UK Power Networks chops tree cutting spend by 28 per cent

13 February 2012

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13 February 2012 | Adam Leach

Combining power line maintenance and tree cutting into one contract reduced costs by more than a quarter and lessened UK Power Networks' need to halt operations.

Speaking to SM, head of procurement at UK Power Networks Philip Patterson, said the power distribution company spends around £20 million a year on chopping back trees to stop them tangling up with power lines. This requires lines to be off while the work is carried out. However, industry regulator Ofgem can fine operators for shutting lines down too often.

When Patterson and his procurement team, who are in the middle of a programme to cut costs by 20 per cent, looked at the contracts, one for managing trees and one for maintenance work, they identified the potential for efficiency savings. Patterson told SM: “We might, during the course of a year, shut the same overhead line down twice whereas if we were a bit more joined up at the hip, we could shut it just once.”

The company decided to award the line maintenance contract to the company that chops back the trees. “We awarded an overhead line contract to an organisation that has been managing our tree portfolio. We’ve had to fundamentally grow its expertise and capability,” said Patterson.

Taking this approach and developing an existing supplier to meet the company’s needs appears to have paid off. Combining the two contracts reduced costs by 28 per cent, so it now gets both services for 36 per cent below the industry benchmark.

UK Power Networks, which was bought by Cheung Kong Group (CKG) from EDF Energy in 2010, has cut its costs by five per cent in the past year and has already identified where it will find the other 15 per cent.

The first part of the savings programme, called Networks First, delivered savings by renegotiating rates, tightening procurement controls and developing the department’s contract management function. Achieving Commercial Excellence, another savings programme, is changing specifications and leveraging buying power. Buyer Andrew Turner told SM: “While we’ve still got a lot to do to deliver them [the savings], a lot of it will be building on the work done last year.”

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