ANNEX 1.

6
Network operating costs
March 2014
Annex 1.6: Network operating costs March 2014

Guidance for the reader

The purpose of this annex

This annex sets out the detailed engineering analysis underlying our network operating costs, which
are summarised in the core narrative.

All day every day, our operating teams work on the network to ensure that we can continue to
provide our customers with a reliable electricity supply. These activities are core to the service that
we provide.

The discussion on network operating costs in the core narrative adopts a proportionate approach.
We discuss our plans at a relatively high level and focus on the changes, relative to today, of specific
cost lines. This annex supports the core narrative and sets out the detailed engineering analysis
underlying our plan for network operations. In particular we set out:

 the volumes of work we are planning to undertake in the 2015-23 period in relation to
inspections and maintenance, tree-cutting, and repairing faults on the network;
 the detailed internal policies which govern the cyclical nature of these programmes, and
therefore determine the volumes we are projecting;

 the unit costs associated with these volumes;

 the benefits and outputs that will be delivered as a result of this investment; and
 our assessment of alternative options that we considered, including alternatives to renewal
investment such as repair and maintenance.

Our target audience for this annex

This annex is primarily aimed at stakeholders with prior knowledge of the engineering challenges we
face, and a technical understanding of our activities. While we have sought to limit the use of
technical language, in order to provide full information for stakeholders we have inevitably included
some concepts and terminology that may not be familiar to the general reader.

Mapping this annex to the core narrative

The relevant sections in the core narrative that relate to this annex are:

 Section 2.2: Outputs, Reliability and Availability

 Annex 2.1: Reliability and availability

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Document history

This document is similar to the version that we published in June 2013 as part of our well-justified
business plan. It has been updated to reflect our latest view of the costs of meeting the outputs that
we have proposed in our plan and to ensure that cross-references to other parts of the plan remain
accurate.

* We have included at annex GL.1 a glossary that explains the key technical terms and abbreviations
used in our business plan.

* For more detail on how this plan differs from our June 2013 plan, please refer to annex G.12.

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Annex 1.6: Network operating costs

Contents

1 Introduction ....................................................................................................................... 5
2 Our network operating activities and outputs .................................................................. 5
2.1 Trouble call ................................................................................................................... 5
2.2 Inspections and Maintenance .................................................................................... 10
2.3 Tree Cutting................................................................................................................ 14
2.4 Substation Electricity ................................................................................................. 17
3 Our future costs ............................................................................................................... 17
3.1 Our future plans for our trouble call activity ............................................................. 17
3.2 Our future plans for our inspection and maintenance activity................................. 21
Annex 1.6: Network operating costs March 2014

1 Introduction
The main elements of our network operating activities are:
 responding to and resolving unplanned interruptions of supply (restoration and repair of
network faults);
 ensuring trees and other vegetation do not grow dangerously close to our wires; and

 inspections, testing, maintenance of the network.

This operating expenditure is essential for delivering continued reliability and security of supply for
customers, and for the continued safety of those working on or near the network. Our overall
network operating costs (NOCs) already benchmark well against those of other network companies
but our aim is to keep driving down the costs of running our business.
The purpose of this document is to:
 Explain the activities that we undertake within the category of Network Operating Costs, and
what outputs this expenditure delivers;

 Set out our plans for the 2015-23 period for Network Operating Cost expenditure, explain
the volumes of work we expect to undertake within that period and identify some potential
innovations we intend to introduce;

 Describe our performance so far in DPCR5, what we have achieved, how we have innovated,
and how we have kept costs low relative to our peers; and
 Identify the relevant risks and uncertainties for the ED1 period, and explain how we intend
to mitigate those risks.

2 Our network operating activities and outputs

Ofgem identifies four different categories of expenditure within the NOC category:
 Trouble call;

 Inspections and maintenance;

 Tree cutting; and
 Substation electricity
In this section we explain what activities each of these areas of activity deliver, and why they are
necessary to ensure continued reliability and safety of the network.

2.1 Trouble call

Our aim is to distribute electricity to all of our customers all of the time. Inevitably we sometimes get
faults and damage to our network assets. This can be as a result of bad weather, third party
interference, damage caused by other utilities working close to our assets or unpredictable faults to
our equipment. Some but not all of these incidents result in loss of power supplies to our customers.
In every case it is our aim and responsibility to restore supplies as quickly as possible to ensure good

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customer service and where necessary to repair the equipment to maintain the safety and reliability
of our network.
On average we experience around 80,000 fault incidents every year, all of which require a reactive
response in a timely and safe manner.
We respond to a variety of different faults that occur on our network. Sometimes a relatively simple
fuse replacement can restore customer supplies with no further work being necessary, whereas
other instances may result in more severe network damage that requires significant repair work to
restore electricity supply to customers, unless a generator can be fitted. Trouble call expenditure
includes the costs of site visits, operations on assets to restore supplies restoration of supply via
temporary means as well as fault location and the permanent repair of our assets.
Two-thirds of our assets are underground. Faults on underground cables are typically more
challenging to locate initially and are more costly to repair; costs associated with excavation and
reinstatement being the main drivers. Incidents on our underground network including faults and
third party damages account for approximately 60% of the total number of faults requiring repair
every year. For our overhead network the weather plays a significant part in fault activity, conditions
such as high winds, lightning and snow and ice can cause fault volumes to rise above normal levels,
damaging poles, grounding overhead conductors and affecting pole mounted equipment such as
transformers.
If power cannot be restored remotely and a site visit is required we have an experienced and
dedicated team of 76 fault technicians known as ‘Rapid Response’ who are the field front line
workforce that are available 24 hours per day to provide prompt incident response for customers
without power or with urgent safety-related incidents. These front line staff currently provide the
first response to all trouble call events irrespective of whether supply is interrupted or not. Our
Rapid Response team are skilled and equipped in order to deal with the range of incidents that are
presented. They have tools, equipment and technology that enable them to provide the optimum
response to each incident. This includes investigating, restoring and locating faults on the network at
the same time as providing information back to our dispatch centre on what further action or
resource may be required to restore supplies effectively. This is vital information that is also used to
keep our customers informed of progress in restoring their supplies.
Where our assets have failed or incurred damage, they will need to be replaced. This may require
specialist overhead line, jointing, fitting or excavation resource. Where it helps to get customers
back on supply quickly, or if a permanent repair cannot take place immediately, we use generators
to restore supplies while the permanent fault is being located and repaired.
Our core skills are embedded within our industrial and technical field work force and consist of a
number of highly skilled jointers, linesman, fitters and engineers. These staff are able to respond,
repair and manage incidents on our network and ensure that the repairs are carried out as efficiently
as possible. If specialist skills are required to complete a repair, or we require additional resource,
we may deploy one of our external service providers. All fault related excavation and reinstatement
work is completed by our single service provider, offering an efficient and cost effective service as
part of that arrangement. The use of contract framework agreements provides us the required
flexibility and price stability through the use of a schedule of rates. All extra high voltage and high
voltage faults are managed and co-ordinated via our two control centres, which ensure the safe and
effective operation of our distribution network. Our trouble call resource is managed by a dedicated
team of dispatchers and resource programme controllers who prioritise and react to faults based on
safety, customer service and network performance drivers. Any priority customers who may have
special needs are identified quickly and every effort made to restore power supplies as quickly as
possible. The number of customers affected and the fault duration of incidents is closely managed.

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We currently manage our resource geographically in five operating zones to maximise resource
deployment and ensure that the nearest available and skilled operative or team can respond to a
fault situation. This operating model has provided a consistent and cost effective response to
customer faults during DPCR5 and we plan to make further improvements by putting further focus
on managing those locations with a high density of faults and incident response in preparation for
the ED1 period.
Two significant drivers of non-routine activity in both our existing and projected costs are
responding to a major weather related incident or metal theft activity. In the 2015-23 period a new
driver will emerge as we have to work to support suppliers as they roll out smart meters. The
following sections describe how these impact the trouble call costs.

Responding to a major weather related incident

Adverse weather can have a severe impact on the network causing an increase in damages, faults
and unplanned interruptions. We have a framework of weather criteria for adverse weather that are
used to trigger mobilisation of our major incident management plan. Severe weather can include
wind, lightning, heavy rain and snow and ice, which can cause damage to our overhead and
underground network. We have seen a marked increase in flooding related incidents during the
current price control period.
Northern Powergrid has a formal major incident management process set out in our policy
document EMP/001 that covers the management of major incidents affecting the distribution
network. The major incident response process and plan is designed to provide a flexible and
structured approach to the management of all incidents that cannot be dealt with via our normal
business processes. We believe this process works well due to criteria driven escalation stages based
on awareness, preparation and response to a weather related major event.
As part of our daily routine we monitor weather forecasts, severe weather warnings, flood warnings
and lightning risk levels to assess the potential impact on our network. This information allows for
early decision making and activation of the major incident plan where necessary. In the event of
advance warnings not being available, trigger levels have been established dictated by increasing
fault rates affecting the distribution network, including LV and HV faults and customers off supply.
Our aim is to respond quickly to these events and restore supplies to our customers with minimum
impact. In these circumstances we deploy additional resource to respond to the increase in fault
volumes and we may contract in additional resource and specialist equipment. For example,
helicopters are often deployed to quickly pinpoint points of damage on the overhead network, and
specialist tracked vehicles are sometimes required in heavy snow conditions to gain access to our
assets to enable us to make repairs quickly and safely.
We, as well as all the other DNOs in the UK and Ireland, are party to an arrangement known as
NEWSAC (The Northern, Eastern, Western and Southern Area Consortium) whereby resource can be
provided on a mutual aid basis, by pooling available resources during times of emergency. DNOs can
be either host or donor and, depending upon the role, have certain duties placed upon them by
signing on to and being part of this agreement. The arrangement is viewed as mutually beneficial
and we have both provided and utilised resource on many occasions in previous years; it is
something that we fully support.
We have positive relationships on commercial terms with our service providers, which provides us
with the flexibility to deploy additional resource quickly and effectively in escalated events.
Weather incidents often have a negative impact on unit costs with onsite working conditions and
access usually being quite difficult. This can have an adverse effect on onsite productivity. In
addition, the concentration on the restoration of supplies through temporary repair solutions can

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lead to a more vulnerable network until the permanent repair can be made. This in turn can lead to
increases in the work in progress level of fault repairs, which results in additional costs to catch up
and return to pre-incident operations.
Every major incident is unique and we regularly review our performance in the form of lessons
learned. These are logged on a register and related into improvement actions. These actions
translate both to major incident situations and normal conditions.
Case study – North Yorkshire Moors April 2012: On 3 & 4 April 2012 the North Yorkshire Moors was
subjected to a period of extreme weather, with peak measured wind gust speeds of 66mph
coincident and reported 6 inch snow drifts and ice accretion levels of up to 50mm of radial ice on our
overhead line network and ambient temperatures around 0°C. The distribution system suffered a
total of 334 faults of which 203 had damage to the overhead line network. Of these 89% related to
broken conductors and 8% due to broken poles.
This is the fourth event in the last 40 years where the overhead line network had suffered such
damage. A recommendation has been made for significant changes to the network to mitigate the
effect of similar failures in the future. The area also presented difficulties in gaining access to
undertake the repair work due to deep snow, the steep gradients involved, narrow gateways into
fields enclosed by dry stone walls, single track roads and the overhead lines often being some
distance from the nearest vehicle access from the road. The recommendations take account of this.
The recommendations have been incorporated into the investment plan, with the work allocated
across 26 individual projects having an overall project budget cost of £4m and with an additional
£2m to cater for the projects that were already in the investment plan before this event.
We have seen more significant impact to our assets during DPCR5 from weather related incidents
and particularly surface water flooding caused by severe and intense localised rainfall. We continue
to track, analyse and project forward the underlying long-run average cost actuals for handling
weather related ‘spikes’ in the fault profile into the RIIO-ED1 period. The average cost of faults as a
consequence of significant weather related incidents is £1.9m per annum in DPCR5 and we envisage
this level of cost to continue into and throughout the next regulatory period.
The chart below shows the cost impact of major weather incidents per annum on the trouble call
activity.

6.00

5.00

4.00
£m

3.00

2.00

1.00

0.00
2006 2007 2008 2009 2010 2011 2012 2013

Figure 1: The cost of major weather related incidents (regulatory year)

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Local Resilience Forum’s, including Highways Agency, Local Authorities, Cabinet Office Briefing
Room, DECC, Ofgem, EA and HSE are the key ‘regional’ and national stakeholders during a severe
fault situation and we have an obligation under ESQCR regulations to inform DECC of such incidents.
The Energy Emergency Executive Committee (E3C) is the joint response forum at a national level and
national tier one exercises are tested so lessons can be learned and improve our response in a
severe disruption. These lessons translate into improvements for our response to customer faults at
a regional and local level. Operation Watermark in 2011 was an exercise that drilled a severe
flooding scenario and we made improvements with our interactions with other agencies and tested
our flood resilience. Operation Faraday in 2012 tested rota load supply disconnections and
recommended an improvement to ensure every primary substation, switchgear and SCADA asset has
batteries that provide 72 hours of back-up to deliver the necessary level of resilience.

Metal theft

Next to the weather, theft and vandalism of our assets continues to be the most significant
unpredictable impact on our network and often results in power cuts for our customers, with
significant operating costs incurred in the current regulatory price control to repair and replace
stolen and vandalised assets.
We have seen a sustained level of attack on our assets by metal thieves with Yorkshire and
Northeast amongst the worst affected areas in the country. Figure 2 shows that Yorkshire was the
third worst affected company in 2013.

1,200

1,000

800

600

400

200

Source: Metal Theft CM21 Data Tables

Figure 2: Comparison of remedial work volume for all DNOs, 2013

So far during the DPCR5 period our trouble call costs include an average of £1.84m per annum,
associated with repairs relating to metal theft attacks. These costs cover:
 works required to respond to incidents of attack;
 investigate and confirm interference by third parties;
 restoring power supplies;

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Annex 1.6: Network operating costs March 2014

 report incident details in line with company reporting procedures including informing the
police; and

 undertaking corrective and safety works to reinstate equipment to the pre-incident

condition.
Whenever there is interference to the electricity distribution system, there are associated safety
consequences, which impact upon the public, community, offenders and Company employees. In
many instances when metal theft occurs, the power is interrupted over wide areas and may
adversely affect our customers. In addition, thefts and attempted thefts have caused environmental
damage such as the release of insulating fluid from electrical equipment, causing a risk of pollution
to ground water systems.
Safety risks arise when thieves break into high voltage electrical substations leaving doors or fencing
open for members of the public to enter. When live overhead power lines are pulled down or when
live underground cables are exposed, this gives rise to the potential for contact with the exposed
electrical equipment. In addition, theft of critical parts of the electricity distribution system can
cause major voltage fluctuations to be experienced by our customers. These fluctuations can cause
an increased electrocution risk to people inside their own premises and can cause electrical
appliances to catch fire presenting a fire and explosion risk within a customer’s premises.
Over the DPCR5 period to date we have seen a greater volume attacks in the Yorkshire area than in
the Northeast. In 2012, 62% of all attacks occurred in Yorkshire (38% in Northeast) and in 2013, the
ratio was 66% in Yorkshire (34% in Northeast). The Yorkshire area is believed to suffer greater
attacks due to the A1, M1, M62 motorway access routes that perpetrators use to transport stolen
metal. We are also aware that the crime footprint we experience in Yorkshire is as a result of out of
area perpetrators travelling long distances to commit metal theft attacks in our area. We also
believe that the motorway links provide easy access to our North Sea ports and the metal recycling
industries in South Yorkshire which provide alternative disposal routes to scrap metal dealerships.
We have recently seen some real progress in the long-running battle against metal theft, including
changes to legislation, but the problem remains and it continues to present a real danger to
innocent people as well as the perpetrators.1 Our intention is to keep working closely with the eight
police constabularies within our service territory in order to deter and detect criminal activity, and to
take sensible, cost-effective steps where we can to protect or target-harden our assets2.

2.2 Inspections and Maintenance

We inspect our assets to understand their condition and undertake maintenance on those assets in
line with our policies. The assets we maintain and inspect are in the following categories:
 HV Plant; the inspection and maintenance of the condition of high voltage transformers and
switchgear through oil sample testing and correction
 EHV Plant; the inspection, testing and maintenance of extra high voltage equipment at
primary substations
 Substations; the inspection and maintenance of primary and distribution substations to
ensure our assets are housed in the correct condition including checking for asbestos and
vulnerable sites prone to vandalism

1
Association of Chief Police Officers April 2013 newsletter
2
British Transport Police: Metal theft neighbourhood policing toolkit March 2011

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 Cables; the inspection and maintenance of fluid-filled underground cables

 Overhead Lines; the inspection and maintenance of overhead line equipment including pole
inspections and pole mounted maintenance using foot patrols and helicopter patrols

 Street furniture; the inspection and maintenance remedial work on link boxes and feeder
pillars

 Protection; the testing and maintenance of the substation protection equipment

 Building and civil; the maintenance work to ensure the housing and the grounds surrounding
primary and distribution substations are fit for purpose

 Public safety: providing inspection of assets due to public safety concerns including isolating
underground and overhead cables and proving that cables are not live

We carry out the inspections and maintenance activity to maintain the health of our assets to ensure
that we meet the needs of our customers by providing a safe and reliable distribution of electricity.
Our assets are inspected and maintained in line with company policy which prescribes the frequency
of inspections and maintenance cycles designed to ensure our assets are fit for purpose and
compliant with legislation as well as being safe and secure.
The costs associated with maintenance activity will vary due to the complexity of the maintenance
work undertaken and the materials required to carry out the maintenance, e.g. licence area costs
will vary dependent upon the configuration of the network for example, in the Northeast the HV
voltage levels include an extensive 20kV network which doesn’t exist in Yorkshire. In addition there
are differences between licence area due to the mix of rural and urban area covered and the type of
switchgear that was originally available at the time of installation.
The costs associated with inspection activity will vary on an annual basis as a result of the timing of
10 yearly cyclical inspections on our overhead network and reactive vulnerable site inspections that
are driven by levels of unauthorised access by third parties to our distribution network. Our planned
network inspection programme makes an assessment of the network and equipment to ensure that
the company’s assets are in a fit operational state and to identify any corrective maintenance work
that may be required or as a trigger to asset replacement. It is a pro-active activity aimed at
identifying issues before they develop into faults such that the electricity supply to customers
remains constant. The process is also used to assess the condition of the asset and identify any
current or potential safety issues.
The main drivers for inspection and maintenance cycles are:
 Safety, Environmental, Financial and Quality of supply are the main business drivers.
 Compliance with our policy and external legislation
The output from our inspections programme is a condition assessment of the entire asset base that
we use to assess the asset condition status. This data is used to feed a number of business processes
notably, our corrective maintenance programmes and the investment programmes.
A similar process exists for our overhead network. The corrective maintenance programmes are
determined via a process that identifies the defect types and allocates them accordingly to the
relevant work function. On completion of the remedial activity the completion date and any other
relevant information is fed back into the defect logging system hence removing the defect from the
list of outstanding work. A quarterly report is issued detailing the number and type of defects
identified in the period and the progress of the remediation actions. The investment programmes

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use the data gathered during the inspections to determine the overall condition of the network
and/or individual groups of asset types. This takes the form of trend and predictive analysis to
inform future investment strategies and priorities.

Policies governing inspections & maintenance

The core determinant of our inspections and maintenance activity are our policies.
Our work programmes for these network operating activities are governed by maintenance policies
and centrally determined inspections and replacement schedules. These policies and schedules link
to our investment planning policies, to ensure that we choose the solution that is appropriate to the
particular need, and ensure that we limit our “appetite for capital” to an efficient level. We consider
we have developed policies based on industry standard principles and include all proven best
practices. During the ED1 period, these policies will continue to govern our expenditure and work
programme, and we will continue to seek ways of ensuring our network remains reliable and safe at
least cost.

External policies

As well as being governed by our own internal policies, there are external regulations and legal
requirements that govern the work that we carry out:
 Electricity at Work Regulations 1989
 Health and Safety at Work etc. Act 1974
 Electricity Supply, Quality and Continuity Regulations 2002 (as amended), for us to avoid
danger as far as is reasonably practicable.
o ESQCR regulation 3 also requires us to avoid interruption to (and interference with)
supply as far as is reasonably practicable including safe back up.
o ESQCR regulation 5 also requires that we operate an effective inspection regime to
secure compliance with ESQCR regulation 3.
 Control of Asbestos at Work Regulations (2002): The Control of Asbestos at Work
Regulations (2002) places obligations on the company to assess all work sites for the
presence of asbestos. It places further obligations for sites where asbestos is, or is assumed
to be, present. One of the further obligations is to provide information about the condition
and location of the asbestos to persons liable to disturb it and to label asbestos and
materials containing asbestos in accordance with the regulations.
 Health and Safety (Safety Signs and Signals) Regulations (1996): The Health and Safety
(Safety Signs and Signals) Regulations (1996) ensure that all signs erected to convey
information regarding safety comply with specified colouring, wording and construction
requirements. All signs and labels specified in this policy document shall comply with the
requirements of these regulations.

We believe our policies provide the best framework to prioritise our inspections and maintenance
activity to ensure our assets are fit for purpose and provide a continuous supply to our customers as
well as being compliant to current legal requirements. These are subject to periodic update as a

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result of any changes made to legislation and latest views and reports associated with asset
degradation.

Internal policies

Our internal policies have been developed driven by the external legislation set out in the Electricity
Safety, Quality and Continuity Regulations (ESQCR), which determine the levels and intervals of
inspections required. This ensures the optimum inspection requirements are adhered to at the most
efficient cost. When determining the policies, industry data on equipment failure modes based on
age and operation is used to determine the optimum inspection interval. Our policies are reviewed
and updated annually with reference to any issues raised during the year captured through our
issues register. In addition our policies are updated if there are any changes in the underlying policy
driver (e.g. external factors; legislation changes, industry recommendations or internal factors
feedback after a failure of an asset). Routine inspections are completed in line with the cycles set out
in the company policies and additional corrective maintenance is carried out as a result of the
inspection and condition assessments.
We have developed a strong framework of internal policies derived from Reliability Centred
Maintenance (RCM) studies and we maintain a policy “issues log” that receives periodic reviews to
inform future policy updates:

Policy Description Drivers

MNT/002 Underground cable systems Safety, environment, financial & quality of supply
MNT/003 Labelling operational assets Safety, regulatory & legal
MNT/004 Overhead systems Safety, financial & quality of supply
MNT/005 Ground mounted plant Safety, environment & quality of supply
MNT/006 Substation site inspections Safety, regulatory & legal
MNT/007 Building & civil condition survey Safety, environment, regulatory, stewardship,
MNT/008 Protection systems Safety, financial, quality of supply
MNT/010 Service termination equipment Safety

Table 1: List of internal policies, inspection and maintenance

Operational substation site inspections are designed to cover four main areas;
 Site Risk Assessment – This is undertaken to assess the risk of unauthorised access at the
substation. It provides vital information to ensure that the company fulfils its obligations
under the ESQCR Regulations. An inspection of the environment in which the substation is
situated is carried out.

 Plant Inspection – This is undertaken to establish some basic information about the
condition of the plant and equipment at each substation site. It also ensures that any safety
related defects are identified and appropriate mitigating actions are implemented.

 Critical Property Unit Assessments – During the inspection of major substation sites
information is gathered to enable the risk classification for the assessments on our key
operational properties.

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 Building and Civil Inspection – This is undertaken to ensure that any safety or security-
related defects which are of an urgent or emergency nature are identified and reported to
the appropriate contractor.
Towards the end of the DPCR4 period we introduced an updated maintenance policy that defined
both Nominal Performance Optimized Intervals (NPOIs) and Imposed Operating Limits (IOLs), the
latter being a ‘hard long-stop control’ for assets that remain in service more than a fixed period
beyond the NPOI date that the asset was nominally due to be maintained.
Our updated policy is designed to ensure the automatic imposition of an operational restriction
which prevents local live operation of equipment by our staff, at the point that any item of plant
exceeds its IOL date. The numbers of assets in the respective categories are reported to the
Executive each month. Since the introduction of this approach, the numbers of assets that are
subject to an operational restriction has fallen and is continuing to reduce due to more effective
prioritisation of work.

2.3 Tree Cutting

Having previously cut back the trees from our overhead lines, we re-visit those lines on a periodic
basis to ensure that the clearance is maintained. This minimises the impact of faults on our network
caused by re-growth in vegetation.

As tree growth encroaches into overhead line clearances it creates a potential hazard to safety and a
risk to our quality of supply performance. In DR5 we will complete a proactive programme of tree
clearance activities to keep the tree growth from encroaching on our overhead line network. Our
aim is to contribute to a safe and reliable overhead line network by maintaining a minimum
clearance distance between the overhead line and the vegetation of between 0.8m and 5.0m. This
clearance is dependent upon the voltage of the overhead line and is maintained on a three year
cutting cycle.

The length of our overhead line network along with infestation levels determines the volume levels
of activity to be undertaken across a three-year cycle which is currently deemed to be the optimum
cycle to manage growth.

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Northern
Voltage Description Northeast Yorkshire
Powergrid
Number of overall network spans 63,470 41,539 105,009
% spans expected to be affected by re-
LV 36% 40% 38%
growth
Spans to be cut in 3yr cycle 22,849 16,616 39,465

Number of overall network spans 112734 93360 206094

% spans expected to be affected by re-
HV 14% 29% 21%
growth
Spans to be cut in 3yr cycle 15,783 27,074 42,857

Number of overall network spans 7,002 15,894 22,896

% spans expected to be affected by re-
EHV 10% 16% 14%
growth
Spans to be cut in 3yr cycle 700 2,543 3,243

Number of overall network spans 1,212 2,024 3,236

% spans expected to be affected by re-
132kv 12% 14% 13%
growth
Spans to be cut in 3yr cycle 145 283 428
Table 2: The optimum three year tree cutting cycle by voltage type
The Yorkshire tree re-growth is anticipated to be higher than in the Northeast (see Table 2). We have
completed a number of cycles in the Northeast dealing with trees adjacent to the EHV and HV
networks whereas in Yorkshire we have not yet completed a full cycle on the HV network. This will
have an impact on the levels of infestation as we would anticipate re-growth reducing following each
cycle. There is a high density of trees in Yorkshire whereas the tree population in the Northeast is
concentrated in more specific areas with the Northeast being much more rural with huge areas of
moorland rather than forest land.
To deliver this programme we have a set of contracts with a number of service providers who are
expert arborists with ‘tried and tested’ techniques to prevent re-growth. We believe our service
providers have the expertise for the tree cutting activity. In each of DR4 and DR5 we have
successfully competitively tendered contracts to provide a fully outsourced operation for vegetation
management. As we complete successive three years cycles the costs will reduce as more work can
be completed without the overhead line having to be shut down to ensure the work can be done
safely. We plan to continue to fully outsource this work programme through ED1.
The cost base for tree cutting reflects the three year maintenance cycle and the tendered contracts
awarded to our service providers at competitive rates which we believe minimise our unit costs. We
plan to continue this successful approach in the ED1 period.
Our positive and proactive approach to vegetation clearance since 2005 has had a favourable impact
on the performance of our network and we believe this approach minimises the disruption to our
overhead line network. There has been a decline in HV faults relating to trees on our networks since
DPCR4. In DPCR5 to date, relative to the Northeast, our Yorkshire licence area still has a measurably
higher tree related fault rate due to the initial ‘cut back’ clearance to the overhead line network that
is ongoing but will be completed in 2014; whereas we achieved 100% initial vegetation clearance in
our Northeast licence area much earlier during DPCR4.

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1.6
1.4
1.2
Faults per 100km
1
0.8
0.6
0.4
0.2
0

Northeast Yorkshire

Figure 3: High voltage tree related faults

Trees normally only cause us issues during high wind events; the two “atypically” good years for tree
faults in 05/06 and 09/10 were due to the autumn/winter of each year being exceptionally benign –
we had no high wind events of any consequence. The other years were more “normal” in this
respect with a number of smaller high wind events which were below the event exemption
threshold below the exemption threshold.

Policies governing tree cutting

Our tree cutting activity is governed by both internal and external policies to determine the
requirement to clear overhead lines to prevent interruption to supply and safe working practices.

Internal Policy

Our internal policy defines a framework for a continuous duty to keep overhead lines clear from
trees to prevent danger and interruption to supply - Internal Policy MNT/0013.

External Policy

We also follow the industry standard documents that have been developed by the Energy Networks
Association with inputs from all UK Distribution Network Operators
 Engineering recommendation G55/2, 2008: safe tree working in proximity to overhead
electric lines.

 Engineering Technical report 132, 2006: Improving network performance under abnormal
weather conditions by use of a risk based approach to vegetation management near electric
overhead lines.

 Engineering technical report 136, 2007 (Draft for public comment) vegetation management
near electricity equipment-principles of good practice.

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 We also have obligations to keep our staff and third parties safe, so far as is reasonably
practicable, under the Health and Safety at Work Act 1974 and the Electricity at Work
Regulations 1989.

 The Electricity Supply, Quality and Continuity Regulations 2002 also include a duty to ensure
quality of supply.

2.4 Substation Electricity

We have over 700 major substations, most of which have on site control room buildings and
chambers to house, secure and protect the network equipment. Maintaining an appropriate
environment within the substation building helps to protect the integrity of our assets, which helps
to minimise the risk of failure. To provide the correct substation climate for our assets we have used
humidistats and a range of heating equipment. This heating requirement dominates the electricity
consumed in our substations.
Since the electricity we consume in these substations is traded as an unmetered supply this means
we have to estimate the volumes of electricity consumed across all our substation properties. Our
cost estimate of £2.9m per annum in the ED1 period is based on a total consumption across all our
substations of 22.6 GW hours per annum.

3 Our plans to improve performance

Our plan for the ED1 regulatory period is to keep our costs to a minimum as we continue to ensure
we stay up to date on our maintenance and tree cutting programmes together with reducing the
number and duration of power cuts.
During ED1 we plan to continue our three main priorities of:
 Improving average fault restoration times;
 Continuing to shorten lead times relative to our maintenance policy; and
 Maintaining vegetation clearances from overhead lines.

The strong efficiency performance that we have achieved so far in the current period means that we
can project forward our costs with a high level of confidence. This is reflected in our cost forecasts
going forward, and we expect to remain amongst the industry leaders on costs.

3.1 Our future plans for our trouble call activity

In the trouble call activity during RIIO-ED1 we plan to respond to customer power cuts more
efficiently through shortening the timescales to restore any loss of supply to customers. This will be
achieved through the continuation of improvements in dispatching our resource and technology
enhancements together with a more localised customer response strategy. Restoring supplies is one
of our main priorities and we are committed to restoring supplies as quickly as we can. We have
included costs in ED1 to reflect the initiatives that we need to embed in our delivery capability in
order to consistently meet the reduction from 18 hours to 12 hours standard in line with the
approach set by our regulator. We aim to do this safely, effectively and at lowest cost to our
customer. Our key targets are for customer interruptions and customer minutes lost and our
ambition is to meet or beat these targets.

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Ofgem’s cost assessment exercise highlighted that our high-voltage underground fault costs
appeared high compared to the costs of some companies. In our view, this assessment did not take
proper account of the benefits of our approach to cable asset investment as part of the post-fault
cycle. However, since Ofgem’s cost assessment does not recognise betterment as part of the unit
costs, we have in our revised plan moved towards a minimum cost repair approach that is more
consistent with the assumptions that lie behind our regulator’s approach to the benchmarking of
efficient costs in this area. This is set out in more detail annex 1.34.

Overall we are proposing a reduction in our trouble call costs of £19.6m compared to our June2013
plan.

Our approach to RIIO fault rate and fault cost forecasting

The unpredictable nature and volatility of fault incident profiles, together with a strong link to
natural and environmental influences, makes long term forecasting of fault volumes (and therefore
fault costs) problematic. Our approach to resolving low confidence in predicting fault profiles is to
develop a representative historical average fault rate and to apply this as a constant fault rate going
forward, conditioned by any other adjustments we believe are necessary to take into account.
The following considerations have been taken into account in our fault volume forecast:
 Historical fault performance data has been analysed to establish a base line average number
of fault incidents. Exceptional factors such as weather related events and metal theft are
taken into account to understand the excessive disturbance to historical performance of
certain asset types.
 Proposed asset investments on our network are chosen on the basis of maintaining the
health of the asset base and operational risk at current levels, inherently eliminating unsafe
and poor performing assets. In doing so, the expectation is that fault rates will be
maintained at existing levels.
 On metal theft, whilst we are pleased with progress since May 2012, we expect to endure
fewer but more severe metal theft attacks during ED1.
o We have assumed a gradually reducing fault cost profile from metal theft from 2019
onwards to reflect the realisation of benefits from our anti-theft security
enhancements that ‘target harden’ the electrical distribution system.
o Only when there are no longer any softer target assets remaining on our network,
do we consider that we will be able to drive down and sustain lower fault operating
costs from metal theft incidents.
o Given the commodity price of copper is predicted to remain very high in the short
and medium term, we believe it will be in the second half of RIIO ED1 (at the
earliest) that we will eventually be able to stabilise, reduce and contain these
operating costs driven by metal theft on a sustained basis. We have managed to
contain our network operating costs despite the metal theft upsurge since 2006 in
our service territory, and (according to HSE metal theft data) we have improved our
position from being upper quartile to second quartile in terms of metal theft
incidence amongst UK DNOs over the same period.

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o The average annual total fault cost in the DPCR5 period due to metal theft events
has been £1.84m, and we anticipate that fewer metal theft incidents, but with
increasing sophistication, impact and yield, will drive a similar level of total fault cost
activity during the next regulatory period.
 The unit cost of a trouble call incident may vary considerably depending on the
circumstances, for example the time of day, location, network activity; resource availability
and complexity all have an impact on the cost. We have taken a view on our costs by
reviewing our current performance as well as future contract and resource arrangements
and operating changes whilst offsetting efficiency targets in each activity.

 It is recognised that the smart meter programme has the potential to substantially impact on
the trouble call activity. The smart meter replacement programme will have a phased
implementation between 2013 and 2020, with over 3.9 million smart meters being installed
in the Northern Powergrid area. The current defect reports associated with meter
replacements have been analysed and we have made some assumptions based on a number
of sources for the total number of defects that may generate a response. We have factored a
percentage of these in as being urgent and requiring a trouble call response.

Our improvement and innovation plans for trouble call

Our goal is to improve the service our customers receive by ensuring that the field response to
incidents and the restoration and repair of the network is as efficient as possible. A good measure of
how well we perform in this area is the time it takes to restore supplies for both high voltage and
low voltage incidents, thereby minimising the impact on the customer. However, our job is only
complete when our network is repaired and returned, at a minimum, to its pre-incident level of
performance. We have set challenging targets for outstanding work in progress levels to ensure that
we effectively manage outstanding fault repairs and limit risk to our network. We aim to provide the
optimum level of system security at all times.
Our restoration performance improvement to date is encouraging but we’d like to do better. Our
2013 goal is to improve our average restoration times incrementally towards a target of 52 minutes
for high voltage faults and 166 minutes for low voltage faults. We plan to achieve this through a
number of initiatives including daily management review of performance and increased
accountability for operations at a local level. Our plan includes additional allocation of resource that
will be better able to respond to faults as a result of proposed changes to our operating model. We
also propose to increase the use of low and high voltage generation to restore customers quickly.
We have tight cost monitoring and controls, but we also believe this is representative by our positive
performance against our DPCR5 trouble call allowance. We believe there are incremental
improvements that can be made to our incident response, to make it more efficient and a better
experience for our customers. We plan to build on our current initiatives and implement additional
improvements in our trouble call response.

Improving HV restoration performance

In 2012 an enduring initiative was introduced with the aim of improving restoration performance by
responding to HV faults with three authorised personnel to complete restoration switching on the
network. This operating practice allows immediate interpretation of onsite indications/status
followed by rapid restoration of a minimum of 50% of the affected customers with the first
sequence of switching instructions. The additional resource utilized increases the average HV fault

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unit cost by having more resource allocated to each fault, however this is offset by generating
incremental revenue benefits through the IIS mechanism by reducing customer minutes lost.

Improving LV restoration performance

In May 2013 we completed implementation of an improved operating model for dispatching fault
resources, which centralised our dispatch capability at our two control centres, one for each licence
area, and provides customers with a much improved 24 hour service on LV network faults. The 24
hour dispatch function provides greater consistency of performance across both of our licences, and
with improved technical decision making, ensures that the most appropriate resource is allocated to
each fault incident. Our improved three shift model enables better fault management oversight, and
with increasingly accurate and timely fault information having a positive impact on customer service
through improved low voltage estimated fault restoration times.

Improving field based activity

 We have taken a number of field based measures during DPCR5 in order to shorten the
restoration cycle for LV faults, the most innovative and successful of which was the adoption
(in high volumes) of a new device called a ‘Bidoyng’ which helps us restore low voltage
mains supplies faster following a transient interruption. Where the fault interruption is a
result of permanent damage to the cable, the device provides ‘distance to damage’
information to help pinpoint the exact location the fault on the underground cable route,
saving disruption from less fault-related excavation outside customers properties. The
device operates as a fuse, automatically detecting the fault and deploying a secondary fuse
on the network, which automatically re-energises supplies without the need for field staff to
immediately attend the substation.
 We have long term fault duration initiatives included in our plans for better use of
generation to restore supplies faster, particularly on low voltage faults. This will help to
reduce low voltage restoration times to routinely achieve the 12 hour standard set out by
Ofgem.

 We continue to develop our directly employed staff through formal training and through the
work force renewal programme to ensure they are multi-skilled and up to date with current
requirements, ensuring that they provide optimum response to incidents. An additional
number of trainees are planned to be recruited each year in support of the additional smart
metering technology roll out which will impact on the trouble call activity.
 Our five zone operating model in DPCR5 has served us well resulting in improvements in the
response times especially for high voltage faults. We believe we can further improve our
response to faults with a more localised operating structure which will focus on the specific
needs in that particular geographical area. For example, in urban centres we will increase
the availability of jointing staff to respond to cable faults and in rural areas we will increase
the availability of linesmen to respond to overhead line faults. Our plan is to review our
operating locations in DPCR5 and implement the revised model in the run up to the ED1
period. This will ensure we respond to faults with a more tailored service at a more local
level, improving the service to our customers.

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In 2012 we set up a daily performance review for those few faults, which we consider were
not restored within our acceptable tolerance in terms of target performance. Reviewing
faults on a detailed job by job basis helps us to understand gaps and inefficiencies and help
us target and refine our end to end process. Our focus on local performance and
encouraging fault ownership will continue and hopefully develop in the remainder of DPCR5
and RIIO ED1.

Improving our technology

 Our programme of investment in operational information systems during DPCR5 will

improve both the functionality and the performance of our network control and fault
incident management systems. It is clear from feedback that we need to provide better
quality fault information to customers, and we now have systems that can be updated direct
from the field. With accurate, timely information the CRC and Dispatch teams will be able to
update the customer on fault and restoration status on a near real time basis.

 Our use of the ‘Fonetrack’ IT application currently allows us to identify the closest and most
appropriate resource to respond to incidents by mapping an operative’s whereabouts with
reference to the location of a high voltage or low voltage fault. We will continue to make
enhancements to this application into ED1 to improve the mapping functionality.
 We have criteria that prioritises resolution of the LV intermittent fault activity on our
networks. This enables us to tackle the top 50 intermittent faults in each zone proactively by
replacing progressively deteriorating cables and ensuring the most appropriate fault
reclosing and fault location devices are deployed in the interim while cable works are
planned and delivered. Continually investing in technology to assist us is a fundamental part
of this plan, reducing the impact on the customer and allowing us to utilise our field staff
more effectively to deal with intermittent faults through a more proactive approach, at the
same time as limiting an adverse unit cost impact.
 We plan to continue to adopt proven innovations in the latest available fault technology
with a view to improving restoration times on ‘repair to restore’ faults. Faster identification
of fault locations is crucial and is being achieved, for example, through the developing use of
‘cable sniffer’ devices.
 Smart metering technology will be introduced to all domestic customers during RIIO-ED1,
which has the potential to have a positive effect on neutral fault scenarios. The meter will
automatically send a message into our Customer Contact Centre if there is a fault which has
the benefit of immediately identifying the number and location of premises affected, which
will greatly assist with establishing the location of the fault and the exact number of
customers off supply. This means we will be able to dispatch operatives to the fault more
effectively and improve our fault response times.

3.2 Our future plans for our inspection and maintenance activity
The strength of our inspection and maintenance policies will continue into the next regulatory
period so that we prioritise our maintenance intervention works based on asset, network and
system risk and minimise the disruption to our customers.

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Given we have demonstrated a sustained high capacity delivery during DPCR5 on maintenance, the
unit costs in our plan are held at the demonstrated and sustainable levels of efficiency that we
achieved during DPCR5.
Our inspections and maintenance plan is based on the policy requirements. We plan to utilise a
similar set of policies in the next regulatory period to build on our current strong position and in
addition we will continue to look for more efficient ways to meet our policy objectives.
The application of rule-based intervals to a diverse asset base does drive fluctuations in the number
of assets that we need to maintain in any given period, for example, when post fault corrective
maintenance ‘resets’ the maintenance interval clock for an item of substation plant. Similarly, long
past high impact weather events (which drew upon all available resources at the time) often led to a
consequential short term localised reduction in maintenance delivery. Practical realities such as
these means there can be ‘bunching’ within the forward maintenance profile as a form of ‘historical
echo’ of past recovery, acceleration and catch up exercises to comply with prevailing maintenance
policy intervals.
By the time DPCR5 concludes in early 2015, we will have little or no work in progress relative to our
maintenance policies and so we are not forecasting any cost for any incomplete or overdue
maintenance interventions. We expect that the worst case past-due maintenance starting position in
ED1 for us is an inconsequential handful of maintenance tasks resulting from any immediate inability
to access those assets that become due to be maintained within the last few weeks of DPCR5. Since
we expect to carry forward next to zero backlog into ED1, our customers are not being asked to fund
NOC allowances for maintenance in ED1 (that they might otherwise justifiably argue should be borne
by the DNO) and we will have delivered our DPCR5 maintenance volumes, plus those DPCR4 works
that we brought forward in 2010.
Our plan for RIIO-ED1 is to build on our current operating model for inspections and maintenance
using a mix of internal resource as well as external service providers. The planned volumes have
been assessed based upon applying the frequency of inspection and maintenance set out in our
company policy for each asset type.
Other factors leading to cost changes in the RIIO-ED1 period are:
 The latest ten yearly overhead line asset condition programme was substantially completed
in DPCR4 and it is planned that the next full programme of work will be completed within
the RIIO - ED1 period.

 Additional asbestos inspections in RIIO-ED1 due to periodic activity following the initial
surveys done in DPCR5. The survey programme commenced in 2012 and is scheduled for
completion in 2016.

 Link box inspections were completed on a reactive basis early in DPCR5 period with no
serious defect issues found, while a new contract was specified, tendered and awarded. This
will lead to greater numbers of inspections in ED1 than DPCR5.

 We believe that our cable tunnel and bridge register will capture additional sites which will
be inspected going forward into RIIO-ED1.
 Hi-resolution helicopter 132KV tower inspections will occur in 2020 and 2021 with the costs
incurred in line with policy as this is when the next survey cycle is scheduled to take place.

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Our improvement and innovation plans for inspections and maintenance

We plan to make improvements in RIIO-ED1 based around our strong policy framework and build
improvements around technology and innovation.
The purpose of these measures is to underpin policy with more effective, specific and certain asset
condition data, which will provide our customers with less disruption from planned preventive and
corrective maintenance works. By continuously improving our maintenance practices in these ways,
we will reduce both the likelihood and impact of power interruptions being caused by
underperforming (or out-of-condition) assets.
Since Ofgem published its fast-track cost assessment we have looked at our plans again. In the
inspections and maintenance category we believe Ofgem’s assessment supported that our costs in
this category are efficient. We have therefore made no changes to our June 2013 plan submission.
Further justification of our inspections and maintenance plan can be found in annex 1.24.

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