Power Surge

Utility companies pump up process improvement with Six Sigma

dentifying defects, measuring capabilities, considering variations. A powerful process improvement surge is coursing through the utility industry. Whether the focus is energy consumption, safety and risk management, or infrastructure recovery, the quest is on to incorporate quality methods to increase productivity and customer satisfaction while achieving and maintaining higher standards of social responsibility.

Organizations that strive to improve business operations by making quality a top priority use Six Sigma to manage the changes required to achieve these goals.
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Six Sigma is a popular improvement method, with many applications in machine operations, extraction, transportation, and utilization of energy. There are also applications in administrative processes—customer usage measurement, customer billing, application of payments, service changes, customer service management, supplier management and employee hiring and training.

The Six Sigma Surge

Six Sigma is a problem-solving methodology and toolbox initially developed by Motorola in the mid-1980s for manufacturing. It’s matured over time and has been used successfully by industries worldwide.

Six Sigma focuses on reducing variability and defects, thereby improving quality. While this focus is significant in many industries, it’s especially important for utilities, as rising demand for reduced costs and reduced environmental impact, combined with constrained natural resources, requires continuous improvement.

Organizations that strive to improve business operations by making quality a top priority use Six Sigma to manage the changes required to achieve these goals.

Results Speak for Themselves

Oil companies have used Six Sigma to improve operations in oilfields and are expanding Six Sigma’s use into exploration. In mature oilfields, Chevron has been able to reduce variability in surveys of existing holes, driving more profitable decisions as to which oilfields to continue to pursue.

Six Sigma is at the root of a robust improvement process used in marketing, refining and transportation at ConocoPhillips.

GE Power Systems produces high technology equipment and services for the oil and gas industries, supporting energy management, power generation and power transmission. GE uses Six Sigma to help the utility industry provide more reliable and efficient power at less cost. The company also uses Six Sigma to ensure delivery of power generation and compression equipment, at record levels, on time.

Bechtel began using Six Sigma to improve customer satisfaction and to save its customers and partners time and money. Six Sigma is built into the strategy of all its global business units and corporate services organizations. Six Sigma process analysis and improvement tools are credited with enabling Bechtel to work faster and more efficiently in every aspect of the business, from engineering and construction to environmental and business services, such as timely delivery of employee payroll. In 2003, projects generated savings of more than $400 million, up from $210 million in 2002. A large majority of these savings was passed on to Bechtel’s customers.

Dominion Energy credits earnings and cash flow growth to earnings from additional energy generated, savings from cost cutting, and the company-wide implementation of Six Sigma. Dominion began using Six Sigma enterprise-wide to improve power generation and delivery to customers in 2000, and has saved more than $300 million since 2001. In 2005, Dominion credited Six Sigma projects with saving more than $178 million, an 80 percent increase over the $99 million saved in 2004. Dominion senior management believes the focus on process measurement and improvement has created a more entrepreneurial spirit among employees.

Constellation Energy began using Six Sigma in 2002 to improve efficiency and output in all areas of operations. The company is using Six Sigma to manage change, solve business problems, and build a culture that thrives on improvement. Constellation Energy is focusing projects on reducing costs, improving quality and reliability, lowering administrative and operational cycle times and improving overall customer satisfaction.

Aquila Inc., formerly Missouri Public Service Company and UtiliCorp United, uses Six Sigma to ensure its future returns are in line with those of its peers. In the second year of using Six Sigma, Aquila’s Business Process Improvement Initiative delivered efficiency gains and reduced costs across its utility operations. With more than 35 projects completed in 2005, it achieved more than $9 million in recurring annual EBIT, with about $1.4 million in cost-of-capital savings. Management wants the analysis and tools of Six Sigma to become part of the company’s culture at all levels.

Six Sigma has been used by mining companies, like BHP Billiton, to improve on the ability to mine raw materials, like energy coal. A project in South Africa that focused on excessive

process plant screen downtime yielded a substantial drop in screen downtime, with annualized benefits of $2.1 million. A project in New Mexico focused on reducing blasting costs, yielding annualized benefits of $310,000.

ScottishPower found improvements through Six Sigma. One project focused on Change of Responsibility form processing, to ensure that changes of billing from builders to homeowners for new construction were processed in an accurate and timely manner.

Yarra Valley Water in Melbourne, Australia, used Six Sigma to improve water quality and delivery to customers. Yarra has also reduced time to handle customer service calls.

DuPont has a corporate energy management goal of lowering manufacturing costs and reducing variability in monthly energy costs. In less than three years, DuPont completed more than 75 Six Sigma energy improvement projects globally. These projects achieved results including boiler and chiller optimization, lowering the dew point of plant air, improved boiler soot blowing, and optimizing water treatment. Projects in the energy management area saved approximately $250,000 per project, greenhouse gas emissions have decreased significantly, and energy consumption remains flat despite increased production.

Dow Chemical Company started Six Sigma about the same time as DuPont. At the end of three years, it achieved $1.5 billion in cumulative savings. Projects at Dow that relate to the utility industry include reduction in steam loss through steam traps, and optimization of primary boilers and steam-reducing stations

Elizabeth M. Keim is past president and past chair of the board of the American Society for Quality. Keim, a Six Sigma Master Black Belt trained at GE and the Six Sigma Academy, is managing partner at Integrated Quality Resources in Boulder, Colo. You many contact Keim at liz.keim@att.net.

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