Benchmarking Objectives & Practices as Applied by NRECA International

1. World Bank Energy Forum Benchmarking Objectives & Practices as Applied by NRECA International Daniel Waddle NRECA International March 8, 2006

2. Benchmarking Methodology • Compare performance of the target utility to that of other organizations or to fixed standards. • Analyze gaps in performance to understand root causes of problems. • Explore options for improving performance. • Execute changes that will result in improved performance. • Measure outcomes and repeat process of identification, evaluation, and execution.

3. Benchmarking: In Best of Cases, a Three Step Process • Phase1 : Statistical review using data base of performance indicators • Phase 2 : Comparison of performance against “Best Practices” within peer group • Phase 3 : Implementing changes • NRECA’s experience in developing countries is that the first step is a significant challenge, and steps 2 & 3 may only come much later.

4. NRECA experience in benchmarking programs in many developing countries • Data collection, information organization, and data availability is quite problematic. • Utility information systems are often non-existent or poorly designed, and do not yield the data required to measure performance. • Utility staff often do not understand the value of data, how it can be used, and which data fields are important. • When data does exist, it is often poorly archived. • The first and often most difficult step in the benchmarking process is secure reliable data at all levels of utility operation.

5. RUS Form 7: Monitoring Rural Utility Performance with Monthly Data • Data collection template designed to facilitate financial, technical, and operational performance analysis • Originally intended to allow RUS to ascertain credit worthiness of U.S. cooperatives as borrowers to RUS loan fund • Includes multiple sections such as: • Statement of Operations: Expense/revenue summary • Changes in GT&D plant: new services, lines, transformers, etc. • Balance sheet: statement of assets & liabilities. • Employee statistics. • Statement of bulk power purchases & sales. • Power requirements data base: energy sales by consumer category

6. Form 7 Sample

7. Form 7 Sample (2)

8. Form 7 Sample (3)

9. REB 550 Data Base • Derived from RUS Form 7 • PBSs submit monthly 550 reports to REB, REB processes data to evaluate performance • June 550 report summarizes annual statistics. • Electronic records date back to 1991. Hard copies are available to the early 1980s.

10. How does REB use the Form 550? • Monitors many performance indices, but a few are much more important than others: • Collection rate • Overall losses • Consumer data, including connections, sales, disconnections, etc. • Less emphasis on: • Tariffs • Power quality • Outages

11. How does REB use the data? • Each month, key performance indicators are summarized in a MIS report circulated to all REB senior officers. • Each year, REB officers meet with PBS management to review performance based upon the 550 data • Performance plans from the prior year are reviewed • Bonuses for all PBS managers are based upon targets set and achieved/not achieved • Performance targets are set for the following year • Targets are primarily set for levels of losses, collections, and new service connections

12. Financial Performance Analysis Selected PBSs FY 2002

13. Statistical Analysis Using Historic Information Only Goes So Far • To determine causes of performance gaps, must evaluate causes in depth within target utility • Need to share information from better managed utilities with lower performing utilities • In Bangladesh, the medium through which this is done is REB – much experience in doing so • In other countries, can be facilitated by a peer group leader, such as consulting firm or utility organization • Without best practice studies, evaluating practices, and sharing experience, benchmarking programs have limited value.

14. While no two utilities are equal, there are common targets that should be achieved: • Collection rates: +90% • System losses: less than 12% • Cost of purchase power: more than 60% of total costs for grid connected systems. • Annual outage duration/consumer: less than 30 hours • Cost of new overhead primary construction: less than $12,000/km • Penetration rates in excess of 40% of potential clients