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Australia’s Power and Utilities energy sector is experiencing the immediate impacts of the COVID-19 pandemic while still recovering from significant challenges presented by the ongoing drought and recent devastating bushfires. In combination these events are set to test the resilience of electricity, gas, water and other essential services businesses on multiple fronts.

Utility providers must remain safe and reliable despite coronavirus (COVID-19), and anticipating and moving swiftly to address any emerging shortcomings is critical. Utilities need to be more agile and customer focused than ever. 

As essential services to communities and businesses, utility providers – particularly electricity, gas and water suppliers – must continue to operate despite the challenges caused by the coronavirus (COVID-19).

While the sector is experienced at crisis response, as recently seen during Australia’s extreme weather events, COVID-19 is a longer term, unprecedented health and economic challenge.

To date, many industry leaders have moved quickly to safeguard their people, implementing policies for both mental health and physical wellbeing. They have met social distancing requirements by splitting their teams, and for those who can are seeing that employees have a safe environment to work from at home.

However, utilities providers have many other complexities to overcome. They must keep their services running safely and reliably, communicate meaningfully with their customers more than ever while, protecting their business strategy and managing new risks.

Here, KPMG’s Cassandra Hogan, Industry Leader, Energy Natural & Resources, and Matt Pearce, Leader, Power & Utilities, explore these challenges and how the sector can further build resilience.

Continued utility supply

Society needs electricity, gas and water at all times, so utilities must maintain service regardless of the COVID-19 challenge. To achieve this, continuing to manage physical infrastructure, rethinking the use of offshore resources, and focusing on the wellbeing of their people are vital steps.

In terms of physical infrastructure, organisations need to secure access to spare parts and consumables to ensure the reliability of service provision. This could be more complex than usual due to supply chain interruptions resulting from freight restrictions.

Pearce offers the example of the liquid chlorines used to dose dams and reservoirs: “With limitations on supply in Australia and tightened border controls in place, the industry is concerned about access to this critical supply.”

Regarding offshore resources, with so many countries impacted by the coronavirus, Hogan says it has already been necessary to bring some of these services back into Australia to ensure continuity of supply, as well as consistency in customer service.

“This development adds new demands on businesses in terms of resourcing and reskilling,” she says.

When it comes to people, many organisations have already been operating workers into teams across depots or are doing more single-person activities to meet social distancing requirements. However, Pearce says this can create a slowdown in essential maintenance and capital delivery work, so must be carefully managed.

Hogan adds: “Organisations need to continue a focus on staff contingency plans in the event of widespread illness, to ensure that there are always enough people to keep services running.”

Customers at the core

With customers vital to the success of every utilities organisation, their needs must always be at the core of decision making. Hogan says with many customers facing unexpected hardships as a result of COVID-19, customer centricity is more important than ever.

“Many energy and water utilities are proactively reassuring customers that they will be supported though existing hardships programs and additional COVID-19 support programs. Energy utilities are suspending disconnection of energy provision for impacted customers until the end of July 2020.”

Hogan says communication with customers will need to remain clear and consistent throughout the entire COVID-19 event.

“With the increase in call volumes, and the number of customers seeking financial assistance, the challenge will be to ensure customers know what mechanisms and support are available for them to access; and how to access them. Confusion will only add to the stress and anxiety of the current situation,” she says.

Business strategy protection

To ensure essential business functions remain resilient during COVID-19, a fundamental step is meeting original regulatory timelines while ensuring debt and financial commitments are met.

Pearce says: “At the moment this is increasing the pressures within network businesses. In fact, we may find that in the short term regulatory obligations may actually increase to further support vulnerable and hardship customers.”

Another issue could be that planned work programs are put on hold while businesses focus on crisis management. This could lead to backlogs, and cause longer-term challenges.

“Organisations will need to be mindful of programs that have been paused or slowed, particularly in technology, maintenance and capital expenditure,” Pearce says.

He adds that many capital programs are being put on hold, with a view to build financial reserves.

“Capital programs is an obvious area where utility providers can immediately reduce spending and preserve cash. Several state owned service providers are conscious of their economic contributions, and are continuing their capital programs. However, some privately owned utilities are more conscious of their capital reserves, and have taken to keeping a buffer in the event of bad debts, customer non-payments or supply shortages.”

Compounded risks

Utilities often face multiple risks in operations, for example storms, safety hazards or building shut downs; but the COVID-19 environment has the potential to compound those risks.

“If some of the forecast scenarios are right, and COVID-19 is a 9-to-15-month impact, in spring there will be storms, in summer, bushfires, and if this continues, conflated risk really comes to the fore,” Pearce says.

Social distancing requirements also mean many staff members are now working from home, opening up further risks around cyber security that need to be mitigated.

“We have noted an increased number of incidents of phishing attacks. Remote workers connected to an organisation’s network are being singled out for phishing attacks, putting risk on the business,” he says.

Looking ahead

The impact of coronavirus will be ongoing, so utilities organisations need to stay vigilant around their scenario planning and crisis management planning.

Hogan says: “In the coming months, businesses will need to turn their mind to what changes or enhancements they need to make to their operating models to remain resilient in the longer term. For some, this may mean an acceleration of digital strategies to support automated responses and remote connectivity, so that operations will become less people dependant.”

Whatever areas are chosen, it is likely that increased focus on resilience emerging from COVID-19 will require select investments, which will be particularly challenging to fund given customer hardship, productivity backlogs and supply chain challenges. The industry will need to continue its journey to understanding its cost base, build business cases and make trade-offs from a total expenditure (TOTEX) perspective.

 

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