SUMMARY ASSET MANAGEMENT PLAN
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SUMM ARY A S s E T MA N A G E M EN T P LAN
IN FOR m AT I O N D I S CLO S U R E FO R
EL EC T R I C I T Y NET W O R KS
2011– 2 0 2 1
ASSET MANAGEMENT PLAN ELECTRICITY NETWORKS FY2011 – FY2021 1
contents
CHIEF EXECUTIVE’S STATEMENT.................................................................. 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?.................................................. 11
STATE OF THE ASSETS................................................................................ 15
PERFORMANCE AGAINST TARGET OVERVIEW........................................... 15
RISK MANAGEMENT.................................................................................... 17
ASSET LIFECYCLE PLAN............................................................................. 17
NETWORK DEVELOPMENT PLAN................................................................ 19
NETWORK PERFORMANCE ENHANCEMENT.............................................. 20
CAPITAL EXPENDITURE............................................................................... 20
OPERATIONAL EXPENDITURES................................................................... 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 FY2011 – FY2021
SUMMARY ASSET MANAGEMENT PLAN ELECTRICITY NETWORKS FY2011 – FY2021 1
Chief Executive’s Statement
Welcome to the 2011 edition of our Summary Asset Management Plan (AMP). continue to augment network security and capacity. We are committed to meeting
our regulatory obligations. However, the combination of an ageing network,
During the past 12 months we have seen continued growth in demand for electricity
increasing electricity demand, customers’ desire for reliable electricity supply and the
and we expect demand to grow in the immediate and long term. Such growth places
constraints on investment mean that Powerco faces significant challenges.
pressure on our ageing network to continue to provide a reliable supply of electricity.
In response, we continue to increase the level of expenditure on the network (which As a result of the severe storms that we experienced last year – in particular, the
has increased by more than 100% since 2002). Our underlying network reliability multi-day events that were a feature of September 2010 – and depending on how
performance continues to be more than satisfactory. the Commerce Commission treats multi-day storm events, there is a risk that we will
not meet our regulatory reliability target for 2011. This would be disappointing, given
Severe storms have also been a feature of the past 12 months. Our ability to
the significant and increased investment that Powerco has made in recent years.
maintain a reliable supply of electricity during severe storms is dependent, amongst
other things, on the level of redundancy and the age and condition of our network.
Actual and Forecast SAIDI Reliability
I am pleased to report that Powerco’s network assets continue to perform well in 350
Forecast Mar 2011 SAIDI Deterioriating reliability due
meeting the on-going growth in demand. Consistent progress has been made in after normalising as per to regulation constraining
DPP rules expenditure
maintaining a reliable supply despite the regulatory regime constraining investment, 300
SAIDI (Class B+C) minutes
given the ageing of the network. Our progress is evidenced by Powerco’s network
250
having significantly fewer faults per kilometre on average than our peers and the
approximately 10% reduction in faults per kilometre since 2005. Our Bring Line
200
Interruptions To Zero (BLITZ) strategy of targeted renewal has meant that our network
performed better during the severe storms than it has during previous events. 150
Our ability to meet the challenges of growth with ageing network assets and to keep
100
the lights on during extreme events is, in part, the result of the comprehensive and
2016
2017
2018
2019
2004
2005
2006
2007
2008
2009
2010
2011
2012
2013
2014
2015
intensive analysis and planning that we undertake every year and which is detailed in
Year
the full 2011 Powerco Asset Management Plan. Actual Reliability (After Normalising for Forecast Reliability (Ending March)
Single-Day Major Event Days) (April 11 AMP spend)
For the past 12 years, the Asset Management Plans have provided the blueprint for Forecast Reliability (After Normalising
for Sept 2010 Multiple-Day Severe Storm)
the management and development of the vast and complex network of Powerco’s Actual Reliability (Before Normalisation Regulatory Threshold
for Major Event Days)
assets. Previous plans have identified the need for increased investment in targeted
areas of the network to maintain reliability of supply. During the past eight years, we Figure 1: Forecast Supply Reliability Performance
have doubled our investment in the network, with a focus on bringing aged (in many
cases over 50 years old) assets up to standard. We have increased our focus on Powerco takes seriously the risk of failure to meet its regulatory targets for 2011 and
security, building redundancy into the backbone of the network to improve reliability we will be working hard to achieve these targets in 2012. We are reviewing our works
and the network’s capacity to accommodate growth. programmes for 2012 to target solutions that improve reliability, consistent with our
key asset management strategies. With that said, Powerco’s geographical spread
The 2011 AMP forecasts further growth in demand, both in volume and peak
and more than 30,000 kilometres of lines means that the risk of future breaches due
demand across all regions. To accommodate the forecast growth, we will need to
to extreme weather events will always exist. Further, we will be engaging with the
2 SUMMARY ASSET MANAGEMENT PLAN ELECTRICITY NETWORKS FY2011 – FY2021
Commerce Commission and are hopeful that the Commission will, when it finalises • Continuing the development of design, construction and maintenance
its enforcement guidelines, adopt the same approach to multiple-day severe storms standards, which lead to lower risk profiles in the network and greater
as it did in the past. If the Commission were to treat the September 2010 storms in consistency of application across the network. Further investment in the
the same manner as the similarly destructive February 2004 storms, we would meet standardisation of systems and processes will allow us to extend asset lives.
our 2011 regulatory target. • Taking further steps along the Smart grid road map, to becoming a Smart
The 2011 AMP commits Powerco to $114 million of capital and maintenance network. The aims of Smart networks include self-healing equipment and
expenditure, an increase of $3 million over last year. We are forecasting this growing processes. Well thought out and implemented network automation offers exciting
to $167 million by 2021. Nothing is more important to me than the safety of our staff, performance benefits. Network automation, combined with increased feeder
contract staff and the public. Every project is evaluated against health and safety interconnections, also fit well with our business plan objectives of improving
drivers and against the health and safety risk it mitigates. Priority will be given to reliability through automated solutions and managing increasing investment profiles
those projects that are considered necessary to minimise risks to health and safety. through non-asset solutions. The 2011 AMP sets out initiatives that are consistent
with the EPRI and Energy Networks Australia visions of Smart networks.
Powerco has demonstrated strong capability in our asset management processes and
performance compared with our peers in New Zealand. However, our processes and Some of these strategies are straightforward; others such as Smart networks are
systems compare less favourably with Australian utilities. If we are to be of international innovative and world class. All are designed to ensure that the investment meets
standard in meeting the expectations of our customers and the requirements of short-term requirements and builds long-term value.
regulators then an investment in our processes and systems must be made. We have a responsibility to provide a safe, secure and reliable supply of electricity
The investment called for in the AMP will, as always, be carefully targeted to to our customers and we have worked hard to achieve this efficiently. It is a
solutions that will ensure our electricity network improves in service and reliability. responsibility that I, and all Powerco employees, take very seriously. We recognise
Key strategies to achieve this are detailed in the AMP and include: that, due to ageing of the network and increased demand, we have a significant
challenge to meet the required investment under the existing regulatory settings.
• Increasing the commitment to the principle that all occupational injuries are
However, it is a challenge that, through careful planning and innovative strategies,
preventable. We have initiated a programme to further advance best practice health
we can rise to.
and safety initiatives across the business and that of our contracting partners.
• Modernisation of the network through the replacement and updating of our The full Asset Management Plan provides more detail on the issues I have discussed.
aged assets. It also describes in detail our plan for addressing each issue. We look forward to
discussing our plans with you.
• Increasing the redundancy of the core network through increasing
subtransmission lines and zone substation capacity.
• Continuing to improve our fault location, isolation and supply restoration
capability through increasing sectionalisation and installing more distribution
automation, such as auto reclosers.
• Standardisation of systems and processes is a key strength of Powerco’s Nigel Barbour
employees and it has been a significant focus for management. As a result, Acting Chief Executive
we have been able to develop a common maintenance management system
and a suite of information system projects directed at improving processes.
SUMMARY ASSET MANAGEMENT PLAN ELECTRICITY NETWORKS FY2011 – 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 13 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 FY2011 – FY2021
Figure 2: 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 industrial and commercial
also entitled to sell electricity transmitting bulk electricity from cables by local distribution (lines) the industry, along with their consumers also purchase
to consumers and energy generation sites to distributors. companies. There are currently own costs to run a retail electricity from retail companies
retailers. Numerous generation Transpower transmits electricity 29 distribution companies, business and provide electricity but may also have the option
sites around the country supply from generating stations to which operate within set consumers with a monthly of contracting directly with
electricity to the National Grid. 178 Grid Exit Points (GXPs) boundaries and range from bill. They set the final price distribution companies for
around New Zealand. These publicly listed companies to consumers pay for electricity. electricity distribution services.
GXPs are the points of supply community-owned trusts. These companies are also
for distribution networks like allowed to participate in the
The 1998 Electricity Reform
Powerco’s. generation sector.
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 FY2011 – 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 4295 GWh of electricity through 30,035km of lines OPERATIONS
and cables to more than 316,000 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 the Coromandel Peninsula, Thames Valley, Tauranga and
Western Bay of Plenty, South and East Waikato, Taranaki, Wanganui, Rangitikei,
Manawatu, Tararua and Wairarapa.
Electricity Networks
Electricity distribution networks in the
Tauranga, Thames, Coromandel, Eastern
and Southern Waikato, Rangitikei,
Taranaki, Wanganui, Manawatu and
Wairarapa regions.
Figure 3: Powerco Electricity Network Operations Map
6 SUMMARY ASSET MANAGEMENT PLAN ELECTRICITY NETWORKS FY2011 – 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
2,500,000
summary of the assets covered.
2,000,000
Electricity Network Replacement Cost by Asset Type
Replacement Cost ($000)
1,000 1,500,000
800 1,000,000
$million 600 500,000
400 0
Overhead Underground Transformers Switchgear Substations
200
Assets Valued at ODV Replacement Cost
Assets Valued at Current Replacement Cost Asset Category
0
Figure 6: Replacement Cost by Asset Category
Overhead Line Underground Cable Distribution Transformers Distribution Switchgear
Zone Substations SCADA/Comms/Ripple Spares (Emergency & Critical) Table 1: Key Network Statistics
Southern &
Figure 4: Electricity Network Asset Replacement Cost by Asset Type (2004 ODV Valuation) Key Network Statistics as at 31 March 2010 Eastern Western Total
Length of Overhead Circuit (km) 8,370 14,245 22,615
Electricity Network Replacement Cost by Function Length of Underground Circuit (km) 4,402 3,018 7,420
1,000
Subtransmission Circuit Length (km) 587 1,008 1,595
800 Distribution Circuit Length (km) 5,869 10,368 16,237
600
Low-Voltage Circuit Length (km) 6,316 5,887 12,203
$million
Number of Zone Substations and Switching Stations 45 68 113
400
Zone Substation Transformer Capacity (MVA) 649 758 1,407
200
Distribution Transformer Capacity (MVA) 1,418 1,517 2,935
0
Subtransmission Zone Substation & GXP Protection & Control Distribution
Distribution Substation Low Voltage Spares (Emergency & Critical)
Figure 5: Electricity Network Asset Replacement Cost by Functional Category (2004 ODV)
SUMMARY ASSET MANAGEMENT PLAN ELECTRICITY NETWORKS FY2011 – FY2021 7
THE ASSET MANAGEMENT PLAN AND PROCESS
With Powerco’s electricity network assets ranging in age from new to more than
Who wants what What performance are How are we managing What does this mean for How can we improve?
50 years old, effective long-term planning is a fundamental requirement of our from the assets? we targeting from the the network and solving the works programmes
assets? How are we any performance gaps? and required
business. Our AMP is an integral part of that planning because it not only explains What is the state of the
assets?
doing vs. the target? expenditure?
What are the gaps?
Powerco’s 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 requirements as assets progressively reach the end of their useful lives. Section 2 Section 4 Section 7 Section 7, 8 Section 11
Define Set Performance Set Asset and 9 Develop AM
The full AMP contains specific details on Powerco’s short- and long-range planning Stakeholders Targets Lifecycle Strategy Develop Work Improvement
for network development, renewal and maintenance. In other words, the AMP is a Define AM Drivers Analyse Renewal Programmes Initiatives
Section 5 Needs Linked with AM
high-level document providing management, stakeholders and any interested parties Performance Driver
with a broad overview of Powerco’s asset management policies, asset details, Section 3 Evaluation Section 8
Describe Assets Security Criteria Section 10
service levels, capital and maintenance works planning, expenditure forecasts, risk Section 6
Prepare Load Set Expenditure
management and performance evaluation. Analyse Network Forecasts Forecasts
Risks
System Growth
Incorporating information from a range of other internal documents, the AMP sets Needs
out the performance criteria for the assets, and summarises the actions needed to
Section 9
achieve those performance criteria. Reliability, Safety,
Environment
Developing the AMP is a key step in ensuring that the needs of all stakeholders are Enhancement
properly considered and incorporated into Powerco’s long-term asset management Needs
strategies. It also ensures that plans provide, subject to any regulatory constraints, Protection
& Control,
the optimum balance between levels of service and the efficient costs to provide Smart Network
the required service. Figure 7 illustrates the structure of the full AMP and what each Development
section is trying to address.
Figure 7: Structure of the Asset Management Plan and Process
8 SUMMARY ASSET MANAGEMENT PLAN ELECTRICITY NETWORKS FY2011 – 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 business
which is intended to identify the key issues relevant to the majority of interested operations. This is the key interface for customer consultation and corporate strategy.
parties. Anyone interested in Powerco’s AMP or operations in general is encouraged
Planning
to read this summary to learn more about our business and what we are trying to
achieve on behalf of all our stakeholders. If further information is required, Powerco’s This process involves planning for the renewal, development, maintenance and
full AMP is available at www.powerco.co.nz/Financial/Stat_Docs/Asset_Disclosures/ operation of the assets.
Please note, this Summary AMP is intended to be consistent with the full AMP Service provision
published in April 2011. 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 publish 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
AMP, our full AMP, or any aspect of our business or the electricity industry. Feedback Information
can be provided in the following ways:
This involves the maintenance of, and reporting from, the asset information databases.
• By email: corp_office@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 FY2011 – 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 9 shows the increase in forecast renewal
eas, the oth
f these ar er tw expenditure.
ne o oa
no rea
uto sw
sp ill
si be Asset Renewal Capital & Operational Expenditure
cu
fo
co
80 2.000
h
m
uc
pr
om
om
70 1.750
ise
If to
Nominal Expenditure ($000)
1.500
d
60
LEVEL
Inflation Index
50 1.250
COST
OF RISK 40 1.000
0.750
NETWORK 30
ASSETS 20 0.500
10 0.250
0 0
2009 A
2010 A
2012 F
2014 F
2015 F
2016 F
2017 F
2018 F
2019 F
2020 F
2006 A
2007 A
2011 B
2013 F
2021 F
2008 A
PERFORMANCE
LEVELS
Asset Replacement and Renewal Refurbishment and Year (ending June)
Inflation Index Renewal Maintenance
Figure 9: Actual and Forecast Asset Renewal Capital and Maintenance Expenditure
Figure 8: Cost, Performance and Risk Balance
10 SUMMARY ASSET MANAGEMENT PLAN ELECTRICITY NETWORKS FY2011 – FY2021WHO WANTS WHAT FROM THE ASSETS?
2. Increasing the redundancy (duplication) of the core network: The following figure illustrates the relationship between Powerco’s main stakeholders,
Redundancy means that if one critical component fails or needs to be taken out their drivers and the asset management process. The diagram now includes a
of service, there is another component ready to continue supply. This includes recognition of the business planning process as the stakeholder drivers are equally
increasing zone substation capacity and installing more network automation. Powerco (and in some cases more appropriately) applicable to the business planning process.
has identified the potential for 17 zone substations to be built and 20 additional
transformer banks to be installed at existing substations over the next 10 years. Customers/ Government & Owners & Lenders Employees &
Consumers Regulator Contractors
3. Standardising systems and processes: This is a key strength of Powerco’s
employees and a significant focus for management. Powerco has developed a
common maintenance management system and an integrated, easily accessible Service/Price Safety Load Economic Efficiency
(Long-Term Interest of Consumers)
Long-Term Value
(Productivity & Utilisation)
Safety Workflow Certainty
Growth Market Costs
suite of information systems. There has also been continuing development of design, Environmental Safety & Compliance Risk Management
construction and maintenance standards, which lead to lower risk profiles in the
network and less reliance on field staff. Further investment in the standardisation of Business Planning Process
systems and processes will allow us to extend asset lives. Asset Management Process
4. Distribution automation and more interconnections at feeder level:
Development, Renewal,
Smart network plans, which are a recent addition to Powerco’s AMP, aim to be Maintenance, Operation
self-healing and capable of shifting the load from peak times. They are something Asset Performance Asset Age/Condition
to which regulators in many countries are now paying greater attention because
Assets
they are perceived to offer customers improvements in performance and cost.
Smart networks, which offer flatter, more manageable patterns of demand, fit well
Figure 10: Powerco Stakeholders and Drivers of the Asset Management Process
with Powerco’s business plan objectives of improving reliability through automated
solutions, and managing increasing investment profiles through non-asset solutions.
5. Continuous improvement and optimisation of our inspection and
maintenance standards: Powerco’s Network Standards set the requirements
for the design and construction of equipment. Our standards also set out our
requirements for maintenance inspections and servicing, and guidelines for the
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,
while not disallowing new ways of doing things. The standards and policies follow a
continuous improvement process whereby the standards are challenged as they are
used. Input to the standards preparation and update process can arise during semi-
regular standards road shows, through the field work audit process or if anyone has
a new idea that should be tried out.
SUMMARY ASSET MANAGEMENT PLAN ELECTRICITY NETWORKS FY2011 – FY2021 11Powerco 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
with Powerco.
• Workshops and focus group meetings with regulators, consumers and
consumer representative groups.
• Various media communication channels, such as newspaper and radio
advertising and Powerco’s website.
In addition to the above, Powerco has a Consultation Manager dedicated to
planning and co-ordinating consultation activities and maintaining relationships with
key stakeholders. Feedback obtained through consultation is incorporated into
Powerco’s asset management planning to help ensure Powerco’s plans are aligned
with consumer and stakeholder expectations. Powerco operated an information kiosk in Tauranga’s CBD for five days during February
2011. This provided Western Bay of Plenty residents with an opportunity to learn more about
Powerco’s plans for the region and other things, such as the structure of the New Zealand
electricity industry, regulation and pricing. It also provided an opportunity for residents to give
feedback directly to Powerco.
12 SUMMARY ASSET MANAGEMENT PLAN ELECTRICITY NETWORKS FY2011 – FY2021Figure 11 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
Powerco’s stands at both the Mystery Creek and Central Districts Agricultural Field Days Figure 11: Illustration of the Influence of Asset Management Drivers
are always popular. Powerco attends these events to survey consumers about the quality of
their electricity supply and to provide consumers with an opportunity to have face-to-face The diagram reflects the current situation, which can be summarised as upwards
discussions with Powerco staff. 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 FY2011 – 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 be 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 2.6 of the full AMP.
14 SUMMARY ASSET MANAGEMENT PLAN ELECTRICITY NETWORKS FY2011 – FY2021STATE OF THE ASSETS PERFORMANCE AGAINST TARGET OVERVIEW
The age profile by replacement costs of the entire infrastructure asset base (on The following table shows Powerco’s key performance measures.
current replacement costs) is presented as a nine-year moving average and is shown Table 2: Current Electricity Asset Performance
in the diagram below.
Electricity Measure Measure (2010) Target for 2012 Commentary
Total Asset Replacement Cost vs Age Network 290.7 min/customer 170 min/ Reliability levels have been static.
reliability (actual) customer Price has been decreasing in real
120,000
(SAIDI) terms, hence customers’ current
196.7 min/customer
price/quality trade-off has been
100,000 (excl storms)
improving in general terms
Replacement Cost ($000)
80,000 Network 2.76 interruptions/ 2.56 See above
reliability customer (actual) interruptions/
60,000 (SAIFI) customer
2.61 interruptions/
customer (excl storms)
40,000
Customer 11.2 ICPs/km N/A Urban/rural mix, below weighted
20,000 density industry average
0 Average 13.4 MWh/ICP N/A Low (presenting growth opportunity).
0 5 10 15 20 25 30 35 40 45 50 55 60 65 ODL consumption Benchmarking weakness
Age (Years)
Direct $1057/km $1266/km Efficient level of spend, in efficient
Substations Switchgear Transformers Underground Overhead operating quartile for the industry
costs
Figure 12: Total Asset Age Profile
Capex spend 6.9% of RAB N/A Efficient level of spend, around the
median for the industry
Condition monitoring shows that the assets are generally in the condition expected
of their age. Asset $32,450/km, $4000/ICP Efficient, particularly when compared
investment $3012/ICP to similar density EDBs
Load factor 67% 65% High load factor, good spread of
customer load
Capacity 29% 30% Low utilisation reflecting rural
utilisation network. Benchmark weakness
Security Substation and feeder N/A Appropriate, standards are
security commensurate with load, current
situation reflects more from historic
standards to new standards and new
load growth
Asset 25 years average age N/A Asset condition well monitored,
condition appropriate asset condition
Asset condition reports
commensurate with age, but
increasing investment profile
SUMMARY ASSET MANAGEMENT PLAN ELECTRICITY NETWORKS FY2011 – FY2021 15Performance 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,
It then looks at the ways in which economic efficiency is assured in the asset as far as practicable, the safety of employees and the public. To this end, the
management process, contractor performance, safety performance, environmental network must be maintained in a way that meets statutory requirements, follows
matters and statutory compliance. good engineering 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
make comparisons with other New Zealand lines companies with the same customer Safety is determined by a combination of:
density and ratio of overhead to underground construction. They also consider past • Asset design;
planning practice, economic factors, recognised international best practice and safety.
• Maintaining the assets in a safe condition;
Powerco achieves a balance between owner requirements and legislative, regulatory
• Safe operating and work practices; and
and consumer expectations in setting these performance criteria. The levels of
service adopted by Powerco for its Asset Management Plan are based on the • Statute: The Electricity Regulations, Electrical Codes of Practice and the
internationally recognised measurements, SAIDI, SAIFI and CAIDI (which are Australian/New Zealand Standard Wiring Rules. There is also the Safety Manual
acronyms for formulae covering the duration and frequency of power outages, and – Electricity Industry (SM-EI), which contains the framework for Powerco’s
their customer bases) and accepted New Zealand lines companies’ best practice. safety-related network operation. Powerco has now implemented its network
operating procedures to comply with the requirements of SM-EI. Additionally,
Powerco conducts an extensive Customer Communications Programme to verify there are the Building Act, the Health and Safety in Employment Act, the
that performance targets match consumer and stakeholder expectations. Consumer Hazardous Substances and New Organisms Act 1996, and various guides set
consultation is a requirement of the Commerce Act (Electricity Distribution Thresholds out by the Electricity Engineers’ Association.
Notice 2004). The primary intention of this requirement is to ensure distribution
Powerco has adopted the practice of working as a reasonable and prudent
businesses effectively consult with, and take into account, the views of their
operator to guide safe asset management practices. Its health and safety policy
customers and stakeholders. Regardless of regulatory requirements, Powerco views
and procedures are set out in documents in the Powerco Business Management
consumer consultation as common sense – essentially, our job is made easier if the
System. Contractors can receive instructions from the Contracts Works Manual and
communities in which we operate understand who we are and how our business
the Network Operations Manual, both of which are new initiatives that operate with
operates. In addition to Powerco-initiated consultation, a database is kept of all
online search applications.
complaints and suggestions registered by its customers through Powerco’s call
centre. These complaints are mapped by type for later reference in planning activities. The company carries out a policy of auditing its contractors for health and
safety compliance, along with their quality of workmanship. Health and safety
Economic efficiency is an important driver for maintenance, renewal and
audit breaches are divided into major and minor. We have a focus on continual
development work. A large proportion of repair work, refurbishment and asset
improvement on health and safety and have a target number of zero major breaches.
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 FY2011 – FY2021RISK MANAGEMENT ASSET LIFECYCLE PLAN
A large part of the asset management process involves managing risks associated with As Powerco’s network continues to age, more investment in renewal and
the assets on behalf of our stakeholders. For example, public safety risks may arise due maintenance is required to maintain current reliability levels. Powerco is spending
to inadequately secured equipment, risks of unexpected supply outages may arise due less on asset renewal than what asset age profiles indicate should be spent;
inadequately trimmed trees, or there could be inadvertent breaches of legislation. however, this must be viewed in the context of regulated allowable revenue. The
required increase in replacement costs is demonstrated in the following figure.
Powerco’s Board and management are committed to maintaining a business
environment that demonstrates good corporate governance practices. Risk
management is therefore an integral part of Powerco’s business to support effective All Assets Replacement Profile
decision-making and provide assurance. 140
The aim of the risk management programme is to identify and understand the 120
Replacement Cost ($m)
likelihood, consequence, control effectiveness, and action plans required to make 100
risk levels acceptable. 80
The risk management programme is supported by Powerco’s corporate insurance 60
programme, which includes low-probability and high-impact events. 40
Our approach to risk management is aligned to the new AS/NZS ISO 31000:2009 20
standard for risk management. 0
2011
2012
2013
2014
2015
2016
2017
2018
2019
2020
2021
2022
2023
2024
2025
2026
2027
2028
2029
2030
More in-depth details on Powerco’s risk management programme are provided in
Section 6 of our full AMP. This section on risk management has now been moved ODV Replacement Cost (March 2010 quantities in $2004 terms) Year of Replacement (FY)
to the middle of the AMP from being at the end. This reflects our view that the Current Replacement Cost (including 2.9 capital efficiency factor)
9 year rolling average, Current Replacement Cost (including capital efficiency factor)
management of risks is central to the asset management process rather than being
50 Year Average Current Replacement Cost (including capital efficiency factor)
simply an output. Renewal Budget (Real $2010)
Figure 13: Total Network Asset Replacement Profile
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 FY2011 – FY2021 17Maintenance Work Types An age- and obsolescence-based replacement strategy is applied to assets with a
Powerco’s maintenance work comprises the following elements: high level of technical complexity or a high level of interconnectedness with other
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
• Routine inspections and condition assessments; availability of spares, or for standardisation or changes in technology. This strategy is
• Routine servicing; applied to equipment such as zone substation switchgear, SCADA equipment and
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’ hence. Beyond this,
• Evaluating faults to predict maintenance or renewal requirements; renewal 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 risk, significant
reliability of supply consequence 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 FY2011 – FY2021NETWORK DEVELOPMENT PLAN
The network security criteria describe the factors considered when preparing the long- Figure 14 below shows projected demand growth for the next five years.
and medium-term development plans. Load forecasts are presented and these, along
with the security criteria, culminate in the capital works programme for development. Zone Substation Maximum Demand Growth
Powerco has a range of development plans for different categories of equipment and 5.0%
customer bases. 4.0%
Network security of supply is a measure of the resilience of the network to 3.0%
Percentage Growth
operational changes, such as planned outages (e.g. those required for maintenance), 2.0%
and unforeseen events (e.g. forced outages, such as those caused by equipment
1.0%
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, 0.0%
somewhat akin to a network balance sheet. -1.0%
Powerco’s security of supply criteria have been set taking into account the -2.0%
Electricity Engineers’ Association’s Security of Supply Guidelines and the report, 2005 2006 2007 2008 2009 2010 F 2011 F 2012 F 2013 F 2013 F 2015 F
entitled “Interaction between Transmission and Distribution System Planning” Powerco Powerco Prudent Powerco Probable
from the CIGRE/CIRED Working Group, as well as the findings of the customer Eastern Eastern Prudent Eastern Probable
Western Western Prudent Western Probable Year
communications process.
Load forecasting for the purposes of the asset management process is based on Figure 14: Powerco Aggregate Maximum Demand Growth
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 FY2011 – 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 FY2021 is shown in the diagram below.
• Protection and control developments, including SCADA, load control and
Total Network Capex
metering;
160 2.00
• Environmental performance and improvement;
140 1.75
• Safety performance enhancement; and
Nominal Expenditure ($m)
120 1.50
• Smart network implementation.
Inflation Index
100 1.25
80 1.00
The network enhancement processes are driven by several of the “big picture”
0.75
strategic themes of renewal and modernisation, automation, safety management and 60
“smartening” the network. 40 0.50
20 0.25
The major network enhancement projects Powerco wishes to undertake are
0 0
described in the maps that follow in this summary AMP. All network enhancement
2009 A
2010 A
2014 F
2015 F
2016 F
2017 F
2018 F
2019 F
2020 F
2021 F
2006 A
2007 A
2011 B
2012 F
2013 F
2008 A
projects will also go through the multi-stakeholder assessment process.
Routine & Preventive Maintenance Inflation Index Financial Year
Figure 15: 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 FY2011 – FY2021OPERATIONAL EXPENDITURES
Operational expenditures are those expenditures directly associated with running The operational expenditure forecasts are denominated in nominal dollar values in
the electricity distribution network that cannot be capitalised. These include line with the disclosure requirements. The inflation index is also shown in the graph.
maintenance expenditures required to operate or maintain the assets to achieve their
original design economic lives and service potentials. Powerco’s maintenance work Total Direct Operational Expenditure
comprises the following: 50 2.00
• Routine condition-monitoring; 1.75
40
Nominal Expenditure ($m)
1.50
• Routine servicing;
Inflation Index
30 1.25
• Evaluation of inspection and condition-monitoring results to determine any
1.00
maintenance requirements;
20 0.75
• Evaluating faults to predict condition-monitoring and maintenance requirements;
0.50
10
• Performing maintenance overhauls; 0.25
• Rotable asset relocation; 0 0
2009 A
2010 A
2011 B
2012 F
2013 F
2014 F
2015 F
2016 F
2017 F
2018 F
2019 F
2020 F
2021 F
2006 A
2007 A
2008 A
• Fault repair; and
• Network operations. Routine & Preventive Maintenance Inflation Index Financial Year
The operating and maintenance expenditures also include direct management Figure 16: Total Direct Operational Expenditure
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 expenditures to FY2021 are shown in
Figure 16 (blue-coloured bars) along with the actual (A) capital expenditures from the
FY2006 to FY2010 periods (purple bars) and the budgeted capital expenditure for
FY2011 (green bar).
SUMMARY ASSET MANAGEMENT PLAN ELECTRICITY NETWORKS FY2011 – FY2021 21You can also read
