Coal, Nuclear

Ameren embraces benchmarking as a core business strategy

By: Bruce Bruzina, Bill Jessop, and Ron Plourde, AmerenUE; Brad Whitlock, Navigant Consulting; and Lew Rubin, Portal Solutions

Nov. 4, 2002 — Ameren Corporation has a long history with successful performance benchmarking. Going back more than a decade, power plant managers have been using benchmarking techniques as a way to scan the power production environment, identify gaps and opportunities, and institute strategic change.

Management has become increasingly more clever, knowledgeable and efficient over the years in using the process, and the results have been well worth the effort.

Similar to many power generation benchmarking stories, the Ameren saga began on the nuclear side. Management at Callaway Nuclear Station began to embrace benchmarking in the early 1980s, as part of a larger quality campaign to improve performance in the nuclear industry in the wake of the Three Mile Island accident.

That the quality efforts were successful, and contributed to no less than a reversal of fortune for an entire generation of U.S. nuclear plants over the last 15 years, is pretty much universally acknowledged today. And for Callaway, as for many other nuclear plants in the industry, performance benchmarking played a critical role.

At Ameren those lessons were not lost on fossil and hydro generation managers in subsequent years, as they began to adopt benchmarking approaches as well. Additionally, Ameren management has taken important steps to streamline and facilitate benchmarking practice, by subscribing to the Generation Knowledge Service (GKS), a benchmarking service from Navigant Consulting.

GKS offers generation benchmarking clients timely and comprehensive data collection, verification and delivery, as well as flexible analysis, thus greatly improving the efficiency and increasing the value of benchmarking practice.

Ameren management today feels the information derived through benchmarking helps them to see and show the impacts of their decisions. It is acknowledged throughout the organization as essential to the generation management team, now and into the future.

A Case in Point

In Ameren lore there is a marvelous example from the mid 1990s of the power of benchmarking to identify gaps and point toward solutions. This is the story of the Sioux Generating Plant. Sioux is a two-unit, coal-fired generating facility that went into service in the late 1960s. It has been essentially a baseload facility from its inception. Both units are rated at about 510 MW nameplate capacity.

The Sioux units were built with cyclone fired supercritical boilers, which provided a generating package with several important advantages, including outstanding heat rate and a key ability to accommodate a wide range of coal types.

Unfortunately, in the power generation business free lunches are few and far between. Over 30-plus years of operation, certain disadvantages in the Sioux design have become apparent to management.

Chief among these is a need for extensive and diligent maintenance practices on the combustion and boiler systems, in order to maintain unit availability and good performance. Consequently, non-fuel O&M costs at Sioux have long been benchmarked as slightly higher than average for the region. Management recognizes this as a necessary evil, and as the price of good performance.

This set of conditions at Sioux began to come to a head in the mid-1990s, when further benchmarking efforts spotlighted several improvement opportunities. Most notably the Sioux units were beginning to fall behind similar facilities in the region in busbar cost performance. At the same time enviromental pressures on NOx control were intensifying nationwide, and Ameren facilities were implementing a number of projects for NOx control and reduction.

To deal with the busbar cost issue, Sioux management pretty much knew at the outset they would have to tackle fuel costs. Non-fuel operating costs were already pretty well optimized, after 30 years of experience with a finicky boiler and combustion system. That the ongoing maintenance issues were contributing to the busbar cost problem was clear; at the same time this area was not where the solution would be found.

So as a first step, management decided to switch to lower-cost PRB coal. This certainly brought the fuel bill down, but quickly precipitated yet another difficulty. Due to its lower heat content, the PRB coal did not have by itself enough energy to achieve full MW load during the summer, when it was most needed. Since losing megawatts during the Midwest summer is a fatal crime for any generator, there was still more to do.

Finally, in the 1995-1996 period, management at the Sioux units began developing an innovative fuel blending and real-time control strategy for the combustion process. This approach, perfected over several years, has allowed for online fuel blending of PRB and Midwest coals (an advantage of the cyclone design) in response to load demands and other conditions. It keeps fuel costs under control and provides added heat content as needed during high load times.

At the same time the approach helps to optimize the combustion process and keep NOx within limits in real time, as load, weather and other conditions change. The strategy has involved key investment in equipment and in control system development over several years, but has kept the Sioux units competitive throughout. The benefits overall have more than outweighed the costs, as the last few years’ evolution of Midwest power markets has made crystal clear.

Investing in a Benchmarking Infrastructure

As a result of the Sioux experiences and others of recent years, Ameren has begun investing in ways to make the benchmarking process more efficient, through subscription to a benchmarking service. The GKS service (offered by Navigant Consulting) has in just the last few years significantly streamlined the process of data gathering, data verification and data manipulation for a growing number of power generators, and thereby helped to reduce a significant barrier to the types of benefits discussed above.

Historically, benchmarking has never been simple for the fossil power generation industry (nor for any other industry, for that matter). The work involved in simply gathering industry information, not to mention verifying, sanitizing and interpreting it, has always been very labor and time-intensive for practitioners.

And in some ways such mechanical obstacles have gotten worse with the onset of competition, as – at least initially – the knee-jerk reaction to no longer share information took hold among generators. In many power generation environments benchmarking has historically been avoided or under-utilized as a result, because it’s just too hard, in spite of the obvious benefits.

The GKS benchmarking service concept, designed and tailored to the fossil generation environment, has begun to demonstrate that such problems can be greatly mitigated:

• By streamlining the data collection efforts of staff, from weeks literally to hours each quarter.
• By providing regular updates of information to clients.
• By assuring confidentiality to all participants, through data masking, aggregation and other manipulation facilities.

As a result the benefits of benchmarking have become even more accessible and available to Ameren management. This type of infrastructure investment has been well worth making for Ameren management.

Developing a Generation of Believers

The Sioux story and other recent successes, as well as the long track record of Callaway Nuclear with these techniques, are slowly creating a benchmarking culture within Ameren’s fossil generating fleet. As more staff and management cross-fertilize between the fossil and nuclear sides, the organizations’ appreciation of benchmarking has grown stronger. The generation staff is coming to believe, across the board, that benchmarking will increasingly be an integral part of performance improvement.

As an illustration of where Ameren management is today on benchmarking, consider the results of a recent management retreat of the fossil plant leadership. During the retreat, participants examined benchmarking data – generated primarily through the use of the GKS facilities – for each plant and major function in the fossil/hydro organization. Throughout the review, items that were specific to individual stations or were indicative of a more systematic, cross-station situation were identified.

Participants potentially identified several areas related to O&M expense where performance improvement relative to the peer group was desirable and achievable. As a result management has revised the generation strategic plan objectives to investigate and deal with improvement in these areas.

Benchmarking as a Strategy Element

Perhaps the most important benefit of all to Ameren has been the underlying discipline benchmarking imposes. Quite apart from any specific problem identified or solution suggested, benchmarking is creating a strategic decision-making context for the generation management team.

In the glare of regular examinations of unit performance, against an appropriate peer group and across a range of key indicators, it becomes easier to avoid short-term or otherwise shortsighted decisions. Regular benchmarking points up the inherent conflicts and trade-offs between key performance indicators – cost vs. availability, short-term vs. life cycle considerations, daily and seasonal differences in the value of a MWh – and helps management focus more clearly on strategic goals for the fleet.

In this sense the benchmarking process can become a critical management tool, no less indispensable than accounting or purchasing systems. At Ameren such indispensability has become a fact of life.

Authors –
Bruce Bruzina became Manager of the Sioux Power Plant in September 2002. He has 28 years of experience with AmerenUE, starting his career at Sioux as an assistant engineer. During his career, Bruzina has worked in AmerenUE’s Power Plant Maintenance group, responsible for turbine and boiler major overhauls, and more recently as Superintendent of Engineering and Planning at the Labadie Power Plant, Director of Power Operation’s Generation Business Plan, and Assistant Manager of the Sioux Plant.

Ron Plourde is Consulting Engineer with AmerenUE.

Bill Jessop is Superintendent of Generation Support at AmerenUE’s Callaway Nuclear Plant. He has 22 years’ experience in nuclear power generation and holds a bachelor’s degree in engineering management from the University of Missouri-Rolla.

Brad Whitlock is a Principal with Navigant Consulting Inc., and manages Navigant’s Generation Knowledge Service (GKS) product. With an economics degree from UCLA, Whitlock has worked in, and consulted to, the power generation industry for 18 years. Additional details about Navigant’s GKS product are available at www.beyondbenchmarking.com.

Lew Rubin is founder and principal of Portal Solutions, a management and strategic consulting firm specializing in electric utility and other regulated industry practice. Previously he was employed at the Electric Power Research Institute.

His practice specialties include asset management and benefits appraisal analysis, in support of capital budgeting and other strategic resource allocation issues. He has earned degrees from Lehigh University, Brown University, and Santa Clara University.