INFORMATION DISCLOSURE FOR ELECTRICITY NETWORKS 2012-2021 - POWERCO
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I NFORm AT I ON D I SC LO SUR E FO R
ELECT RI C I T Y NET W O R K S 2012 - 20 21
ASSET MANAGEMENT PLAN ELECTRICITY NETWORKS FY2011 – FY2021 1
contents
EXECUTIVE SUMMARY................................................................................... 2
POWERCO AND THE NEW ZEALAND ELECTRICITY INDUSTRY.................... 4
OUR ELECTRICITY NETWORK....................................................................... 6
ASSETS COVERED......................................................................................... 7
THE ASSET MANAGEMENT PLAN AND PROCESS........................................ 8
PURPOSE OF THIS SUMMARY AMP.............................................................. 9
HOW TO PROVIDE FEEDBACK...................................................................... 9
PROCESS OVERVIEW.................................................................................... 9
ASSET MANAGEMENT STRATEGY OVERVIEW............................................ 10
WHO WANTS WHAT FROM THE ASSETS?.................................................. 12
STATE OF THE ASSETS................................................................................ 15
PERFORMANCE AGAINST TARGET OVERVIEW........................................... 15
RISK MANAGEMENT.................................................................................... 17
ASSET LIFE CYCLE PLAN............................................................................ 17
NETWORK DEVELOPMENT PLAN................................................................ 19
NETWORK PERFORMANCE ENHANCEMENT.............................................. 20
CAPITAL EXPENDITURE............................................................................... 20
OPERATIONAL EXPENDITURE..................................................................... 21
FINANCIAL.................................................................................................... 22
ASSET MANAGEMENT IMPROVEMENT....................................................... 23
INFORMATION SYSTEMS............................................................................. 23
SERVICE PROVISION STRATEGY................................................................. 23
PROJECT MAPS........................................................................................... 24
KEY DEFINITIONS......................................................................................... 33
2 SUMMARY ASSET MANAGEMENT PLAN ELECTRICITY NETWORKS FY2012 – FY2021
SUMMARY ASSET MANAGEMENT PLAN ELECTRICITY NETWORKS FY2012 – FY2021 1
EXECUTIVE SUMMARY
Welcome to the 2012 edition of our Summary Asset Management Plan (AMP). apply a risk-based prioritisation approach to our investments. We consider this to be
This Summary AMP outlines the key points, that we consider relevant to interested an acceptable approach as long as this doesn’t erode our operating headroom and
parties, from Powerco’s full AMP. It is intended to provide a starting point for ability to manage the on-going risk of adverse network performance and/or result in
discussions with key stakeholders and generate increased feedback on the vital grossly inefficient cost outcomes.
service Powerco provides.
Powerco has a constructive relationship with its economic Regulator, the Commerce
The full AMP is an important part of Powerco’s planning and investment framework. Commission, and where we believe long-term investment requirements may be
It describes for our customers, shareholders, employees and partners how we will compromised by the current regulatory allowances we will discuss this with them.
manage our electricity distribution network to deliver the standards of reliability of We believe our AMP is an important starting point for engaging positively with
electricity supply that our customers demand and the commercial performance that the Commission and its advisers to ensure long-term investment levels remain
our shareholders expect. appropriate. Whilst being primarily a document developed for Powerco’s own
planning purposes, publication of the AMP also satisfies the regulatory requirement
The AMP is a technical document that sets the context for the annual investment
to disclose details of our Asset Management methodologies, in accordance with the
we believe is necessary to maintain the performance of existing network assets
Electricity Disclosure Handbook 2004 (as amended 2008).
and to provide future capacity and security through investment in new assets. The
programmes of work identified in the AMP are based on our current understanding Asset Strategy and Context for the 2012 AMP
of customer and stakeholder requirements, and our knowledge of the existing and
Powerco understands that good Asset Management underpins the ability of our
projected condition and performance of the assets on our networks.
networks to deliver both supply quality and security, and value for consumers.
The 2012 AMP covers a planning period from 1 April 2012 to 31 March 2022. We refer to Asset Management in this context as the co-ordinated policies and
However, our main focus is on ensuring that our work programmes for the next practices through which we acquire, analyse and review information on our assets,
three to five years are clearly defined and form part of a longer-term asset strategy. assess future network requirements and deliver cost-effective and safe investment
Each year, a comprehensive update of the plan is completed to reflect changes on in our network.
the network, new technologies that are available and work we have undertaken
An important element of our Asset Management practice is a focus on continuous
during the year to develop a better understanding of the overall health of our
improvement and, to this end, we have recently assessed our practices against the
assets. The updated AMP also reflects independent feedback we have received on
criteria in the International Infrastructure Management Manual and using the Asset
our Asset Management methodologies from the Commerce Commission and its
Management Maturity Assessment Tool prepared by Parsons Brinckerhoff NZ for the
expert advisors.
Commerce Commission. The results, whilst identifying some areas for improvement,
Our ultimate aim is to optimise the life-cycle costs of our assets whilst meeting mainly in relation to data capture and information systems, were on the whole
agreed service targets and future demand requirements at an acceptable level positive. From a strategic perspective, we are seeking to extend our planning horizon
of network risk – what we term achieving a steady state level of efficient asset out to 20-plus years to make more explicit the company’s strategy for delivering
investment. However, as a regulated supplier of electricity services, we have to outputs and meeting demand over the long term.
work within the realities of a regulatory price cap, and so achieving everything that is
identified in the plan is not always possible and, in some cases, we are required to
2 SUMMARY ASSET MANAGEMENT PLAN ELECTRICITY NETWORKS FY2012 – FY2021
Our focus to date, on effective Asset Management has enabled the company to
deliver strong outcomes for our customers over recent years. We have established
the company as a low-cost operator in comparison with our peers in New Zealand,
whilst maintaining a stable operating performance overall, which also benchmarks
favourably. Ultimately, this has flowed through to lower prices for customers.
Central to our strategy of containing costs has been the introduction of processes to
optimise expenditure on our networks, within the regulatory allowances and to the
level where returns to the company’s shareholders are considered acceptable.
However, whilst our headline network performance and the reliability of supply
experienced by our customers (when taken in aggregate), has been broadly stable
over recent years, our analysis indicates a slow but observable deterioration in asset
condition and an increase in the average age of assets on certain parts of our network.
Perhaps, not surprisingly we are starting to observe a correlation between declining
reliability performance and the health and age of our assets at these localised
network “hot spots”. Left unchecked, we anticipate this declining performance
trend will continue, resulting in an unacceptable level of supply interruption to our
customers. As we set out in the full AMP, there are a number of short-term initiatives
and investment decisions that we can apply to target interventions at the worst-
performing parts of our network, but increased levels of investment will almost
certainly be required in the longer term to redress this adverse performance trend.
However, as our customers, through increased prices, will ultimately fund investments,
we believe it is important that the case for increased expenditure is well articulated,
fully justified, and completed with appropriate consultation with our customers and the
Regulator. We will be progressing this work over the next 18 months.
The full AMP provides more details on the issues discussed here. It also describes in
detail our plans for addressing each issue. We look forward to discussing our plans
with you.
SUMMARY ASSET MANAGEMENT PLAN ELECTRICITY NETWORKS FY2012 – FY2021 3
POWERCO AND THE New Zealand
ELECTRICITY INDUSTRY
To provide relevant feedback on Powerco’s AMP, it is vital
that any interested parties understand the structure of
New Zealand’s electricity industry and Powerco’s role in it.
This country’s electricity industry has undergone considerable
structural change over the past 14 years as the Government
has worked to promote competition, reliability and fair prices
for consumers.
As part of the distribution sector, Powerco sits midway along
the supply chain. It contracts with Transpower for transmission
services and with generators “embedded” in our networks.
At present, we do not sell electricity – we own and operate
the infrastructure that delivers it from the National Grid to
individual homes and businesses. Our main customers are
energy retailers with whom we have wholesale “use of system”
agreements. We invoice retailers for the cost of our services,
which comprise delivery (including transmission) charges, and
maintaining and upgrading the distribution network. Retailers
bundle up the cost of our services, along with their own
services and those of generators, into customers’ monthly
electricity bills. Retailers, which compete for customers, set the
overall price for the end-consumer.
The different sectors of the industry are described next.
4 SUMMARY ASSET MANAGEMENT PLAN ELECTRICITY NETWORKS FY2012 – FY2021
Figure 1: Sectors of the New Zealand Electricity Industry
1. Generation 2. Transmission 3. Distribution 4. Retailing 5. Consumers
Generators, as the name Transpower owns and operates At the GXPs, electricity is Retail companies sell delivered Residential and business
suggests, are the companies the National Grid, which transformed to lower voltages electricity to end-consumers. consumers buy delivered energy
that generate electricity in comprises pylons, high-voltage then distributed to end-users via Retailers bundle up the costs from retail companies. Large
power stations. Generators are cables and switchgear for overhead lines and underground from the other sectors of the industrial and commercial
also entitled to sell electricity transmitting bulk electricity from cables by local distribution (lines) industry, along with their own consumers also purchase
to consumers and energy generation sites to distributors. companies. There are currently costs to run a retail business, electricity from retail companies
retailers. Numerous generation 29 distribution companies, and provide electricity but may also have the option
Transpower transmits electricity
sites around the country supply which operate within set consumers with a monthly of contracting directly with
from generating stations to
electricity to the National Grid. boundaries and range from bill. They set the final price distribution companies for
178 Grid Exit Points (GXPs)
publicly listed companies to consumers pay for electricity. electricity distribution services.
around New Zealand. These
community-owned trusts. These companies are also
GXPs are the points of supply
allowed to participate in the
for distribution networks like The 1998 Electricity Reform
generation sector.
Powerco’s. Act required full ownership
separation of distribution
businesses from energy (retail
and generation) businesses,
preventing Powerco and
other lines companies from
participating in the retail
or generation sectors. The
Electricity Industry Bill 2009
allows distribution companies
to once again participate in the
retail and generation sectors,
subject to strict controls.
SUMMARY ASSET MANAGEMENT PLAN ELECTRICITY NETWORKS FY2012 – FY2021 5
OUR ELECTRICITY NETWORK
Powerco is New Zealand’s second largest electricity distributor in terms of customer
connections and largest in terms of geographical area covered and the length of our
network. We own and operate a large network of electricity distribution assets that,
over the last year, delivered 4652 GWh of electricity through approximately 30,000km OPERATIONS
of lines and cables to more than 319,000 consumer connections. Powerco’s
networks supply electricity to a diverse range of communities and consumer types,
from major provincial centres with highly interconnected CBD networks, through to
remote rural communities; from large industrial plants to small back-country shearing
quarters. Powerco’s networks cover Thames-Coromandel, Hauraki, Tauranga and
Western Bay of Plenty, Matamata Piako and South Waikato (collectively known as
our Eastern Region) and Taranaki, Whanganui, Rangitikei, Manawatu, Tararua and
Electricity Networks
Wairarapa (collectively known as our Southern and Western Regions). Electricity distribution networks in the
Tauranga, Thames, Coromandel, Eastern
and Southern Waikato, Rangitikei,
Taranaki, Whanganui, Manawatu and
Wairarapa regions.
Figure 2: Powerco Electricity Network Operations Map
6 SUMMARY ASSET MANAGEMENT PLAN ELECTRICITY NETWORKS FY2012 – FY2021
ASSETS COVERED
The full AMP, to which this summary refers, provides detailed information on
Replacement Cost by Asset Category
Powerco’s fixed electricity network assets. The following graphs and table provide a
2,500
summary of the assets covered.
2,000
Replacement Cost ($m)
Electricity Network Replacement Cost by Asset Type
900 1,500
800
1,000
700
600
500
500
$million
400 0
Overhead Underground Transformers Switchgear Substations
300
200 Asset Category
100 Assets Valued at ODV Replacement Cost Assets Valued at Current Replacement Cost
0
Overhead Line Underground Cable Distribution Transformers
Figure 5: Replacement Cost by Asset Category
Distribution Switchgear Zone Substations
SCADA/Comms/Ripple Spares (Emergency & Critical) Table 1: Key Network Statistics
Southern &
Figure 3: Electricity Network Asset Replacement Cost by Asset Type Key Network Statistics as at 31 March 2012 Eastern Western Total
Length of Overhead Circuit (km) 7,679 14,644 22,323
Length of Underground Circuit (km) 4,407 3,192 7,600
Electricity Network Replacement Cost by Function
Subtransmission Circuit Length (km) 592 1,011 1,603
1,000
Distribution Circuit Length (km) 5,828 10,780 16,609
800
Low-Voltage Circuit Length (km) 5,667 6,044 11,711
600 Number of Zone Substations and Switching Stations 45 73 118
$million
Zone Substation Transformer Capacity (MVA) 748 962 1710
400
Distribution Transformer Capacity (MVA) 1,418 1,548 2,967
200
0
Subtransmission Zone Substation & GXP Protection & Control Distribution
Distribution Substation Low Voltage Spares (Emergency & Critical)
Figure 4: Electricity Network Asset Replacement Cost by Functional Category (2004 ODV)
SUMMARY ASSET MANAGEMENT PLAN ELECTRICITY NETWORKS FY2012 – FY2021 7
THE ASSET MANAGEMENT PLAN AND PROCESS
With Powerco’s electricity network assets ranging in age from new to more than 50
Who wants what What performance are How are we managing What does this mean for How can we improve?
years old, effective long-term planning is a fundamental requirement of our business. from the assets? we targeting from the the network and solving the works programmes
assets? How are we any performance gaps? and required
Our AMP is an integral part of that planning because it not only explains Powerco’s What is the state of the
assets?
doing vs. the target? expenditure?
What are the gaps?
management and maintenance policies, but also sets out our plans for focused
investment in security, capacity and reliability of an ageing network that is facing
constantly rising levels of demand. This means Powerco has increasing investment
Section 2 Section 4 Section 7 Section 7, 8 and 9 Section 11
requirements as assets progressively reach the end of their useful lives. Define Stakeholders Set Performance Set Asset Life Cycle Develop Work Develop AM
Define AM Drivers Targets Strategy Programmes Improvement Initiatives
The full AMP contains specific details on Powerco’s short- and long-range planning Analyse Renewal Linked with AM Driver
Section 5 Needs
for network development, renewal and maintenance. In other words, the AMP is a Section 3
Describe Assets Performance
high-level document providing management, stakeholders and any interested parties Evaluation Section 8 Section 10
with a broad overview of Powerco’s asset management policies, asset details, Section 6
Security Criteria Set Expenditure
Prepare Load Forecasts
service levels, capital and maintenance works planning, expenditure forecasts, risk Analyse Network Forecasts
Risks
management and performance evaluation. System Growth Needs
Section 9
Incorporating information from a range of other internal documents, the AMP sets
Reliability, Safety,
out the performance criteria for the assets, and summarises the actions needed to Environment
Enhancement Needs
achieve those performance criteria. Protection & Control,
Smart Network
Developing the AMP is a key step in ensuring that the needs of all stakeholders are Development
properly considered and incorporated into Powerco’s long-term Asset Management
strategies. It also ensures that plans provide, subject to any regulatory constraints,
Figure 6: Structure of Asset Management Plan
the optimum balance between levels of service and the efficient costs to provide
the required service. Figure 6 illustrates the structure of the full AMP and what each
section is trying to address.
8 SUMMARY ASSET MANAGEMENT PLAN ELECTRICITY NETWORKS FY2012 – FY2021PURPOSE OF THIS SUMMARY AMP PROCESS OVERVIEW
Electricity distribution networks and the Asset Management processes that drive The Asset Management process requires that electricity is provided at the most
them are very complex. Therefore, a huge amount of information is required to efficient cost. This is a process of many parts, including:
compile a thorough AMP. This complexity and level of detail can act as a barrier
Strategy
to providing feedback for some parties, due to a feeling of “information overload”.
Powerco recognises this and that is why we have produced this Summary AMP, Long-term strategic direction for the management of the assets and the
which is intended to identify the key issues relevant to the majority of interested business operations. This is the key interface for customer consultation and
parties. Anyone interested in Powerco’s AMP or operations in general is encouraged corporate strategy.
to read this summary to learn more about our business and what we are trying to
Planning
achieve on behalf of all our stakeholders. If further information is required, Powerco’s
full AMP is available at: This process involves planning for the renewal, development, maintenance and
operation of the assets.
www.powerco.co.nz/Publications-and-Disclosures/Disclosures/Electricity
Service provision
Please note, this Summary AMP is intended to be consistent with the full AMP
published in April 2012. Therefore, commentary, figures and dates contained within This involves the delivery of construction, maintenance and operating services on the
this Summary AMP reflect those from the published date for the full AMP. network assets.
Network operations
HOW TO PROVIDE FEEDBACK This involves the management of the real-time operation of the network, recording
network outages and approving planned outages and access to the network by
Powerco provides a vital service to your community. Therefore, it is vital that you service providers.
have your say on the service we provide. We welcome feedback on this Summary
Information
AMP, our full AMP, or any aspect of our business or the electricity industry. Feedback
can be provided in the following ways: This involves the maintenance of, and reporting from, the asset information databases.
• By email: yourview@powerco.co.nz There is, of course, extensive and constant interaction between these processes,
• By telephone: 0800 POWERCO (0800 769 3726) and with corporate, customer and regulatory management teams.
• By post: Consultation Manager
C/- Powerco Ltd
Level 2, 84 Liardet St
Private Bag 2061
New Plymouth 4342
SUMMARY ASSET MANAGEMENT PLAN ELECTRICITY NETWORKS FY2012 – FY2021 9ASSET MANAGEMENT STRATEGY OVERVIEW
At its highest level, the Asset Management process seeks to find and optimise the Powerco’s AMP identifies and provides details on the following key electricity Asset
most efficient trade-off between cost, service and risk. By minimising the costs, the Management-related strategies:
asset manager may compromise on asset performance and asset risk; by minimising
1. Renewal and modernisation: Modernisation of the network involves the
the asset risk, service performance may be compromised and costs increased.
replacement and updating of our aged assets to reduce the risk of asset failure,
These three areas are intrinsically linked and the asset manager seeks to achieve the
which can result in interruptions to supply. Powerco’s required renewal expenditure
appropriate balance between them. This is represented in the following diagram.
is forecast to trend upwards as the wave of assets installed between the 1950s and
early 1980s approaches end-of-life. Figure 8 shows the increase in forecast renewal
f these ar
eas, the oth
er tw expenditure.
ne o oa
no rea
uto sw
sp ill
si be
cu Asset Renewal Capital & Operational Expenditure
fo
co
h
m
100
uc
pr
om
om
80
ise
If to
Nominal Expenditure ($000)
d
70
LEVEL 60
COST
OF RISK 50
40
NETWORK
30
ASSETS
20
10
0
2009 A
2010 A
2011 A
2012 B
2013 F
2014 F
2015 F
2016 F
2017 F
2018 F
2019 F
2020 F
2021 F
2022 F
2006 A
2007 A
2008 A
PERFORMANCE
LEVELS
Asset Replacement and Renewal Refurbishment and Year (ending June)
Renewal Maintenance
Figure 8: Actual and Forecast Asset Renewal Capital and Maintenance Expenditure
Figure 7: Cost, Performance and Risk Balance
10 SUMMARY ASSET MANAGEMENT PLAN ELECTRICITY NETWORKS FY2012 – FY20212. Increasing the redundancy (duplication) of the core network: 5. Distribution automation and more interconnections at feeder level:
Redundancy means that if one critical component fails or needs to be taken out Smart network plans, which are a recent addition to Powerco’s AMP, aim to be
of service, there is another component ready to continue supply. This includes self-healing and capable of shifting the load from peak times. They are something
increasing zone substation capacity and installing more network automation. Powerco to which regulators in many countries are now paying greater attention because
has identified the potential for 17 zone substations to be built and 20 additional they are perceived to offer customers improvements in performance and cost.
transformer banks to be installed at existing substations over the next 10 years. Smart networks, which offer flatter, more manageable patterns of demand, fit well
with Powerco’s business plan objectives of improving reliability through automated
3. Standardising systems and processes: This is a key strength of Powerco’s
solutions, and managing increasing investment profiles through non-asset solutions.
employees and a significant focus for management. Powerco has developed a
common maintenance management system and an integrated, easily accessible 6. Continuous improvement and optimisation of our inspection and
suite of information systems. There has also been continuing development of design, maintenance standards: Powerco’s Network Standards set the requirements
construction and maintenance standards, which lead to lower risk profiles in the for the design and construction of equipment. Our standards also set out our
network and less reliance on field staff. Further investment in the standardisation of requirements for maintenance inspections and servicing, and guidelines for the
systems and processes will allow us to extend asset lives. overhaul of equipment. The standards reflect the range of different contractor drivers
in place across Powerco’s network as well as a need to prevent corner-cutting,
4. Management of public safety: Electrical equipment is capable of causing
while not disallowing new ways of doing things. The standards and policies follow a
serious harm or death so safety is of utmost importance to Powerco. Safety
continuous improvement process whereby the standards are challenged as they are
performance enhancement is to a large extent workforce-related, and is about
used. Input to the standards preparation and update process can arise during semi-
fostering safety-focused leadership and culture within both Powerco and its
regular standards road shows, through the field work audit process or if anyone has
contractors. Most of the safety initiatives described in the full AMP are, therefore,
a new idea that should be tried out.
people-focused rather than network equipment-focused. Nevertheless, some
network projects are centred on eliminating safety hazards. Safety enhancement
programmes are driven from a variety of perspectives and sources. They are
generally approached with risk-based techniques. Powerco has an established
Health and Safety Plan and its purpose is to document the proposed pathway we
will take to execute and improve all areas of our Health and Safety performance. The
main areas of focus are:
• Committed safety leadership;
• Business-wide safety culture; and
• Continuous improvement of safety systems.
SUMMARY ASSET MANAGEMENT PLAN ELECTRICITY NETWORKS FY2012 – FY2021 11WHO WANTS WHAT FROM THE ASSETS?
The following figure illustrates the relationship between Powerco’s main stakeholders, • Various media communication channels, such as newspaper and radio
their drivers and the Asset Management process. The diagram now includes a advertising and Powerco’s website.
recognition of the business planning process as the stakeholder drivers are equally
In addition to the above, Powerco has a Consultation Manager dedicated to
(and in some cases more appropriately) applicable to the business planning process.
planning and co-ordinating consultation activities and maintaining relationships with
key stakeholders. Feedback obtained through consultation is incorporated into
Customers/ Government & Owners & Lenders Employees &
Consumers Regulator Contractors Powerco’s Asset Management planning to help ensure Powerco’s plans are aligned
with consumer and stakeholder expectations. We ensure this happens by involving
a wide range of Powerco people in customer consultation, including engineers, key
Service/Price Safety Load Economic Efficiency
(Long-Term Interest of Consumers)
Long-Term Value
(Productivity & Utilisation)
Safety Workflow Certainty decision-makers and business leaders. This way, consumer feedback goes directly
Growth Market Costs
Environmental Safety & Compliance Risk Management to the people who are able to act on it.
Business Planning Process
Asset Management Process
Development, Renewal,
Maintenance, Operation
Asset Performance Asset Age/Condition
Assets
Figure 9: Asset Management Process Stakeholders and Drivers
Powerco uses a range of best-practice methods to undertake consultation and to
identify stakeholder interests, including, but not limited to:
• Key Account Managers assigned to liaise directly with large or industrial
consumers.
• Consumer surveys conducted at events like the Mystery Creek and Central
Districts Agricultural Field Days. Surveys are designed to help Powerco
understand if consumer expectations about the quality of their electricity supply
are being met. Attendance of Powerco staff at these events also provides
consumers with an opportunity to discuss any concerns they may have directly Powerco Chief Engineer Michael Whaley responds to a question at a consultation with
with Powerco. members of the Taranaki Chamber of Commerce. Also on hand from Powerco to listen to
consumer feedback were (from left to right) Planning Manager Peter Armstrong, Regulatory
• Workshops and focus group-type meetings with regulators, consumers and
Manager Charlotte Littlewood and Network Operations Manager Phil Marsh.
consumer representative groups.
12 SUMMARY ASSET MANAGEMENT PLAN ELECTRICITY NETWORKS FY2012 – FY2021Figure 10 below illustrates the influences of the various drivers affecting the total
amount spent on the network over time.
Network Spend
Long-term
Shareholder
value
Regulated Revenue
Productivity
Utilisation
Indirect Costs
O&M
Development
Market Costs
Renewal For Work
Risk
Mgmt
Environmental
Asset Age,
Load Safety
Condition & Service
Configuration Growth
Time
Asset Management Process
Figure 10: Illustration of the Influence of Asset Management Drivers
Powerco Performance Engineer Ken Pattie discusses Powerco’s BasePower solution for remote The diagram reflects the current situation, which can be summarised as upwards
rural consumers at the Whanganui River settlement of Matahiwi. pressure on network spend through:
• The required level of service.
• Load growth.
• Safety, environmental and other regulatory compliance obligations.
• The market costs for field work activities.
• The current attributes of the network, i.e. asset age, condition and configuration.
The drivers that place downwards pressure on network expenditure are:
• Powerco’s commercial driver to achieve long-term sustainable value for its
shareholders, which (in this context) is reflected in utilisation and productivity drivers.
• The regulated revenue, namely the allowable revenue and form of control.
SUMMARY ASSET MANAGEMENT PLAN ELECTRICITY NETWORKS FY2012 – FY2021 13At a strategy level, constraints, Asset Management drivers and the needs and interests At a tactical and operational level in the network planning process, the investment
of various stakeholders are evaluated and considered as part of the corporate planning policy and Asset Management strategy is shaped by Powerco’s multi-stakeholder
process. These are all applied during the network planning process. assessment process. This process is a key part of the way in which network
development and renewal programmes are formed. Powerco faces a constant
It must be recognised that, with such a wide range of stakeholders, their drivers and
balancing act to ensure the needs of consumers and stakeholders are met at the
needs will also vary widely. For example, Powerco’s consultation to date indicates
optimal levels of price and quality. Feedback from electricity retailers and consumers
that most consumers wish to see reliability and quality standards improve or remain
is essential in ensuring we achieve the best possible balance for the widest possible
at present levels but do not wish to pay more for electricity overall. However,
range of stakeholders.
maintaining or improving standards requires a greater level of investment due to an
ageing network and load growth. By restricting Powerco’s revenue through price- To help achieve the optimal balance, projects are assessed using a multi-stakeholder
constraining regulation, Regulators seek to put downwards pressure on electricity optimisation process (known as Coin Optimiser), whereby the projects are reviewed
prices. The regulation is limited in its effectiveness in constraining overall retail prices against a set of four strategic objectives. The primary objectives of the optimisation
because the majority of a retail electricity bill is made up of components that are process are:
outside Powerco’s control. However, it does have a large impact on how much • To provide a consistent approach to the development of capital works
Powerco is able to invest back into the network – at the same time, Powerco must programmes that balances (potentially conflicting) stakeholder requirements;
continue to maintain reliability and quality standards while still making a fair return to
• To eliminate (or mitigate) any high risks to public safety, network performance,
investors. As such, Powerco seeks to operate an efficient business and to ensure
customer outcomes, public relations, or employee engagement; and
regulatory consistency, predictability, transparency and accountability to help lower
perceived investment risk, thus allowing for investment at appropriate levels required • To maximise the strategic value of the portfolio of projects that make up the
to achieve the optimal balance of all stakeholder expectations. It is at the strategy capital works programme.
level where the best overall balance between these drivers and needs is sought. Further details on the optimisation process are set out in Section 2.5 of the full AMP.
14 SUMMARY ASSET MANAGEMENT PLAN ELECTRICITY NETWORKS FY2012 – FY2021STATE OF THE ASSETS PERFORMANCE AGAINST TARGET OVERVIEW
The age profile by replacement costs of the entire infrastructure asset base Table 2: Current Electricity Asset Performance
(on current replacement costs) is presented as a nine-year moving average and is Electricity Measure Measure (2011) Target for 2013 Commentary
shown in the diagram below.
Network 273.93 min/Performance looks at the consumer-related service requirements, and the Safety is a critical driver of the Asset Management process. Electrical plant and
confirmation of these requirements through the consumer consultation process. equipment are capable of causing serious harm. Measures must be taken to ensure, as
It then looks at the ways in which economic efficiency is assured in the Asset far as practicable, the safety of employees and the public. To this end, the network must
Management process, contractor performance, safety performance, environmental be maintained in a way that meets statutory requirements, follows good engineering
matters and statutory compliance. practice, and is considered safe in accordance with recognised industry standards.
The targets also take into account the type of assets used across our network, and Safety is determined by a combination of:
make comparisons with other New Zealand lines companies with the same customer • Asset design;
density and ratio of overhead to underground construction. They also consider past
• Maintaining the assets in a safe condition;
planning practice, economic factors, recognised international best practice and safety.
• Safe operating and work practices; and
Powerco achieves a balance between owner requirements and legislative, regulatory
and consumer expectations in setting these performance criteria. The levels of • Statute: The Electricity Regulations, Electrical Codes of Practice and the
service adopted by Powerco for its Asset Management Plan are based on the Australian/New Zealand Standard Wiring Rules. There is also the Safety Manual
internationally recognised measurements, SAIDI, SAIFI and CAIDI (which are – Electricity Industry (SM-EI), which contains the framework for Powerco’s
acronyms for formulae covering the duration and frequency of power outages, and safety-related network operation. Powerco has now implemented its network
operating procedures to comply with the requirements of SM-EI. Additionally,
their customer bases) and accepted New Zealand lines companies’ best practice.
there are the Building Act, the Health and Safety in Employment Act, the
Powerco conducts an extensive Customer Communications Programme to verify Hazardous Substances and New Organisms Act 1996, and various guides set
that performance targets match consumer and stakeholder expectations. Consumer out by the Electricity Engineers’ Association.
consultation is a requirement of the Commerce Act (Electricity Distribution Thresholds
Powerco has adopted the practice of working as a reasonable and prudent
Notice 2004). The primary intention of this requirement is to ensure distribution
operator to guide safe Asset Management practices. Its health and safety policy
businesses effectively consult with, and take into account, the views of their
and procedures are set out in documents in the Powerco Business Management
customers and stakeholders. Regardless of regulatory requirements, Powerco views
System. Contractors can receive instructions from the Contracts Works Manual and
consumer consultation as common sense – essentially, our job is made easier if the
the Network Operations Manual, both of which are new initiatives that operate with
communities in which we operate understand who we are and how our business
online search applications.
operates. In addition to Powerco-initiated consultation, a database is kept of all
complaints and suggestions registered by its customers through Powerco’s call The company carries out a policy of auditing its contractors for health and
centre. These complaints are mapped by type for later reference in planning activities. safety compliance, along with their quality of workmanship. Health and safety
audit breaches are divided into major and minor. We have a focus on continual
Economic efficiency is an important driver for maintenance, renewal and
improvement on health and safety and have a target number of zero major breaches.
development work. A large proportion of repair work, refurbishment and asset
replacement work is undertaken only after economic analysis to determine the most
cost-effective solution. This frequently involves the choice between replacement and
continued maintenance.
16 SUMMARY ASSET MANAGEMENT PLAN ELECTRICITY NETWORKS FY2012 – FY2021RISK MANAGEMENT ASSET LIFE CYCLE PLAN
A large part of the Asset Management process involves managing risks associated As Powerco’s network continues to age, more investment in renewal and
with the assets on behalf of our stakeholders. For example, public safety risks may maintenance is required to maintain current reliability levels. Powerco is spending
arise due to inadequately secured equipment, risks of unexpected supply outages less on asset renewal than what asset age profiles indicate should be spent;
may arise due to inadequately trimmed trees, or there could be inadvertent breaches however, this must be viewed in the context of regulated allowable revenue. The
of legislation. required increase in replacement costs is demonstrated in the following figure.
Powerco’s Board and management are committed to maintaining a business All Assets – Replacement Profile
environment that demonstrates good corporate governance practices. Risk 140
management is therefore an integral part of Powerco’s business to support effective
120
decision-making and provide assurance.
Replacement Cost ($m)
100
The aim of the risk management programme is to identify and understand the 80
likelihood, consequence, control effectiveness, and action plans required to make
60
risk levels acceptable.
40
The risk management programme is supported by Powerco’s corporate insurance
20
programme, which includes low-probability and high-impact events.
0
Our approach to risk management is aligned to the new AS/NZS ISO 31000:2009
2012
2013
2014
2015
2016
2017
2018
2019
2020
2021
2022
2023
2024
2025
2026
2027
2028
2029
2030
2031
standard for risk management.
ODV Replacement Cost (June 2011 quantities in $2004 terms) Year of Replacement (FY)
Current Replacement Cost (including capital efficiency factor)
More in-depth details on Powerco’s risk management programme are provided in 9 year rolling average, Current Replacement Cost (including capital efficiency factor)
Section 6 of our full AMP. This section on risk management has now been moved 50 Year Average Current Replacement Cost (including capital efficiency factor)
to the middle of the AMP from being at the end. This reflects our view that the Renewal Budget (Real $2011)
management of risks is central to the Asset Management process, rather than being
Figure 12: Total Network Asset Replacement Profile
simply an output.
A number of renewal projects are described in the maps that follow in this Summary
AMP. The maps show the major projects Powerco wishes to undertake prior to
application of the multi-stakeholder assessment process described earlier.
SUMMARY ASSET MANAGEMENT PLAN ELECTRICITY NETWORKS FY2012 – FY2021 17Maintenance Work Types An age- and obsolescence-based replacement strategy is applied to assets with a
high level of technical complexity or a high level of interconnectedness with other
Powerco’s maintenance work comprises the following elements:
network assets (that is, the operation of a system as a whole is dependent on the
• Maintenance management and maintenance planning; integrity of several assets). It includes the need to replace equipment because of the
• Routine inspections and condition assessments; availability of spares, or for standardisation or changes in technology. This strategy is
applied to equipment such as zone substation switchgear, SCADA equipment and
• Routine servicing;
protection relays. Reactive renewal strategies are based around the need to renew
• Non-routine servicing (overhauls); assets that have failed and need to be replaced in a short time or to renew assets
• Fault first response, callouts; with a high imminent risk of failure.
• Asset relocations (where an asset is simply moved and not replaced); Asset Renewal Forecasting Process
• Evaluation of inspection and condition-monitoring results to determine any The most accurate means of forecasting renewal needs for the network is through
maintenance or renewal requirements (this may be performed in the field at the knowledge of the condition of the assets. A condition-based renewal programme
time of inspection/condition-monitoring or later by engineering staff);
is the most accurate for a period of around one to five years. Beyond this, renewal
• Evaluating faults to predict maintenance or renewal requirements; forecasts are best made using age profiles.
• Performing corrective maintenance or renewal as a result of the above; and Renewal forecasting involves determining the quantity of assets needing renewal
• Service disconnections. (renewal tasks) and the unit costs per renewal task. The forecast renewal expenditure
equals the product of these two factors. The asset condition information is presently
Asset Renewal Strategic Themes
being compiled in the Maintenance Management system, and so the full extent of
Powerco’s scheduled asset renewal strategy encompasses three main themes, each condition-based renewal needs is still in progress.
of which is appropriate for the different asset types.
Estimates of condition-based renewal forecasts, calculated on the information
A run-to-failure strategy is applied to assets where the consequences of failure are available, have been entered into Powerco’s Improvement Register and an extract of
not major and where the costs of on-going condition-monitoring may outweigh the the renewal expenditure needs from this is given in Section 10 of the full AMP.
costs of failure. This strategy is applied to equipment such as small pole-mounted
Life-Extension Practices
distribution transformers, underground distribution feeder cable spurs, LV cables,
expulsive fuses and surge arresters. Various life-extension techniques have been tried by Powerco, but apart from
transformer refurbishment, these really apply to only specialised assets, and many of
A risk- and condition-based replacement strategy is applied where there is a
the techniques have had only limited degrees of success.
significant implication due to failure, such as major health and safety risks, significant
reliability of supply consequences or a major expense in repair. This strategy is Redeployment, Upgrade and Disposal of Existing Assets
applied where on-going condition inspections are needed to comply with regulations
Powerco is presently developing its policy on reusing second-hand materials, such
or where the costs of condition-monitoring are small compared with the costs
as poles and conductors, and rotables, such as transformers.
associated with failure. It is applied to equipment such as poles, cross-arms,
important distribution feeder cables and zone substation transformers. Powerco is also updating its disposal policies in line with its Environmental Strategy.
It is not envisaged that any major network assets will need disposal that would have
environmental consequences during the period covered by the full AMP.
18 SUMMARY ASSET MANAGEMENT PLAN ELECTRICITY NETWORKS FY2012 – FY2021NETWORK DEVELOPMENT PLAN
The network security criteria describe the factors considered when preparing the
long- and medium-term development plans. Load forecasts are presented and
these, along with the security criteria, culminate in the capital works programme
for development.
Powerco has a range of development plans for different categories of equipment and
customer bases.
Network security of supply is a measure of the resilience of the network to
operational changes, such as planned outages (e.g. those required for maintenance),
and unforeseen events (e.g. forced outages, such as those caused by equipment
failure or storms, as well as unexpected customer loads). The ability of the network
to accommodate unforeseen events is a factor that can influence reliability of supply,
somewhat akin to a network balance sheet.
Powerco’s security of supply criteria have been set taking into account the
Electricity Engineers’ Association’s Security of Supply Guidelines and the report,
entitled Interaction between Transmission and Distribution System Planning
from the CIGRE/CIRED Working Group, as well as the findings of the customer
communications process.
Load forecasting for the purposes of the Asset Management process is based on
growth in peak-time demands. Peak requirements need to be understood to determine
the required capacity of a lines infrastructure that will support local load growth.
The most significant influences on demand growth continue to result from changes
in population and household composition, and the growth or relocation of industry.
Internal migration patterns thus have a strong influence on the observed demand
growth. Government initiatives to promote energy efficiency and the preference for
renewable sources of energy have been considered in preparing the forecast growth.
Known industry changes – such as oil and gas exploration and development; primary
sector changes; and infrastructure, such as ports – account for step changes seen in
forecasts. The establishment of major new industries can have a considerable impact
within a short time on the level of demand experienced in any given locality. The
possibility of new spot loads is monitored through Key Account Managers, Resource
Management Act notifications and consumer consultation.
SUMMARY ASSET MANAGEMENT PLAN ELECTRICITY NETWORKS FY2012 – FY2021 19NETWORK PERFORMANCE ENHANCEMENT CAPITAL EXPENDITURE
Powerco’s network enhancement plans encompass: Capital expenditure (capex) is the budget used to create new assets or to increase
• Reliability improvements, which take into account feeder reliability performance, the service performance or potential of an existing asset. The forecast total capital
historical trends and plans for automation; expenditure to FY2022 is shown in the graph below.
• Protection and control developments, including SCADA, load control and Total Network Capex
metering; 160
• Environmental performance and improvement; 140
Nominal Expenditure ($m)
• Safety performance enhancement; and 120
100
• Smart network implementation.
80
The network enhancement processes are driven by several of the “big picture” 60
strategic themes of renewal and modernisation, automation, safety management and 40
“smartening” the network. 20
The major network enhancement projects Powerco wishes to undertake are 0
2011 A
2012 B
2013 F
2014 F
2015 F
2016 F
2017 F
2018 F
2019 F
2020 F
2021 F
2022 F
2006 A
2007 A
2008 A
2009 A
2010 A
described in the maps that follow in this Summary AMP. All network enhancement
projects will also go through the multi-stakeholder assessment process. Financial Year
Figure 13: Total Network Capital Expenditure
Capital budgets, under the categories of System Growth, Reliability, Safety,
Environment and Asset Renewal, are monitored at the end of every month and
budget re-forecasts are made quarterly. A portion is set aside for reactive or
unforeseen work, such as equipment failure or storms. Under- or over-spend in this
category is accommodated by juggling other projects in the capital programme.
Allowance is also made for opportunities to purchase land for future zone substation
sites or easements for lines. In our experience, gradual land- or easement-banking,
as the opportunities arise to a well-thought-out development plan, is a more efficient
way of developing the network than an urgent short-term focus.
20 SUMMARY ASSET MANAGEMENT PLAN ELECTRICITY NETWORKS FY2012 – FY2021OPERATIONAL EXPENDITURE
Operational expenditure is the expenditure directly associated with running the The operational expenditure forecasts are denominated in nominal dollar values in
electricity distribution network that cannot be capitalised. This includes maintenance line with the disclosure requirements.
expenditure required to operate or maintain the assets to achieve their original
design economic lives and service potentials. Powerco’s maintenance work Total Opex
comprises the following: 60
• Routine condition-monitoring; 50
Nominal Expenditure ($m)
• Routine servicing; 40
• Evaluation of inspection and condition-monitoring results to determine any
30
maintenance requirements;
20
• Evaluating faults to predict condition-monitoring and maintenance requirements;
• Performing maintenance overhauls; 10
• Rotable asset relocation; 0
2009 A
2010 A
2011 A
2012 B
2013 F
2014 F
2015 F
2016 F
2017 F
2018 F
2019 F
2020 F
2021 F
2022 F
2006 A
2007 A
2008 A
• Fault repair; and
• Network operations.
Figure 14: Total Direct Operational Expenditure
Operating and maintenance expenditure also includes direct management costs
not immediately associated with creating network assets, such as customer
management, network planning, network operating and managing service
provider relationships. They include site leases, site service charges, network
insurance, charter payments and other like costs. They may include the costs of
decommissioning existing assets (where a new asset is not created).
The operating and maintenance expenditure forecast has been set based on
benchmarked operational costs per asset replacement cost and per system length,
based on present work levels, after adjustments have been made to allow for
increased service provider efficiency (downwards) and growth in system length and
ODV (upwards). These are confirmed against the asset maintenance plans developed
using the maintenance strategy and Powerco’s present operating practices.
The forecast total operational and maintenance expenditure to FY2022 is shown in
Figure 14 (blue-coloured bars) along with the actual (A) capital expenditure from the
FY2006 to FY2011 periods (purple bars) and the budgeted capital expenditure for
FY2012 (green bar).
SUMMARY ASSET MANAGEMENT PLAN ELECTRICITY NETWORKS FY2012 – FY2021 21FINANCIAL
A summary of the forecast capital and maintenance expenditure over the next 10 years is shown in the tables below.
Table 3: Capital Expenditure Forecast July to June Financial Year ($000) (Nominal $ Values)
Capex summary breakdown FY 2006 A FY 2007 A FY 2008 A FY 2009 A FY 2010 A FY 2011 A FY 2012 B FY 2013 F FY 2014 F FY 2015 F FY 2016 F FY 2017 F FY 2018 F FY 2019 F FY 2020 F FY 2021 F FY 2022 F
Customer Connection 23,714 22,076 29,144 29,023 23,153 17,977 18,813 18,167 17,172 16,322 16,681 17,048 17,423 17,806 18,198 18,598 19,008
System Growth 11,563 14,472 15,951 18,853 23,424 18,883 24,294 20,490 19,361 19,792 25,283 25,856 26,439 27,037 27,647 28,270 28,892
Reliability, Safety and Environment 7,413 8,128 8,961 10,986 5,591 12,465 15,081 14,835 15,015 15,226 16,138 17,133 18,155 19,268 20,488 21,817 23,189
Asset Replacement and Renewal 16,526 14,164 15,626 20,710 21,659 26,209 25,552 33,869 37,264 41,011 45,146 49,728 54,444 59,662 65,436 71,829 78,875
Asset Relocations 2,635 2,453 3,238 3,225 1,821 3,092 2,316 2,245 2,342 2,227 2,276 2,326 2,377 2,429 2,483 2,537 2,593
Total Capex 61,851 61,293 72,920 82,797 75,647 78,626 86,056 89,608 91,154 94,579 105,523 112,091 118,838 126,202 134,252 143,053 152,558
Table 4: Operating & Maintenance Expenditure Forecast July to June Financial Year ($000) (Nominal $ Values)
Opex summary breakdown FY 2006 A FY 2007 A FY 2008 A FY 2009 A FY 2010 A FY 2011 A FY 2012 B FY 2013 F FY 2014 F FY 2015 F FY 2016 F FY 2017 F FY 2018 F FY 2019 F FY 2020 F FY 2021 F FY 2022 F
System Management and Operations 6,654 6,750 7,627 5,968 6,902 7,239 11,078 11,500 11,996 12,281 12,551 12,827 13,109 13,398 13,692 13,994 14,301
Routine and Preventive Maintenance 9,427 9,901 11,510 10,394 13,063 13,495 14,053 12,642 12,803 13,783 16,262 16,612 16,971 17,338 17,712 18,147 18,547
Refurbishment and Renewal Maintenance 7,683 7,615 6,918 8,938 6,783 6,853 7,001 8,428 8,536 9,189 10,841 11,075 11,314 11,559 11,808 12,098 12,364
Fault and Emergency Maintenance 4,353 4,314 5,990 5,064 5,941 6,826 6,105 7,023 7,113 7,657 9,034 9,229 9,428 9,632 9,840 10,082 10,304
Total Opex 28,118 28,580 32,045 30,364 32,688 34,413 38,237 39,593 40,448 42,910 48,688 49,744 50,822 51,926 53,052 54,321 55,516
Table 5: Total Expenditure Forecast July to June Financial Year ($000) (Nominal $ Values)
Expenditure Class FY 2006 A FY 2007 A FY 2008 A FY 2009 A FY 2010 A FY 2011 A FY 2012 B FY 2013 F FY 2014 F FY 2015 F FY 2016 F FY 2017 F FY 2018 F FY 2019 F FY 2020 F FY 2021 F FY 2022 F
Capital Expenditure 61,851 61,293 72,920 82,797 75,647 78,626 86,056 89,608 91,154 94,579 105,523 112,091 118,838 126,202 134,252 143,053 152,558
Operating Expenditure 28,118 28,580 32,045 30,364 32,688 34,413 38,237 39,593 40,448 42,910 48,688 49,744 50,822 51,926 53,052 54,321 55,516
Total 89,969 89,873 104,964 113,161 108,335 113,039 124,293 129,201 131,602 137,489 154,211 161,835 169,660 178,129 187,304 197,374 208,074
22 SUMMARY ASSET MANAGEMENT PLAN ELECTRICITY NETWORKS FY2012 – FY2021ASSET MANAGEMENT IMPROVEMENT SERVICE PROVISION STRATEGY
Powerco has a philosophy of continual improvement in its Asset Management and Powerco has reviewed its service provision strategy and set the long-term direction
customer management processes (as well as other business processes). for the management of construction and maintenance activities in line with its
business model and corporate objectives.
A gap analysis of the level of maturity of Powerco’s electricity network Asset
Management processes is presented in Section 11 of the full AMP, along with The service provision strategy was revised during 2010 and the updated strategy is
specific system improvement projects. given below. The strategy was reviewed giving consideration to:
• Safety performance;
INFORMATION SYSTEMS • Powerco’s corporate business drivers, including productivity improvement;
• Requirements to show cost effectiveness to Regulators;
Given Powerco’s history of growth and acquisition, standardisation of systems and • The current capabilities, strengths and weaknesses of the service provision market;
processes are key strengths of Powerco’s employees and this has been a significant • The needs of the service providers; and
focus for management over recent years.
• The capabilities of the Asset Management Group in managing the outsourcing
A range of information systems has been implemented at Powerco to support the of construction and maintenance activities.
Asset Management processes, covering spatial network data; works and financial
Powerco will increasingly use competitive market principles to deliver sustainable
management; and real-time operation and control of the network. Powerco has also
improvements in the cost, quality and safety of construction and maintenance
established a continuous improvement team to deliver incremental improvements
services on the electricity and gas networks. The elements of the revised service
in systems, data and processes, and a range of significant data and system
provision strategy are:
rationalisation projects are being undertaken.
• Facilitating service provider resources with expertise matched to the work
Under continual refinement is Powerco’s maintenance management system, which requirement in the locations required;
includes the progressive roll-out of field automation. A significant recent refinement • Allowing appropriate levels of service provider’s control over the inputs to its
is the delivery of applications to service provider PCs and mobile devices, enabling services to allow it to meet the service performance level;
field-capture of asset condition, defect and maintenance activity records, scheduled
• Utilising competitive tension through market-based mechanisms, such as tendering,
maintenance activity completion, prescribed test results and corrective maintenance
to encourage continuous improvement in the cost of the delivered service;
work instructions.
• Setting the appropriate level of management of service providers while ensuring
maximum control is maintained to deliver the desired service outcome;
• Maintaining a superior level of safety performance by service providers;
• Fairly allocating risk between Powerco and the service provider; and
• Creating and maintaining a strong body of network field knowledge within Powerco.
The service provision principles describe the use of tendered contracts with
service providers. It is considered that this style of contract is the most appropriate
commercial arrangement for Powerco to move ahead with its service providers for
core construction and maintenance activities. Powerco’s Service Delivery strategy
continues to deliver strong results in works completion performance.
SUMMARY ASSET MANAGEMENT PLAN ELECTRICITY NETWORKS FY2012 – FY2021 23You can also read
