006 © Renoir Consulting Limited
Definition Development InstallationChange
ManagementResults
Sustaining Results
• Training
• Creative Tension• 4 Stages
• Minds Path• Measurement
• Time Frame
• Behaviour
6 stage process
Technology of Change
• Process
• System
• Structure
• The Issues
2006 © Renoir Consulting Limited
“ “ Doing what you have always done and Doing what you have always done and thinking somehow magically performance thinking somehow magically performance
will improve”will improve”
Behaviour Change
What is the definition of madness?What is the definition of madness?
2006 © Renoir Consulting Limited
SystemsSystems
Education Education
BehaviouralChange
BehaviouralChange
ProcessesProcesses
Information
Activities
Training
ResultsResults
Structures Structures People
Internal Business Framework
Stage 2 - Development
2006 © Renoir Consulting Limited
Disconnection
Faulty Meter
Cross Meter
GovernmentAccounts
Found SupplyDisconnected
CounterClerk
CounterClerk
SpecialLetter
Unpaid &Vacated
Metered IllegalRestoration
Slap-onNotice
W/O 30
No Access
JBE
W/O 90 UPJBack billing
NTL
Unpaid &Vacated
Clerk
W/O40
Close AccountDeduct Deposit
Higher LevelDisconnectionn
DisconnectionExpense
Address Not Found Take to MRE Next MR To Check
Direct IllegalRestoration
TheftClerk
Higher LevelDisconnection
DisconnectedAccount Status
Unbilled TeamFollow-up
Access
No Access
Sub Process Example: Disconnection Issue Management
2006 © Renoir Consulting Limited
Process Planning
2006 © Renoir Consulting Limited
Process Planning
2006 © Renoir Consulting Limited
Process Planning
2006 © Renoir Consulting Limited
Management Control System Development
2006 © Renoir Consulting Limited
Performance Measurement
KPI Format (Weekly Report)
2006 © Renoir Consulting Limited
Standard Operating Procedures
2006 © Renoir Consulting Limited
Definition
Change - Stage 3
Development InstallationChange
ManagementResults
Sustaining Results
• Training
• Creative Tension• 4 Stages
• Minds Path• Measurement
• Time Frame
• Behaviour
• Process
• System
• Structure
• The Issues
Project Management Process
2006 © Renoir Consulting Limited
Stage 3- Installation
Training Tools - Skills Matrix
% SKILL ATTAINED BY INDIVIDUAL 100.0 0.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0
% TRAINED PEO PLE BY
SKILL MULTI-SKILL
Jagd
ish
Ann
e
Pras
hant
Nag
le
Sanj
eev
Sing
h
Raj
esh
Jadh
av
90.0 Influencing SkillsT UT TR TR TR TR TR TR TR TR
90.0 Team BuildingT UT TR TR TR TR TR TR TR TR
90.0 Team MotivationT UT TR TR TR TR TR TR TR TR
90.0 Change ManagementT UT TR TR TR TR TR TR TR TR
90.0% Multi-Skill attained by area
Skill Matrix for TSSL
% SKILL ATTAINED BY INDIVIDUAL 100.0 0.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0
% TRAINED PEO PLE BY
SKILL MULTI-SKILL
Jagd
ish
Ann
e
Pras
hant
Nag
le
Sanj
eev
Sing
h
Raj
esh
Jadh
av
90.0 Influencing SkillsT UT TR TR TR TR TR TR TR TR
90.0 Team BuildingT UT TR TR TR TR TR TR TR TR
90.0 Team MotivationT UT TR TR TR TR TR TR TR TR
90.0 Change ManagementT UT TR TR TR TR TR TR TR TR
90.0% Multi-Skill attained by area
Skill Matrix for TSSL
Figure indicates the % Multiskill attained by a area/ division/ region.
Figure indicates the %skill attained by individual.
The individual to be trained
The skill required by individual
% people trained for particular skill
2006 © Renoir Consulting Limited
Stage 3- Installation
Training Modules
• Technology of Change
• Active Supervision
• Managing with numbers
• Training Skills
• Communication Skills
• Time Management
• Team Building
• Management Systems
2006 © Renoir Consulting Limited
InformationInformation
TransparencyTransparency
ProceduresProcedures
AccountabilityAccountability
ConfrontationPositive Confrontation
To provide accountabilityTo change behaviour
ConfrontationPositive Confrontation
To provide accountabilityTo change behaviour
Effective MeetingsStructure and set up
Action solving root causesIndividuals responsible
Effective MeetingsStructure and set up
Action solving root causesIndividuals responsible
Problem AnalysisRoot Cause, not symptoms
5 Why analysisDetermination, not deferral
Problem AnalysisRoot Cause, not symptoms
5 Why analysisDetermination, not deferral
Systems
Creative Tension
Stage 3- Installation
2006 © Renoir Consulting Limited
Definition
Change - Stage 4
Development InstallationChange
ManagementResults
Sustaining Results
• Training
• Creative Tension• 4 Stages
• Minds Path• Measurement
• Time Frame
• Behaviour
• Process
• System
• Structure
• The Issues
Technology of Change
2006 © Renoir Consulting Limited
The lack of awareness and understanding that a successful change
process has to go through ‘four changes in mindset’ is a common
reason why many strategic change programmes fail…
We also make false assumptions about peoples ability to adhere to new
ways of working, and to manage and accept change.
Where Most Things Go Wrong!
Change Assessment Management System (CAMS)
2006 © Renoir Consulting Limited
Co
nsc
iou
sU
nco
nsc
iou
s
Incompetent Competent
Direct Delegate
Support Coach
The Four States of Mind!
Co
nsc
iou
sU
nco
nsc
iou
s
Incompetent Competent
Compliance Culture
Understanding Usage
Renoir Minds Path Matrix
……No shortcuts possible...No shortcuts possible...
The Four States of Mind!
Change Assessment Management System (CAMS)
2006 © Renoir Consulting Limited
The four mindsets must be measured by auditing.
Auditing is a quantitative measure of a qualitative thing!
The secret to successful change management is to be able to assess
and measure your progress through the ‘minds path’.
“ “ If you can’t measure it, you can’t manage it.” If you can’t measure it, you can’t manage it.”
The Key to Success!
Change Assessment Management System (CAMS)
2006 © Renoir Consulting Limited
• Audit questionnaires are developed to assess the mindset levels using a
structured approach:
1. Closed ended questions for compliance.
2. Open ended questions for understanding.
3. Demonstrative questions for usage.
Measuring the Four Mindsets
• The audit questionnaire answers get converted into a scoring scheme…
• 0 for wrong or not done.
• 1 for partially right or partly done.
• 3 for correct or demonstrated.
• The percentages of each system performance category are plotted
• The target is 100%.
Change Assessment Management System (CAMS)
2006 © Renoir Consulting Limited
Installation Status
0%
10%
20%
30%
40%
50%60%
70%80%
90%
100%
-5 -4 -3 -2 -1 0 Current
Period
Ach
iev
eme
nt
Installed Partially Installed Not Installed System Utilization Status
0%
20%
40%
60%
80%
100%
-5 -4 -3 -2 -1 Current
Period
Ach
ieve
men
t
Mechanical Understanding Usage
Installation Status
Change Assessment Management System (CAMS)
2006 © Renoir Consulting Limited
Definition
Change - Stage 5
Development InstallationChange
ManagementResults
Sustaining Results
• Training
• Creative Tension• 4 Stages
• Minds Path• Measurement
• Time Frame
• Behaviour
• Process
• System
• Structure
• The Issues
Technology of Change
2006 © Renoir Consulting Limited
Section 1
System Performance
2006 © Renoir Consulting Limited
LV Breakdowns South
3 2 8
1 4 3
7 9
0
5 0
1 0 0
1 5 0
2 0 0
2 5 0
3 0 0
3 5 0
B a s e 4 w k a v g T a r g e t
L V B r e a k d o w n ( J o h o r )
0
5 0
1 0 0
1 5 0
2 0 0
2 5 0
3 0 0
% Improvement over base
56%
2006 © Renoir Consulting Limited
Section 3
Projects
2006 © Renoir Consulting Limited
Project Average Closing Duration - Days
% Improvement72 %
326
92
60
0
50
100
150
200
250
300
350
No.
of
Day
s
Base 4 Wk Avg Target
2006 © Renoir Consulting Limited
Section 2
Non Technical Losses
2006 © Renoir Consulting Limited
Unbilled Customers SDE
% Improvement93%
52457
35741000
0
10000
20000
30000
40000
50000
60000
No.
of U
nbil
led
Cus
tom
er
Base 4 Mth. Avg. Target
2006 © Renoir Consulting Limited
Faulty Meter WP
5.74 mil
9.12 mil*
Total Recovery To Date : RM 5.74 m
7000000
7500000
8000000
8500000
9000000
9500000
24/09/00 10-08-00
22/10/00 11-05-00
19/11/00 12-03-00
17/12/00 31/12/00 14/01/00
WEEK
BA
CK
BIL
LE
D
3000000
3500000
4000000
4500000
5000000
5500000
6000000
6500000
7000000
7500000
8000000
CO
LL
EC
TIO
N
Backbilled (Cumulative) Collection (Cumulative)
2006 © Renoir Consulting Limited
Tampered Meter WP
9000000
9200000
9400000
9600000
9800000
10000000
10200000
09-10-00
24/09/00 10-08-00
22/10/00 11-05-00
19/11/00 12-03-00
17/12/0031/12/0014/01/01
WEEK
BA
CK
BIL
LE
D
0
2000000
4000000
6000000
8000000
10000000
CO
LL
EC
TIO
N
Backbilled(Cumulative) Collection (Cumulative)
2006 © Renoir Consulting Limited
Definition
Change - Stage 6
Development InstallationChange
ManagementResults
Sustaining Results
• Training
• Creative Tension• 4 Stages
• Minds Path• Measurement
• Time Frame
• Behaviour
• Process
• System
• Structure
• The Issues
Technology of Change
2006 © Renoir Consulting Limited
Project Results
“I appreciate the discipline that you have put into the workforce, as it was
severely lacking in the traditional TNBD culture . . . .Everyone used to promise to
do things, but rarely delivered. . . . Now people promise, and they deliver . . .
People don’t like to loose face in TNBD, so if they have promised and everyone
knows they have promised, they will deliver. Everyone’s job is now very
transparent, so everyone else knows what you should be doing as well” -
Yazid Adon (GM South).
“I used to be concerned that my people spent too much time in meetings, as I did
not think that the meetings were of any real benefit. Now I realize that they were
of benefit. Now with a KPI and action focused meetings at all levels, I know
that the meeting is at least a focused one. As a result, meetings conducted
are generally a lot shorter and more focused, so on the whole, meeting time is
reduced, but more effective” - Abu Hasan (COO South).
2006 © Renoir Consulting Limited
Contents
• About Renoir
• Current Indian Scenario in Distribution
• Case Study – TNB Distribution
– Project History
– Project Goals
– Project Results
– Project
• Next Steps
2006 © Renoir Consulting Limited
Conclusion - Next Steps
• India has an estimated level of billing efficiency of 55% and collection efficiency of 41%
• 2001-2002 SEB losses of Rs 33000 = 1.5% GDP (SOURCE
MINISTRY OF POWER APDRP OVERVIEW).• The Power Sector can never be financially viable until these issues are addressed. • The only precondition is addressing the issues we have illustrated.
2006 © Renoir Consulting Limited
Queries
Saumil Shah,
Head of Operations - India,
Renoir Consulting (India) Limited
2nd. Floor, Raheja Chambers,
213 Nariman Point,
Mumbai, India
Tel : 022 - 2282 1923
Mobile : (0) 9898246465
Email : [email protected]
Website: www.renoirgroup.com
2006 © Renoir Consulting Limited
Conclusion - Next Steps
• Pilot project to demonstrate best practice with empirical evidence.
• Need to select a geographical area for preliminary business audit.