GridPower GmbH

Case Prompt

Our client is GridPower GmbH, a Dutch-based utility company that operates in Southern Netherlands. GridPower GmbH has been profitable over the last several years, and has seen relatively stable/favorable business conditions during that time. However, 2 weeks ago, regulators began pressuring GridPower GmbH to reduce its costs in order to improve prices/rates for customers. GridPower GmbH operates in a highly-regulated energy market, and is required to justify the prices/rates it charges customers through an annual process that examines a provider’s cost structure and attaches a “reasonable return” on top of its cost structure in order to arrive at prices/rates. The CEO of GridPower GmbH, Klaas “Storm” de Boer, has engaged our team to identify where and how GridPower GmbH can reduce its costs by €500M.

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General response summary

This is an interviewee led case, but will require the interviewer to nudge/direct the interviewee during the case. The interviewee is expected to provide structured thoughts backed by evidence/experience. That may not always mean that the interviewee’s initial hypothesis/best guess will align with where the case is going. The key is for the interviewee to “earn” the slide/exhibit before they are provided.

Information to provide if asked:

• GridPower GmbH provides both gas and electric services, but both businesses operate the same
• GridPower GmbH is a fully-integrated utility, performing all functions of the utility value chain: generation, transmission, and retail
• Good structure will segment the utility by activities and consider:
• Generation: cost of fuel (e.g. renewables, gas/coal, nuclear, etc.) and efficiency, efficiency/throughput (TPT) of labor & assets (including maintenance/repairs and capital expenses)
• Transmission/maintenance: cost of maintaining assets (e.g. power lines), construction of new assets, TPT/efficiency of labor
• Retail: call center costs & TPT/efficiency, cost of customer