INFORmATION DISCLOSURE FOR ELECTRICITY NETWORKS 2012-2021

ASSET MANAGEMENT PLAN ELECTRICITY NETWORKS FY2011 – FY2021 1

INFORmATION DISCLOSURE FOR ELECTRICITY NETWORKS 2012-2021

2 SUMMARY ASSET MANAGEMENT PLAN ELECTRICITY NETWORKS FY2012 – FY2021

contents

EXECUTIVE SUMMARY .................................................................................. 2

POWERCO AND THE NEW ZEALAND ELECTRICITY INDUSTRY ................... 4

OUR ELECTRICITY NETWORK ...................................................................... 6

ASSETS COVERED ........................................................................................ 7

THE ASSET MANAGEMENT PLAN AND PROCESS ....................................... 8

PURPOSE OF THIS SUMMARY AMP ............................................................. 9

HOW TO PROVIDE FEEDBACK ..................................................................... 9

PROCESS OVERVIEW ................................................................................... 9

ASSET MANAGEMENT STRATEGY OVERVIEW ........................................... 10

WHO WANTS WHAT FROM THE ASSETS? ................................................. 12

STATE OF THE ASSETS ............................................................................... 15

PERFORMANCE AGAINST TARGET OVERVIEW .......................................... 15

RISK MANAGEMENT ................................................................................... 17

ASSET LIFE CYCLE PLAN ........................................................................... 17

NETWORK DEVELOPMENT PLAN ............................................................... 19

NETWORK PERFORMANCE ENHANCEMENT ............................................. 20

CAPITAL EXPENDITURE .............................................................................. 20

OPERATIONAL EXPENDITURE .................................................................... 21

FINANCIAL ................................................................................................... 22

ASSET MANAGEMENT IMPROVEMENT ...................................................... 23

INFORMATION SYSTEMS ............................................................................ 23

SERVICE PROVISION STRATEGY ................................................................ 23

PROJECT MAPS .......................................................................................... 24

KEY DEFINITIONS ........................................................................................ 33

1SUMMARY ASSET MANAGEMENT PLAN ELECTRICITY NETWORKS FY2012 – FY2021


apply a risk-based prioritisation approach to our investments. We consider this to be an acceptable approach as long as this doesn’t erode our operating headroom and ability to manage the on-going risk of adverse network performance and/or result in grossly inefficient cost outcomes.

Powerco has a constructive relationship with its economic Regulator, the Commerce Commission, and where we believe long-term investment requirements may be compromised by the current regulatory allowances we will discuss this with them. We believe our AMP is an important starting point for engaging positively with the Commission and its advisers to ensure long-term investment levels remain appropriate. Whilst being primarily a document developed for Powerco’s own planning purposes, publication of the AMP also satisfies the regulatory requirement to disclose details of our Asset Management methodologies, in accordance with the Electricity Disclosure Handbook 2004 (as amended 2008).

Asset strategy and context for the 2012 AMP

Powerco understands that good Asset Management underpins the ability of our networks to deliver both supply quality and security, and value for consumers. We refer to Asset Management in this context as the co-ordinated policies and practices through which we acquire, analyse and review information on our assets, assess future network requirements and deliver cost-effective and safe investment in our network.

An important element of our Asset Management practice is a focus on continuous improvement and, to this end, we have recently assessed our practices against the criteria in the International Infrastructure Management Manual and using the Asset Management Maturity Assessment Tool prepared by Parsons Brinckerhoff NZ for the Commerce Commission. The results, whilst identifying some areas for improvement, mainly in relation to data capture and information systems, were on the whole positive. From a strategic perspective, we are seeking to extend our planning horizon out to 20-plus years to make more explicit the company’s strategy for delivering outputs and meeting demand over the long term.

eXecUtIVe sUMMARY

Welcome to the 2012 edition of our Summary Asset Management Plan (AMP). This Summary AMP outlines the key points, that we consider relevant to interested parties, from Powerco’s full AMP. It is intended to provide a starting point for discussions with key stakeholders and generate increased feedback on the vital service Powerco provides.

The full AMP is an important part of Powerco’s planning and investment framework. It describes for our customers, shareholders, employees and partners how we will manage our electricity distribution network to deliver the standards of reliability of electricity supply that our customers demand and the commercial performance that our shareholders expect.

The AMP is a technical document that sets the context for the annual investment we believe is necessary to maintain the performance of existing network assets and to provide future capacity and security through investment in new assets. The programmes of work identified in the AMP are based on our current understanding of customer and stakeholder requirements, and our knowledge of the existing and projected condition and performance of the assets on our networks.

The 2012 AMP covers a planning period from 1 April 2012 to 31 March 2022. However, our main focus is on ensuring that our work programmes for the next three to five years are clearly defined and form part of a longer-term asset strategy. Each year, a comprehensive update of the plan is completed to reflect changes on the network, new technologies that are available and work we have undertaken during the year to develop a better understanding of the overall health of our assets. The updated AMP also reflects independent feedback we have received on our Asset Management methodologies from the Commerce Commission and its expert advisors.

Our ultimate aim is to optimise the life-cycle costs of our assets whilst meeting agreed service targets and future demand requirements at an acceptable level of network risk – what we term achieving a steady state level of efficient asset investment. However, as a regulated supplier of electricity services, we have to work within the realities of a regulatory price cap, and so achieving everything that is identified in the plan is not always possible and, in some cases, we are required to


Our focus to date, on effective Asset Management has enabled the company to deliver strong outcomes for our customers over recent years. We have established the company as a low-cost operator in comparison with our peers in New Zealand, whilst maintaining a stable operating performance overall, which also benchmarks favourably. Ultimately, this has flowed through to lower prices for customers. Central to our strategy of containing costs has been the introduction of processes to optimise expenditure on our networks, within the regulatory allowances and to the level where returns to the company’s shareholders are considered acceptable.

However, whilst our headline network performance and the reliability of supply experienced by our customers (when taken in aggregate), has been broadly stable over recent years, our analysis indicates a slow but observable deterioration in asset condition and an increase in the average age of assets on certain parts of our network.

Perhaps, not surprisingly we are starting to observe a correlation between declining reliability performance and the health and age of our assets at these localised network “hot spots”. Left unchecked, we anticipate this declining performance trend will continue, resulting in an unacceptable level of supply interruption to our customers. As we set out in the full AMP, there are a number of short-term initiatives and investment decisions that we can apply to target interventions at the worst-performing parts of our network, but increased levels of investment will almost certainly be required in the longer term to redress this adverse performance trend.

However, as our customers, through increased prices, will ultimately fund investments, we believe it is important that the case for increased expenditure is well articulated, fully justified, and completed with appropriate consultation with our customers and the Regulator. We will be progressing this work over the next 18 months.

The full AMP provides more details on the issues discussed here. It also describes in detail our plans for addressing each issue. We look forward to discussing our plans with you.


PoWeRco AnD tHe neW ZeAlAnD electRIcItY InDUstRY

To provide relevant feedback on Powerco’s AMP, it is vital that any interested parties understand the structure of New Zealand’s electricity industry and Powerco’s role in it.

This country’s electricity industry has undergone considerable structural change over the past 14 years as the Government has worked to promote competition, reliability and fair prices for consumers.

As part of the distribution sector, Powerco sits midway along the supply chain. It contracts with Transpower for transmission services and with generators “embedded” in our networks. At present, we do not sell electricity – we own and operate the infrastructure that delivers it from the National Grid to individual homes and businesses. Our main customers are energy retailers with whom we have wholesale “use of system” agreements. We invoice retailers for the cost of our services, which comprise delivery (including transmission) charges, and maintaining and upgrading the distribution network. Retailers bundle up the cost of our services, along with their own services and those of generators, into customers’ monthly electricity bills. Retailers, which compete for customers, set the overall price for the end-consumer.

The different sectors of the industry are described next.


1. Generation

Generators, as the name suggests, are the companies that generate electricity in power stations. Generators are also entitled to sell electricity to consumers and energy retailers. Numerous generation sites around the country supply electricity to the National Grid.

2. transmission

Transpower owns and operates the National Grid, which comprises pylons, high-voltage cables and switchgear for transmitting bulk electricity from generation sites to distributors.

Transpower transmits electricity from generating stations to 178 Grid Exit Points (GXPs) around New Zealand. These GXPs are the points of supply for distribution networks like Powerco’s.

3. Distribution

At the GXPs, electricity is transformed to lower voltages then distributed to end-users via overhead lines and underground cables by local distribution (lines) companies. There are currently 29 distribution companies, which operate within set boundaries and range from publicly listed companies to community-owned trusts.

The 1998 Electricity Reform 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.

4. Retailing

Retail companies sell delivered electricity to end-consumers. Retailers bundle up the costs from the other sectors of the industry, along with their own costs to run a retail business, and provide electricity consumers with a monthly bill. They set the final price consumers pay for electricity. These companies are also allowed to participate in the generation sector.

5. consumers

Residential and business consumers buy delivered energy from retail companies. Large industrial and commercial consumers also purchase electricity from retail companies but may also have the option of contracting directly with distribution companies for electricity distribution services.

Figure 1: Sectors of the New Zealand Electricity Industry


oUR electRIcItY netWoRK

Powerco is New Zealand’s second largest electricity distributor in terms of customer connections and largest in terms of geographical area covered and the length of our network. We own and operate a large network of electricity distribution assets that, over the last year, delivered 4652 GWh of electricity through approximately 30,000km of lines and cables to more than 319,000 consumer connections. Powerco’s networks supply electricity to a diverse range of communities and consumer types, from major provincial centres with highly interconnected CBD networks, through to remote rural communities; from large industrial plants to small back-country shearing quarters. Powerco’s networks cover Thames-Coromandel, Hauraki, Tauranga and Western Bay of Plenty, Matamata Piako and South Waikato (collectively known as our Eastern Region) and Taranaki, Whanganui, Rangitikei, Manawatu, Tararua and Wairarapa (collectively known as our Southern and Western Regions).

OPERATIONS

Electricity NetworksElectricity distribution networks in the Tauranga, Thames, Coromandel, Eastern and Southern Waikato, Rangitikei, Taranaki, Whanganui, Manawatu and Wairarapa regions.

Figure 2: Powerco Electricity Network Operations Map


Assets coVeReD

The full AMP, to which this summary refers, provides detailed information on Powerco’s fixed electricity network assets. The following graphs and table provide a summary of the assets covered.

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Electricity Network Replacement Cost by Asset Type

Overhead Line Underground Cable Distribution Transformers

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Figure 3: Electricity Network Asset Replacement Cost by Asset Type

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Subtransmission Zone Substation & GXP Protection & Control Distribution

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Figure 4: Electricity Network Asset Replacement Cost by Functional Category (2004 ODV)

Replacement Cost by Asset Category

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Figure 5: Replacement Cost by Asset Category

Table 1: Key Network Statistics

Key Network Statistics as at 31 March 2012 EasternSouthern &

Western Total

Length of Overhead Circuit (km) 7,679 14,644 22,323

Length of Underground Circuit (km) 4,407 3,192 7,600

Subtransmission Circuit Length (km) 592 1,011 1,603

Distribution Circuit Length (km) 5,828 10,780 16,609

Low-Voltage Circuit Length (km) 5,667 6,044 11,711

Number of Zone Substations and Switching Stations 45 73 118

Zone Substation Transformer Capacity (MVA) 748 962 1710

Distribution Transformer Capacity (MVA) 1,418 1,548 2,967


tHe Asset MAnAGeMent PlAn AnD PRocess

With Powerco’s electricity network assets ranging in age from new to more than 50 years old, effective long-term planning is a fundamental requirement of our business. Our AMP is an integral part of that planning because it not only explains 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.

The full AMP contains specific details on Powerco’s short- and long-range planning for network development, renewal and maintenance. In other words, the AMP is a high-level document providing management, stakeholders and any interested parties with a broad overview of Powerco’s asset management policies, asset details, service levels, capital and maintenance works planning, expenditure forecasts, risk management and performance evaluation.

Incorporating information from a range of other internal documents, the AMP sets out the performance criteria for the assets, and summarises the actions needed to achieve those performance criteria.

Developing the AMP is a key step in ensuring that the needs of all stakeholders are properly considered and incorporated into Powerco’s long-term Asset Management strategies. It also ensures that plans provide, subject to any regulatory constraints, the optimum balance between levels of service and the efficient costs to provide the required service. Figure 6 illustrates the structure of the full AMP and what each section is trying to address.

Who wants what from the assets?

What is the state of the assets?

What performance are we targeting from the assets? How are we doing vs. the target? What are the gaps?

How are we managing the network and solving any performance gaps?

What does this mean for the works programmes and required expenditure?

How can we improve?

Section 2

Define StakeholdersDefine AM Drivers

Section 3

Describe Assets

Section 4

Set Performance Targets

Section 5

Performance Evaluation

Section 6

Analyse Network Risks

Section 7, 8 and 9

Develop Work ProgrammesLinked with AM Driver

Section 10Set Expenditure Forecasts

Section 7

Set Asset Life Cycle StrategyAnalyse Renewal Needs

Section 9

Reliability, Safety, Environment Enhancement NeedsProtection & Control, Smart Network Development

Section 8

Security Criteria Prepare Load Forecasts System Growth Needs

Section 11

Develop AM Improvement Initiatives

Figure 6: Structure of Asset Management Plan


PRocess oVeRVIeW

The Asset Management process requires that electricity is provided at the most efficient cost. This is a process of many parts, including:

strategy

Long-term strategic direction for the management of the assets and the business operations. This is the key interface for customer consultation and corporate strategy.

Planning

This process involves planning for the renewal, development, maintenance and operation of the assets.

service provision

This involves the delivery of construction, maintenance and operating services on the network assets.

network operations

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 service providers.

Information

This involves the maintenance of, and reporting from, the asset information databases.

There is, of course, extensive and constant interaction between these processes, and with corporate, customer and regulatory management teams.

PURPose oF tHIs sUMMARY AMP

Electricity distribution networks and the Asset Management processes that drive them are very complex. Therefore, a huge amount of information is required to compile a thorough AMP. This complexity and level of detail can act as a barrier 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, which is intended to identify the key issues relevant to the majority of interested parties. Anyone interested in Powerco’s AMP or operations in general is encouraged 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 full AMP is available at:

www.powerco.co.nz/Publications-and-Disclosures/Disclosures/Electricity

Please note, this Summary AMP is intended to be consistent with the full AMP published in April 2012. Therefore, commentary, figures and dates contained within this Summary AMP reflect those from the published date for the full AMP.

HoW to PRoVIDe FeeDBAcK

Powerco provides a vital service to your community. Therefore, it is vital that you 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 can be provided in the following ways:

• By email: [email protected]

• By telephone: 0800 POWERCO (0800 769 3726)

• By post: Consultation Manager C/- Powerco Ltd Level 2, 84 Liardet St Private Bag 2061 New Plymouth 4342


Asset MAnAGeMent stRAteGY oVeRVIeW

At its highest level, the Asset Management process seeks to find and optimise the most efficient trade-off between cost, service and risk. By minimising the costs, the asset manager may compromise on asset performance and asset risk; by minimising the asset risk, service performance may be compromised and costs increased. These three areas are intrinsically linked and the asset manager seeks to achieve the appropriate balance between them. This is represented in the following diagram.

NETWORK ASSETS

COST LEVEL OF RISK

PERFORMANCE LEVELS

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Figure 7: Cost, Performance and Risk Balance

Powerco’s AMP identifies and provides details on the following key electricity Asset Management-related strategies:

1. Renewal and modernisation: Modernisation of the network involves the replacement and updating of our aged assets to reduce the risk of asset failure, which can result in interruptions to supply. Powerco’s required renewal expenditure is forecast to trend upwards as the wave of assets installed between the 1950s and early 1980s approaches end-of-life. Figure 8 shows the increase in forecast renewal expenditure.

Asset Renewal Capital & Operational Expenditure

Asset Replacement and Renewal Refurbishment and Renewal Maintenance

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Figure 8: Actual and Forecast Asset Renewal Capital and Maintenance Expenditure


5. Distribution automation and more interconnections at feeder level: Smart network plans, which are a recent addition to Powerco’s AMP, aim to be self-healing and capable of shifting the load from peak times. They are something to which regulators in many countries are now paying greater attention because they are perceived to offer customers improvements in performance and cost. Smart networks, which offer flatter, more manageable patterns of demand, fit well with Powerco’s business plan objectives of improving reliability through automated solutions, and managing increasing investment profiles through non-asset solutions.

6. 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.

2. Increasing the redundancy (duplication) of the core network: Redundancy means that if one critical component fails or needs to be taken out of service, there is another component ready to continue supply. This includes increasing zone substation capacity and installing more network automation. Powerco 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.

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 suite of information systems. There has also been continuing development of design, 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 systems and processes will allow us to extend asset lives.

4. Management of public safety: Electrical equipment is capable of causing serious harm or death so safety is of utmost importance to Powerco. Safety performance enhancement is to a large extent workforce-related, and is about fostering safety-focused leadership and culture within both Powerco and its contractors. Most of the safety initiatives described in the full AMP are, therefore, people-focused rather than network equipment-focused. Nevertheless, some network projects are centred on eliminating safety hazards. Safety enhancement programmes are driven from a variety of perspectives and sources. They are generally approached with risk-based techniques. Powerco has an established Health and Safety Plan and its purpose is to document the proposed pathway we will take to execute and improve all areas of our Health and Safety performance. The main areas of focus are:

• Committed safety leadership;

• Business-wide safety culture; and

• Continuous improvement of safety systems.


WHo WAnts WHAt FRoM tHe Assets?

The following figure illustrates the relationship between Powerco’s main stakeholders, their drivers and the Asset Management process. The diagram now includes a recognition of the business planning process as the stakeholder drivers are equally (and in some cases more appropriately) applicable to the business planning process.

Asset Management Process

Business Planning Process

Customers/Consumers

Assets

Government & Regulator

Owners & Lenders Employees & Contractors

Safety Workflow Certainty Market Costs

Service/Price Safety Load Growth

Asset Performance Asset Age/Condition

Development, Renewal, Maintenance, Operation

Long-Term Value (Productivity & Utilisation) Risk Management

Economic Efficiency (Long-Term Interest of Consumers) Environmental Safety & Compliance

Figure 9: Asset Management Process Stakeholders and Drivers

Powerco uses a range of best-practice methods to undertake consultation and to identify stakeholder interests, including, but not limited to:

• Key Account Managers assigned to liaise directly with large or industrial consumers.

• Consumer surveys conducted at events like the Mystery Creek and Central Districts Agricultural Field Days. Surveys are designed to help Powerco understand if consumer expectations about the quality of their electricity supply are being met. Attendance of Powerco staff at these events also provides consumers with an opportunity to discuss any concerns they may have directly with Powerco.

• Workshops and focus group-type 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. We ensure this happens by involving a wide range of Powerco people in customer consultation, including engineers, key decision-makers and business leaders. This way, consumer feedback goes directly to the people who are able to act on it.

Powerco Chief Engineer Michael Whaley responds to a question at a consultation with members of the Taranaki Chamber of Commerce. Also on hand from Powerco to listen to consumer feedback were (from left to right) Planning Manager Peter Armstrong, Regulatory Manager Charlotte Littlewood and Network Operations Manager Phil Marsh.


Powerco Performance Engineer Ken Pattie discusses Powerco’s BasePower solution for remote rural consumers at the Whanganui River settlement of Matahiwi.

Figure 10 below illustrates the influences of the various drivers affecting the total amount spent on the network over time.

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Asset Management ProcessTime

Renewal

Asset Age,Condition &

Configuration

Development

Utilisation

Productivity

Long-termShareholder

value

Regulated Revenue

O&MIndirect Costs

Service LoadGrowth

Safety

Environmental

RiskMgmt

Market CostsFor Work

Figure 10: Illustration of the Influence of Asset Management Drivers

The diagram reflects the current situation, which can be summarised as upwards 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.


At a strategy level, constraints, Asset Management drivers and the needs and interests of various stakeholders are evaluated and considered as part of the corporate planning process. These are all applied during the network planning process.

It must be recognised that, with such a wide range of stakeholders, their drivers and needs will also vary widely. For example, Powerco’s consultation to date indicates that most consumers wish to see reliability and quality standards improve or remain at present levels but do not wish to pay more for electricity overall. However, 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-constraining regulation, Regulators seek to put downwards pressure on electricity prices. The regulation is limited in its effectiveness in constraining overall retail prices because the majority of a retail electricity bill is made up of components that are outside Powerco’s control. However, it does have a large impact on how much Powerco is able to invest back into the network – at the same time, Powerco must continue to maintain reliability and quality standards while still making a fair return to investors. As such, Powerco seeks to operate an efficient business and to ensure regulatory consistency, predictability, transparency and accountability to help lower perceived investment risk, thus allowing for investment at appropriate levels required to achieve the optimal balance of all stakeholder expectations. It is at the strategy level where the best overall balance between these drivers and needs is sought.

At a tactical and operational level in the network planning process, the investment policy and Asset Management strategy is shaped by Powerco’s multi-stakeholder assessment process. This process is a key part of the way in which network development and renewal programmes are formed. Powerco faces a constant balancing act to ensure the needs of consumers and stakeholders are met at the optimal levels of price and quality. Feedback from electricity retailers and consumers is essential in ensuring we achieve the best possible balance for the widest possible range of stakeholders.

To help achieve the optimal balance, projects are assessed using a multi-stakeholder optimisation process (known as Coin Optimiser), whereby the projects are reviewed against a set of four strategic objectives. The primary objectives of the optimisation process are:

• To provide a consistent approach to the development of capital works programmes that balances (potentially conflicting) stakeholder requirements;

• To eliminate (or mitigate) any high risks to public safety, network performance, customer outcomes, public relations, or employee engagement; and

• To maximise the strategic value of the portfolio of projects that make up the capital works programme.

Further details on the optimisation process are set out in Section 2.5 of the full AMP.


stAte oF tHe Assets

The age profile by replacement costs of the entire infrastructure asset base (on current replacement costs) is presented as a nine-year moving average and is shown in the diagram below.

Total Asset Replacement Cost vs Age

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Figure 11: Total Asset Age Profile.

Condition monitoring shows that the assets are generally in the condition expected of their age.

PeRFoRMAnce AGAInst tARGet oVeRVIeW

Table 2: Current Electricity Asset Performance

Electricity Measure Measure (2011) Target for 2013 Commentary

Network reliability (SAIDI)

273.93 min/customer (actual)

241.76 min/customer (excluding major storm events)

<210 min/customer (excluding major storm events)

We believe that the static SAIDI numbers are masking an underlying deterioration in performance at certain locations and within specific asset groups. Left unchecked and in the absence of increased investment, we expect further deterioration in performance in these “hot spot” areas over time

Network reliability (SAIFI)

2.62 interruptions/ customer (actual & excluding major storm events)

<2.8 interruptions/ customer (excluding major storm events)

See above

Customer density

10.7 ICPs/km N/A Urban/rural mix, below weighted industry average

Average consumption

14.6 MWh/ICP N/A Low (presenting growth opportunity). Benchmarking weakness

Direct operating costs

$1146/km $1310/km Efficient spend but we are becoming increasingly concerned with the adequacy of the operating expenditure

Capex spend $2666/km Benchmark on information disclosures

Efficient level of spend, around the median for the industry.

Asset investment

$4128/ICP $4500/ICP Efficient, especially when compared to similar density distribution companies

Load factor 66% 65% High load factor, good spread of customer load

Zone substation capacity utilisation

51% 40% Higher than target utilisation. Indicates investment needed in zone substation capacity

Security Substation and feeder security

N/A Generally appropriate. Standards are commensurate with load. Increasing need for investment in subtransmission lines

Asset condition 25.81 years average age

Asset condition reports

N/A Asset condition well monitored. Appropriate asset condition commensurate with age, but increasing investment profile


Performance looks at the consumer-related service requirements, and the confirmation of these requirements through the consumer consultation process. It then looks at the ways in which economic efficiency is assured in the Asset Management process, contractor performance, safety performance, environmental matters and statutory compliance.

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 density and ratio of overhead to underground construction. They also consider past planning practice, economic factors, recognised international best practice and safety.

Powerco achieves a balance between owner requirements and legislative, regulatory and consumer expectations in setting these performance criteria. The levels of service adopted by Powerco for its Asset Management Plan are based on the internationally recognised measurements, SAIDI, SAIFI and CAIDI (which are acronyms for formulae covering the duration and frequency of power outages, and their customer bases) and accepted New Zealand lines companies’ best practice.

Powerco conducts an extensive Customer Communications Programme to verify that performance targets match consumer and stakeholder expectations. Consumer consultation is a requirement of the Commerce Act (Electricity Distribution Thresholds Notice 2004). The primary intention of this requirement is to ensure distribution businesses effectively consult with, and take into account, the views of their customers and stakeholders. Regardless of regulatory requirements, Powerco views consumer consultation as common sense – essentially, our job is made easier if the communities in which we operate understand who we are and how our business operates. In addition to Powerco-initiated consultation, a database is kept of all complaints and suggestions registered by its customers through Powerco’s call centre. These complaints are mapped by type for later reference in planning activities.

Economic efficiency is an important driver for maintenance, renewal and development work. A large proportion of repair work, refurbishment and asset replacement work is undertaken only after economic analysis to determine the most cost-effective solution. This frequently involves the choice between replacement and continued maintenance.

Safety is a critical driver of the Asset Management process. Electrical plant and equipment are capable of causing serious harm. Measures must be taken to ensure, as far as practicable, the safety of employees and the public. To this end, the network must be maintained in a way that meets statutory requirements, follows good engineering practice, and is considered safe in accordance with recognised industry standards.

Safety is determined by a combination of:

• Asset design;

• Maintaining the assets in a safe condition;

• Safe operating and work practices; and

• Statute: The Electricity Regulations, Electrical Codes of Practice and the Australian/New Zealand Standard Wiring Rules. There is also the Safety Manual – Electricity Industry (SM-EI), which contains the framework for Powerco’s safety-related network operation. Powerco has now implemented its network operating procedures to comply with the requirements of SM-EI. Additionally, there are the Building Act, the Health and Safety in Employment Act, the Hazardous Substances and New Organisms Act 1996, and various guides set out by the Electricity Engineers’ Association.

Powerco has adopted the practice of working as a reasonable and prudent operator to guide safe Asset Management practices. Its health and safety policy and procedures are set out in documents in the Powerco Business Management System. Contractors can receive instructions from the Contracts Works Manual and the Network Operations Manual, both of which are new initiatives that operate with online search applications.

The company carries out a policy of auditing its contractors for health and safety compliance, along with their quality of workmanship. Health and safety audit breaches are divided into major and minor. We have a focus on continual improvement on health and safety and have a target number of zero major breaches.


RIsK MAnAGeMent

A large part of the Asset Management process involves managing risks associated with the assets on behalf of our stakeholders. For example, public safety risks may arise due to inadequately secured equipment, risks of unexpected supply outages may arise due to inadequately trimmed trees, or there could be inadvertent breaches of legislation.

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 decision-making and provide assurance.

The aim of the risk management programme is to identify and understand the likelihood, consequence, control effectiveness, and action plans required to make risk levels acceptable.

The risk management programme is supported by Powerco’s corporate insurance programme, which includes low-probability and high-impact events.

Our approach to risk management is aligned to the new AS/NZS ISO 31000:2009 standard for risk management.

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 to the middle of the AMP from being at the end. This reflects our view that the management of risks is central to the Asset Management process, rather than being simply an output.

Asset lIFe cYcle PlAn

As Powerco’s network continues to age, more investment in renewal and maintenance is required to maintain current reliability levels. Powerco is spending less on asset renewal than what asset age profiles indicate should be spent; however, this must be viewed in the context of regulated allowable revenue. The required increase in replacement costs is demonstrated in the following figure.

All Assets – Replacement Profile

Rep

lace

men

t C

ost

($m

)

0

20

40

60

100

140

Year of Replacement (FY)

2012

2013

2014

2015

2016

2017

2018

2019

2020

2021

2022

2023

2024

2025

80

120

2026

2027

2028

2029

2030

2031

ODV Replacement Cost (June 2011 quantities in $2004 terms)

Current Replacement Cost (including capital efficiency factor)

9 year rolling average, Current Replacement Cost (including capital efficiency factor)

50 Year Average Current Replacement Cost (including capital efficiency factor)

Renewal Budget (Real $2011)

Figure 12: 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.


Maintenance Work types

Powerco’s maintenance work comprises the following elements:

• Maintenance management and maintenance planning;

• Routine inspections and condition assessments;

• Routine servicing;

• Non-routine servicing (overhauls);

• Fault first response, callouts;

• Asset relocations (where an asset is simply moved and not replaced);

• Evaluation of inspection and condition-monitoring results to determine any maintenance or renewal requirements (this may be performed in the field at the time of inspection/condition-monitoring or later by engineering staff);

• Evaluating faults to predict maintenance or renewal requirements;

• Performing corrective maintenance or renewal as a result of the above; and

• Service disconnections.

Asset Renewal strategic themes

Powerco’s scheduled asset renewal strategy encompasses three main themes, each of which is appropriate for the different asset types.

A run-to-failure strategy is applied to assets where the consequences of failure are not major and where the costs of on-going condition-monitoring may outweigh the costs of failure. This strategy is applied to equipment such as small pole-mounted distribution transformers, underground distribution feeder cable spurs, LV cables, expulsive fuses and surge arresters.

A risk- and condition-based replacement strategy is applied where there is a significant implication due to failure, such as major health and safety risks, significant reliability of supply consequences or a major expense in repair. This strategy is applied where on-going condition inspections are needed to comply with regulations or where the costs of condition-monitoring are small compared with the costs associated with failure. It is applied to equipment such as poles, cross-arms, important distribution feeder cables and zone substation transformers.

An age- and obsolescence-based replacement strategy is applied to assets with a high level of technical complexity or a high level of interconnectedness with other network assets (that is, the operation of a system as a whole is dependent on the integrity of several assets). It includes the need to replace equipment because of the availability of spares, or for standardisation or changes in technology. This strategy is applied to equipment such as zone substation switchgear, SCADA equipment and protection relays. Reactive renewal strategies are based around the need to renew assets that have failed and need to be replaced in a short time or to renew assets with a high imminent risk of failure.

Asset Renewal Forecasting Process

The most accurate means of forecasting renewal needs for the network is through knowledge of the condition of the assets. A condition-based renewal programme is the most accurate for a period of around one to five years. Beyond this, renewal forecasts are best made using age profiles.

Renewal forecasting involves determining the quantity of assets needing renewal (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 being compiled in the Maintenance Management system, and so the full extent of condition-based renewal needs is still in progress.

Estimates of condition-based renewal forecasts, calculated on the information available, have been entered into Powerco’s Improvement Register and an extract of the renewal expenditure needs from this is given in Section 10 of the full AMP.

life-extension Practices

Various life-extension techniques have been tried by Powerco, but apart from transformer refurbishment, these really apply to only specialised assets, and many of the techniques have had only limited degrees of success.

Redeployment, Upgrade and Disposal of existing Assets

Powerco is presently developing its policy on reusing second-hand materials, such as poles and conductors, and rotables, such as 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.


netWoRK DeVeloPMent PlAn

The network security criteria describe the factors considered when preparing the long- and medium-term development plans. Load forecasts are presented and these, along with the security criteria, culminate in the capital works programme for development.

Powerco has a range of development plans for different categories of equipment and customer bases.

Network security of supply is a measure of the resilience of the network to operational changes, such as planned outages (e.g. those required for maintenance), and unforeseen events (e.g. forced outages, such as those caused by equipment failure or storms, as well as unexpected customer loads). The ability of the network to accommodate unforeseen events is a factor that can influence reliability of supply, somewhat akin to a network balance sheet.

Powerco’s security of supply criteria have been set taking into account the Electricity Engineers’ Association’s Security of Supply Guidelines and the report, entitled Interaction between Transmission and Distribution System Planning from the CIGRE/CIRED Working Group, as well as the findings of the customer communications process.

Load forecasting for the purposes of the Asset Management process is based on growth in peak-time demands. Peak requirements need to be understood to determine the required capacity of a lines infrastructure that will support local load growth.

The most significant influences on demand growth continue to result from changes in population and household composition, and the growth or relocation of industry. Internal migration patterns thus have a strong influence on the observed demand growth. Government initiatives to promote energy efficiency and the preference for renewable sources of energy have been considered in preparing the forecast growth.

Known industry changes – such as oil and gas exploration and development; primary sector changes; and infrastructure, such as ports – account for step changes seen in forecasts. The establishment of major new industries can have a considerable impact within a short time on the level of demand experienced in any given locality. The possibility of new spot loads is monitored through Key Account Managers, Resource Management Act notifications and consumer consultation.


netWoRK PeRFoRMAnce enHAnceMent

Powerco’s network enhancement plans encompass:

• Reliability improvements, which take into account feeder reliability performance, historical trends and plans for automation;

• Protection and control developments, including SCADA, load control and metering;

• Environmental performance and improvement;

• Safety performance enhancement; and

• Smart network implementation.

The network enhancement processes are driven by several of the “big picture” strategic themes of renewal and modernisation, automation, safety management and “smartening” the network.

The major network enhancement projects Powerco wishes to undertake are described in the maps that follow in this Summary AMP. All network enhancement projects will also go through the multi-stakeholder assessment process.

cAPItAl eXPenDItURe

Capital expenditure (capex) is the budget used to create new assets or to increase the service performance or potential of an existing asset. The forecast total capital expenditure to FY2022 is shown in the graph below.

Nom

inal

Exp

end

iture

($m

)

0

20

40

60

80

100

120

140

160

2006

A

2007

A

2008

A

2009

A

2010

A

2011

A

2012

B

2013

F

2014

F

2015

F

2016

F

2017

F

2018

F

2019

F

2021

F

2022

F

2020

F

Total Network Capex

Financial Year

Figure 13: Total Network Capital Expenditure

Capital budgets, under the categories of System Growth, Reliability, Safety, Environment and Asset Renewal, are monitored at the end of every month and budget re-forecasts are made quarterly. A portion is set aside for reactive or unforeseen work, such as equipment failure or storms. Under- or over-spend in this category is accommodated by juggling other projects in the capital programme.

Allowance is also made for opportunities to purchase land for future zone substation sites or easements for lines. In our experience, gradual land- or easement-banking, as the opportunities arise to a well-thought-out development plan, is a more efficient way of developing the network than an urgent short-term focus.


oPeRAtIonAl eXPenDItURe

Operational expenditure is the expenditure directly associated with running the electricity distribution network that cannot be capitalised. This includes maintenance expenditure required to operate or maintain the assets to achieve their original design economic lives and service potentials. Powerco’s maintenance work comprises the following:

• Routine condition-monitoring;

• Routine servicing;

• Evaluation of inspection and condition-monitoring results to determine any maintenance requirements;

• Evaluating faults to predict condition-monitoring and maintenance requirements;

• Performing maintenance overhauls;

• Rotable asset relocation;

• Fault repair; and

• Network operations.

Operating and maintenance expenditure also includes direct management costs not immediately associated with creating network assets, such as customer management, network planning, network operating and managing service provider relationships. They include site leases, site service charges, network insurance, charter payments and other like costs. They may include the costs of decommissioning existing assets (where a new asset is not created).

The operating and maintenance expenditure forecast has been set based on benchmarked operational costs per asset replacement cost and per system length, based on present work levels, after adjustments have been made to allow for increased service provider efficiency (downwards) and growth in system length and ODV (upwards). These are confirmed against the asset maintenance plans developed using the maintenance strategy and Powerco’s present operating practices.

The forecast total operational and maintenance expenditure to FY2022 is shown in Figure 14 (blue-coloured bars) along with the actual (A) capital expenditure from the FY2006 to FY2011 periods (purple bars) and the budgeted capital expenditure for FY2012 (green bar).

The operational expenditure forecasts are denominated in nominal dollar values in line with the disclosure requirements.

Nom

inal

Exp

end

iture

($m

)

0

10

20

30

40

50

60

2006

A

2007

A

2008

A

2009

A

2010

A

2011

A

2012

B

2013

F

2014

F

2015

F

2016

F

2017

F

2018

F

2019

F

2021

F

2022

F

2020

F

Total Opex

Figure 14: Total Direct Operational Expenditure


FInAncIAl

A summary of the forecast capital and maintenance expenditure over the next 10 years is shown in the tables below.

Table 3: Capital Expenditure Forecast July to June Financial Year ($000) (Nominal $ Values)

Capex summary breakdown FY 2006 A FY 2007 A FY 2008 A FY 2009 A FY 2010 A FY 2011 A FY 2012 B FY 2013 F FY 2014 F FY 2015 F FY 2016 F FY 2017 F FY 2018 F FY 2019 F FY 2020 F FY 2021 F FY 2022 F

Customer Connection 23,714 22,076 29,144 29,023 23,153 17,977 18,813 18,167 17,172 16,322 16,681 17,048 17,423 17,806 18,198 18,598 19,008

System Growth 11,563 14,472 15,951 18,853 23,424 18,883 24,294 20,490 19,361 19,792 25,283 25,856 26,439 27,037 27,647 28,270 28,892

Reliability, Safety and Environment 7,413 8,128 8,961 10,986 5,591 12,465 15,081 14,835 15,015 15,226 16,138 17,133 18,155 19,268 20,488 21,817 23,189

Asset Replacement and Renewal 16,526 14,164 15,626 20,710 21,659 26,209 25,552 33,869 37,264 41,011 45,146 49,728 54,444 59,662 65,436 71,829 78,875

Asset Relocations 2,635 2,453 3,238 3,225 1,821 3,092 2,316 2,245 2,342 2,227 2,276 2,326 2,377 2,429 2,483 2,537 2,593

Total Capex 61,851 61,293 72,920 82,797 75,647 78,626 86,056 89,608 91,154 94,579 105,523 112,091 118,838 126,202 134,252 143,053 152,558

Table 4: Operating & Maintenance Expenditure Forecast July to June Financial Year ($000) (Nominal $ Values)

Opex summary breakdown FY 2006 A FY 2007 A FY 2008 A FY 2009 A FY 2010 A FY 2011 A FY 2012 B FY 2013 F FY 2014 F FY 2015 F FY 2016 F FY 2017 F FY 2018 F FY 2019 F FY 2020 F FY 2021 F FY 2022 F

System Management and Operations 6,654 6,750 7,627 5,968 6,902 7,239 11,078 11,500 11,996 12,281 12,551 12,827 13,109 13,398 13,692 13,994 14,301

Routine and Preventive Maintenance 9,427 9,901 11,510 10,394 13,063 13,495 14,053 12,642 12,803 13,783 16,262 16,612 16,971 17,338 17,712 18,147 18,547

Refurbishment and Renewal Maintenance 7,683 7,615 6,918 8,938 6,783 6,853 7,001 8,428 8,536 9,189 10,841 11,075 11,314 11,559 11,808 12,098 12,364

Fault and Emergency Maintenance 4,353 4,314 5,990 5,064 5,941 6,826 6,105 7,023 7,113 7,657 9,034 9,229 9,428 9,632 9,840 10,082 10,304

Total Opex 28,118 28,580 32,045 30,364 32,688 34,413 38,237 39,593 40,448 42,910 48,688 49,744 50,822 51,926 53,052 54,321 55,516

Table 5: Total Expenditure Forecast July to June Financial Year ($000) (Nominal $ Values)

Expenditure Class FY 2006 A FY 2007 A FY 2008 A FY 2009 A FY 2010 A FY 2011 A FY 2012 B FY 2013 F FY 2014 F FY 2015 F FY 2016 F FY 2017 F FY 2018 F FY 2019 F FY 2020 F FY 2021 F FY 2022 F

Capital Expenditure 61,851 61,293 72,920 82,797 75,647 78,626 86,056 89,608 91,154 94,579 105,523 112,091 118,838 126,202 134,252 143,053 152,558

Operating Expenditure 28,118 28,580 32,045 30,364 32,688 34,413 38,237 39,593 40,448 42,910 48,688 49,744 50,822 51,926 53,052 54,321 55,516

Total 89,969 89,873 104,964 113,161 108,335 113,039 124,293 129,201 131,602 137,489 154,211 161,835 169,660 178,129 187,304 197,374 208,074


Asset MAnAGeMent IMPRoVeMent

Powerco has a philosophy of continual improvement in its Asset Management and customer management processes (as well as other business processes).

A gap analysis of the level of maturity of Powerco’s electricity network Asset Management processes is presented in Section 11 of the full AMP, along with specific system improvement projects.

InFoRMAtIon sYsteMs

Given Powerco’s history of growth and acquisition, standardisation of systems and processes are key strengths of Powerco’s employees and this has been a significant focus for management over recent years.

A range of information systems has been implemented at Powerco to support the Asset Management processes, covering spatial network data; works and financial management; and real-time operation and control of the network. Powerco has also established a continuous improvement team to deliver incremental improvements in systems, data and processes, and a range of significant data and system rationalisation projects are being undertaken.

Under continual refinement is Powerco’s maintenance management system, which includes the progressive roll-out of field automation. A significant recent refinement is the delivery of applications to service provider PCs and mobile devices, enabling field-capture of asset condition, defect and maintenance activity records, scheduled maintenance activity completion, prescribed test results and corrective maintenance work instructions.

seRVIce PRoVIsIon stRAteGY

Powerco has reviewed its service provision strategy and set the long-term direction for the management of construction and maintenance activities in line with its business model and corporate objectives.

The service provision strategy was revised during 2010 and the updated strategy is given below. The strategy was reviewed giving consideration to:

• Safety performance;

• Powerco’s corporate business drivers, including productivity improvement;

• Requirements to show cost effectiveness to Regulators;

• The current capabilities, strengths and weaknesses of the service provision market;

• The needs of the service providers; and

• The capabilities of the Asset Management Group in managing the outsourcing of construction and maintenance activities.

Powerco will increasingly use competitive market principles to deliver sustainable improvements in the cost, quality and safety of construction and maintenance services on the electricity and gas networks. The elements of the revised service provision strategy are:

• Facilitating service provider resources with expertise matched to the work requirement in the locations required;

• Allowing appropriate levels of service provider’s control over the inputs to its services to allow it to meet the service performance level;

• Utilising competitive tension through market-based mechanisms, such as tendering, to encourage continuous improvement in the cost of the delivered service;

• Setting the appropriate level of management of service providers while ensuring maximum control is maintained to deliver the desired service outcome;

• Maintaining a superior level of safety performance by service providers;

• Fairly allocating risk between Powerco and the service provider; and

• Creating and maintaining a strong body of network field knowledge within Powerco.

The service provision principles describe the use of tendered contracts with service providers. It is considered that this style of contract is the most appropriate commercial arrangement for Powerco to move ahead with its service providers for core construction and maintenance activities. Powerco’s Service Delivery strategy continues to deliver strong results in works completion performance.


PRoJect MAPs

The following maps show a selection of the major projects Powerco plans to undertake in the next five years. However, it must be noted that the projects and dates listed on the maps are indicative only. Planning and property considerations, and changing financial priorities across our networks may alter these. The total cost of some projects may not be fully reflected in these maps because of the five-year planning period used. Projects beginning near the end of this planning period may have additional costs in subsequent years that have not been included in this edition of the Summary AMP. The projects are categorised according to the Commerce Commission’s definitions of capital investment in a distribution network. These are:

• Replacement and Renewal – capital expenditure primarily associated with the progressive physical deterioration of the condition of network assets or their immediate surrounds or expenditure arising as a result of the obsolescence of network assets.

• System Growth – capital expenditure primarily associated with a change in demand on the network assets where the expenditure is not recoverable in total or in part through a contribution from the consumer(s) that is (are) responsible for the change in demand.

• Reliability, Safety and Environment – capital expenditure primarily associated with maintaining or improving the safety of the network for customers, employees and the public; with the improvement of reliability or service standards; and with meeting existing, new or enhanced environmental requirements.

It should also be noted that the maps show major projects only and that Powerco plans to undertake many more projects in addition to these. More detailed lists of proposed projects are set out in sections 7.13, 8.13 and 9.12 of Powerco’s full AMP. These include smaller and miscellaneous projects, as well as major projects, comprising many smaller tasks, such as pole, cross-arm and conductor replacements across entire regions.


Valley Region Subtransmission Map – Coromandel, Hauraki


Tauranga West Region Subtransmission Map


Tauranga East Region Subtransmission Map


Valley Region Subtransmission Map – Matamata Piako, South Waikato


Taranaki Region Subtransmission Map


Whanganui Region Subtransmission Map


Manawatu Region Subtransmission Map


Wairarapa Region Subtransmission Map


KeY DeFInItIons

AMP: Asset Management Plan.

CAIDI: Consumer Average Interruption Duration Index. The average duration of an interruption of supply per consumer who experienced an interruption in the period under consideration (usually a year).

Capital Expenditure (Capex): The expenditure used to create new assets or to increase the service performance or service potential of existing assets beyond their original design service performance or service potential.

Conductor: Wire or cable through which electricity travels.

Consumer: A person or organisation that receives electricity supply through a connection to Powerco’s network but is charged for the connection by an electricity retailer.

Cross-arm: A long piece of timber or concrete that goes across the pole and supports the overhead wire (conductor).

Distribution Transformer: A transformer is a device that changes voltage. Most distribution transformers change voltage from 11kV (but sometimes 6.6kV or 22kV) down to 400 or 230 volts.

Failure: An event in which a component or piece of equipment does not operate or ceases to operate as intended.

High Voltage: Voltage greater than 1000 volts (1kV).

ICP: Installation Control Point. This is the point of connection of a consumer to the Powerco network.

Insulator: A device made of material such as porcelain or glass that does not conduct electricity well and is, therefore, used to keep overhead wires (conductor) from touching each other or the pole/cross-arm.

Interruption: An unplanned loss of electricity supply of one minute or longer, affecting three or more ICPs, due to an outage on the network.

Low Voltage: Voltage lower than 1000 volts (1kV).

Maintenance: Activities necessary for retaining an asset as near as practicable to its original condition but excluding renewal of the asset.

Operational Expenditure (Opex): The expenditure directly associated with running the electricity distribution network that cannot be capitalised. This includes maintenance and operating expenditure.

ODV: Optimised Deprival Valuation. A methodology used to value electricity distribution network assets at the level at which they can be commercially sustained in the long term, and no more.

Outage: A loss of electricity supply.

RAB: Regulated Asset Base. The valuation of Powerco’s network according to the Commerce Commission’s rules, upon which Powerco is able to earn a return.

Redundancy: Having contingency components installed on the network. If one key component fails, there is another to perform the same role, which means there is no loss of electricity supply.

Refurbishment: Activities to rebuild or replace parts or components of an asset to restore it to a required functional condition and extend its life beyond that originally expected (which may incorporate some modification). Refurbishment is a renewal activity.

Renewal: Activities to replace an existing asset with one of equivalent service performance capability.

Repair: The restoration of the functionality of a network component, either by replacing parts or rectifying faults.

SAIDI: System Average Interruption Duration Index. The average length of time of interruptions of supply that a consumer experiences in the period under consideration (usually a year).

SAIFI: System Average Interruption Frequency Index. The average number of interruptions of supply that a consumer experiences in the period under consideration (usually a year).

Scheduled or Planned Outage: A planned loss of electricity supply, e.g. to undertake essential maintenance or renewal activities.

Security: The ability of the network to meet the service performance demanded of it during and after a transient or dynamic disturbance of the network or an outage to a component of the network.

Service Performance: The level of electricity supply service delivered in terms of quality, capacity and reliability.

Service Potential: The total expected future service performance of an asset. It is normally determined by reference to the service performance and economic life of similar assets.

Subtransmission Network: The subtransmission network carries electricity from Transpower or generation connection points to Powerco zone substations.

Zone Substation: A major Powerco building or site housing transformers and other equipment. At zone substations, electricity is converted from subtransmission voltage (33kV or 66kV) to distribution voltage (usually 11kV).


WWW.POWERCO.CO.NZPowerco welcomes feedback on this summary AMP, our full AMP, or any aspect of our business. Feedback can be directed to [email protected] or 0800 POWERCO (0800 769 3726)

Documents

INFORmATION DISCLOSURE FOR ELECTRICITY NETWORKS 2012-2021