Cost-cutting cooperation

The figures tucked away in a press release from Sierra Pacific Power Co.

are dramatic.

Even as the company set records each year for bringing new electric customers on line 11,244 new meters in 2004 alone it managed to sharply reduce the average cost of making a connection from $2,704 in 1999 to $1,895 last year.

And the cost-cutting didn't come at the cost of customer satisfaction.

Ninety-five percent of the builders and developers who ordered new electric service last year gave the power company top marks.

The story behind that reduction?

"We turned the organization upside down," says Gary Smith, director of new business, electric and gas, for Sierra Pacific.

And some of the muscle to turn the organization upside down came from the Builders Association of Northern Nevada, which spent seven years working with Sierra Pacific Power to streamline its process.

Builders in the mid-1990s, Smith acknowledges, were beginning to grumble about delays and costs involved with electric hookups.

As the builders and power company officials began meeting, some cost- and time-saving steps quickly became apparent.

Instead of multiple inspections of new connections, Sierra Pacific began consolidating them.

Bob Jones, director of strategic planning for the Builders Association of Northern Nevada and a participant in the talks from the beginning, says a key to their success was the involvement of first-line personnel.

"Often, we talk above the problem at the administrative level," he says.

Other changes were more subtle.

Developers and Sierra Pacific both stood to reap substantial savings by meeting early to talk about siting buildings so that they can be easily and inexpensively served by power lines.

Today, Smith says, it's not uncommon for developers to meet with the power company even before they decide whether to purchase a piece of land.

Technology provided a boost as digital mapping of the power grid reduced field trips."A lot of this stuff now can be done inhouse," says Smith.

But some the biggest changes, measured in cost-cutting of a dollar or two here and there, came from sweeping organizational and philosophical changes within the organization.

Smith and his management team, for instance, gave more authority to field personnel to make decisions.

No more costly, timeconsuming waits for a manager to come out.

"We put the person who was doing the work in charge," Smith says.

Installation crews, many of them unionized workers, were offered a financial incentive in their contract for reaching cost-control goals.

Because the company is so busy, they didn't worry that cost-cutting measures would lead to layoffs.

"It was a neat transformation for them," Smith says."They got to build it and own it." The builders association also had financial incentives to improve the process.

"This has saved time in the field, and it has saved cost for the builders," says Jones.

Giving more authority to crews in the field is likely to create even more cost savings as Sierra Pacific can devote less management time to the installation of new meters, says Mike Smart, regional operations executive for the utility.

The changes didn't come easily.

Smith devoted nearly all his time for a full year to reworking the organization.

And he's learned along the way that it's not enough to simply make organizational changes.

For instance: As construction booms in northern Nevada, builders brought on new superintendents who weren't familiar with Sierra Pacific practices.As a result, the customer- satisfaction ratings dipped in one recent year.

That spurred Smith's team to make sure newcomers in the industry understand the utility's procedures, and satisfaction ratings rebounded.

"It's something you have to nurture," Smith says.