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Carlson School of Management: Quality Education Session #1


Previous Quality Education Sessions with the Galvin Electricity Initiative

The Galvin Electricity Initiative believes continuous improvement methods can be a strategic lever to instill a focus on customers and to spur innovation in the electric industry.

In 1999, Robert W. Galvin brought the principles of continuous improvement to the health care industry. Armed with this education, health care professionals invented new models and processes that revolutionized their industry and are being replicated widely. Results at individual hospitals include improved financial performance, reduced spending per patient, fewer health complications and reduced emergency room visits and stays.

The Initiative sponsored  an initial wave of quality education sessions in 2006 and 2007. These sessions paved the way for today’s conference and for creating a team of utilities to serve as quality leaders as the industry embraces the smart grid in 2011 and beyond. Summaries of the sessions and their outcomes are below.

Quality Education Session #1, Carlson School of Management

Over four days in late 2006, four utility teams participated in a quality training course designed by the Joseph M. Juran Center for Leadership and Quality in partnership with the Galvin Electricity Initiative. The course was the first of its kind, designed to educate the electricity industry on the principals of continuous improvement.

The utility industry members at the training, like the health care industry leaders who took the first step toward continuous improvement seven years ago, questioned the prudence of pursuing perfection. Galvin Electricity Initiative leadership explained that quality or perfection is achieved through a commitment and dedication to continuous improvement over several decades. Quality or perfection is a journey, not an end state, which over a 10-year time horizon can provide what the CEO of Hutchinson called a durable competitive advantage.

Each utility team participating in the training brought a unique perspective and demonstrated a commitment to improvement or quality:

  • First Energy recently completed a thorough independent assessment of performance and is embarking on a major distribution system improvement program. This program provided an opportunity for the company's improvement team to build a shared knowledge on quality and strengthen their project plan.
  • Kansas City Power and Light is forming a team to find innovative ways to meet growing demand without building new infrastructure in a bid to increase asset utilization.
  • Public Service of New Mexico (PNM) embarked on a continuous improvement program over a year ago and now has more than 30 managers trained as quality "green belts." They have embarked on a number of projects that have improved customer satisfaction and lowered cost. PNM has achieved seven sigma reliability for several customers, measured in terms of cycles not outages.
  • The Illinois Institute of Technology, which owns and operates its own electricity distribution and generation system, is in the midst of a major system overhaul and is seeking to provide Perfect Power as defined by the faculty, students and other stakeholders.

During the four days, the teams learned about quality methods and tools, while also working in teams to apply these principles to a specific company project. What emerged during the course is a number of new metrics that begin to reveal the cost of quality. These metrics also identify the opportunities for improvements that have an impact on the customer’s service experience.

Metric
Description
Outages as defined by the customer (This could include a loss of power, loss of a phase, power quality fluctuations, etc.) The team discussed dividing customers into quality classes – high, medium and low. Where high-reliability customers protect life safety or request higher reliability, some customers require power that must be managed within cycles. This could be a new utility service.
Economic impact of outages A measure of the real impact of each outage in terms of the impact on customers. Lost productivity, lost product, damaged goods, etc.
Service territory gross domestic product and jobs A measure of the service territories' economic health. Most utilities' growth depends upon the economic viability of the region. Utilities can provide a competitive advantage through costs, esthetics, quality, reliability and emissions reduction.
Asset utilization The ratio of actual kWh delivered divided by the theoretical capability of the asset (kW times 8760).
Number of degreed programs offered at universities Measure of the health of the industry.
Carbon emissions Reducing carbon footprint could mitigate the impact of pending economic constraints.
New customer services/choices Measuring the new services offered to customers. This provides an indication of innovation.