ASSET MANAGEMENT PLAN 2013

boliviahonorableΔιαχείριση

18 Νοε 2013 (πριν από 3 χρόνια και 7 μήνες)

596 εμφανίσεις

ASSET MANAGEMENT
PLAN 2013
Disclaimer: The information in this document has been prepared in good faith and represents
Powerco’s intentions and opinions at the date of issue. Powerco however, operates in a
dynamic environment (for example, the changing requirements of customers, deteriorating
asset condition and the impact of severe weather events) and plans are constantly evolving to
reflect the most current information and circumstances. As a result, Powerco does not give
any assurance, either express or implied, about the accuracy of the information or whether
the company will fully implement the plan or undertake the work mentioned in the document.
None of Powerco Limited, its directors, officers, shareholders or representatives accepts any
liability whatsoever by reason of, or in connection with, any information in this document or any
actual or purported reliance on it by any person. Powerco may change any information in this
document at any time.
1 EXECUTIVE SUMMARY ..................3
1.1 Purpose of the Document...................3
1.2 Key Challenges ..................................3
1.3 The Structure of the 2013 AMP ..........3
1.4 Operational Context ...........................4
1.5 Our Assets .........................................5
1.6 Network Performance and Levels of
Service ...............................................5
1.7 Our Asset Management Framework ...6
1.8 Key Drivers of Expenditure..................7
1.9 Forecast Capex and Opex ..................8
1.10 Asset Management Improvement .....11
1.11 Conclusion .......................................11
2 INTRODUCTION ............................13
2.1 Purpose and Objectives of the Plan ..13
2.2 Overview of Powerco .......................13
2.3 Powerco’s Vision, Mission and Values 13
2.4 Powerco’s Stakeholders ...................14
2.5 Approach to Asset Management ......15
2.6 Key Assumptions of the AMP ...........21
2.7 Structure of the Plan .........................22
3 POWERCO’S ASSETS ...................23
3.1 Introduction ......................................23
3.2 Network Overview ............................23
3.3 Area Network Descriptions ...............25
3.4 Asset Fleet Summary .......................32
3.5 Powerco’s Customers and Service ......
Levels ..............................................44
3.6 Historical Performance .....................48
4 OBJECTIVES ..................................53
4.1 Introduction ......................................53
4.2 Background .....................................53
4.3 Safety...............................................53
4.4 Reliability ..........................................56
4.5 Asset Stewardship ...........................58
4.6 Cost Efficiency .................................59
4.7 Summary of Objectives
and Measures ..................................62
5 GOVERNANCE AND DELIVERY ....63
5.1 Introduction ......................................63
5.2 Responsibilities for Asset
Management ....................................63
5.3 Asset Management Governance .......66
5.4 Strategic Direction ............................68
5.5 Planning ...........................................69
5.6 Delivery ............................................74
5.7 Non-Network Project Governance
and Management .............................76
5.8 Risk Management ............................77
5.9 Contingency Plans ...........................81
6 MAINTENANCE AND RENEWAL ..85
6.1 Introduction ......................................85
6.2 Approach to Maintenance and
Renewals .........................................85
6.3 Fleet Plans .......................................86
6.4 Subtransmission Fleet Plan ...............87
6.5 Zone Substation Fleet Plan ...............91
6.6 Distribution and LV Overhead Lines
Fleet Plan .........................................96
6.7 Distribution and Low-voltage
Underground Cables Fleet Plan ......102
6.8 Distribution Substations and
Transformers Fleet Plan ..................105
6.9 Distribution Switchgear Fleet Plan ...108
6.10 Other System Fixed Assets
Fleet Plan .......................................112
6.11 Non-network Assets Fleet Plan .......118
6.12 Reliability Projects Summary ...........120
6.13 Network Safety Improvements ........121
6.14 Maintenance Strategy .....................122
6.15 Renewal Strategy ...........................124
6.16 Operation Strategy .........................126
6.17 Integration of Renewal and Growth
Drivers............................................127
6.18 Improvements in Maintenance and
Renewal Strategy Development ......128
7 NETWORK DEVELOPMENT ........129
7.1 Introduction ....................................129
7.2 Approach to Network
Development ..................................129
7.3 Area Plans ......................................131
7.4 Distribution Development ................154
7.5 Planning Considerations .................158
7.6 Non-network Options .....................163
7.7 Asset Capacity ...............................165
7.8 Demand Forecasting ......................168
8 ENHANCEMENT INITIATIVES .....173
8.1 Introduction ....................................173
8.2 Safety and Environmental-focused
Enhancements .............................. 173
8.3 Asset Stewardship-focused
Enhancements ...............................175
8.4 Cost Effectiveness-focused
Enhancements – Business
Processes ......................................177
8.5 Cost Effectiveness-focused
Enhancements - Smart Networks
and Automation ..............................179
9 EXPENDITURE FORECASTS ......185
9.1 Executive Summary ........................185
9.2 Background ...................................185
9.3 Interpreting the Forecasts ...............188
9.4 High-Level Summaries ...................189
9.5 Maintenance ..................................191
9.6 Renewal .........................................195
9.7 Growth ...........................................196
9.8 System Enhancement ....................198
9.9 Expenditure Forecast Summaries ...199
APPENDICES
1 Appendix 1: Glossary
(Key Definitions) ..............................201
2 Appendix 2: Information Disclosure
Schedules 11a-14a ........................203
3 Appendix 3: Stakeholder Interests ..225
4 Appendix 4: Major Customers ........229
5 Appendix 5: Subtransmission
Maps..............................................232
6 Appendix 6: Non-Network Assets ...239
7 Appendix 7: Summary of
Performance Against 2012
AMP Measures ...............................243
8 Appendix 8: Physical Works
Programme Completion .................247
9 Appendix 9: General Network Risk
Issues ............................................250
10 Appendix 10: Renewal & Maintenance
Project Descriptions .......................253
11 Appendix 11: Demand Forecast
Tables ............................................256
12 Appendix 12: Subtransmission
Feeder & Zone Substation
Constraints .....................................261
13 Appendix 13: System Growth
Project Descriptions ......................264
14 Appendix 14: Regulatory
Requirements Look Up ...................275
15 Appendix 15: Compliance
Certification ....................................284
CONTENTS
1
THIS PAGE HAS BEEN LEFT INTENTIONALLY BLANK.
2
1.1. PurPose of the Document
Powerco’s networks provide an essential service to the communities we serve and
they need to be reliable and sustainable. The electricity distribution infrastructure
assets we manage are capital-intensive and have very long lives. Ours is a
stewardship role that relies on effective and efficient long-term asset planning and
investment.
This Asset Management Plan (AMP) outlines our long-term strategy for the electricity
distribution services under Powerco’s management. The AMP is an essential part of
the company’s planning and investment framework. It is used throughout the year as
the reference point for prioritising and approving work programmes.
In addition, the AMP is a useful summary document for us to demonstrate to
our stakeholders, including our regulators, customers and end-consumers, the
effectiveness of the company’s asset management and decision-making processes.
The plan covers a period from 1 April 2013 to 31 March 2023, with a particular
focus on the work programmes planned for the next three to five years. It reflects
Powerco’s focus on achieving an optimal balance between the key elements of asset
management, which are service levels, cost and risk.
As it is a working document, the AMP also describes the areas where we believe our
asset management processes, systems and data can be improved. We call this our
asset management journey. Our goal is to position Powerco’s asset management
to achieve leading industry practice, as referenced against PAS55, an internationally
recognised asset management standard, within a five-year period.
1.2. Key challenges
Powerco faces a number of asset management challenges. The expenditure forecasts
set out in this AMP are based on our responses to these challenges. In summary:
• Powerco is a company that places a high level of importance on delivering stable
prices to our customers and we have a strong history of delivering this outcome.
Over the past decade, the annual level of network expenditure has nearly doubled,
while average prices have tracked at a rate less than inflation.
• Our headline reliability performance, as measured by SAIDI and SAIFI, is relatively
stable
1
. However, indications are that underlying reliability performance at specific
locations across our networks is being affected negatively by a combination of
deteriorating condition, increasing age and asset model or type-related issues.
• At current levels of expenditure, the asset stock is progressively maturing (ageing).
This is particularly the case for overhead network assets. While age alone is not
a justification for investment, it is an effective indicator of asset condition, which
1 SAIDI is a measure of the reliability of electricity supply and stands for System Average Interruption Duration
Index. SAIFI is also a measure of reliability but is based on the frequency of supply interruptions.
drives the need for asset replacement and maintenance. The upward trend in asset
age indicates that asset-related investment may need to increase.
• The operational margin around our SAIDI and SAIFI quality targets is eroding due
to increased faults associated with our deteriorating assets. Parts of our network
appear to be becoming more vulnerable to severe weather and exceptional storm
events. At current levels of expenditure we are able to manage SAIDI and SAIFI
close to the target, but we are unable to build operational margins to provide a
buffer against severe weather events.
• Our on-going analysis indicates an approaching need to lift both opex
(maintenance) and renewal expenditure (capex) in targeted areas across our
networks in order to begin to reverse the above trends.
• All things being equal, increased investment will place upward pressure on prices
and may need to be approved by the Commerce Commission. Given our focus on
delivering a sustainable and cost effective service, we are working hard to minimise
the cost impact on customers.
• Powerco is actively considering applying for a Customised Price Path (CPP), which
is a regulatory mechanism whereby the Commission is able to establish a price
path for a company based on its own unique (forecast) circumstances. However,
before we do so, we will need to further refine our thinking to manage our costs
and consult widely with our stakeholders.
• In the interim, our expenditure projections allow for continued increases in asset
investment. During this time we will continue to monitor network performance,
further refine our investment strategies and refocus our activities as needed to meet
our quality targets.
1.3. the structure of the 2013 amP
This edition of our AMP has been redesigned and refocused as a key step in our
asset management journey. We have refined our asset strategy goals and objectives,
refocused and sharpened the asset-related discussions and placed a particular focus
on the areas that will have the most impact on our prices over the next decade.
There is much we can do to develop our AMP further to support our discussions with
stakeholders. However, we hope the changes we have made will make it easier for
our customers to understand how our networks are performing, the areas and options
that will shape the path of future investment and the nature of the investments we are
considering. The new structure of the document is outlined below.
1. EXECUTIVE SUMMARY
3
Figure 1.1: Structure of the AMP.
context anD aPProach
Stakeholder expectations, strategic framework and business drivers.
Description of assets.
Objective setting.
2 - IntroDuctIon
Purpose & objectives
Stakeholders strategic alignment,
continuous improvement, AMP
structure
.
4 - objectIves
Setting objectives
Reviewing performance
Gap analysis
3 - Powerco’s assets
Geographical regions
Customer groups
Asset information
aPPenDIces
Glossary & maps
Asset management schedules
Asset Management Maturity Tool
Detailed information on projects,
stakeholders and capacity.
worK Programme
Governance, enablers and controls.
Work programmes and expenditure.
Improvements.
5 - governance & DelIvery
Governance, planning & delivery
Responsibilities, controls &
decision making tools
8 - enhancement InItIatIves
Enhancements for safety, environment
& compliance and smart networks
Information systems enchancements
6 - maIntenance & renewal
Operations, renewal & maintenance
Fleet plans & key challenges
9 - exPenDIture forecasts
Assumption & drivers
Opex and capex 10-year forecasts
7 - networK DeveloPment
Planning processes & criteria
Demand forecasts & area
development plans
1.4. oPeratIonal context
The Commerce Commission has recently analysed trends in the cost and reliability
performance of each electricity distribution business in New Zealand, including
Powerco. A summary of Powerco’s performance measured across a range of
activities, over the period 2008 to 2011 and relative to the industry average, is set out
in Table 1.1 below.
Table 1.1: Our relative performance compared with the NZ distribution sector.
Powerco’s relative Performance within the industry (2008 to 2011)
Revenue received
from customers.
Revenue from line charges, which make up most of Powerco’s revenue,
increased by around 2% over the period. The industry average increase was
around 8%.
Average unit price
paid by residential
customers.
The average price paid per unit of electricity delivered to Powerco’s residential
customers increased by around 4% over the period. The industry average
increase was around 8%.
Operating
Expenditure.
Powerco’s total operating expenditure declined by 3% per year after adjusting
for inflation. This compares to an industry average increase per year of around
2% over same period. Powerco’s operating expenditure per customer, per km
of network and per unit of electricity all trended down from 2008 to 2011.
Capital Expenditure.Powerco’s unit capital expenditure (i.e. $/customer, $/MWh and $/RAB) has
trended slightly below the industry average, although recently it has been
consistent with the average.
Recent Reliability
Trends.
The average duration and frequency of interruptions across Powerco’s
network has remained stable when adjusted for the occurrence of major
storms. The overall industry profile for SAIDI over the period mirrors that for
Powerco, which seems to confirm that network reliability at a headline level is
strongly influenced by exogenous factors.
(Source: Electricity Distributors’ Performance from 2008 to 2011, 29 January 2013, Commerce Commission)
Our review of the Commission’s analysis suggests that, over recent years, Powerco
has been managing its business to hold both revenue and cost increases below
industry average levels, whilst at the same time maintaining stable “headline” reliability
performance across its networks. Similarly, the review also supports our view that
Powerco effectively delivers against its annual operating and capital forecasts.
The asset management themes and expenditure profiles, set out in the 2013 AMP,
build on our current strong operational capability while transitioning to address the
implications of a maturing asset base. The AMP should also enable us to keep
pace with good practice asset management and continue our asset management
improvement journey.
4
1.5. our assets
Powerco owns and operates extensive urban and rural electricity distribution
networks, servicing around 320,000 customers in Coromandel, Hauraki Plains, East
and South Waikato, Western Bay of Plenty, Tauranga, Taranaki, Whanganui, Rangitikei,
Manawatu and Wairarapa. We manage over 32,000 distribution transformers across
over 30,000 km of distribution network (i.e. 20% of the national network length). We
supply nearly 5,000 GWh of electricity (i.e.14% of the national volume) and manage a
peak demand of around 850MW.
The networks we operate are a mix of underground and overhead lines, and when
combined with substations, transformers and supporting infrastructure, provide an
essential link between the national grid and our customers’ homes and businesses.
These networks are operated on a continuous basis from a central control room in
New Plymouth, Taranaki.
The mix and indicative replacement cost (RC) of the assets we operate is outlined below.
Figure 1.2: Our Assets.
RC in $m by Asset Category
0 200 400 600 800 1000 1200 1400
Subtransmission cables
Subtransmission lines
Distribution switchgear
Distribution substations
Other network assets
Distribution cables
Distribution transformers
Zone substations
LV cables
LV lines
Distribution lines
RC $m
1.6. networK Performance anD levels of servIce
A key objective of our asset management approach to date has been to provide a
stable level of service (i.e. no deterioration from historical average performance).
Our strategies have delivered well against this short-term objective in recent years.
Our headline network reliability performance, as measured by SAIDI, has been
relatively stable, as explained in Section 3 and illustrated below. However, indications
are that underlying reliability performance at specific locations across our networks is
being affected negatively by a combination of deteriorating condition, increasing age
and model/type-related issues.
In recent years, Powerco’s Board has approved substantial discretionary expenditure
directed at managing short term reliability. This additional expenditure is not being
directly compensated for under Powerco’s current price path (which will be reset
in 2015). We anticipate spending an additional $20m over the regulatory period to
maintain short term reliability.
Figure 1.3: Supply Reliability.
0
50
100
150
200
250
300
2007 2008 2009 2010 2011 2012
Unplanned
Planned
SAIDI Target & Threshold
SAIDI (minutes)
The expenditure profile set out in this AMP reflects a level of investment in our assets
that is necessary to ensure that we can continue to deliver network services, at or
around current levels of network reliability, over the long term. In other words, the
proposed expenditure profile is predicated on maintaining an appropriate operating
margin around the current regulatory reliability target of 210 SAIDI minutes.
To the extent practicable, we believe the targeted outcomes in the AMP reflect the
expectations of our stakeholders. During the year, we routinely consult and survey our
customers and the end-consumers on our networks to seek feedback on the quality
5
of supply and overall level of service they receive from us. Stakeholder engagement
will again be a core focus in FY14, especially in light of the increasing cost pressures
being faced by the company which, all things being equal, will ultimately flow through
to upward pressure on prices.
1.7. our asset management frameworK
Powerco’s asset strategy and planning capability is well respected within the
distribution industry, and our annual AMP has been consistently rated as a leading
example in independent industry reviews.
However, asset strategy as a discipline continues to undergo progressive refinement
internationally and the bar is continually rising. As part of our preparation for this AMP
we have taken the opportunity to re-evaluate our planning processes against the
Asset Management Maturity Assessment Tool (AMMAT) introduced by the Commerce
Commission as part of the information that electricity distribution businesses (EDBs)
are required to disclose. The AMMAT standard is based on the internationally
recognised asset management framework, PAS55.
PAS55 is the British Standards Institution’s (BSI) Publicly Available Specification for the
optimised management of physical assets. It provides clear definitions for establishing
and verifying an optimised and whole of life management system for all types of
physical assets.
The result of this assessment has highlighted that while we have a solid core of
competency in asset management, our delivery is constrained in places by a paucity
of robust asset data and information. Although we have sound practices in place,
and excel in some areas (for example, more than half the EDBs in New Zealand have
chosen to use our library of standards) we know that there are many areas where we
can drive improvement.
Powerco believes that improving our asset management capability will translate
directly to improved cost effectiveness in the way we build and operate our networks,
and ultimately help mitigate the level of future price rises. For this reason we have
initiated a programme of work to achieve a step-change improvement in our asset
management process, systems and documentation. Our goal is to move to an
intermediate status on the AMMAT scale in five years
2
.
The sub-sections that follow outline our approach to asset management. Those
who are familiar with prior editions of our AMP will notice a change. Over the past
18 months, we have taken steps to refine our objectives, policies, governance and
planning frameworks to help focus our path to improved asset management. These
are important changes and changes that we believe are necessary if we are to
develop the asset management capability we are seeking.
2 Intermediate status in PAS55 terminology would equate to maturity level 3, which states “All elements of
PAS55 are in place and are being applied and are integrated. Only minor inconsistencies may exist”.
1.7.1. objectIves
Powerco believes in delivering quality services to our customers, at a cost they can be
confident represents good value for money. Electricity is inherently dangerous and we
strive to build and operate our assets in a way that keeps the public safe from harm.
We also believe it is not just what we do that is important, but how we do it. We strive
to be a reliable partner to our customers and communities, and to build networks that
support New Zealand’s energy future.
Delivering on these aspirations is at the core of our corporate vision and values and is
something we care deeply about. We understand that delivering to these standards
is something that needs clear objectives and goals to guide our decisions and
investments. In this version of the AMP, we have linked our objectives much more
tightly to our corporate vision.
Our new objectives and targets are described in Section 4 and are based around four
key areas, as follows:
Safety: Our safety goal has been set to ensure that the safety of our staff and the
public remains our number one priority over the planning period.
Reliability: Our reliability goal is designed to ensure appropriate management of our
assets to provide a sustainable and reliable service to our customers as we transition
to higher rates of asset renewal over the next ten years.
Asset Stewardship: Our asset stewardship goal is designed to ensure continual
enhancement of our asset management processes as the basis for any increased
investment.
Cost Efficiency: Our cost efficiency goal is to strive to continually reduce the real
cost of operating our networks.
1.7.2. PolIcy
Powerco’s asset management policy has been developed to ensure that we
continually focus on delivering services in a way that balances risk and long-term
costs. The policy establishes the core asset management principles that drive our
planning framework and governance arrangements. In summary, the key policy is:
“To ensure Powerco’s asset management practices achieve an optimal approach to
the management of assets (i.e. maintenance and operation, renewal, development
and disposal) in order to deliver a safe network at the required level of service in a
manner that effectively controls and balances whole of life costs and risks”.
1.7.3. governance
Section 5 of the AMP summarises Powerco’s organisational structure, which governs
the asset management framework, including the processes for establishing objectives
6
and managing risks, project and expenditure approvals, procurement and works
delivery. While we have made some recent changes, our governance arrangements
are mature and score relatively highly based on the AMMAT assessment. Across the
asset management functions, there is a system of roles, responsibilities, authorities and
controls to ensure we deliver on the asset management objectives, policy and plans.
1.7.4. PlannIng frameworK
In Section 2 we describe our approach to asset management. The various
components together reflect a whole of life approach to investment. We have
developed some core planning documents over time and made some recent
improvements. The key planning documents are:
Area Plans: Area Plans consider the performance and adequacy of GXPs, the
subtransmission network and zone substations over a 15-year horizon. The areas are
logical groupings of GXPs and subtransmission network areas that can be considered
with minimal influence from neighbouring areas. Primarily focused on the development
of the network to respond to growth and to deliver adequate levels of security and
reliability, the Area Plans will, in the future, consider the renewal of major zone substation
and subtransmission components to ensure that renewal and growth replacements are
harmonised. The area planning process is discussed in detail in Section 7.
Medium Term Plans: Medium Term Plans are completed on a regional basis and
consider the performance and adequacy of the distribution network over a five-
year horizon. Distribution feeders are evaluated to ensure voltage performance and
thermal capacity are adequate to meet the five-year load forecast, and that backfeed
performance is sufficient for the feeder class. The medium term plans are also
discussed in Section 7.
Fleet Plans: Our Fleet Plans set out the lifecycle investment for distribution fleet
assets such as switchgear, distribution transformers and cables. The plans provide
a renewal programme for replacement and specify the approaches to managing the
equipment through its lifecycle and obtaining best value from the assets. The Fleet
Plans are discussed in detail in Section 6.
Specialist Asset Management Plans: Our specialist AMPs manage various classes
of specialist equipment, e.g. protection systems, SCADA, communications and asset
management IT systems. The plans provide a renewal programme for replacement
and specify the approaches to managing the equipment through its lifecycle and
obtaining the best value from the assets. These are discussed in detail in Sections 6
and 8.
As set out in Section 9, the annual level of expenditure is forecast to increase over
the next few regulatory periods (at least until 2023). Our planning framework therefore
emphasises ensuring proposed work programmes are achievable and practicable from
a delivery standpoint, which includes an assessment of resource capacity and capability.
1.8. Key DrIvers of exPenDIture
Key expenditure drivers fall into three areas:
1. Renewal and Maintenance (Section 6);
2. System Growth and Network Development (Section 7); and
3. Non-Network (Section 8).
Each of these is summarised below.
1.8.1. renewal anD maIntenance
Many of the classes of asset that we operate are in the early/mid parts of their lives, or
demonstrate a relatively stable age profile, and are considered to be in a reasonable
state of “health”. This is the case for our underground networks, our zone substations,
and the majority of our transformer and switchgear assets. For these classes of
assets, we expect current levels of renewal and maintenance expenditure to remain
relatively stable over the next 10 years.
However, our fleet strategies have highlighted a number of emerging issues that, if left
unchecked, would affect Powerco’s ability to continue to meet its asset management
objectives. These include:
• Overhead lines (a major part of Powerco’s overall asset stock) are now showing
increasing failure rates as a result of condition, age and, in some cases, type
issues. In particular, there appears to be an upward trend in fault rates associated
with our distribution overhead lines.
• Limiting the number of planned outages has, over the past few years, helped
contribute to maintaining overall reliability performance within regulated limits, but
this is considered to be a short-term approach, because it limits our ability to carry
out maintenance and renewal work necessary to arrest and, ultimately, improve
unplanned outages over the long term.
• An analysis of asset age profiles indicates an impending “bow wave” of increasing
renewal expenditure. While age alone is not the sole driver of replacement, renewal
expenditure will need to increase to maintain asset health at a level that supports
the target levels of service and reliability sought by our consumers.
• Vegetation encroachment onto overhead structures has a major effect on network
reliability performance. Our analysis indicates that increasing the frequency of tree
trimming, at certain parts of the network, would yield reliability benefits.
Our 2013 AMP includes programmes of work to address the above issues over the
planning period.
7
1.8.2. system growth anD networK DeveloPment
In addition to addressing the effect of ageing/performance of our overhead assets,
there is also a need to refine and develop our network architecture to respond to
growth and capacity constraints on our networks, and manage changing energy-use
patterns more generally.
Network development planning on the subtransmission part of our network is
undertaken through the development of individual “Area Plans”, of which there are 15
in total (refer to table below). Area Plans cover a local geographic location, generally
in each area the network that consumers are supplied from a particular GXP, or a
number of inter-connected GXPs.
Table 1.2: Powerco’s 15 Network Development Planning Areas.
Coromandel Hinuera Taihape
Waikino Kinleith Marton
Tauranga Taranaki Manawatu
Te Puke Egmont Tararua
Waihou Whanganui Wairarapa
Focusing our network planning at an area level ensures that we can take into account
local demand trends and address specific customer and community requirements,
as well as local environmental conditions and network characteristics. Going forward,
Area Plans will be developed to take a more integrated view of both renewal and
growth investment.
Our investment proposals for the planning period, which are detailed in Section 7,
include strategies to lift security on our Tauranga and Palmerston North networks.
Work is also included to improve remote load-shifting technology on our networks to
address localised peaks in demand.
Area Plans also incorporate a number of ‘Smart Grid’ developments, which
include distribution automation solutions and enhanced use of energy monitoring.
Automation is targeted at feeders with high customer density, poor performance and
high SAIDI impact.
While these solutions increase network operational and protection complexity, the
benefits include increased speed of fault response, cost efficiencies, improved local
reliability and consumer communication.
1.8.3. non-networK ImProvements
To lay the foundations for continuous improvement in our asset management
capabilities (leading to improved cost and quality performance), and to meet the
challenges of the future, we have identified a number of critical business improvement
initiatives that will be progressed over the AMP planning period. The expenditure
forecasts reflect the resources required by Powerco to achieve its business
improvement plans, which encompass:
• Enhancing asset management systems and supporting information systems;
• Improving maintenance works planning and the scheduling system;
• Developing a robust resource forecasting and standard cost-estimating process;
• Enhancing ripple control on the network to facilitate more effective demand-side
management.
Ultimately, the objective of these improvement initiatives is to provide users and end-
consumers with a reliable and secure distribution service in accordance with their
needs and expectations, while minimising whole of life costs. We expect that the effect
of these initiatives on cost efficiencies and quality performance, as experienced by
end-consumers, will be gradual as many of these initiatives will take a number of years
to implement. Nonetheless, the initiatives are aligned with our longer-term objectives
and these objectives cannot be met unless improvements are achieved.
1.9. forecast caPex anD oPex
The forecast expenditure over the planning period (FY14 to FY22) is shown below.
The basis of the expenditure profile can be summarised as follows:
• The investment profile for the four-year period FY14 to FY17 is aimed at meeting
short-term network needs and allows for a build-up of expenditure (and delivery
resources) to a more steady state level from FY18 onwards.
• The investment profile for FY18 to FY22 reflects an increase in the level of
expenditure to deliver a managed ramp-up of renewals and maintenance work
that will address long-term network investment requirements and maintain current
levels of network reliability. This expenditure path will need to be approved by the
Commerce Commission, but Powerco would seek the views of both customers
and end-consumers prior to making any expenditure commitments.
8
Figure 1.4: Forecast Capex and Opex (Net of Capital Contributions).
Constant $ (000)
20
40
60
80
100
120
140
2013 B 2014 F 2015 F 2016 F 2017 F 2018 F 2019 F 2020 F 2021 F 2022 F 2023 F
Capex Opex
The 2013 AMP sets out the rationale for the FY18 step change in more detail.
The four-year lead-in period allows us sufficient time to:
a) further refine our investment plan, particularly in terms of timing and prioritisation;
and
b) engage and consult with key stakeholders and the regulator to determine whether
or not our plans reflect an appropriate trade-off between price and quality.
Over the next four years, our maintenance and renewal expenditure (which currently
is tracking at a level higher than can be accommodated within the current price path
allowances set by the Commission) will continue to be focused on critical safety and
those areas that have a more immediate beneficial impact on reliability.
Other short-term tactical measures, over and above those currently in place, have
been identified (most notably proactive maintenance of critical overhead structures
and the use of automated restoration techniques on our networks) to cope with the
impact that severe storms have on system reliability. These short-term measures will
be further developed during FY14 to ensure optimal expenditure in areas with the
potential for the highest impact.
1.9.1. caPItal exPenDIture
The following figure shows a breakdown of capital expenditure (in real /constant terms)
and excluding capital contributions) on the following:
• System growth;
• Replacement and renewal;
• Reliability, safety and environment;
• Asset relocation;
• Non-network assets.
There are a number of specific areas where increased levels of capital expenditure will
be required to ensure we can meet our asset management objectives. These are:
• Asset Renewal and Replacement: A review of the performance and age profile
of our asset fleets has highlighted the need to lift renewal expenditure (particularly
for overhead assets) from around midway through the planning period (FY17/
FY18) as an increasing number of our assets reach the end of their service lives.
Key focus areas over the planning period are overhead distribution networks,
zone substation renewals and distribution switchgear. Asset renewal plans will be
refined over the next three years to confirm the timing and volume of renewal work
required.
• Network Growth: A review of future growth-related capex on an area by area
basis has confirmed the appropriate level of expenditure over the period. This
indicates a modest increase in investment for this category of expenditure towards
the latter part of the planning period to enable us to maintain targeted levels of
security and reliability for our customers.
• Reliability and Safety: We have identified a number of reliability, safety and
environmental enhancement projects which are required to support the delivery of
our asset management objectives. A key initiative will be our transformer monitoring
programme which will provide improved real-time oversight of our networks.
We are also planning other initiatives to improve reliability, safety and network
communications capability.
9
Figure 1.5: Capital Expenditure (Net of Customer Contribution Capex).
140
0
20
40
60
80
100
120
2013 B 2014 F 2015 F 2016 F 2017 F 2023 F
Constant $ (m)
2018 F 2019 F 2020 F 2021 F 2022 F
Quality of supply
Other reliability, safety and environment
Asset replacement and renewal
System growth
Consumer connection
Non-network assets
Asset relocations
Cost of financing
We believe ongoing delivery of expenditure at a level near forecast 2023 levels will
enable a steady state of expenditure to be achieved from then on, with pricing to our
customers stabilising around that time.
1.9.2. oPeratIng exPenDIture
Network operating expenditure is made up of maintenance work (i.e. routine
maintenance, inspections, fault and emergency maintenance, and refurbishment and
renewal maintenance) and expenditure associated with operating the system.
We have forecast a modest increase in operating expenditure in the short term (FY14
to FY17), reflecting an increased focus on managing reliability outcomes through
defects management (refer to tactical measures mentioned above). During this period
we will be validating and refining the case for lifting operating expenditure across a
number of areas.
From FY18 onwards, maintenance expenditure is forecast to increase more sharply as
we increase the rate of asset refurbishment, deploy additional fault-related resources
and focus on planned vegetation management. Our intent in lifting operational
expenditure is to optimise our overall level of investment, i.e. we anticipate that the
operational expenditures we are proposing will enable us to manage the path of capex
investment more effectively.
There are a number of specific areas where increased levels of operating expenditure
will be required to ensure we can meet our asset management objectives; these are:
• Fault Response: Recent analysis, including modelling of SAIDI outcomes,
suggests that lifting expenditure in the fault response area will provide a cost
effective way of maintaining our reliability targets as our networks age.
• Vegetation Management: Recent analysis and physical trials on our networks
indicate that effective tree trimming programmes (collectively termed vegetation
management) provide direct benefits for network reliability. We have more work
to do to design our cutting programmes to achieve maximum effect in a way
that can be effectively resourced. Once this work is complete we anticipate lifting
expenditure from around FY18 and introducing rolling cyclical cutting out across
our full footprint.
• Routine Maintenance: Our analysis suggests that by lifting the volume of routine
maintenance ‘interventions’ in some targeted areas, we will be able to enhance the
service lives of some assets and improve their overall levels of performance.
A breakdown of forecast operating expenditure (in real/constant terms) is shown in the
figure below.
Figure 1.6: Operating Expenditure.
90
0
10
20
30
40
50
60
2013 B 2014 F 2015 F 2016 F 2017 F 2023 F
Constant $ (m)
2018 F 2019 F 2020 F 2021 F 2022 F
70
80
System operations and network support
Asset replacement and renewal
Routine and corrective maintenance and inspection
Service interruptions and emergencies
Vegetation management
Business support
10
The increase in operational expenditure that we are proposing reflects a rebalancing of
capital and operational expenditure. We consider this to be an appropriate step as our
assets mature and we respond to the requirements of an older network. We anticipate
that the levels of operational expenditure established towards the end of the planning
period will represent a long-term or steady state position.
1.10. asset management ImProvement
Our asset management improvement programme includes a wide range of initiatives
that, together, will achieve sustained improvements in asset management and the
long-term performance of our networks. These initiatives include:
• further development of our overall asset management framework, governance and
documentation to more closely align with PAS55;
• development of individual fleet asset strategy plans, which integrate lifecycle
costs, interventions (maintenance/replacement/disposal) and set out medium-term
investments and implementation plans by asset type;
• further development of asset information systems (single sources of asset data,
network performance modelling, predictive life and asset health models and
replacement of the maintenance management system);
• a focus on works plan delivery and the development of new service provider
arrangements, which will include further deployment of contractor competency
standards to ensure the highest standards of safety on our networks;
• further roll-out of a revised range of standards covering material specifications and
design and construction with the aim of standardising equipment types across our
different networks as assets are routinely replaced or new assets put in place.
Asset management is not a static process. As circumstances affecting our assets
change (e.g. standards, knowledge, etc.) the expenditure interventions required in
a given year are likely to change. The process of annual review and the governance
arrangements that we have in place, as set out in Section 6, are designed to ensure
that the AMP remains relevant in a dynamic environment.
1.11. conclusIon
The 2013 edition of our AMP represents a departure from our historical format. This is
more than just a cosmetic change – it represents a change in our approach to asset
management and a refocusing of our approach for the future.
Over the planning period, we anticipate we will need to achieve a step change
in investment to ensure that the standards of service to which our customers
have become accustomed can be maintained. As this is likely to affect the prices
charged to our customers, we are moving to step up the sophistication of our asset
management approach to ensure that the optimum balance of quality and long-term
cost efficiency can be achieved (and demonstrated).
There is much to be done over the coming few years to ensure we are able to deliver
the step change in required investment. Enhancing our asset management approach
is a critical first step, but we also need to work with our customers and the regulator
to ensure they understand the need for us to change our approach, and the costs that
this will entail.
Our new AMP represents a critical first step in this repositioning process, and forms a
basis for starting the discussions that will need to occur. We hope that our customers
and other stakeholders find it a useful starting point.
11
THIS PAGE HAS BEEN LEFT INTENTIONALLY BLANK.
12
2.1. PurPose anD objectIves of the Plan
This Asset Management Plan (AMP) outlines our long-term strategy for managing the
assets under Powerco’s ownership. The plan covers a period from 1 April 2013 to 31
March 2023, with a particular focus on the work programmes planned for the next
three to five years, during which time, forecasts of asset management drivers can be
made with a reasonable degree of accuracy. These drivers include asset condition,
resource availability, the regulatory framework, economic growth and its effect on
consumption, and stakeholder expectations. Beyond this five-year period, these
issues are inherently less certain and, consequently, more generalised forecasts are
used. The AMP is based on Powerco’s vision of being “Your Reliable Partner Delivering
New Zealand’s Energy Future” by providing a focus on achieving an optimal balance
between the key elements of asset management, service levels, cost and risk. This
focus is reflected throughout this document and is incorporated within our business
planning process and the subsequent annual tactical work plans that result. Together,
this composite suite of documents is reviewed annually.
During the AMP planning period, the distribution system requires enhancement and
progressive replacement of network assets to maintain current network performance
and satisfy on-going growth in demand. This will ensure the network will continue
to meet our customer’s needs and to underpin economic development in the
communities we serve. Our analysis to date indicates an approaching need to lift both
opex (maintenance) and renewal expenditure (capex) in targeted areas across our
networks. The rationale for this increased investment is set out in this AMP.
All things being equal, increased investment will place upward pressure on prices
and may need to be approved by the Commerce Commission. Given our focus on
delivering a sustainable and cost-effective service, we are working hard to minimise
the cost impact on customers.
Powerco is actively considering applying for a Customised Price Path (CPP), but
before we do so, we will further refine our thinking to manage our costs and consult
widely with our stakeholders.
In the interim, our expenditure projections allow for continued increases in asset
investment. During this time we will continue to monitor network performance, further
refine our investment strategies and refocus our activities, as needed, to meet our
quality targets.
2.2. overvIew of Powerco
For more than a century, Powerco has distributed electricity and gas to New Zealand
homes and businesses. We have grown and diversified over the last 20 years to
become a significant part of New Zealand’s economic infrastructure. We are owned by
QIC (58%) and Brookfield Infrastructure Partners (42%). We operate and maintain the
largest network of electricity lines and gas pipes in New Zealand over the largest area
of our country. We are the second largest energy distributor in New Zealand in terms
of customer connections. Our network of assets is complex and the scope of our
operations is large.
Powerco’s electricity networks supply customers in Tauranga, Thames Valley,
Coromandel, Eastern and Southern Waikato, Taranaki, Whanganui, Rangitikei,
Manawatu and Wairarapa.
2.3. Powerco’s vIsIon, mIssIon anD values
Our Vision, “Your Reliable Partner Delivering New Zealand’s Energy Future”, requires
us to effectively manage, maintain and improve upon our assets and to reliably and
safely deliver the energy that our customers expect – today and into the future. The
New Zealand electricity and gas distribution sectors are heavily regulated and, as
such, our investment and our pricing decisions must be made in consultation with
our regulator. We have a responsibility to our stakeholders, our shareholders and our
regulators to ensure that our business decisions are carefully considered so that the
actions we take achieve the objectives that we have set in the most cost-effective
manner.
Figure 2.1: Powerco’s Corporate Vision.
Powerco, your reliable partner, delivering
New Zealand’s energy future
Our Mission statement seeks to build further on our vision of reliable community
partnership and focuses our people on the importance of our future energy needs.
The Mission statement also highlights the essential requirement to operate safely and
efficiently in delivering energy.
A theme that is reflected throughout this AMP is our clear commitment to reliability.
This commitment involves continuous improvement in all our operations. How we
manage our business for the future will drive increased energy efficiency and value for
our stakeholders.
Figure 2.2: Powerco’s Mission Statement.
In profitable
partnership
with our stakeholders we are
powering the future
of New Zealand through the
delivery
of
safe
,
reliable
and
efficient

energy
.
2. INTROdUCTION
13
Our Values define our identity, who we are and what we stand for. We developed these
values by describing a set of observable behaviours that would be displayed by the
typical Powerco employee. These behaviours define the way we go about our work
and our relationships with others. By demonstrating these behaviours we will be living
our Values. The Values define our culture, inform our decisions and provide authority to
our leadership. Our asset management framework aims to embed these Values in our
approach to all aspects of the investment cycle, from planning through to delivery.
Figure 2.3: Powerco’s Values.
OUR VALUES
Safe
Trustworthy
Collaborative
Conscientious
Intelligent
Accountable
OUR OBSERVABLE BEHAVIOURS
We are commited to keeping people safe.
We act with integrity. We are honest, consistent and ethical.
We trust each other and our external partners and work to be trust in return.
We work together with our partners, contribute to our capabilities and provide timely
support and consideration to achieve our collective goals.
We are proactive, hardworking, diligent and thoughtful. We are mindful of the
needs of others and the environment. We take ownership for our actions.
We make informed decisions for the best outcome. We continually seek improve-
ment and innovative solutions from our suppliers and ourselves.
We lead. We take ownership of our decisions and responsibility of our actions.
We are proactive in identifying and resolving problems.
2.4. Powerco’s staKeholDers
Our stakeholders are at the centre of our Vision and Mission. Prior to committing to
investment, which ultimately flows through to customer prices, Powerco must carefully
consider the needs of its stakeholders to deliver outcomes that strike a balance
between price and delivered quality of service. Stakeholder requirements don’t always
align or are sometimes mutually exclusive. For example, different customers may place
greater or lesser emphasis on price or quality or have an expectation that the level of
service can continually be improved with minimal cost implications. In such instances,
Powerco is required to exercise judgment, but in all cases we strive to engage with
stakeholders in a transparent manner to explain our decisions. The publication of this
AMP is one such example of engagement.
Powerco’s key stakeholders, their interests and how these interests are
accommodated in our asset management practices are described in Table 2.1.
Further detail is presented in Appendix 3.
Table 2.1: Powerco’s Stakeholders.
stakeholder main interest how stakeholders’ interests are identified
Electricity
consumers
• Service quality and reliability
• Price
• Safety
• Information
• Environmental
• Consultation and retailer feedback
• Dedicated client managers for large
consumers
• Appropriate price paths and quality standards
• Incident reports, complaints and compliments
• Measurement and benchmarking of Powerco
performance
Retailers • Efficient business-to-business
processes
• Service to final consumers
• Price
• Dedicated relationship client managers
• Contracting agreements
• Direct engagement
Embedded
Generators
• Technical performance and
rules
• Reliability
• Connection agreement
• Direct engagement and negotiation
• Contractual connection agreements
Transpower
(as grid
and system
operator)
• Technical performance and
rules compliance
• GXP loading and planning
• Direct engagement
• Administration of Electricity Governance Rules
Commerce
Commission
• Pricing levels
• Quality standards
• Effective governance
• Meetings with Commissioners and staff
• Quality responses to consultation papers,
decision papers and regulatory determinations
State
bodies and
regulators
• Safety via the Ministry of
Economic Development
• Market operation and access
via the Electricity Authority
• Environmental performance via
the Ministry for the Environment
• Published acts, rules and determinations
• Formal reporting
• On-going consultation
Powerco’s
shareholders
• Efficient and effective business
management and planning
• Financial performance
• Governance
• Risk management
• Corporate governance arrangements
• Formal reporting
• KPIs
Employees
and
Contractors
• Safe, productive working
environment
• Training and development
• Continuous improvement,
adoption of new technology
and practices
• Regular dialogue, internal communications
and employee surveys
• Contractor negotiations and dialogue
• Unions and employment negotiations
Public, iwi,
landowners
• Public safety
• Land access and respect for
traditional lands
• Environmental
• Consultation and feedback
• Access and easement negotiations and
agreements
• Acts, regulation and other requirements
14
2.5. aPProach to asset management
2.5.1. IntroDuctIon
This subsection describes Powerco’s approach to asset management and how it
fits with Powerco’s corporate Vision, Mission and Values. A key characteristic of our
methodology is the link from corporate objectives, through the asset management
policy to specific asset management plans.
Powerco has established a reputation as an effective manager of its assets, with a
appropriate focus on cost effective outcomes which have flowed through to bottom
line results for our customers. This capability was recently highlighted via external
analysis completed by the Commerce Commission who analysed trends in the cost
and reliability performance of each electricity distribution business in New Zealand,
including Powerco.
A summary of Powerco’s performance measured across a range of activities, over the
period 2008 to 2011, relative to the industry average, is set out in Table 2.2 below.
Table 2.2: Our relative performance compared with the NZ distribution sector.
Powerco’s relative Performance within the industry (2008 to 2011)
Revenue
received from
customers.
Revenue from line charges, which make up most of Powerco’s revenue, increased
by around 2% over the period. The industry average increase was around 8%.
Average
price paid by
residential
customers.
The average price paid per unit of electricity delivered to Powerco’s residential
customers increased by around by around 4% over the period. The industry
average increase was around 8%.
Operating
expenditure.
Powerco’s total operating expenditure declined by 3% per year after adjusting
for inflation. This compares to an industry average increase per year of around
2% over same period. Powerco’s operating expenditure per customer, per km of
network and per unit of electricity all trended down from 2008 to 2011.
Capital
expenditure.
Powerco’s unit capital expenditure (i.e. $/customer, $/MWh and $/RAB) has
trended slightly below the industry average, although recently it has been
consistent with the average.
Recent
reliability
trends.
The average duration and frequency of interruptions across Powerco’s network
has remained stable when adjusted for the occurrence of major storms. The overall
industry profile for SAIDI over the period mirrors that for Powerco, which seems to
confirm that network reliability at a headline level is influenced mainly by exogenous
factors rather than a company’s asset health per se.
(Source: Electricity Distributors’ Performance from 2008 to 2011, 29 January 2013, Commerce Commission.)
The Commission’s analysis indicates that, over recent years, Powerco has been
managing its business to hold both revenue and cost increases well below industry
average levels, whilst at the same time maintaining stable “headline” reliability
performance across its networks. The Commission’s review also highlights Powerco’s
relative strength in its ability to deliver against its annual operating and capital
forecasts.
We are pleased with the results we have been able to achieve via effective asset
management in recent years; however, there is an opportunity to build on this strong
base to enhance our capability further. In some areas our approach is constrained by
the paucity of reliable asset data - for example, condition information. Therefore, we
are currently placing a significant focus on improving our processes, tools, systems
and documentation to address information deficiencies.
The need to make further improvement is particularly pertinent in the face of an
observable degradation in performance of our overhead line assets, described in
Section 3. We need to drive for better utilisation of asset condition information, more
integrated investment decision-making (to better optimise lifecycle expenditure) and
more closely target field operations on those areas that are integral to maintaining
acceptable service levels to our customers. The framework we use for these key
elements of asset management is described in this section.
2.5.2. overall aPProach
Powerco’s approach to asset management uses many aspects of good (and in places
leading) industry practice through the establishment of an asset management policy,
asset management enablers and controls, and a focus on the efficient delivery of
plans. All this is done within the context of the current (and an expectation of future)
customer requirements, the prevailing business and regulatory environment and
available resources and technology.
Powerco is currently transitioning its asset management approach to align more visibly
with the requirements specified by the PAS55 framework. For several years, Powerco
has benchmarked its asset management maturity using the International Infrastructure
Management Manual self-assessment procedures. This has a high level of focus on
systems integrity and information availability.
However, typical of many New Zealand utilities, perhaps the most significant gap
Powerco has with immediately aligning to the PAS55 framework is the need to
strengthen documentation that articulates the rationale for investment decision-making
across the lifecycle of an asset and which illustrates how the core asset management
principles (and policy) are being applied in practice.
15
Four areas of our asset management system have been identified as priority areas for
further development:
• Asset Management Policy: Provides a high-level statement of Powerco’s
direction, principles and mandatory requirements; this is the key driver of the asset
management system and everything should map back to the policy. Our Asset
Management Policy is a recently introduced document and will take time to embed
within the business;
• Asset Management Strategy: Sets out how the Asset Management Policy will
be achieved, and be the co-ordinating mechanism to ensure that activities on
physical assets are aligned to optimally achieve the organisation’s corporate and
asset management objectives. We have yet to develop an Asset Management
Strategy, but will be doing so over the next 12 months. Currently our asset strategy
is incorporated in our Asset Management Plans;
• Asset Management Plans: Identify the tasks that need to be completed (by
when) to meet the asset management objectives and provide for the allocation of
appropriate responsibility and authority for each task. We are looking to continue
the development and refinement of our plans. Establishing an Asset Strategy will
assist in the alignment of our planning documents; and,
• Controls and Enablers: Are the process elements that are essential to ensure
appropriate governance is in place during the execution of the plans. Controls and
enablers also ensure that resources are available and there is a methodological
approach to decision-making, promoting consistent, repeatable and auditable
actions. We have a continuing focus on improving the efficiency and effectiveness
of our processes and systems, including investment in capturing and analysing
asset information.
The Asset Management Policy and Strategy are discussed below. A detailed
discussion of Powerco’s overall asset management performance objectives is set out
in Section 4 and a description of the asset management governance arrangements,
which are in place across the business, is set out in Section 5. Asset plans covering
asset renewals, growth/development and non-network investments, are summarised
in Sections 6, 7 and 8 respectively.
2.5.3. asset management PolIcy
The purpose of the Powerco’s Asset Management Policy is to interpret the Vision,
Mission and Values in terms that can be reflected in asset management plans. It
is a recently introduced document that provides the necessary linkage between
our corporate objectives and what we are aiming to achieve through our asset
management practices. The Policy also sets out some key asset management
principles that flow through all of our processes, and establishes our asset
management objectives and key accountabilities for asset management.
Figure 2.4 illustrates where the Asset Management Policy fits within the overall asset
management structure.
Figure 2.4: Asset Management Policy.
RegIonAl AReA
DevelopmenT plAnS
DemAnD FoReCASTS
ASSeT FleeT RenewAl
AnD mAInTenAnCe plAnS
ASSeT Age / HeAlTH
poweRCo mISSIon, vISIon AnD vAlueS
CoRpoRATe objeCTIveS AnD neTwoRk vISIon
ASSeT mAnAgemenT polICy
neTwoRk DevelopmenT AnD ASSeT mAnAgemenT STRATegIeS
STAKEHOLDER EXPECTATIONS
CApITAl woRkS pRogRAmme
EXTERNAL INFLUENCES
mAInTenAnCe woRkS plAnS
16
The Policy states that one of our main aims is “to ensure Powerco’s asset
management approach delivers optimal outcomes for all stakeholders, consistent with
their needs and requirements, by:
• Meeting and surpassing (where it is cost-effective to do so) regulated requirements
for asset management;
• Ensuring requirements and operational capabilities for asset management are
identified, responsibility for asset management is defined and the provision of
resources to deliver the asset management objectives occurs;
• Demonstrating transparent and responsible asset management processes that
align with sound industry practice; and
• Optimising the useful life and service performance of the assets against the costs
incurred.”
The Policy has been approved by the CEO and communicated to all asset
management staff. The full Asset Management Policy is available on Powerco’s
internet site at www.powerco.co.nz. The new asset management policy will play a
leading part in driving the development of Powerco’s asset management system.
2.5.4. asset management Performance objectIves
The introduction of the formal Asset Management Policy has provided Powerco with
a platform to more clearly define a revised suite of asset management performance
“goals and objectives” – against which we can measure our success. These goals
and objectives are described in more detail in Section 4, together with a summary
of the tactical initiatives that will help us achieve them. We believe that the newly
defined goal and objectives better reflect the corporate vision and place a particular
emphasis on delivery of services to our customers and alignment with the needs of
our stakeholders.
In summary, the asset management goals are:
Safety – Keep the public, our staff and our contractors from harm.
Reliability – Deliver reliable networks that meet the needs of our customers.
Asset Stewardship – Enhance asset management to the benefit of our customers.
Cost Efficiency – Continuously seek out and deliver cost efficiencies.
The goals we have developed are forward-facing and each is supported by a number
of objectives with measurable targets, which will enable us to keep track of and report
on, our progress.
2.5.5. DeveloPIng an asset management strategy
PAS55 specifies that the purpose of an Asset Management Strategy is to establish
the context and approach for asset management plans by providing a clear linkage
between the high-level objectives established in the Asset Management Policy. This is
illustrated in Figure 2.5.
Powerco does not currently have a formal asset management strategy document.
Strategic asset management planning is currently disseminated and incorporated
into individual asset plans. Development of a formal asset management strategy, in
accordance with the specification set out under PAS55, will be a key focus over the
next 12 months. It is envisaged the strategy will address such things as:
• Lifecycle management requirements of the assets;
• Clearly state the approach and methods by which assets will be managed,
including performance, condition and criticality assessment;
• Set out criteria for optimising and prioritising asset management objectives;
• Describe Powerco’s approach to the management of risk;
• Set out a direct link between our asset management practices, current
performance levels and our target service levels;
• Outline the rationale and approach to the economic assessment of investment
options, including a statement of base assumptions;
• Set out a roadmap and timeline to frame planned continuous improvement
initiatives; and
• Provide a framework methodology for the development of integrated maintenance
and renewals plans.
Our current strategic planning practices are described in Sections 6, 7 and 8. Closing
the gap to have a documented asset strategy will involve documenting both our
current and future approach to asset planning.
2.5.6. asset management PlannIng Documents
Powerco’s suite of individual Asset Management Planning Documents forms the
backbone of the company’s asset management approach. These plans are described
below. More detail on each plan can be found within Sections 6, 7 and 8. These
include documentation of the planning methodology and key assumptions, the
different interventions and options considered (where appropriate), the specific tasks
and activities (actions) required to optimise costs, risk and performance of the assets
in questions (to the extent practicable with the current level of asset information) and
the means and timescales by which these actions are to be achieved.
• Fleet Asset Renewal Plans: These plans set out the lifecycle approach for
our distribution fleet assets, such as switchgear, distribution transformers and
cables. The plans provide a renewal programme for replacement and specify the
17
approaches for managing the equipment through its lifecycle and obtaining best
value from the assets. The fleet plans are discussed in detail in Section 5.
• Area Plans: Area Plans consider the performance and adequacy of Grid Exit
Points (GXPs), the subtransmission network and zone substations over a 15-
year horizon. The areas are logical groupings of GXPs and subtransmission
network areas that can be considered with minimal influence from neighbouring
areas. Currently, there are 15 Area Plans, each focused on the development
of the network to respond to growth and to deliver adequate levels of security
and reliability. During FY14 we intend to develop Area Plans to also consider the
renewal of major zone substation and subtransmission components to ensure that
renewal and growth replacements are integrated. The Area Planning process is
discussed in detail in Section 7.
• Medium Term Plans: Medium Term Plans are completed on a regional basis
and consider the performance and adequacy of the distribution network over a
five-year horizon. Distribution feeders are evaluated to ensure voltage performance
and thermal capacity is adequate for the five-year load forecast, and that backfeed
performance is sufficient for the feeder class. The medium term plans are also
discussed in Section 7.
The output from the individual planning documents form the basis of our capital and
maintenance work programmes. These are used to optimise network investment
within each of the primary network areas operated by Powerco (Eastern and Western).
The overall management process for the establishment of these plans and governance
structure is described in more detail in Section 6.
2.5.7. asset management DrIvers
As noted above, Powerco’s asset management objectives align with the company’s
corporate objectives, which, in turn, stem from the Powerco’s Vision and Mission.
However, successful delivery of Powerco’s asset management objectives is dependent
to a large extent on the external context within which Powerco operates (factors
largely outside of Powerco’s control) as well as a number of internally derived
influences, which can be considered to be more controllable. Figure 2.5 illustrates
some of the main external and internal influences that need to be considered as part
of the overall asset management decision-making framework.
Figure 2.5: Factors Influencing Powerco’s Asset Management Framework.
A reliable client,
delivering
new Zealand’s
energy future.
In profitable
partnership with
stakeholders...
delivery of safe,
reliable and
efficient energy.
Asset management
policy and key
performance
objectives.
KEY
INTERNAL
INFLUENCES
Asset Health
(Age/Condition)
Resource Capacity
/Capability
Risk Tolerances
Asset Configuration
Safety/environment
policy
KEY
EXTERNAL
INFLUENCES
Customer price
expectations
load growth
Regulatory
Context
Technology Trends
Customer Service
expectations
ASSET
MANAGEMENT
PLAN (AMP)
Planning
Approval
Operating &
Maintenance
Renewal
Procurement Delivery
Development Disposal
18
The key external influences include:
• Customer Expectations: These include both price and service expectations of the
end-consumer, as well as broader stakeholder requirements. These are reflected
throughout our AMPs, through the establishment of security criteria for planning
for subtransmission, zone substations and distribution level assets. Customer
requirements are also reflected in the setting of performance targets, such as for
feeder performance, response times for outages and notification times for planned
outages, as well as criteria specified as part of the customer Initiated works process.
Customer requirements are validated and, if necessary, updated via annual surveys,
routine customer contact and through feedback received from retailers.
• Load Growth: Load growth comes about through new connections and changing
consumer demands. General load growth brings about a need to invest in
additional network capacity and security.
• Regulatory Context: Obligations are imposed by government agencies and
Powerco’s stakeholders expect the expression of good corporate ethics. These
influence the commercial and administrative arrangements Powerco makes as a
business entity and our overall approach to asset management. The regulatory
framework determines our ability to earn and the economic return on our
investments to meet the expectations and service levels sought by our customers.
• Technology Trends: Continuous improvement is a key part of asset management,
new technologies, tools or methods that have a potential benefit to the company
continually become available. Given that some of our assets have an expected
life in excess of 40 years, it is important that investment undertaken now takes
into account likely future technology trends. Powerco has a focused research and
development programme in place, which is actively seeking to identify, trial and
evaluate new technology opportunities. Further details are set out in Section 8.
The key internal influences include:
• Asset Health: The current age and condition profile of the asset stock has a major
influence on our future asset management plans. Where possible asset investment
decisions will take into account the current condition and performance of assets
and the expected condition and performance profile under different investment
scenarios. Such an idealised approach, based on modelling remaining life and
associated performance trends is not always possible due to a paucity of available
data. Where this is the case, we seek to apply engineering judgment, coupled
with analyses of observed asset performance as a proxy for condition. A core
component of our asset management improvement programme is the improvement
of data capture and information provision.
• Resource Capacity/Capability: The market in New Zealand for skilled electricity
workers is highly competitive, particularly for certain skill types, such a line workers.
Our asset management plans, which extend out over a 10-year planning horizon,
need to consider future resource requirements and the company’s capacity to
deliver the work. This is particularly when the level of investment is forecast to
increase in the future, as is the case in over the current AMP planning horizon.
• Risk Tolerance: Central to any AMP is the management of risk as this has a
significant influence on the quantum and focus of future investment. Powerco’s
formal approach to the quantification of risk is one of the areas identified as being
in need of strengthening to more closely meet the requirements of PAS55. Risk
identification, as reflected in asset management planning, should include, among
other things: (a) the probability of credible events and consequences; (b) physical
asset failure risks arising from such interventions as, incidental damage and
malicious damage; (c) operational risks; (d) human factors; (e) natural environmental
events (storm, floods etc.); (f) supply chain failures; (g) regulatory and legal risks;
and (h) risks associated with the different lifecycle stages of an asset.
• Asset Configuration: This includes the inherent redundancy (security), the use of
automation and the locality of assets where load exists. There are location specific
factors like snow loading, high winds, rocky soils, remote terrains and vegetation.
• Safety and Environmental Policy: The Company’s policy in relation safety and
the environment drives certain asset management decisions. Our network assets
are integrated in the fabric of our communities. Accordingly, we place the highest
possible priority on minimising the safety risks our assets pose to the public. This
is a complex task, given the diverse and geographic spread of our assets, but
one that we take very seriously. We have one simple target. Our objective is to
have zero injuries to the public caused by the integrity of our network. This is plain
and simple and we strongly believe that any other target is not acceptable. This
means incorporating into our asset management planning consideration of factors
such as; (a) safety by design requirements; (b) integrating network enhancement
opportunities with associated safety benefits; (c) safety awareness campaigns;
(d) contractor management and training; (e) targeted defect corrections; and (f)
incident investigation.
These external and internal influencing factors provide the context for asset
management at Powerco. The combination of these factors and managing the balance
between drivers is incorporated into our overall AMP and individual asset plans.
2.5.8. assessment of asset management Performance
As a regulated of supplier of electricity distribution services, Powerco must undertake
and disclose to the Commerce Commission (and publicly) a self-assessment of the
maturity of its practices in relation to asset management using a prescribed Asset
Management Maturity Assessment Tool (AMMAT).
The AMMAT seeks to identify the maturity of a company’s current asset management
practices, relative to an objective standard based on good asset management
practices, such as that described in PAS55:2008.
19
Powerco supports the disclosure of the AMMAT because it allows interested persons
to understand how well we are managing our assets against an objective and
internationally recognised standard. Disclosure of the AMMAT results does not require
a regulated supplier to lift its asset management. However, Powerco has set a goal to
move to an intermediate status on the AMMAT scale over the next five years.
Powerco’s asset strategy and planning capability is well respected within the
distribution industry, and our annual asset management plan has been consistently
rated as a leading example in independent industry reviews. However, asset strategy,
as a discipline, continues to undergo progressive refinement internationally and the bar
is continually rising.
The AMMAT consists of 30 questions from the PAS55:2008 assessment module,
scoring maturity in each asset management area on a scale from zero to four. The
detailed results of our self-assessment are included as Appendix 2 to the AMP.
Figure 2.6 below summarises the AMMAT results and Figure 2.7 illustrates our current
level of maturity and the level we have set as a target to achieve over the next five years.
Figure 2.6: Powerco’s Self Assessed AMMAT Score.
AMMAT Results
4
0
1
2
3
Five Year Maturity AspirationCurrent Maturity Assessment
Score
3
10
11
26
27
29
31
33
37
40
42
45
48
49
50
53
59
62
63
64
69
79
82
88
91
95
99
105
109
113
115
AMMAT Question No.
Figure 2.7: Current versus Target AMMAT level.
Current assessment area average
ASSeT STRATegy AnD DelIveRy
DoCumenTATIon,
ConTRolS AnD RevIew
CompeTenCy
AnD TRAInIng
SySTemS, InTegRATIon AnD
InFoRmATIon mAnAgemenT
STRuCTuRe, CApAbIlITy
AnD AuTHoRITy
CommunICATIon AnD pARTICIpATIon
4
3
2
1
0
Aspiration assessment area average
The AMMAT gap analysis demonstrates that while Powerco has a solid core of
competency in asset management, we are constrained in places by a paucity of
robust asset data and information, and a need to more fully document our decision-
making practices.
To achieve our goal of lifting our asset management maturity further, we have put in
place an asset management improvement plan (referred to as our Asset Management
Journey Plan). Over the next five years this will result in a step-change in asset
management practices across Powerco, supported by enhanced asset information
systems, which will allow us to more accurately assess the “health” of our assets and
plan for, and meet, the future renewal investment challenge.
Our AMMAT scores should be interpreted as being an honest assessment of or
current practices, reflecting the high standards we are setting ourselves. As an
example, Powerco has invested heavily in health and safety and compliance in the
last few years. Although Powerco considerably improved our performance in this
area, we have rated ourselves at a maturity score of between 1 and 2 we consider
these aspects “non-negotiables”, given their importance. We will continually strive to
improve every part of performance.
We believe that improving our asset management capability will translate directly to
improved cost-effectiveness, over the longer term, in the way we build and operate
our networks, and ultimately help mitigate the level of future price rises.
20
2.5.9. asset management ImProvement InItIatIves
Our asset management improvement programme includes a wide range of initiatives,
which, together, will achieve sustained improvements in asset management and the
long-term performance of our networks. These include:
• Further development of our overall asset management framework, governance and
documentation to more closely align with PAS55:2008;
• Development of individual fleet asset strategy plans, which integrate lifecycle
cost interventions (maintenance/replacement/disposal) and set out medium-term
investments and implementation plans by asset type;
• Further development of asset information systems (single sources of asset data,
network performance modelling, predictive life and asset health models, and
replacement of the maintenance management system);
• Development of asset health indicators and criticality factors for the asset classes
that have the highest economic value;
• Development of new service provider arrangements and further deployment of
contractor competency standards to ensure the highest standards of safety on our
networks; and
• Further roll-out of a revised range of standards covering material specifications and
design and construction, the aim being to standardise equipment types across our
different networks as assets are routinely replaced or new assets put in place.
Asset management is not a static process – as circumstances affecting our assets
change (e.g. standards, knowledge) there is likely to be a changing impact on
expenditure interventions required in a given year. The process of annual review and
the governance arrangements we have in place, as set in Section 5, are designed to
ensure that the AMP remains relevant in a dynamic environment.
2.5.10. asset management challenges
Against this background of continuous improvement, Powerco faces a number of
approaching asset management challenges that, together, inform the expenditure
forecasts set out in this AMP. In summary:
• Our reliability performance, as measured by SAIDI, is relatively stable. However,
indications are that underlying reliability performance at specific locations across
our networks is being impacted negatively by a combination of deteriorating
condition, increasing age and model/type-related issues;
• At current levels of expenditure our network assets are progressively ageing.
This is particularly the case for overhead network assets. While age alone is not
a justification for investment it is an effective indicator for asset condition, which
drives asset replacement and maintenance;
• The operational margin around our SAIDI/SAIFI quality targets is eroding due to
increased faults associated with our deteriorating assets;
• As unplanned outages have risen, Powerco has sought to meet its reliability targets
by limiting some planned works. While this is an acceptable short-term approach,
in the long term it is not sustainable because it limits the ability to undertake works
necessary to the address deteriorating asset condition;
• Outages due to vegetation contacting lines are increasing. This is due to a number
of drivers, including failure by some landowners to adequately manage vegetation;
• A changing environment in areas such as safety regulation, legal liability, energy
policy and climate change.
These issues are discussed throughout this AMP.
2.6. Key assumPtIons of the amP
This AMP is based on some fundamental assumptions that underpin our long-term
strategic direction and operating environment. These key assumptions are:
• The present electricity structure broadly remains the same and Powerco continues
to operate as a non-vertically integrated electricity business.
• The national grid continues to operate and develop in generally the same direction
as currently, and is maintained to an adequate level.
• Field services continue to be outsourced, and there are no major disruptive
changes to the availability of contractors.
• Design services continue to be provided in-house.
• Consumer demand and expectations continue to follow long-term trends and are
not significantly altered by a disruptive technology. This assumption relates to a
major unforeseen shift (our strategy considers the impact of likely changes on its
assets - for example, the growth of electric vehicles and distributed generation).
• There is no major change to the regulatory regime - for example, structural
changes to the regulatory institutions - or mechanisms currently in place.
• To the extent possible, all the assumptions made in developing this AMP have been
quantified and described in the relevant sections. Where an assumption is based
on information that is sourced from a third party, we have clearly set this out.
21
2.7. structure of the Plan
This edition of our AMP has been redesigned and refocused as a key step in our
asset management journey. We have refined our asset strategy goals and objectives,
refocused and sharpened the asset-related discussions, and placed a particular focus
on the areas that will have the most impact on our prices over the next decade.
There is much we can do to further develop our AMP to support our discussions with
stakeholders. However, we hope the changes we have made will make it easier for
our customers to understand how our networks are performing, the areas and options
that will shape the path of future investment, and the nature of investments we are
considering. The new structure of the document is outlined below.
Figure 2.8: Structure of the Plan.
context anD aPProach
Stakeholder expectations, strategic framework and business drivers.
Description of assets.
Objective setting.
2 - IntroDuctIon
Purpose & objectives
Stakeholders strategic alignment,
continuous improvement, AMP
structure
.
4 - objectIves
Setting objectives
Reviewing performance
Gap analysis
3 - Powerco’s assets
Geographical regions
Customer groups
Asset information
aPPenDIces
Glossary & maps
Asset management schedules
Asset Management Maturity Tool
Detailed information on projects,
stakeholders and capacity.
worK Programme
Governance, enablers and controls.
Work programmes and expenditure.
Improvements.
5 - governance & DelIvery
Governance, planning & delivery
Responsibilities, controls &
decision making tools
8 - enhancement InItIatIves
Enhancements for safety, environment
& compliance and smart networks
Information systems enchancements
6 - maIntenance & renewal
Operations, renewal & maintenance
Fleet plans & key challenges
9 - exPenDIture forecasts
Assumption & drivers
Opex and capex 10-year forecasts
7 - networK DeveloPment
Planning processes & criteria
Demand forecasts & area
development plans
22
3.1. IntroDuctIon
The first step of asset management is to understand our assets, where they are