Fit for the future

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Transforming the global energy sector is expected to cost almost US$17 trillion1 by 2035. But with money tight and investors cautious, the power and utilities (P&U) sector must target investment wisely to get maximum value for its spend. Jens Grabow, Al Galiunas and Henry Kinler report.

The P&U sector must make hard decisions now to ensure it is lean, clean and ready to meet future demands.

Waking up to the new normal

To improve their performance, many utilities are looking to more successful peers and considering how they might adopt – or adapt – some of their processes.

By using comparative analysis, utilities can review processes that will make their transition to new business models smoother, faster and more efficient. They can also review methods and approaches that can be amplified or modified to better suit particular needs.

Our Power and Utilities Maturity Model and Architecture (PUMMA) offers our global view of power, gas and water organizations:

  • Process value chains
  • Maturity models
  • Risk and controls
  • Key performance indicators
  • IT systems environment

Blueprint from the best

PUMMA is a blueprint for the future. Developed in conjunction with our global clients and in response to market demands, it is a pool of constantly updated data that utilities can use to drive their own positive transformation.2

By outlining the exact processes and process flows being used by some of the world’s top utilities, companies can save time and help ensure their investment is targeted to achieve maximum benefit.

PUMMA classifies practices from basic to leading, helping utilities gauge exactly where they are and what they need to do to reach their next steps and, ultimately, their goals.

EY’s PUMMA

EY's PUMMA

PUMMA sits on top of existing business models, providing a map to the desired future state by helping identify potential weaknesses in existing workings. It also pinpoints where to put things right – limiting the risks of detours or misguided expenditure.

Targeted transformation

PUMMA is especially useful in traditional businesses, such as utilities, where legacy practices, built up over a number of years, may need to be simplified and recalibrated.

It is designed to help businesses objectively assess existing capabilities and make choices about what needs to change in order to move forward in the industry transformation in a strategic and profitable manner.

Given the cash demands on utilities, PUMMA can help guide investment, highlighting those areas with the widest maturity gaps and those with the most potential for high-value returns.

Unlike other models, PUMMA defines the operational risks inherent in specific processes and the controls that top-performing utilities employ to mitigate or prevent them.

Thus, utilities need not re-invent the wheel but adopt, adapt, and replicate proven practices and controls to capture leading insights and best protect their operations.

Time to make a difference

PUMMA is a tool that helps accelerate the journey from A to B. As a core element of our service delivery, it enables a utility to:

  • Explore what it needs to improve and by how much
  • Discover and address performance issues in a more expedient and profitable manner
  • Prioritize investments so money is spent in the best way
  • Identify and minimize gaps in risks and controls to extend ROI
  • Highlight opportunities for ongoing improvement

Results can be relatively quick due to the elective nature of the PUMMA approach. Utilities seeking to measure the maturity of specific operational processes and implement improvements can expect to realize benefits in a matter of weeks.

Changes to risks and controls will take a little longer. A wholesale assessment and realignment of the underlying architecture as a foundation for utility-wide improvement should be viewed as a long-term project.

PUMMA is constantly updated with global knowledge gleaned from client engagements and other metrics. Clients can confidently test the maturity and sophistication of their own performance and target investment appropriately.

How can I use PUMMA?

PUMMA is a versatile methodology that can be used on single or multiple processes. For example, a utility concerned about the reliability of its distribution network assets might use PUMMA to benchmark its process maturity against the industry's top performers.

PUMMA helps the utility to take an objective look at its "as-is" network processes and to identify where they might become more competitive. It also can be used in a wholesale approach to systematically benchmark a utility’s sophistication across all end-to-end processes to:

  • Identify deficiencies
  • Strengthen underlying architecture
  • Bring its entire process performance up to industry-leading standards

What is driving transformation?

Utilities all over the world are transforming the way they operate. These process changes are being driven by multiple drivers that help companies re-energize their businesses, create more efficient operations and extract value from existing resources to increase profitability and competitive advantage.

These drivers include:

  • Regulatory and government policies
  • Cost pressures
  • Competition from existing and emerging players
  • Innovation challenges
  • Merger and acquisition opportunities
  • 1 International Energy Agency, World Energy Outlook 2012.
  • 2 Data is derived from EY professionals' experience with power and utility companies around the world, leading industry practices and information from the American Productivity & Quality Center (APQC), a third-party organization focused on benchmarking, knowledge management, measurement and process improvement.