How Virginia Power plans to succeed in a deregulated market8 January 1999
For nuclear plants already among the top performers, opportunities for further reduction of O&M costs are increasingly scarce. In looking for ways to prepare for deregulation, Virginia Power undertook a reengineering exercise which did not simply lead to down-sizing and outsourcing: it helped the utility determine how to operate more efficiently with fewer outside contractors, putting the expertise of its own people to greater use. The utility believes that by staying committed to strengthening its core competencies, while pursuing business opportunities wherever possible, its nuclear programme can thrive in the deregulated and competitive industry. by DAVID HEACOCK
The power industry is now preparing for deregulation. In an effort to get ready for the more competitive market, US electric companies are undergoing major restructuring, both internally and externally. This is particularly true for operators of nuclear plants.
Virginia Power operates two nuclear stations, Surry and North Anna, both two-unit PWRs which began operating in 1972/73 and 1978/80, respectively. These plants, which are typical of their vintage, were not top performers in the 1970s or 1980s.
Starting in the late 1980s this began to change. An emphasis was placed on improving the plant material condition, budget control and overall performance and, to complement this, measures were taken to develop a strong team culture (eg an extensive painting and material improvement programme was initiated and an employee task team was formed to select a uniform for all station employees).
A more challenging environment for staff was also created – each time any goal was achieved, the standard was raised. Extensive benchmarking of the top plants in the industry was also undertaken.
We also took advantage of the commonality of the two stations; we share infrastructure, management and lessons learned – all of which contribute greatly to efficiency and adds to the collective expertise.
Both North Anna and Surry are now performing very well with respect to costs. In 1996, Surry ranked number one in the country for low-cost production and North Anna came in second. Over a three-year average, 1994-96, North Anna ranked first and Surry ranked number five, demonstrating that we don’t have to sacrifice top performance in an effort to keep production costs low. In fact, we have demonstrated that the lowest cost plants can also be the highest performing.
What have we done and are continuing to do to strengthen the economic performance of our operations?
To begin, the most vital part of our nuclear programme is our commitment to achieving the highest level of safety. As our number one priority, we maintain an unwavering focus on reactor, radiological, public and personal safety.
This deeply engrained safety culture also helps us ensure reliability which, as we all appreciate, is the key to keeping plants operating for sustained periods of time – an absolute necessity if we are to maintain good economic performance. So clearly, our absolute focus on safety is the cornerstone of our nuclear programme and its low-cost production.
We have also undertaken several major initiatives to help improve our economics. Four years ago, our nuclear programme formed its own strategic business unit. We didn’t break off from the company, but we did begin operating as though we were our own distinctly separate financial unit.
This restructuring gave us an opportunity to look closely at our costs through various financial reports. It refocused our decision-making process; we began making decisions based on their business and financial impact. We formed service agreements with other departments in the company who provided us with necessary services. The agreements allowed us to see clearly what those services were costing us, and in many cases, to renegotiate their costs and redefine the parameters of those services.
When we formed the Nuclear Business Unit, we established measurements for our success. For the first time, we were able to closely monitor our level of success in operating with financial accountability and profitability.
Shortly after we formed the Nuclear Business Unit, our company undertook a major reengineering effort to prepare for competition. Vision 2000, as we called it, took a close look at processes and assessed the economics of how we were doing business.
Reengineering helped us determine that we could operate more efficiently with fewer outside contractors on the nuclear side. We reduced our reliance on external vendors and put the expertise of our own people to greater use. In a few instances, we recognised that we could outsource services more efficiently than providing them in-house. In those instances, we refocused and reprioritised functions of various departments. Our greatest cost-cutting brought about through reengineering was in reduction of staffing levels. We found that we could reduce our staffing levels by a significant percentage and still continue to be a top performer.
With reduced staffing, we have recognised the need to focus more than ever on the continuous development of our employees, especially in the two areas of financial training for management and information technology training for all employees.
With this focus in mind, we have provided a series of leadership and business trainings to our nuclear management team. We have also encouraged employees to pursue additional business education by underwriting the cost of graduate programmes in business administration and by collaborating with a Virginia college to offer graduate business courses at our company locations.
We have also made a strong effort to provide our employees with ongoing computer training. To improve information technology efficiency, we first developed software and computer standards for nuclear, requiring everyone to use the prescribed equipment and software programs. Of course, we recognise that this needs to be a continuous improvement effort as technology rapidly changes.
While all of these efforts have been important in our achieving and maintaining low-cost production, the most significant thing we’ve done in our nuclear programme to improve efficiency is reducing our downtime, or outage time, and increasing our output of megawatts. Along with the rest of the industry, we have made significant strides in increasing our capacity factor, steadily improving it over the years. This past year we achieved our highest ever capacity factor of 91%. And as a result, we achieved a total generation of 27 TWh, our highest ever output.
This improved generation is the result primarily of reducing the duration of our refuelling outages. Six years ago, the average duration of a refuelling outage for us was about 60 days. This past year, it was considerably less than that – 38 days. Our goal for this year will be 35 days per outage. We know that this is achievable because two out of three of our refuelling outages this past year came in under 35 days.
This is a trend occurring throughout our industry as all try to reduce costs and increase revenue through increased generation.
What are we doing differently that is enabling us to trim our downtime so substantially?
At Virginia Power, we have focused on several areas that have resulted in more efficient refuelling outages.
One part of the outage process that we have clearly improved is the planning stage. We operate by the motto “Plan your work and work your plan,” applying this philosophy throughout the outage. Months before an outage starts, we begin very detailed planning of the schedule, the scope of work, and clearly defined goals and responsibilities. Then we run the outage according to the plan.
We enforce a 150-day rule with regard to the scope of the outage: we do not add anything to the scope after 150 days. We also have improved our outage organisation. We use only experienced personnel in key positions. We clearly define every responsibility and who ‘owns’ it. We ensure that we have adequate manning levels in key positions and departments.
In our most recent outage, we recognised that we can push down authority, or allow decisions to be made at a lower level without involvement from top level management. While this speeds the process, it has produced results just as favourable as when we involved management in every decision.
We have also improved our outage communication. Well in advance of the beginning of an outage, we clearly communicate the plan and expectations to all employees. We do a detailed pre-outage review of the goals and schedule, ensuring that everyone realised the goals are achievable. Throughout the outage, we keep detailed multi-departmental logs. And we generate daily outage updates to keep everyone briefed on our progress.
Another key to our reduced outage time is improved teamwork. Our materials groups work together as a very effective team to ensure that materials are delivered on time. We strive for continuous job motion by efficient, crisp hand-offs between work tasks. And departmental teams continuously look ahead in the outage and anticipate needs.
One of the ways we control the scope of outage maintenance work is through our FIN – fix-it-now – teams. These are maintenance teams who do on-line maintenance as the work emerges.
In addition to shortened outages, we have invested in other initiatives that have resulted in increasing output. We have now replaced all of our steam generators at both of our stations. Two years ago we uprated the core of both units at our Surry station, raising megawatt output from 820 to 850. And just last year we conducted a chemical cleaning of our Surry steam generator to remove corrosion components. This resulted in improving operating power to 100%. So we have made significant investments in our equipment that are now paying off for us in terms of higher output and lower cost production.
We have worked hard to develop one of the most highly skilled and talented management teams in the nuclear industry. And now we are in the position of being able to provide this expertise to other companies. We have contracts in the areas of management services, fuel cycle management and training.
We have provided management expertise to Northeast Utility to lead the effort in bringing their Millstone units 2 and 3 back on line. We are also negotiating with other companies to provide them with similar management services.
In 1996, a team of Virginia Power nuclear specialists conducted an exhaustive assessment of nuclear fuel cycle costs. The team developed and implemented an assessment methodology that identified numerous significant cost reduction opportunities with regard to the fuel cycle. We now offer this Nuclear Fuel Cost Assessment to other utilities to help companies improve their fuel cost performance. The assessment methodology address all aspects of the fuel cycle: procurement of uranium, conversion and enrichment services; fuel assembly design and fabrication; fuel utilisation and fuel cycle planning; and spent fuel dry storage facility planning and design.*
Our team will review the utility’s entire fuel cycle management practices, using the tools and techniques developed by over 85 reactor years of experience. We will then provide guidance in implementing the cost control practices we have found to be most effective.
Other areas of expertise include instrumentation consulting, equipment reliability engineering, design support, equipment procurement and vendor quality surveillance.
|While working on improving the bottom line, by leveraging the company's nuclear expertise, Virginia Power maintains excellent operating performance by continuing to strengthen core competencies such as: Strong operations management expertise and experience. A nuclear culture committed to safety, professionalism, quality self-assessments, "can-do" attitude, and solid teamwork. A strong, experienced leadership team with clearly articulated expectations. An important aspect of the company's operating strategy is the use of "commonality." Since North Anna and Surry are very similar in design, focusing on commonality drives O&M costs down by reducing duplication and expanding the benefits obtained from process efficiency improvements. Pursuit of commonality focuses our nuclear organisation's collective experience on sharing success rather than comparing problems. Virginia Power has created standard procedures and work practices in all areas of its nuclear operations, including maintenance, engineering, training, security and materials management. This facilitates the sharing of personnel between North Anna and Surry as it becomes much easier for individuals to immediately contribute to the other station's success. This also provides quality self-assessment as personnel identify improvements in the details of the other stations' practices. For example, during refuelling outages personnel from opposite stations made many recommendations regarding outage planning and co-ordination of containment activities.|