Draft RIIO-ED2 Business Plan Data Template Commentary

Publication 31 March 2021 Contact: RIIO-ED Team date: Team: RIIO-ED Cost Analysis

Tel: 020 7901 7000

This document provides a template and instructions for providing supporting commentary for the RIIO-ED2 Business Plan data templates.

This document is for people who are filling out the RIIO-ED2 Business Plan data templates and this associated commentary template. It explains what information should be provided in the commentary, and where to find more information.

This version of the commentary document has been prepared for publication on the Electricity North West website (www.enwl.co.uk).

Where items in the original commentary contain commercially sensitive information or information related to the security of our networks, those items have been redacted.

Guidance – Draft RIIO-ED2 Business Plan Data Template Commentary

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Without prejudice to the generality of the terms of the Open Government Licence the

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Guidance – Draft RIIO-ED2 Business Plan Data Template Commentary

Content

1. Instructions and Guidance ...... 7 Background ...... 7 Instructions and guidance ...... 7

2. Data Table Commentary ...... 10 Finance Table Commentary ...... 10 I1 – Universal Data ...... 10 I2 – BPFM Inputs ...... 10 I3 – Licence Values ...... 10 F1 – Financial Requirements ...... 10 F2 – Debt ...... 10 F3 - Interest ...... 11 F4 – Tax Inputs ...... 11 Cost Table Commentary ...... 11 C2 – Connections ...... 11 C3 – Physical Security ...... 14 C4 - Non-Operational IT and Telecoms ...... 14 C5 – Property (Non-op) ...... 16 C6 – Vehicles and Transport (Non Op) ...... 16 C7 - STEPM (Non Op) ...... 18 C8 - Remote Generation Opex ...... 18 C9 - Core Closely Associated Indirects (CAI)...... 18 C10 - Wayleaves (CAI) ...... 23 C11 - Vehicles and Transport (CAI) ...... 24 C12 - Core Business Support ...... 25 C13 - IT and Telecoms (Business Support) ...... 27 C14 - Property Management (Business Support) ...... 28 C15 - Atypicals Non Severe Weather ...... 29 C16 - Smart Meter Outside PC ...... 29 C17 - Legacy Meters ...... 29 C18 - De Minimis ...... 30 C19 - Other Consented Activity ...... 30 C21 - Out of Area Networks...... 30 C22 - Pass-through ...... 30 C23 - Other NABC ...... 31 C24 - Related Party Margin ...... 31

Guidance – Draft RIIO-ED2 Business Plan Data Template Commentary

C25 – Shetland (SSEH Only) ...... 32 Cost and Volume Table Commentary ...... 32 CV1 - Primary Reinforcement ...... 32 CV2 - Secondary Reinforcement ...... 35 CV3 - Fault Level Reinforcement ...... 39 CV4 - New Transmission Capacity Charges (NTCC) ...... 42 CV5 - Diversions ...... 44 CV6 - Diversions Rail Electrification ...... 45 CV7a - Asset Replacement NARM ...... 46 CV7b - Asset Replacement Non NARM ...... 47 CV7c - Asset Replacement Civils Driven ...... 48 CV8 - Refurbishment non NARM ...... 49 CV9 - Refurbishment NARM ...... 50 CV10 - Civil Works Condition Driven ...... 52 CV11 - Operational IT and Telecoms ...... 52 CV12 - Black Start ...... 59 CV13 - BT21CN ...... 59 CV14 - Legal and Safety ...... 59 CV15 - QoS and North of Scotland Resilience ...... 62 CV16 - Flood Mitigation ...... 63 CV17 - Rising and Lateral Mains (RLMs) ...... 64 CV18 - Overhead Clearances ...... 65 CV19 - Worst Served Customers (WSC) ...... 66 CV20 - Visual Amenity ...... 67 CV21 - Losses...... 67 CV22 - Environmental Reporting ...... 68 CV23 – RIIO-ED1 High Value Projects ...... 71 CV24 - DPCR5 High Value Projects ...... 71 CV25 - RIIO-ED2 High Value Projects ...... 71 CV26 - Faults ...... 72 CV27 - Severe Weather 1 in 20 ...... 73 CV28 - Occurrences Not Incentivised (ONIs) ...... 73 CV29 - Tree Cutting ...... 74 CV30 - Inspections ...... 75 CV31 - Repairs and Maintenance ...... 75 CV32 - Dismantlement...... 77 CV33 - Substation Electricity ...... 77 CV34 - Smart Meter Intervention DNO ...... 78

Guidance – Draft RIIO-ED2 Business Plan Data Template Commentary

CV35 - Operational Training (CAI) ...... 78 CV36 – NIA ...... 79 CV36a– Innovation ED2 ...... 80 CV37– NIC ...... 82 CV38– IFI & LCN Fund ...... 83 CV39– DRS ...... 84 Volume Table Commentary ...... 84 V1– Total Asset Movements ...... 84 V2– Cleansing ...... 84 V3– Connections ...... 85 V4– Other Asset Movements ...... 85 AP1– Age Profile ...... 85 RPEs and Ongoing Efficiency Table Commentary ...... 85 RPEs and ongoing efficiency ...... 85 Memo Table Commentary ...... 86 M1 - Flood Mitigation (site) ...... 86 M4 – Vulnerability Strategy ...... 88 M5 - Connections Strategy Delivery ...... 89 M6 - Metal Theft ...... 89 M7 - Protection Summary ...... 89 M8 - Link Boxes ...... 89 M9a - Trad Streetworks (ex ante) ...... 90 M9b - Permit & Lane (ex ante) ...... 90 M9c - Permit & Lane (Re-opener) ...... 90 M13 – Uncertainty Mechanisms ...... 91 M14 - Drivers ...... 92 M15 - MEAV ...... 93 M18 - FTE ...... 93 M19 – DSO ...... 93 M20 - LCT ...... 97 M21 - Bespoke Activities ...... 98 M23 – Environmental Action Plan ...... 99 M24 - Losses Snapshot ...... 99 M25 – Company Specific Factors ...... 100 M26 – Incremental Costs ...... 100 M27 – Cyber Security Op IT ...... 101 M28 – Cyber Security Non-op ...... 101 NARM1 – Risk Index Weightings ...... 101

Guidance – Draft RIIO-ED2 Business Plan Data Template Commentary

NARM2 – ED1 NARM Profiles ...... 101 NARM3 – ED3 NARM Profiles ...... 102 LI - Substations ...... 102 LI – Substation Groups ...... 105 Additional Commentary ...... 106 Additional commentary ...... 106

Guidance – Draft RIIO-ED2 Business Plan Data Template Commentary

1. Instructions and Guidance

Background

1.1. This document, the RIIO-ED2 Business Plan Data Templates Commentary (BPDTC), is a template for DNOs to provide additional information alongside the Business Plan Data Templates (BPDT), to help:

• identify, explain, and justify the main drivers of forecast expenditure and volume profile across the RIIO-ED2 price control period

• explain and justify scenarios used for justifying the forecast workload volumes and costs across the RIIO-ED2 period,

• explain any assumptions made in populating the tables how any allocations have been applied,

• explain any allocation methodologies applied, which haven’t been detailed elsewhere in the business plan submission,

• assist Ofgem in the process of navigating the data submission and supporting documentation.

1.2. This template should be read alongside the Business Plan data template instructions and guidance for RIIO-ED2, the RIIO-ED2 Business Plan guidance, and the RIIO-ED2 Sector Specific Methodology Decision.

Instructions and guidance

1.3. Alongside the submission of the RIIO-ED2 BPDT, DNOs must, to the best of their ability, complete this BPTDC template for each worksheet in the BPDT. For each worksheet, where appropriate, include commentary on the following:

• Please compare the current forecast across the RIIO-ED2 period and the latest information on the historic and forecast position across the RIIO-ED1 period and explain any material differences between them. Please include information in terms of run rates, trends, unit costs etc. and explain the reason for any material step change or difference.

• Please summarise and explain the profile of the RIIO-ED2 information.

Guidance – Draft RIIO-ED2 Business Plan Data Template Commentary

• Please provide a justification for any unit cost/trend outliers, including any regional and/or site-specific factors and where there is material interaction with other areas of the BPDT.

• Please identify and explain the scenario used for planning, the level of sensitivity within the forecasts used and clarify how uncertainty has been considered/tested. Indicate the materiality of these assumptions.

• Explain the interactions with wider governmental policy.

• Explain the interactions with the Green Recovery Scheme.

• Please explain the types of internal and external benchmarking exercise (where applicable) that have been undertaken to support the RIIO-ED2 forecasts (eg. internal tendered framework rates and/or international unit cost comparison).

• Please reference areas of the BPDT submission that can be used to further evidence or substantiate the submission (eg. cells A:B of tab “X” of the BPDT or supporting document “Y”).

• Highlight any relevant additional information to aid Ofgem’s understanding and interpretation of the information.

• Where costs have been apportioned across one or more activities, the basis of apportionment must be provided in the cost commentary document. Please also give an indication of the robustness of those assumptions.

1.4. The BPDTC template is applicable to all worksheets in the final RIIO-ED2 BPDT, except for any cover, contents or summary sheets, and some finance, asset and other sheets. If DNOs consider it necessary or useful to provide supporting information on any worksheet we haven’t requested commentary on, there is space for this at the end of this document. Each DNO must use reasonable endeavours to provide a commentary for each of the categories above. DNOs should report “n/a” where questions do not apply to the subject matter of the worksheet and should ignore any tables that do not apply to them.

1.5. The BPDTC must not exceed 3 pages in length for each worksheet, unless otherwise specified. Where visual representations of information (e.g. waterfall diagrams) may aid understanding these should be included and will not contribute to the page limit.

Guidance – Draft RIIO-ED2 Business Plan Data Template Commentary

1.6. Where information that is relevant for the BPDTC is located in the main Business Plan submission or supporting files (e.g. engineering justification, CBA etc.); directions to the relevant information must be clearly signposted in the BPDTC. Where it is not possible to include all information as prescribed, DNOs will need to clearly explain the reasons why.

1.7. The appropriateness and materiality of the commentary provided should be at a level that minimises the need for Ofgem to ask supplementary questions.

1.8. DNOs should, to the fullest extent possible, ensure that the BPDTC contains all information relevant to Ofgem’s assessment of the plan. This includes providing a proportionate summary of the overall activity level experienced and costs incurred and expected by the DNO. The BPDTC must therefore provide overview information on the level of activity and costs across the RIIO-ED1 period and the current BPDT forecasts for the RIIO-ED2 period. Where a variance is observed in the transition between price control periods, a succinct explanation of the material differences between them and factors driving the variation is required.

Guidance – Draft RIIO-ED2 Business Plan Data Template Commentary

2. Data Table Commentary

2.1. DNOs must provide commentary for each BPDT worksheet using the templates below.

Finance Table Commentary

I1 – Universal Data

No DNOs input required.

I2 – BPFM Inputs

Commentary

Redacted in website version of commentary and tables

I3 – Licence Values

No DNOs input required.

F1 – Financial Requirements

Commentary

Redacted in website version of commentary and tables

F2 – Debt

Commentary

Redacted in website version of commentary and tables

Guidance – Draft RIIO-ED2 Business Plan Data Template Commentary

F3 - Interest

Commentary

Redacted in website version of commentary and tables

F4 – Tax Inputs

Commentary

Redacted in website version of commentary and tables

Cost Table Commentary

C2 – Connections

Commentary

Average annual costs in 2020-21 Change from

money RIIO-ED1 to RIIO-ED2 DPCR5 RIIO-ED1 RIIO-ED2 Connections within the 12.39 4.68 21.90 368% price control Connections outside the 17.42 24.95 21.81 -13% price control

Forecast Methodology/Planning scenario

The forecasting methodology for the connections activities in C2 are illustrated in the diagram below. The approach for unlooping is described later.

Guidance – Draft RIIO-ED2 Business Plan Data Template Commentary

3 years data accepted projects

ATLAS Forecasts 3 x Archetype Models # Domestic Domestic Consolidated # Non Distributed Domestic Generation C2 BPDT

Non MW DG Domestic

There are two key inputs for the forecasting:

• Activity volumes; and • Costs of activities.

The volumes are taken from our DFES approach that utilise the ATLAS methodology and is described in more detail in our Load Related Investment Planning Methodology. The DFES provides forecasts for the number of domestic and non-domestic demand connections at a primary substation level for each of the years of RIIO-ED2 based on the Central Outlook. Similarly, the quantum of distributed generation MW connected is used as this is considered to give a better forecast of the connection costs than the number of connections.

The costs of these activities have been forecast by analysing three years of accepted projects. The data on accepted projects has been used as it is considered to give a more contemporary view of the economically viable cost of connections. Using accepted projects reflects the most recently available insight of customer choice; the alternative of using actual historic costs reflects the customer decision made potentially 3-5 years ago due to the inherent lag in projects being developed.

These two inputs are then combined into three archetype models that follow the same principles. For each of the models, numerous archetypes are identified based on:

• Four operational regions; • Who made the connection? (ENWL, ICP or IDNO); • Ofgem category (established sub market segment categories eg LVAL, LVHV etc); and • Level of reinforcement.

These combinations resulted in between 72 and 188 archetypes, each with volumes, sole use, DUoS and customer funded reinforcement assumptions. The forecast volumes from the DFES were then used to scale the data from the accepted projects to forecast the component costs. The methodology applies the same unit costs to the forecast volumes across all five years.

The approach recognises that the unit costs in different parts of our network will vary and applies these assumptions to the geographically disaggregated volume forecasts from DFES. Assumptions on changing levels of competition and increased consumption for domestic customers to reflect the increase in EV and HP take-up.

Guidance – Draft RIIO-ED2 Business Plan Data Template Commentary

There is little EHV and 132kV reinforcement in the three-year data set and therefore the model forecasts no future costs for these. An additional overlay for known EHV and 132kV reinforcement that is expected to be delivered in RIIO-ED2 has therefore been included.

As increasing volumes of LCTs, and in particular EVs, during RIIO-ED2 are expected, there is a need for domestic customers fed by looped services to be able to connect LCTs to their network without delay. Full details of the approach can be found in Engineering Justification Paper reference ‘LRE EJP 8 – Service Unlooping Programme’.

Two unlooping solutions are available and have been considered, specifically: • partial de-looping that provides necessary capacity for a single LCT to connect in a loop and removes a potential safety issue for associated domestic customers; and, • full unlooping that allows all domestic customers in a loop adopt LCTs and futureproofs the network not only for the electrification of transport that has higher certainty, but also for the electrification of heating and other LCT adoption as part of UK’s transition to net zero carbon by 2050.

Costs in the table are based on a proposed mix of partial de-looping and full unlooping given that:

• full unlooping is applied for the majority of customers and this is the most cost- efficient intervention type that futureproofs the network; and, • the partial de-looping interventions, which have higher associated NPV costs (reduced efficiencies), are targeted only to customers expected to have significant disruption levels and are more likely to oppose a full unlooping intervention.

Key assumptions

The methodology assumes a consistent unit cost for activities across the RIIO-ED2 period. Any variance in cost is therefore due to changes in volume assumptions.

The methodology assumes an increase in the usage on domestic premises based on an assumed increase in HP uptake. This is used in the model to forecast different costs associated with those volumes.

The methodology assumes increased in the level of competition over RIIO-ED2.

RIIO-ED2 profile

The high-level cost profile for Inside and Outside Price Control are shown in the chart below. C2 Connections profile 35.0 30.0 25.0 20.0 15.0 10.0 5.0 - 2016 2017 2018 2019 2020 2021 2022 2023 2024 2025 2026 2027 2028

Total Gross Costs - Inside the price control Total Gross Costs - Outside the price control

Guidance – Draft RIIO-ED2 Business Plan Data Template Commentary

Outside price control

The cost profile shows an increase in 2023 which is due to expected expenditure on some large EHV DG projected. The profile for RIIO-ED2 shows a reduction which is due to a combination of reduced volumes forecast from the DFES and the assumptions for increased competition.

Inside price control

The profile shows a step change in 2024 which is due to the increased forecast for unlooping that commences in that year. The forecasts for reinforcement for connections activities is a reducing trend based on the reduced DFES volume forecasts.

C3 – Physical Security

Commentary

Average annual costs in 2020-21 Change from

money RIIO-ED1 to RIIO-ED2 DPCR5 RIIO-ED1 RIIO-ED2 Physical Security - - 0.92 New

Redacted in website version of commentary and tables

C4 - Non-Operational IT and Telecoms

Commentary

Average annual costs in 2020-21 Change from

money RIIO-ED1 to RIIO-ED2 DPCR5 RIIO-ED1 RIIO-ED2 IT and Telecoms (Non- 14.27 6.56 7.25 11% Op)

Using information and technology to support customers is a critical enabler for our future aspirations and delivery of our business plan. It drives the transition to a more sustainable future by providing more flexible, efficient, responsive and customer centric services that directly support our transition to Net Zero Carbon.

A lot of what we are doing is improving uptime of our systems to support customers and to help maintain and support a more sustainable future. This is because our customers’

Guidance – Draft RIIO-ED2 Business Plan Data Template Commentary

reliance on our electricity network is growing with the move to Net Zero and the adoption of low carbon technology. We also need to support the transition to the Distribution System Operation (DSO) model which is a transformational change and these new services will also need to be on all the time.

We have built the foundations in RIIO-ED1 and are leveraging and building on them in RIIO-ED2 to drive out cost and increase customer satisfaction, improving the service we offer in terms of resilience and reliability as well as value for money. However, with an increased dependence on the electricity network, and with IT systems now being relied upon to deliver our services in an increasingly hostile Cyber world. Cyber security is becoming far more important, whether at infrastructure level or at systems level with embedded security, or through people’s behaviours, intruder management or attack recovery planning.

In order to compile our forecasts for this table we have developed an investment portfolio which consists of 10 investment areas. We have divided these investments into three groups:

• Non-Op IT Business systems • Enterprise Resource Management • Customer Relationship Management • Geographical Information Systems (GIS) • Market Operations • Work and Asset Management • Real Time Systems – Smart Meters • Smart Meter Gateway • Foundational – In-Direct IT • Data and Analytics • Non-Op IT Cyber • Cloud and Infrastructure • Digital Workplace

A detailed overview of how we have developed the forecasts is provided in the form of ten individual Investment Proposals, which are provided as annexes to this document.

Because of the commercial and security aspects of these documents they are not included in the version of our plan published on our website.

The investment proposals are:

• Commentary Annex 01 - IT Investment Proposal - Enterprise Resource Planning • Commentary Annex 02 - IT Investment Proposal - Customer Relationship Management • Commentary Annex 03 - IT Investment Proposal - Geographical Information Systems • Commentary Annex 04 - IT Investment Proposal - Market Operations • Commentary Annex 05 - IT Investment Proposal - Work and Asset Management • Commentary Annex 06 - IT Investment Proposal - Smart Meters • Commentary Annex 07 - IT Investment Proposal - Data Analytics and Integration Platform • Commentary Annex 08 - IT Investment Proposal - IT (Non-Operational) Cyber • Commentary Annex 09 - IT Investment Proposal - Cloud and Infrastructure • Commentary Annex 10 - IT Investment Proposal - Digital Workplace

Guidance – Draft RIIO-ED2 Business Plan Data Template Commentary

C5 – Property (Non-op)

Commentary

Average annual costs in 2020-21 Change from

money RIIO-ED1 to RIIO-ED2 DPCR5 RIIO-ED1 RIIO-ED2 Property (Non-Op) 2.25 1.09 2.40 120%

There are two elements to our Non-Op capex forecast for property: business-as-usual work and work to deliver one carbon neutral depot each year of RIIO-ED2.

The business-as-usual work covers the routine upkeep and development of our offices and depots as detailed in the table below and is estimated to cost £7m over the five-year period.

In addition, as part of our plans to reduce our carbon footprint we have committed to stakeholders that we will implement energy efficiency measures at one of our depots in each year of RIIO-ED2, so we will have five Net Zero depots by 2028. The estimated costs of these measures totals £5m.

The details of each project are listed in the table below:

Redacted in website version of commentary and tables

C6 – Vehicles and Transport (Non Op)

Commentary

Average annual costs in 2020-21 Change from

money RIIO-ED1 to RIIO-ED2 DPCR5 RIIO-ED1 RIIO-ED2 Vehicles and Transport 2.49 2.46 4.16 69% (Non-Op)

Our Vehicles and Transport (Non Op) forecasts are based on two component parts:

• The costs of vehicles replaced on a like-for-like basis; and • The costs of introducing electric vehicles into our fleet.

We expect to maintain our fleet at the current size during RIIO-ED2. The proposed replacement plan for RIIO-ED2 based on assets which will reach the end of their asset life in the period and will be replaced on a like-for-like basis is:

Guidance – Draft RIIO-ED2 Business Plan Data Template Commentary

Numbers of vehicles to replace RIIO- Vehicle Type 2024 2025 2026 2027 2028 ED2 Small/Medium Vans 9 6 8 15 1 39 Fault Tech 1 2 2 5 4 14 Jointer Type 12 29 27 34 28 130 Toyota 4X4 30 16 9 3 13 71 4x4 Mewps 2 1 5 3 11 Oil Van 2 3 2 2 9 Flat Bed 2 1 2 5 Trucks 4 6 3 1 14 Plant & Trailers 68 36 79 31 17 231 Unimogs & LL Fleet 1 3 3 2 3 12 Test Vans 1 1 Grand Total 127 103 136 99 72 537

Where the technology is available and the whole life cost is neutral to our customers, we will introduce electric vehicles into our fleet. We estimate that the additional initial purchase costs will be offset by a reduction in fuel costs over an eight-year period. This will mean that the introduction of electric vehicles will result in a higher capital outlay, but costs will be recovered in the remaining years of RIIO-ED2, in RIIO-ED3 and for vehicles purchased in the last two years of RIIO-ED1 we will see reduced costs in RIIO-ED4.

From the total vehicles identified above we plan to replace the following with an electric equivalent:

Numbers of vehicles to replace RIIO- Vehicle Type 2024 2025 2026 2027 2028 ED2 Small/Medium Vans - - 2 - - 2 Fault Tech - - 1 4 4 9 Jointer Type 5 19 15 25 20 84 Toyota 4X4 29 16 9 3 12 69 4x4 Mewps - 2 1 5 3 11 Oil Van - - 2 2 - 4 Flat Bed - - 2 1 2 5 Trucks ------Plant & Trailers 13 1 12 2 3 31 Unimogs & LL Fleet ------Test Vans - - - - 1 1 Grand Total 47 38 44 42 45 216

We have also included in our forecast £453k to cover the costs of EV maintenance facilities, workshop equipment and the application of telematics.

The forecast expenditure for RIIO-ED2 is:

RIIO- 2024 2025 2026 2027 2028 ED2 Traditional vehicle costs 4.0 3.9 3.3 3.5 3.0 17.6 Premium for electric vehicles 0.5 0.5 0.6 0.6 0.6 2.7 Equipment and telematics 0.1 0.1 0.1 0.1 0.1 0.5 Total 4.6 4.5 3.9 4.1 3.6 20.8

Guidance – Draft RIIO-ED2 Business Plan Data Template Commentary

C7 - STEPM (Non Op)

Commentary

Average annual costs in 2020-21 Change from money RIIO-ED1 to RIIO-ED2 DPCR5 RIIO-ED1 RIIO-ED2 Small Tools and 0.88 1.52 3.77 147% Equipment

The RIIO-ED2 forecast is based on a continuation of the expected spend in 2023 of £0.5m per year.

To this figure we have added a total of £2.4m associated with the Kelvatek maintenance contract for smart devices and £14m for the replacement of smart devices reaching end-of- life.

Further details of our plans for managing and replacing our existing inventory of smart devices can be found in the associated EJP – RM_EJP_2_Monitoring_Device_Management.

C8 - Remote Generation Opex

Commentary

We do not incur costs in this category, so the table is blank.

C9 - Core Closely Associated Indirects (CAI)

Commentary (up to 7 pages)

Average annual costs in 2020-21 Change from

money RIIO-ED1 to RIIO-ED2 DPCR5 RIIO-ED1 RIIO-ED2 Core CAI 47.10 50.21 67.01 33%

In common with many of the tables in this submission, our strategy for Closely Associated Indirects (CAI) has two components:

• Continuing to do the things we do now, but doing them more efficiently; and • Identifying new activities that we will have to introduce to meet stakeholders’ requirements to deliver initiatives such as DSO, Net Zero and improved customer service.

Guidance – Draft RIIO-ED2 Business Plan Data Template Commentary

Base Costs

Throughout the RIIO-ED1 period we have worked to deliver the service that stakeholders expect as efficiently as possible, and we will continue with this process through to the end of March 2023.

Consequently, we have taken the 2022-23 forecast of expenditure in our Company Business Plan as the basis for our RIIO-ED2 forecasts. We have presented this as a flat profile with no efficiencies built into these numbers. Forecast efficiencies are shown in the RPEs and Ongoing Efficiency table.

New activities

We have identified new activities which we plan to deliver in RIIO-ED2 through:

• Our Enhanced Stakeholder engagement process including our largest ever customer consultation exercise; and • Internal reviews of the needs associated with delivering our stakeholder requirements.

From this we have developed a list of additional costs which we have associated with the different components of CAI.

This list has been internally reviewed to finalise the following list of attributes which we have included in our plan.

Cost driver Amount in Category type plan Black Start capability 6.3 Control Centre Community energy including fund 6.3 Network Policy Increase in network design work to facilitate 17.2 Network Design and Carbon Reduction, move to DSO and increased Engineering network investment programme Increased network investment leading to increased 0.5 Engineering requiring for management & clerical support Management and Clerical Support Increased network investment programme 2.2 Project Management requires increased numbers of project managers Kelvatek Maintenance 13.8 Engineering Management and Clerical Support Sapient costs (ongoing running costs of the fault- 7.5 Engineering finding service) Management and Clerical Support Register at least 60% of PSR customers 1.9 Call Centre Improve the quality of PSR data held - review all 3.3 Call Centre High every 12 months and others every two years Increase telephony support and frequency of calls 3.8 Call Centre during power cut rather than digital response. In a power cut we would introduce additional 2.0 Call Centre channels and services including food and warmth To actively support all customers in fuel poverty 10.0 Call Centre through partner charities at £40 per head

Guidance – Draft RIIO-ED2 Business Plan Data Template Commentary

To protect vulnerable customers - Create an 1.8 Call Centre engagement plan on changing technology and network through multi-channel To protect vulnerable customers - Create 0.8 Call Centre demographic specific feedback groups to develop ideas To protect vulnerable customers - Create an 1.3 Call Centre innovation fund for partners to provide solution opportunities, Customer experience - Night staff in call centre 1.0 Call Centre Movement of costs from IT - To EMCS (Business 9.0 Engineering Change) Management and Clerical Support Movement of costs from IT - To System Mapping 0.4 System Mapping Total 88.7

These cost areas are further explored below:

Black Start Capability

New standards for Electricity System Restoration will require our support so that the Electricity System Operator (ESO) can restore:

• 60% of the regional demand within 24 hours; and • 100% of the regional demand within five days.

During DPCR5 and RIIO-ED1 we will spend £4.4m on the installation of Protection Batteries and Telecoms Infrastructure to provide the physical resilience required for the current standard.

To meet the new standards, we will need to invest in operational costs, through the employment of additional staff in the Control Room.

For further details, please see section 5.2.2.6 of our plan.

Community Energy

As explained in section 5.3.1.3 of our plan we are working to improve the work we do to support community energy. The £6.25m funding covered in this table covers:

Community energy fund Annual fund to support the development £1.00m/yr of community energy projects Community and local Resource to continue the dedicated point £0.25m/yr energy strategy of contact and understanding of this development delivery customer group

Closely associated indirects associated with the increased investment programme

As detailed throughout our plan, we expect to see a large increase in our network investment programme in RIIO-ED2 associated with the move to Net Zero, the introduction of DSO and the ongoing requirements to maintain a reliable, resilient network.

Guidance – Draft RIIO-ED2 Business Plan Data Template Commentary

In order to support this plan, we will need to increase the number of staff in the closely associated supporting roles.

The figures shown above can be further broken down into these areas of work:

Move to Net Zero 3.0 Network Design and Move to DSO 1.1 Engineering Secondary Network Design 9.5 Transmission Network Design 3.5 Engineering Management and Clerical Support 0.5 Project management 2.2 Total 19.9

Monitoring Device Management

As part of our move to a more active network we are introducing increased levels of monitoring. Elements of this monitoring will be delivered through a maintenance contract with Kelvatek and through the deployment of their Sapient product.

We plan to spend around £4.2m per year on these two initiatives, which we have classified as ‘Engineering Management and Clerical Support’.

Call Centre costs

We plan to spend an additional £5.1m each year on projects associated with delivering a better service to vulnerable customers, which we have classified as Call Centre costs.

The table below details these initiatives and the proposed cost for the RIIO-ED2 period.

Raising PSR membership to 60% 1.9 Costs of £375k per annum are based on two employees within the call centre at approximately £67k per annum and the remainder on partnerships and advertising.

This forms part of proposition 5.1.2.3 in our plan

Improve the PSR customer data 3.3 We will enhance the service provided to members through making contact more frequently - all those classed as High priority will be contacted every 12 months to ensure our data is up to date. The remainder will be contacted every two years

The costs of £650k per annum will cover the costs of sixteen extra call centre agents and their manager.

This also forms part of proposal 5.1.2.3 in our plan

To better respond to our customers in a power cut 3.8 Increase telephony support and frequency of calls during power cut so customers talk to a member of staff rather than receiving a digital response.

The costs of £750k per year are based on twenty additional call centre staff and two managers.

Guidance – Draft RIIO-ED2 Business Plan Data Template Commentary

To better serve our customers in a power cut 2.0 Introduce additional channels and services including providing food and warmth during a power cut. A sum of £400k per annum would cover the cost of two co-ordinators and the hire or purchase of the necessary commodities

To actively support people in fuel poverty 10.0 Following a trial with Citizen’s Advice we are planning to work with charitable organisations to provide support to the 250,000 fuel poor customers in our area at a cost of £2m each year.

Further information on this initiative is given in proposal 5.1.2.5. of our plan.

To protect vulnerable customers and not leave them behind – 1.8 engagement plan We anticipate spending £350k per annum over the RIIO-ED2 period to create an engagement plan on changing technology and to publicise this scheme through various channels.

The costs relate to the development and advertising costs associated with the plan.

To protect vulnerable customers and not leave them behind – 0.8 feedback groups We will create demographic specific feedback groups to develop ideas at a cost of £150k per year. The costs are £40k to co-ordinate with the rest payable to customers

To protect vulnerable customers and not leave them behind 1.3 As detailed in proposal 5.1.2.4 of our plan we intend to introduce a new £250k annual fund to remove the barriers that prevent the take- up of low carbon technologies, such as electric vehicles or solar panels, so that no customer gets left behind.

Overnight call centre staff 1.0 In order to fulfil our responsibility to contact PSR customers during outages we will have to increase the number of call centre staff to provide an enhanced out-of-hours service.

We anticipate that this will cost £200k per year.

Total additional Call Centre cost 25.6

Movements of costs from IT

In developing our plan, we have reviewed the allocation of costs to the various regulatory categories. Consequently, we have identified that for £9.4m of costs that we would have previously reported in our IT tables it would be more appropriate to report in the ‘Engineering Management and Clerical Support’ and ‘System Mapping’ rows of this table. These costs relate primarily to business teams which input to IT system design & development.

Guidance – Draft RIIO-ED2 Business Plan Data Template Commentary

C10 - Wayleaves (CAI)

Commentary

Average annual costs in 2020-21 Change from

money RIIO-ED1 to RIIO-ED2 DPCR5 RIIO-ED1 RIIO-ED2 Wayleaves 4.59 4.20 4.75 13%

Annual Wayleave Payments

As well as traditional Wayleave Payments this line also includes ‘Substation Freehold Purchases and Leasehold Single Premium Payments’ which we forecast separately.

We are currently working with the NFU and other electricity network companies to review wayleave rental payments as well as wayleave compensation rates, but we are unlikely to see the full impact until ED2. We are anticipating that there may be an increase in the actual rental payment and compensation elements but as yet, we do not know for certain what percentage increase we will agree with the NFU.

Net Zero delivery will undoubtedly lead to an increase in the number of consents required. Whilst we will always attempt to secure any apparatus on an easement in the first instance, we must allow for the provision of wayleave payments where a wayleave is the most appropriate consent or the only consent that is accepted by the land owner. This will result in an increase on the current payment rate.

To date we have received almost 7,000 wood pole claims currently primarily secured on 14- year termed wayleaves but with some high value/impact claims secured by way of easements. We are also anticipating similar claims on our underground network. This will undoubtedly reduce the annual wayleave payments over time as we progress with the completion of the anticipated claims numbers through ED2 (around 13,000 anticipated in total for wood pole networks and around 16-18,000 underground cable claims). We are likely see the impact as we progress through ED2 which is reflected in our forecast of anticipated payments.

We have seen the impact of the claims on the wood pole networks, so we have consulted with land agents in order to improve our understanding of their position in ED2, which we have reflected in our forecasts.

Substation Freehold Purchases and Single Premium Payments for Leasehold Sites (included in Wayleaves Payments)

These costs relate to non-scheme related freehold/ single premium payment acquisitions at the sole cost to us. These are predominately driven by Asset Protection, but a number will be led by Secondary Network reinforcement schemes.

The current programme of reviewing ‘holding over’ leases and other leases reaching the end of the lease term are driving an increasing number of freehold site purchases or single premium payments for longer lease terms to ensure the security of our network.

Towards the end of 2020-21 and the start of 2021-22, there are twelve sites submitted for legal completion at a value of £70.5k (exc fees).

Guidance – Draft RIIO-ED2 Business Plan Data Template Commentary

Our preferred policy is to obtain the freehold or a long-term leasehold on a single premium payment basis to provide security for our network and to simplify financial reporting.

In a similar vein to substation lease renewals, we have seen a larger than normal number of freehold revisions stalled within the legal process due to the impact of COVID.

Substation Rental Payments

Redacted in website version of commentary and tables

Wayleave Admin Costs

Redacted in website version of commentary and tables

C11 - Vehicles and Transport (CAI)

Commentary

Average annual costs in 2020-21 Change from

money RIIO-ED1 to RIIO-ED2 DPCR5 RIIO-ED1 RIIO-ED2 Vehicles and Transport 4.60 4.50 4.36 -3% (CAI)

We forecast that our costs for RIIO-ED2 will continue at our 2023 levels, with the addition of the following over the five-year period;

Cost driver Additional costs (£m) Costs associated with vehicle innovation, relating to initiatives 0.5 such as self-driver vehicle automation Costs associated with legislation relating to vehicle 0.5 compliance data leading to increased software, hardware and indirect costs. The removal of the rebate associated with red diesel will lead 0.5 to increased fuel costs Total 1.5

Guidance – Draft RIIO-ED2 Business Plan Data Template Commentary

These additional costs will be offset by the reduction in fuel costs associated with electric vehicles. As these vehicles are introduced across the period we expect to see the following annual savings on fuel:

Reduction in fuel costs associated with electric vehicles (£m) 2024 2025 2026 2027 2028 -0.07 -0.13 -0.20 -0.27 -0.34

C12 - Core Business Support

Commentary (up to 7 pages)

Average annual costs in 2020-21 Change from

money RIIO-ED1 to RIIO-ED2 DPCR5 RIIO-ED1 RIIO-ED2 Core BS 21.55 20.31 25.10 24%

In common with many of the tables in this submission, our strategy for Core Business Support has two components:

Base Costs

Throughout the RIIO-ED1 period we have worked to deliver the service that stakeholders expect as efficiently as possible, and we will continue with this process through to the end of March 2023.

Consequently, we have taken the 2022-23 forecast of expenditure in our Company Business Plan as the basis for our RIIO-ED2 forecasts. We have presented this as a flat profile with no efficiencies built into these numbers. Forecast efficiencies will be shown in the RPEs and Ongoing Efficiency table.

New activities

We have identified new activities which we plan to deliver in RIIO-ED2 through:

From this we have developed a list of cost movements which we have associated with the different components of Business Support Costs.

Guidance – Draft RIIO-ED2 Business Plan Data Template Commentary

This list has been reviewed through a series of workshops to finalise the following list of attributes which we have included in our plan.

Cost driver Amount in plan Category type (£m) Legal and Land Rights and Consents costs 0.5 Finance and Regulation associated with moving our assets off the masts of radio site operators. Costs of direct leases associated with 0.5 Finance and Regulation moving our assets off the masts of radio site operators. Mobile phone contract – expected increase 0.5 Finance and Regulation in operating costs under new contract. RIIO-ED2 - Cost saving from standing -3.8 Finance and Regulation down RIIO-ED2 team Increased cost of Stakeholder Engagement 0.2 Finance and Regulation RIIO-ED3 – Cost of establishing a RIIO- 4.1 Finance and Regulation ED3 team Additional cost of supporting the Customer 0.1 Finance and Regulation Engagement Group (CEG) Additional cost of Stakeholder Manager 0.4 Finance and Regulation Legal Services – increased cost of new 1.4 Finance and Regulation contract providing additional services Land Rights & Consents – costs associated 1.7 Finance and Regulation with increased workload. Audit Costs - Additional costs of audit 0.3 Finance and Regulation compliance Treasury - Additional costs in treasury 0.3 Finance and Regulation Ensure that all employees are trained to 2.3 Non-operational training support vulnerable customers and that all our touch points deliver PSR Total 8.5

These cost areas are summarised below:

Mobile phone contract (£0.5m)

With increased reliance on our mobile phone network, both for voice and data traffic, we expect to see an increase in the contract costs.

Price review team and associated stakeholder engagement (£1m)

Whilst we will be completing the RIIO-ED2 regulatory engagement early in the period, we will have to begin planning for the RIIO-ED3 price review almost immediately. We will also need to maintain an enhanced level of stakeholder engagement, both through the Customer Engagement Group (CEG) and with other stakeholders.

We are particularly keen to build on the relationships we have established with local authorities in our area, so we intend to employ a Stakeholder Manager to look after these relationships.

Professional costs (£4.7m)

There are two main areas where we expect to see increased professional costs:

Guidance – Draft RIIO-ED2 Business Plan Data Template Commentary

• increased activity associated with moving assets from mobile sites and the expected increase in wood pole claims means that we will need increased resources in our legal team and within our Land Rights and Consents team; and • changes in interpretation of financial regulations will mean that we will need to employ more staff in our Audit and Treasury teams.

Training to support vulnerable customers (£2.3m)

As part of our programme to support vulnerable customers we will be providing training to all staff to ensure that all customers on our Priority Services Register, and any other vulnerable customers, will receive all required support during power cuts and other interactions.

C13 - IT and Telecoms (Business Support)

Commentary (up to 7 pages)

Average annual costs in 2020-21 Change from

money RIIO-ED1 to RIIO-ED2 DPCR5 RIIO-ED1 RIIO-ED2 IT& Telecoms (Business 19.97 17.48 21.48 23% Support)

Using information and technology to support customers is a critical enabler for our future aspirations and business plan. It drives the transition to a more sustainable future by providing more flexible, efficient, responsive and customer centric services that directly support our transition to Net Zero Carbon.

Our approach to IT will be underpinned by our Cloud First Strategy. This will enable us to continue to modernise and enhance our IT capabilities whilst delivering towards our environmental and sustainability goals. We are also proposing a significant move towards ‘As a Service’ based solutions. Whilst both have a positive impact on our Carbon footprint there will be a resultant move from Capital Expenditure to Operational Expenditure.

In order to compile our forecasts for this table we have developed an investment portfolio which consists of 10 investment areas. We have divided these investments into three groups:

Guidance – Draft RIIO-ED2 Business Plan Data Template Commentary

• Digital Workplace

A detailed overview of how we have developed these forecasts is provided in the form of ten individual Investment Proposals. These are provided as annexes to this commentary and detail the Business Support impact within the RIIO-ED2 period post-implementation.

Because of the commercial and security aspects of these documents they are not included in the version of our plan published on the web.

The investment proposals are:

Additionally, there are a number of areas of Opex (Business Support) growth driven by Net Zero and enhanced cyber defences.

1. £5m Opex efficiency savings (over ED2) 2. Net Zero Carbon driven sourcing and IT operating model optimisation to support more 24x7 services and additional DSO capabilities. This amounts to an increase of £3.87m (over ED2) 3. Net Zero Carbon driven Operational IT Opex increases to support additional DSO capabilities. This amounts to an increase of £3.53m (over ED2). 4. Net Zero Carbon Telecom increases to support growth in Telemetry units to enable increased monitoring and control of the distribution network as well as growth in the network. This amounts to an increase of £5.32m (over ED2).

This results in an overall increase in Opex over ED2, of £7.72m.

C14 - Property Management (Business Support)

Commentary

Average annual costs in 2020-21 Change from

money RIIO-ED1 to RIIO-ED2 DPCR5 RIIO-ED1 RIIO-ED2 Property Mgt 6.30 5.08 5.22 3%

Guidance – Draft RIIO-ED2 Business Plan Data Template Commentary

As we develop one depot each year to become Net Zero we will see the mix of costs change, but we do not expect to see a significant difference in the overall quantum of costs. Consequently, we are forecasting that the level of expenditure in RIIO-ED2 will continue at the levels that we plan to be at in 2023.

C15 - Atypicals Non Severe Weather

Commentary

Average annual costs in 2020-21 Change from

money RIIO-ED1 to RIIO-ED2 DPCR5 RIIO-ED1 RIIO-ED2 Atypicals Non Sev 1.41 0.47 - No costs Weather

We have included no forecasts for atypicals in the remainder of the RIIO-ED1 period or for RIIO-ED2.

C16 - Smart Meter Outside PC

Commentary

We do not plan to incur any costs for this activity.

C17 - Legacy Meters

Commentary

Average annual costs in 2020-21 Change from

money RIIO-ED1 to RIIO-ED2 DPCR5 RIIO-ED1 RIIO-ED2 Legacy meters 0.02 0.01 0.00 -60%

This is an area of relatively low spend in RIIO-ED1, where we have spent around £7k each year. We expect this figure to continue to reduce in RIIO-ED2.

As the Smart Meter roll-out programme continues we expect to see further reductions in the expenditure associated with Legacy Meters, to a level of around £1k per year at the end of RIIO-ED1.

Guidance – Draft RIIO-ED2 Business Plan Data Template Commentary

C18 - De Minimis

Commentary

Average annual costs in 2020-21 Change from

money RIIO-ED1 to RIIO-ED2 DPCR5 RIIO-ED1 RIIO-ED2 De Minimis 2.23 2.02 0.99 -51%

Redacted in website version of commentary and tables

C19 - Other Consented Activity

Commentary

We are not forecasting any costs for Other Consented Activity.

C21 - Out of Area Networks

Commentary

We are not forecasting any costs for Out of Area Networks.

C22 - Pass-through

Commentary

Average annual costs in 2020-21 Change from

money RIIO-ED1 to RIIO-ED2 DPCR5 RIIO-ED1 RIIO-ED2 Pass through 47.61 50.10 47.86 -4%

We are expecting pass-through expenditure to remain at the levels we are currently seeing in RIIO-ED1, with the following exceptions:

Guidance – Draft RIIO-ED2 Business Plan Data Template Commentary

• the Licence Fee Payments which we expect to rise to £1.8m per year; • the Smart Meter Communication Licensee Costs which are set to rise to £3.1m per year; and • Transmission Connection Point Charges which are individually calculated and agreed with National Grid Electricity Transmission.

C23 - Other NABC

Commentary

Average annual costs in 2020-21 Change from

money RIIO-ED1 to RIIO-ED2 DPCR5 RIIO-ED1 RIIO-ED2 Other Non-Activity Based Costs 17.42 16.22 -1.14 -107%

We do not think it is appropriate to forecast a level of compensation payments, so the rows associated with compensation and ex-gratia payments have been set to zero.

We do expect that there will be a continuing responsibility to support bad debt activities, so we have included a small amount in this line based on RIIO-ED1 averages.

Similarly, we are forecasting that the profit and loss from the sale of fixed assets and scrap will continue at RIIO-ED1 levels.

We plan to complete all payments associated with the pensions deficit repair in RIIO-ED1, so ‘Pensions Established Deficit Repair Payments’ are set to zero in RIIO-ED2.

C24 - Related Party Margin

Commentary

Redacted in website version of commentary and tables

Guidance – Draft RIIO-ED2 Business Plan Data Template Commentary

C25 – Shetland (SSEH Only)

Commentary

This table is intentionally blank.

Cost and Volume Table Commentary

CV1 - Primary Reinforcement

Commentary

Average annual costs in 2020-21 Change from

money RIIO-ED1 to RIIO-ED2 DPCR5 RIIO-ED1 RIIO-ED2 Reinforcement (Primary 8.91 6.41 5.86 -9% Network)

Methodology

A detailed overview of the methodology behind the determination of the Primary Reinforcement program is presented in the Load Related Investment Planning Methodology – Forecasting and Planning Processes annex – Annex 19.

In summary a desktop exercise combined with detailed power system analysis has been carried out to develop high-level reinforcement solutions for all identified network issues. Out with the projects at Harker and Bredbury where specific issues have been identified, our starting point has been assessment of the load forecasts for the Central Outlook forecast compared to existing firm capacities at all substations and groups. Where a thermal overload or voltage excursion has been identified then a detailed network study was undertaken and a desktop solution to that issue has been determined.

The solution could be as simple as overlaying a small section of limiting cable or replacing a primary transformer with one of a greater rating. If several overloads are concentrated in one area, then the proposed solution is to install a new primary as is the case in Manchester city centre. This option can then be used to resolve several LI excursions nearby through load transfers via the additional capacity created by the new asset.

Our proposed solutions take into account overall system performance and the status of neighbouring parts of the network. This ensures that efficient and economic development of the network takes place and stranded assets are not created. All solutions identified take account of construction delivery risks (equipment outage risk, consents acquisition risk etc) and are designed to provide an efficient solution which is deliverable within the RIIO-ED2 period. At this stage, except for one scheme (Southern Gateway) no consents have been sought for the solutions identified.

Guidance – Draft RIIO-ED2 Business Plan Data Template Commentary

The profiling of expenditure has been constructed with a view to scheduling interventions to solve predicted network issues in a timely manner before they occur, but also providing a consistent workload over the RIIO-ED2 period to ensure deliverability. Other considerations included avoiding simultaneous projects in the same area of the network to avoid operational difficulties in obtaining the necessary outages during the RIIO-ED2 period. Scheduling of work will be refined as the program rolls out during the period.

Table CV1 relates to primary reinforcement classified as 132kV and 33kV reinforcement of our network. Projects here have been identified through a combination of desktop analysis and detailed study of the network which will have led to bespoke solutions for the specific network issues. Details of the individual projects can be found in the general submission data and a high-level summary is detailed below. Table CV1 contains the cost and output volumes covering the twenty reinforcement projects identified.

No of Driver Projects Load Index / P2/7 (N-1) 17 Load Index / P2/7 (N-2) 1 Reinforcement Other 1 Power Quality 1 Total 20

The load related programme of network interventions has been cross referenced with that of the non-load programme. A coordinated approach has been taken to ensure that any intervention initially appearing in both programmes was reviewed with a decision taken as to which programme the intervention should lie within.

Where the value for an individual project exceeds £2m an Engineering Justification Paper has been generated. Each EJP contains detailed system study results with analysis of the options we considered, and an accompanying CBA has been carried out to justify the chosen solution. Out of twenty primary reinforcement schemes there are a total of seven projects above £2m and thus EJPs have been created for these seven projects.

The seven EJP projects are as follows:

• Frederick Road; • Southern Gateway; • Little Hulton; • Northern Gateway / South Heywood; • Mayfield Regeneration; • Lower Darwen; and • Harker Energy Enablement.

Harker

Harker Energy Enablement is a significant project in the RIIO-ED2 program and is also identified in NGET’s RIIO-T2 program. Harker is an existing Grid Supply Point in our region near Carlisle and the Scottish border.

NGET have determined that the existing SGTs at Harker need to be upgraded from 120 to 240MVA units as part of an offline rebuild due to numerous drivers dominated by asset condition but also including a significant number of distributed generation applications to connect to our network in RIIO-ED1. The existing AIS 132kV switchgear at Harker will be replaced, including our equipment and hence the inclusion of this large project in our RIIO- ED2 submission.

Guidance – Draft RIIO-ED2 Business Plan Data Template Commentary

Harmonics

A scheme is proposed at Bredbury GSP to install a harmonic filter at 132kV to mitigate against a known 5th and 7th Harmonic excursion beyond Engineering Recommendation G5/5 planning limits. Design work has commenced on this and concluded that a filter is required along with a 132kV circuit breaker. Further monitoring and detailed filter design work is required in advance of the construction in RIIO-ED2.

Pricing Methodology

The value of the EHV and 132kV programme was derived from individually named projects with a defined scope of work. The identified scope was broken down into standard work items and these in turn costed on the existing 2020-21 unit rates for specific items, such as cable installation per meter and transformer replacement.

Cost Benefit Analysis

A CBA has been carried out for each project which exceeds £2m. These CBAs consider reinforcement costs, timings and losses impact of each alternative option to determine the best value for money solution for the specific network issue. A detailed description of the CBA process is provided in our Load Related Investment Planning Methodology – Forecasting and Planning Processes annex document.

Cost Type

We intend to deliver load related investments using a mix of approaches, with our initial assumed split as shown in CV1

High Level Cost Adjustments

Two lines are included in the table CV1 to account for the following -

Line 311 - EHV Smart and Flex adjust

Individual capacity constraint lines of table CV1 have been completed based on costs for asset-based solutions at this stage and includes options to apply flexible and innovative approaches to solve capacity shortfalls. Although they are not clearly defined yet, these innovative and flexible solutions are anticipated to provide cost savings during the RIIO- ED2 period. For example, the introduction of our new Network Management System is expected to provide opportunities for smarter methods of managing network capacity and LV monitoring will ensure that we use the full capacity of our existing equipment.

For this reason and because our named schemes are costed based on asset solutions, we have entered values in the “conventional” lines of table CV1. We have not entered values in the “innovative” rows but have instead included our smart and flex discount in a separate row. Line 311 includes negative values to reduce the costs of the asset-based program to reflect savings from the application of smart and flexible technologies. For our EHV load related investments, we expect that innovative solutions will deliver a reduction of 20% on the cost of the load related expenditure program based on asset solutions as laid out in tables CV1 and CV3.

There are values in the CV1 flexible service costs row. These reflect the continuation of the payments to existing service providers plus additional payments to new providers who are required to support single primary sites which are not included in the list of named schemes for which asset based solutions have been costed.

Guidance – Draft RIIO-ED2 Business Plan Data Template Commentary

Line 312 - Customer Funded EHV Reinforcement

Table CV1 has been completed based on the total future demand reflected in our Central Outlook forecast. We assume that some of this growth in demand will correspond with new customer connections since our forecast accounts for the overall increase in electricity usage across our network driven by load growth and connections. Some of these new connections may have reinforcement associated with them, part of which is payable by the customer under the current rules. Adjustment to our load related investment plan must be made to take into account such customer contributions. We have assumed 100% overlap with the connections driven reinforcement identified in connections table C2 and the reinforcement in CV1 due to general load growth.

Therefore, we have included in line 312 negative values to reflect the customer contributions to EHV reinforcements across the RIIO-ED2 period effectively reducing the value of the load related investment plan. These negative values correspond to the customer contributions in table C2 which have been derived from an analysis of historic connections and the forecast EHV reinforcement investment required to facilitate demand and generation connections on our network anticipated across the RIIO-ED2 period. Our approach ensures that we avoid double counting when splitting our load related reinforcement between connections driven reinforcement and general reinforcement.

Further detail on our approach to the allowances made in CV1 and a simple summary table is provided in our Load Related Investment Planning Methodology – Forecasting and Planning Processes annex document.

CV2 - Secondary Reinforcement

Commentary

Average annual costs in 2020-21 Change from

money RIIO-ED1 to RIIO-ED2 DPCR5 RIIO-ED1 RIIO-ED2 Reinforcement 6.56 4.12 11.43 261% (Secondary Network)

RIIO-ED1 performance

Load related expenditure (LRE) in RIIO-ED1 is currently lower than the regulatory allowance as a result of a number of factors:

• lower uptake of Low Carbon Technologies (LCTs) than forecasted; • reduction in demand relative to forecast due to covid-19 pandemic; and • innovative and efficient solutions to network loading issues, including application of Demand Side Response (DSR).

We are however forecasting to be within the 20% deadband for the operation of the LRE re-opener.

Guidance – Draft RIIO-ED2 Business Plan Data Template Commentary

RIIO-ED2 secondary network reinforcement plan

The uptake of LCTs, comprising mainly electric vehicles (EVs) and heat pumps (HPs), is expected to significantly increase over the RIIO-ED2 period as the UK transition to net zero carbon by 2050 at the latest is required by UK law. We forecast numbers of LCTs, distributed generation and storage capacities and growth in the underlying demand to help us understand what the future requirements of our network may be. Especially for EVs, there is high certainty in associated significant uptakes due to the national policies supporting the electrification of transport. As a result of the increases in LCT connections, we are expecting a significant increase in secondary network reinforcement requirements compared to RIIO-ED1 in order to:

a) facilitate the non-diversified demand growth expected on LV feeders up to HV feeders due to regional uptakes of LCTs; and, b) ensure the safe supply of the increased residential demand from EVs and HPs at the connection points of domestic customers.

The key issues addressed in the RIIO-ED2 secondary network reinforcement programme are: • overloaded (thermal and voltage issues) HV and LV feeders; • overloaded (thermal and voltage issues) distribution substations; • harmonic distortion non-compliance; and • service unlooping.

Our approach to unlooping services to ensure safe customer supplies and that our network isn’t a barrier to customers adoption of LCTs is detailed in a specific Engineering Justification Paper (EJP) and the expected costs are included in table C2.

The CV2 data tables contain the baseline (ex-ante) load related expenditure for secondary networks. This is informed from our Central Outlook scenario (part of ENW DFES 2020) that is based on national policies driving demand growth as part of the transition to net zero carbon and has been identified as the highest certainty scenario in line with RIIO-ED2 guidance.

Accelerated decarbonisation versions of our DFES 2020 have been considered to capture the investment range that is possible for RIIO-ED2 in the case that local net zero carbon targets are met before 2040. The peak demand forecasts and associated investment requirements for these scenarios and all other DFES 2020 scenarios are included in our Load Related Investment Planning Methodology – Forecasting and Planning Processes annex.

The delivery of the secondary network investment programme will be optimised using the proposed widespread installation of our LV PRESense monitoring system (included in CV11 table).

Methodology

Future Capacity Headroom (FCH) model

Our secondary load related reinforcement plan is based on the Future Capacity Headroom model that was developed and used for our RIIO-ED1 submission. Further details of the modelling approach are provided in the Load Related Investment Planning Methodology – Forecasting and Planning Processes annex. A key advantage of the FCH model is that it employs actual network topology, connectivity plant/equipment ratings and existing maximum demands, utilising data contained within our corporate systems. Metered loading

Guidance – Draft RIIO-ED2 Business Plan Data Template Commentary

data appropriate to HV feeders and consumers (based on standard load profiles) produces a current loading profile for all assets on our HV and LV network.

Reflective of the large extent of our HV and LV networks along with the lower cost of any necessary intervention, the FCH model provides an output on volumes of overloaded plant/equipment. Outputs from the FCH model are counts of assets on the secondary network that are loaded beyond their thermal rating. The uncertainty in the exact location of LCT penetration means that the results for future overloads are only valid as counts in aggregate and cannot be site specific. The FCH model also counts assets where LV network voltage limits are likely to be exceeded by checking LCT capacities, including PV, against an indicative thermal rating threshold.

Harmonic distortion issues

The FCH model also identifies harmonic distortion issues due to LCT uptakes. The simplified harmonic distortion analysis assumes that harmonic issues are directly proportional to volumes of LCTs. Recent work1 carried out by RINA for Western Power Distribution (WPD) has been used for the basis of the methodology for assessing the volumes of harmonic issues. A detailed description of the methodology is given in our RIIO-ED2 Load Related Investment Planning Methodology – Forecasting and Planning Processes Annex.

Solutions and costs

The volumes of interventions arising from our FCH model are converted to plan costs using standard priced modular solutions based on typical network reinforcements to address the following corresponding secondary network issues:

• Thermal overloads on HV and LV feeders; • Thermal overloads – distribution (HV/LV) transformers; • Voltage issues – LV feeders / Distribution substations; and • Harmonic level non-compliance.

Profiling of interventions

The volume and timing of interventions is heavily dependent on the uptake of LCTs especially electric vehicles and heat pumps. Interventions to address thermal and voltage issues on HV and LV feeders as well as distribution substations have been profiled based on the forecast uptake trend of EVs as this is expected to be the main driver for secondary network reinforcement because the numbers of EVs is much higher during the RIIO-ED2 period compared to the corresponding numbers of domestic HPs or domestic PV.

This compares to service unlooping included in table C2 which has been profiled based on the uptake of battery electric cars as this EV type is more likely to adopt domestic EV charging compared to vans and plug-in hybrid vehicles which are likely to have a lesser network impact as internal combustion engine vehicles are phased out.

1 “Electric Vehicle Charging: Monitoring & Analysis / project number PSE0564001”,rev. 21, WPD, Bristol, UK, May 2018

Guidance – Draft RIIO-ED2 Business Plan Data Template Commentary

The accompanying service unlooping EJP explains in detail how the unlooping requirements have been assessed taking into account, amongst others, the population of looped properties, access of domestic customers to off-street parking, customer disruption depending on property type and futureproofing network to allow all domestic customers adopt an EV charger and/or a HP by 2050.

High Level Cost Adjustments

Similar to the approach we have adopted in table CV1, two lines are included in the table CV1 to account for the following -

Line 158 – LV & HV Smart and Flex adjust

Individual capacity constraint lines of table CV1 have been completed based on costs for asset-based solutions at this stage and include an option to apply flexible and innovative approaches to solve capacity shortfalls. Though these are not clearly defined yet these are anticipated to provide cost savings during the RIIO-ED2 period. For example, the introduction of our new Network Management System is expected to provide opportunities for smarter methods of managing network capacity and LV monitoring will ensure that we use the full capacity of our existing equipment.

For this reason, we have entered values in the “conventional” lines of table CV2. We have not entered values in the “innovative” rows but have instead included our smart and flex discount in a separate row. Line 158 includes negative values to reduce the costs of the asset-based program to reflect savings from the application of smart and flexible technologies. For our secondary networks load related investments, we expect that innovative solutions will deliver a reduction of 5% on the cost of the load related expenditure program based on asset solutions as laid out in tables CV2 and CV3.

There are no values in the flexible service costs line of table CV2. This reflects that we do not yet have any providers of flexible services to resolve HV or LV network issues, but it doesn’t reflect that there will not be any during the RIIO-ED2 period. However, we do not know there magnitude yet so have instead reflected the savings they are expected to bring in line 158.

Line 159 - Customer Funded LV & HV Reinforcement

Table CV2 has been completed based on the total future demand reflected in our Central Outlook forecast. We assume that some of this growth in demand will correspond with new customer connections since our forecast accounts for the overall increase in electricity usage across our network driven by load growth and connections. Some of these new connections may have reinforcement associated with them, part of which is payable by the customer under the current rules. Adjustment to our load related investment plan must be made to take into account such customer contributions.

We have assumed 100% overlap with the HV and LV connections driven reinforcement identified in connections table C2 and the reinforcement in CV2 due to general load growth.

Therefore, we have included in line 159 negative values to reflect the customer contributions to secondary network reinforcements across the RIIO-ED2 period effectively reducing the value of the load related investment plan. These negative values correspond to the customer contributions in table C2 which have been derived from an analysis of historic connections and the forecast secondary networks reinforcement investment required to facilitate demand and generation connections on our network anticipated across the RIIO-ED2 period. Our approach ensures that we avoid double counting when splitting

Guidance – Draft RIIO-ED2 Business Plan Data Template Commentary

our load related reinforcement between connections driven reinforcement and general reinforcement.

Further detail on our approach to the allowances made in CV2 and a simple summary table is provided in our Load Related Investment Planning Methodology – Forecasting and Planning Processes document – Annex 19.

CV3 - Fault Level Reinforcement

Commentary

Average annual costs in 2020-21 Change from

money RIIO-ED1 to RIIO-ED2 DPCR5 RIIO-ED1 RIIO-ED2 Fault Level 0.70 1.78 6.43 261% Reinforcement

EHV fault level reinforcement

Network fault levels are increasing as more embedded generation connects to our network. Currently over 2.5GW of DG is connected to our networks with LV connections of around 200MW, HV connections over 800MW and EHV (132 and 33kV) over 1.7GW. Our forecasts of more generation at all voltage levels mean that this trend is expected to continue, particularly for renewable generation where we currently have 1.5GW and are expecting this to increase up to 2.1GW by the end of the decade.

This will require fault level reinforcement to address the arising issues as short circuit currents exceed the capabilities of our equipment. Our duty of care for our employees and the public requires us to mitigate such problems immediately normally through operational approaches and then more permanently to avoid suboptimal running arrangements which can affect the security of customers’ supplies.

Table CV3 relates to fault level reinforcement covering all voltage ranges in our network. All investments here have been identified through detailed analysis of the network as described in the Load Related Investment Planning Methodology – Forecasting and Planning Processes annex.

We use different approaches to identify the fault level reinforcement requirements of our EHV (132kV and 33kV) networks and our lower voltage networks (HV and LV). They reflect the relative magnitudes of these two parts of our network and employ suitable focus to deliver robust plans best utilising the models and data currently available to us.

The overall EHV requirements are built up from named schemes as it is important to consider each individual requirement separately as although the EHV network comprises fewer components, interventions are more expensive. Interactions between fault level and the requirements for other load and asset condition network interventions have been considered to form an efficient development plan and avoid duplication.

The uncertainty in the range of DFES forecasts has been considered in the scheduling of the plans we have outlined at this stage, but precise details will be refined nearer to the time to ensure that they are fully informed by the latest information on network conditions.

Guidance – Draft RIIO-ED2 Business Plan Data Template Commentary

Our costings are based on efficient standard unit costs which in practice will be optimised through competitive tenders for large volumes and for individual large cost items throughout the price control period.

EHV fault level reinforcement plan

Our fault level reinforcement plan incorporates interventions at thirty-one locations across our network as identified through detailed analysis. As Engineering Justification Papers are only prepared for schemes above £2m none of the thirty-one EHV fault level reinforcement schemes have necessitated a specific EJP.

Driver No of Projects Fault Level – HV Primary Bars 11 Fault Level – EHV Bars 20 Total 31

The specific methodology behind the site determination of fault level is detailed in the Load Related Investment Planning Methodology – Forecasting and Planning Processes annex. This provides a detailed overview of how fault levels are established at each specific site.

Detailed IPSA simulations are used to model fault flows, with the model also containing existing accepted generation, forecast future demand and generation contributions.

Following this methodology results in a robust program which addresses many site issues across our network using forecast and actual data to arrive at a justifiable program of works.

The assumed level of intervention for fault level has been set at 97.5% of existing switchgear Make and Break rating. This level has been selected as generally the simulated short circuit levels can be subject to inaccuracies but are considered to be cautious due to the use of pessimistic assumptions for equipment parameters and operating conditions.

A high-level overview of the process is as follows:

• IPSA simulations of short circuit currents predicted in 2028 based on a detailed model containing existing and forecast fault level contributions from demand and generation; • All sites where level is greater than 97.5% of make and break level identified; • Investigations and definition of solutions at each of these sites to resolve fault level exceedance; and • Estimation of expenditure required at each site to determine overall programme cost.

Several areas of our network already have a high system network fault level which even with new switchgear have fault levels near or in excess of existing switchgear ratings. These sites would not benefit from having the switchgear replaced. This may be in an area fed from three grid transformers where the fault level is naturally high or an area with significant penetration of distributed generation has occurred.

Our 132kV and 33kV fault level reinforcement programme has been developed and costed on the basis of applying asset-based solutions because we have less certainty in the alternatives which are still evolving. The development of our fault level reinforcement plan already considers network reconfiguration and operational management techniques as alternatives to replacement of switchgear for solving fault level issues. However, yet unseen efficiencies are expected through synergies with other network investments,

Guidance – Draft RIIO-ED2 Business Plan Data Template Commentary

replacing transformers with higher impedance units or through the deployment of alternative technology solutions such as active fault level management.

Research has been carried out during RIIO-ED1 to determine the viability of these alternative options and it is anticipated this learning will be incorporated into the detailed solutions for sites where we have identified the need for fault level interventions.

Based on the efficiencies that are likely to be possible during the RIIO-ED2 period with the application of these alternatives, we have applied a discount of 20% to the initial asset- based estimates of EHV fault level reinforcement costs. This is detailed in line 161 “Schemes of fault level constraints – other” for EHV. A similar approach has been included for secondary networks fault level interventions and a discount of 5% is included in line 162 to account for this.

Secondary Networks general fault level reinforcement

RIIO-ED1 performance

The main focus of fault level intervention has been on 6.6kV switchgear rated below the present design standard of 21.9kA in urban conurbations within our region. This is a continuation of a programme started in DPCR5. An innovative approach to enhancing fault level rating on Long & Crawford HV switchgear has been developed and is being rolled out in the remaining years of RIIO-ED1. It will continue to be used in RIIO-ED2.

RIIO-ED2 Forecast

HV networks in the conurbations within our region operate predominantly at 6.6kV. Our RIIO-ED2 fault level reinforcement programme in HV networks considers interventions purely on the 6.6kV part of the HV network. The short circuit current rating of a proportion of the 6.6kV switchgear in these areas is below the present design standard of 21.9kA. This equipment often represents a significant barrier to the connection of LCTs such as heat pump motor load and DG.

The lead time of replacement equipment is typically up to two years which could be a barrier to customers’ prompt connection of LCTs. Consequently, a programme to remove this inadequately rated switchgear from the network started in DPCR5 and has continued in the RIIO-ED1 period.

We are on target to intervene on all the identified switchgear by the end of RIIO-ED2 when switchgear replaced due to condition is taken into account. 41 sites were addressed in DPCR5 whilst 295 sites are targeted to be addressed in RIIO-ED1 with 432 sites to be addressed in RIIO-ED2.

The criteria used to identify and prioritise 6.6kV secondary network switchgear for replacement are:

• switchgear fault level rating less than 20kA; • current feeding primary substation HV fault level greater than 13.1kA; and • current feeding primary switchgear rating greater than or equal to 20kA.

The above criteria identify all 6.6kV switchgear rated less than 20kA where there is a likelihood of the prospective short circuit current exceeding the equipment’s fault level rating and allows for the grouping of switchgear changes by primary substation. This strategy allows us to certify that a particular primary is unlikely to have fault level issues for connection of LCTs and hence release the maximum amount of capacity in the shortest time.

Guidance – Draft RIIO-ED2 Business Plan Data Template Commentary

Costs for replacing the 6.6kV switchgear are based on standard unit costs, removal of current equipment and installation of new switchgear equipment. The fault level programme of network interventions is compared with that of the non-load programme. Any intervention appearing in both programmes was removed from the load related programme and remains in the non-load programme.

CV4 - New Transmission Capacity Charges (NTCC)

Commentary

Average annual costs in 2020-21 Change from

money RIIO-ED1 to RIIO-ED2 DPCR5 RIIO-ED1 RIIO-ED2 New Transmission - - - No costs Capacity Charges

Table CV4 on New Transmission Connection Charges has a nil submission because there is no requirement for ex-ante funding forecast due to their being no anticipated costs payable for transmission works associated with known projects initiated by the ourselves.

No new transmission connection points are anticipated. At the present time, the planned interventions at our transmission interfaces during the RIIO-ED2 period are driven by National Grid factors and not DNO requirements. The known ongoing and planned transmission works at our interface points are tabulated below, with the given facts reviewed by National Grid who judged them to be accurate. All works are assumed to be funded by National Grid for reasons explained in the table and consequently there is no requirement for ex-ante funding forecast and hence the nil submission in table CV4.

National Grid have confirmed that at this point in time there is nothing to suggest that planned works will be reclassified by NGET as DNO driven and therefore no expectation of associated new transmission connection charges.

We checked the likelihood of new transmission connection charges due to work not yet in planning based on there being no need for reinforcement indicated in NGET’s recent security of supply compliance assessment B/07 results for the RIIO-ED2 period. National Grid confirmed that their latest and best forecast of reinforcement works needed and therefore the best outlook. They also confirmed that there was no information to suggest there would be new charges before 2028 due to length of time taken to deliver transmission projects, although this was a possibility.

Should a yet unknown requirement for DNO driven transmission works materialise then the most efficient solution to the reinforcement requirement will be ascertained in conjunction with National Grid. In particular, we will continue to work on whole systems approaches and collaborate with the development of the ESO’s Regional Development Process.

Guidance – Draft RIIO-ED2 Business Plan Data Template Commentary

ENWL GSP Works NTCC comment (transmission connection points) Bold No works planned No NTCC Bredbury No works planned No NTCC Carrington No works planned No NTCC Harker The planned reconfiguration and No NTCC required since the SGT replacements at Harker are scheme is not driven by DNO now purely driven by National requirements/request. Grid asset condition. Additional capacity will be created as a biproduct of the planned works expected to be completed in 2026. Heysham A new protection system is to be There are no NTCC associated with installed to facilitate ENWL this protection scheme based on Generator customer connections the appendices to the December at Heysham. 2020 Consag which don’t include any new assets or connection charges. Hutton No works planned No NTCC Kearsley No works planned No NTCC Macclesfield No works planned No NTCC Padiham ENWL assets are being replaced There are no transmission works at Padiham requiring NG works driven by distribution connections, which are not associated with a so NTCC are not applicable. new connection. Padiham classified as sole use from 2020. Penwortham No works planned No NTCC Risley No works planned No NTCC Rochdale The asset replacement works There are no transmission works taking place at Rochdale are driven by distribution connections, required based on asset health so NTCC are not applicable. but will fortuitously enable additional headroom at the site. Completion due 2021. South Asset replacement works at There are no transmission works Manchester South Manchester are due to be driven by distribution connections, completed in 2028. so NTCC are not applicable. Stalybridge No planned works following No NTCC asset replacement works completed in December 2017. Stanah Asset replacement works There are no transmission works planned. driven by distribution connections, so NTCC are not applicable. Whitegate No planned works following No NTCC asset replacement works completed in December 2017.

Guidance – Draft RIIO-ED2 Business Plan Data Template Commentary

CV5 - Diversions

Commentary

Average annual costs in 2020-21 Change from

money RIIO-ED1 to RIIO-ED2 DPCR5 RIIO-ED1 RIIO-ED2 Diversions (Excluding 4.41 4.59 15.64 240% Rail Electrification)

Diversions is an area where we expect to see significant costs increases in the RIIO-ED2 period. This is largely driven by increased costs associated with wood pole claims, but there are several other significant factors.

Woodpole claims

As illustrated in the chart below, we expect to see a significant increase in the costs associated with settling wood pole claims and, to a lesser extent, claims associated with underground cables. This is due to both an expected increase in volumes of work and a revised approach to settling these claims.

Redacted in website version of commentary and tables

Conversion of Wayleaves to Easements, Easements & Injurious Affection (EHV and 132kV)

Redacted in website version of commentary and tables

Guidance – Draft RIIO-ED2 Business Plan Data Template Commentary

Development Claims

Redacted in website version of commentary and tables

Diversions Due to Wayleave Terminations

Redacted in website version of commentary and tables

Diversions for highways (funded as detailed in NRSWA)

This area of expenditure is largely customer led so our forecasts are based on an expectation of a level of general schemes together with larger named projects. The costs associated with these projects in ED2 are:

General Schemes 2.01 Carlisle Link Road 0.17 HS2 1.80 Two Metrolink Schemes 1.38 5.36

CV6 - Diversions Rail Electrification

Commentary

Average annual costs in 2020-21 Change from

money RIIO-ED1 to RIIO-ED2 DPCR5 RIIO-ED1 RIIO-ED2 Diversions (Rail - 0.04 0.02 -55% Electrification)

Network Rail’s next price control equivalent (CP7) runs from 2024-2029 and no details are available yet, so our plans in this area may change.

The only named scheme included in our current plans is the Transpennine North Upgrade project.

Guidance – Draft RIIO-ED2 Business Plan Data Template Commentary

CV7a - Asset Replacement NARM

Commentary (up to 10 pages combined with CV7b)

Average annual costs in 2020-21 Change from

money RIIO-ED1 to RIIO-ED2 DPCR5 RIIO-ED1 RIIO-ED2 Asset Replacement 40.84 29.66 43.57 47% NARM

Volumes of activity

The NARM element of our asset replacement programme is informed by the second version of the Common Network Asset Indices methodology (CNAIM2).

Using CNAIM2 we have identified the extent to which our network would deteriorate over the RIIO-ED2 period if there were no interventions.

Our aim in the RIIO-ED2 period is to maintain network risk at its current level, but we recognise that there will be contributions from a number of sources – not just asset replacement and refurbishment.

Our modelling of the contribution from other drivers suggests that they will contribute around 20% of the required risk points. This means that our asset replacement and refurbishment programmes will need to contribute the remaining 80%.

Using a prioritisation model, we identify which asset replacement interventions would be required to deliver those risk points most efficiently, subject to constraints due to the availability of labour and contractors and also due to the desire to minimise the number of outages on the network.

Once we have identified an asset replacement only programme, we then identify which interventions could be more effectively delivered through a refurbishment option. These interventions are introduced into the programme and the asset replacement programme re- calculated in order to meet the target of keeping our network health constant.

Unit Costs

The unit costs used in our submission are largely based on our experience over the first five years of RIIO-ED1, benchmarked against the performance of the thirteen other DNOs.

The one area where we have significantly deviated from this methodology is in the area of switchgear. Over recent years the standard switchgear installation has contained Sulphur Hexafluoride (SF6) which is a potent greenhouse gas. We are currently investigating the availability of SF6 free switchgear. Current information we are receiving from manufacturers indicate that we will see a premium of 20% for 33kV switchgear and 76% for 132kV switchgear

Details

More details on the development of the costs and volumes in this table can be found in the following documents in our submission:

Guidance – Draft RIIO-ED2 Business Plan Data Template Commentary

Annex 25 Summary of RIIO-ED2 NARMs Our approach to EJPs & Cost Benefit Analysis Annex 29 (CBA) NARM EJP 1 Transformers Intervention Programme NARM EJP 8 LV UGB NARM EJP 2 LV Switchgear NARM EJP 2A HV Switchgear NARM EJP 3 EHV Switchgear NARM EJP 4 Overhead Lines (Woodpoles) NARM EJP 5 Overhead Lines (Towers) NARM EJP 7 Oil Assisted Cables (EHV and 132kV) PRO EJP 1 South Manchester PRO EJP 2 Harker Lancaster - Spring Garden - Burrowbeck PRO EJP 4 33kV T11 & T12 FFC Replacement PRO EJP 5 AF line Roosecote - Sellafield - Barrow PRO EJP 6 V line PRO EJP 8 Greenhill - Whitegate 2 and 3 PRO EJP 10 Kearsley - Agecroft 1/Fred Road 1 and 2 PRO EJP 11 HL HA HC 33kV OHLs Refb/Repl

CV7b - Asset Replacement Non NARM

Commentary (up to 10 pages combined with CV7a)

Average annual costs in 2020-21 Change from money RIIO-ED1 to RIIO-ED2 DPCR5 RIIO-ED1 RIIO-ED2 Asset Replacement Non 13.22 9.21 18.05 96% NARM

Volumes

We plan to continue non-NARM asset replacement in RIIO-ED2 at similar levels to RIIO-ED1 other than in the area of LV and HV underground cables.

We are planning to spend an additional £6.6m on LV cable overlays and an additional £12.2m on a programme to replace ‘plain lead’ HV cables. Further details on these programmes can be found in NNARM EJP 3 and NNARM EJP 4.

Woodpole conductor, fixtures and fittings

Our expenditure on these items is condition driven based on faults, inspection of the lines and detailed examination during intervention. We expect that both annual volumes and cost will be consistent with those in RIIO-ED1.

Guidance – Draft RIIO-ED2 Business Plan Data Template Commentary

Pole mounted plant

As with woodpole conductor, replacement of HV pole-mounted plant is based on faults and observed condition. Unlike ground mounted plant there is no proactive replacement programme.

We will be replacing a large number of pole mounted transformers due to known or suspected PCB contamination. but these will be recorded and accounted for separately from those replaced due to failure or poor condition (see PCBs in CV22). Our expectation is that the rates of replacement of pole mounted plant items due to their condition will be consistent with those in RIIO-ED1.

Unit Costs

The unit costs used in our submission are largely based on our experience over the first five years of RIIO-ED1, benchmarked against the performance of the thirteen other DNOs.

Details

More details on the development of the costs and volumes in this table can be found in the following documents in our submission:

Our approach to EJPs & Cost Benefit Analysis Annex 29 (CBA) NNARM EJP 2 Services & cut-outs NNARM EJP 3 Cables (LV) NNARM EJP 4 Cables (HV) NNARM EJP 7 Condition based mural wiring

CV7c - Asset Replacement Civils Driven

Commentary (up to 10 pages combined with CV7a)

Average annual costs in 2020-21 Change from

money RIIO-ED1 to RIIO-ED2 DPCR5 RIIO-ED1 RIIO-ED2 Asset Replacement 3.75 1.89 3.02 60% Civils Driven

The costs for asset replacement driven civils are closely linked to the volumes of activities for plant reported in tables CV7a and CV7b. Our forecast has been derived by looking at this relationship and making provisions in our plan in the same proportions as for RIIO- ED1.

The increase in asset replacement activity drives a 60% increase in associated civils costs.

Guidance – Draft RIIO-ED2 Business Plan Data Template Commentary

CV8 - Refurbishment non NARM

Commentary (up to 7 pages)

Note on presentation of historical figures

Wherever possible we have populated the historical costs and volumes directly from the RIGs Cost and Volumes pack, inflated by RPI to 2020-21 prices for costs.

In the RIGs table ‘CV9 – Refurbishment NARM’ we had the facility to record costs and volumes for asset types which did not have an SDI declared. These rows have been ‘greyed-out’ in the RIIO-ED2 BPDT as these interventions will no longer be recorded on CV9.

To ensure that all historical costs and volumes are captured in the BPDT we have added the data from rows that are no longer populated in CV9 to the equivalent rows in CV8.

However, we have not attempted to re-calculate the historical cost type splits in each table, which will still match the data recorded in the Cost and Volumes pack. Consequently, the error checks in row 28 show ‘Errors’ in the years 2011, 2013 and 2016.

If the error check was made against the sum of costs from both CV8 and CV9 then the totals would match and there would be no error.

The materiality of the movements to CV8 are as follows:

2011 2012 2013 2014 2015 2016 0.452 -0.006 0.051 - 0.000 0.015

Average annual costs in 2020-21 Change from

money RIIO-ED1 to RIIO-ED2 DPCR5 RIIO-ED1 RIIO-ED2 Refurbishment non NARM 6.64 3.94 4.92 25%

We plan to continue with our refurbishment programme for non-NARMs activities at the RIIO-ED1 volumes and unit rates.

The one exception to this is the programme to refurbish protection assets. We have a number of different types of protection assets on our network, which require different types of refurbishment, as discussed in EJP NNARM EJP 6 - Protection refurbishment. The following table summarises the range of costs and volumes:

Unit Cost Protection type Volumes Cost (£m) (£k/#) AVCs 92 1.84 20.00 DBS & Translays 179 2.04 11.42 KCGG 331 1.21 3.67 KCEG 93 0.38 4.10 KBCH 6 0.09 14.64 KAVR 116 1.63 14.05

Guidance – Draft RIIO-ED2 Business Plan Data Template Commentary

PBO Manchester and Peak 843 3.70 4.39 GCM Relays at 132kV 86 2.85 33.13 1,660 10.90 7.88

As the table shows the unit cost per activity ranges from £3.7k/intervention to £33.1k/intervention, based on the different types of protection. In presenting these activities in the single row in table CV8 we use the blended unit cost of £7.9k/intervention to represent all activities.

We expect that the different DNOs will have different mixtures of protection types on their networks and consequently the ‘average’ unit cost may be quite different from DNO to DNO. This will need to be considered in the design of the cost assessment process for this area.

CV9 - Refurbishment NARM

Commentary (up to 7 pages)

Note on presentation of historical figures.

Wherever possible we have populated the historical costs and volumes directly from the RIGs Cost and Volumes pack, inflated by RPI to 2020-21 prices for costs.

To ensure that all historical costs and volumes are captured in the BPDT we have added the data from rows that are no longer populated in CV9 to the equivalent rows in CV8.

If the error check was made against the sum of costs from both CV8 and CV9 then the totals would match and there would be no error.

The materiality of the movements from CV9 are as follows:

2011 2012 2013 2014 2015 2016 -0.452 0.006 -0.051 - -0.000 -0.015

Average annual costs in 2020-21 Change from

money RIIO-ED1 to RIIO-ED2 DPCR5 RIIO-ED1 RIIO-ED2 Refurbishment NARM 3.36 4.50 6.06 35%

As noted in the commentary to CV7a, once we have identified an asset replacement only programme based on CNAIM2 scores, we then identify which interventions could be more effectively delivered through a refurbishment option.

Guidance – Draft RIIO-ED2 Business Plan Data Template Commentary

The NARM assets where we have elected to apply a refurbishment technique are listed below:

Volumes Cost 6.6/11kV CB (GM) Primary 155 3.1 6.6/11kV CB (GM) Secondary 15 0.1 6.6/11kV Switch (GM) 136 0.4 6.6/11kV RMU 2,873 8.4 33kV Tower 264 2.7 33kV Transformer (GM) 43 6.1 132kV Tower 812 8.2 132kV Transformer 7 1.3 30.3

The unit cost we have used is based on the average achieved in the RIIO-ED1 period for all asset types other than the transformers.

For both 33kV and 132kV Transformers we have applied a premium of 52% to the unit cost to reflect the additional costs of applying the Totus transformer regeneration technique at a cost of £2.5m. This is described in more detail in the following section.

Totus transformer regeneration

Over the last ten years we have undertaken a programme of grid and primary transformer regeneration as opposed to traditional asset replacement. This initiative has delivered significant benefits for customer through the extension of asset lives by some 25 years.

To ensure the risk posed by these regenerated asset remains acceptable we also deployed the Totus asset monitoring and reporting systems.

Working with our technology providers at Kelvatek we have used these systems to enable a deeper understanding of the condition of these assets and underpin this asset life extension strategy. It has also helped develop the industry knowledge based on our oil regeneration program. Reports capture the data from the TOTUS online monitoring systems, as well as off-line test data and transformer information to show in-depth condition assessment of each transformer and also an assessment of the wider fleet condition.

We will work with Kelvatek to develop Enhanced Asset Monitoring which will give us the ability to create ‘bespoke’ diagnostics for each individual transformer as well as deeper fleet-wide insight This will enhance the ability to mitigate risk and manage valuable resource further.

Details

More details on the development of the costs and volumes in this table can be found in the following documents in our submission:

Annex 25 Summary of RIIO-ED2 NARMs Annex 29 Our approach to Cost Benefit Analysis (CBA) NARM EJP 1 Transformers Intervention Programme NARM EJP 2A HV Switchgear NARM EJP 5 Overhead Lines (Towers)

Guidance – Draft RIIO-ED2 Business Plan Data Template Commentary

CV10 - Civil Works Condition Driven

Commentary

Average annual costs in 2020-21 Change from

money RIIO-ED1 to RIIO-ED2 DPCR5 RIIO-ED1 RIIO-ED2 Civil Works Condition 3.36 4.29 5.38 25% Driven

We expect the base volume of work in RIIO-ED2 to continue at the levels we saw in the first five years of RIIO-ED1. To this we have added two specific projects which will incur additional work.

The additional costs in RIIO-ED2 are:

Cost driver Amount in plan Increased costs associated with requirement to improve staff welfare 2.0 facilities Substation Energy Efficiency - Capex Costs of work at 26 substations each 0.6 year Total 2.6

It should be noted that annual spend in the final three years of the RIIO-ED1 period is expected to be lower than the first five years. Consequently, the figure quoted as the RIIO- ED1 Average Annual Cost is lower than our ‘base expenditure’ which is £4.85m per year. The additional £0.52m per year takes the annual predicted spend to £5.38m.

CV11 - Operational IT and Telecoms

Commentary (up to 5 pages)

Average annual costs in 2020-21 Change from

money RIIO-ED1 to RIIO-ED2 DPCR5 RIIO-ED1 RIIO-ED2 Operational IT and 5.99 10.21 17.11 68% telecoms

Operational IT and Telecoms

Our Operational Technology strategy for RIIO-ED2 is built upon the foundations laid during DPCR5 and RIIO-ED1 and is broadly made up of four investment areas:

• Technology Refresh – Ensure our infrastructure remains fit for purpose and secure;

Guidance – Draft RIIO-ED2 Business Plan Data Template Commentary

• Smart Grid Enablement – Enhance our telemetry control and monitoring capabilities; • DSO Capability – Ensure we perform or enable DSO functions; and • New Initiatives – Implement new capability or enhance existing capability to further improve service and efficiency.

Following is a summary of our Operational IT and Telecoms investment initiatives during RIIO-ED2.

Substation RTU, Marshalling Kiosks and Receivers (£13.0m)

Primary and Secondary RTU Capital Replacement

As all non-smart grid capable primary RTU assets were replaced during RIIO-ED1 to support our ADMS replacement project, we have assumed that no primary RTUs will be routinely replaced or refreshed during RIIO-ED2. Secondary RTUs will be replaced based on our extended asset lives of 18 years outdoors and 24 years indoors and as a consequence, we have assumed 132 indoor and 959 outdoor secondary RTUs will be replaced during RIIO-ED2.

Secondary RTU Capital Maintenance

In order to extend the asset life of our secondary RTU we have implemented a six-year maintenance regime. This replaces shorter life components such as batteries and peripheral hardware, dependent on their condition, rather than replacing the entire RTU. We have assumed we will maintain 1377 outdoor and 5590 indoor secondary RTU units in RIIO-ED2.

Growth in Monitoring Equipment

Our load growth strategy is to fit monitoring equipment as load grows rather than carry out asset-based reinforcement allowing us to manage (Connect & Manage) our network more effectively within its rating using the additional telemetry data ensuring our customers can connect low carbon technology without incurring additional charges through asset reinforcement. Our load related investment strategy assumes that this investment delivers a reduction in load related reinforcement investment due to load growth and we have assumed additional measurement and control capability will be deployed on 2000 HV and LV circuits during the RIIO-ED2 period.

Data Harvesting at Scale

As the requirement for more telemetry data increases, especially on the LV network, an increasing number of sensor devices will require communications technology in order to transmit data onwards. Sensors incorporate a wide range of communications technologies including Zigbee, LoRaWAN, 3G/4G and Powerline. Traditionally the sensors are connected to an RTU which collects data and transmits this data back to the centre via the commercial 3G/4G network. In remote locations this tends to lead to a proliferation of RTUs and data communication circuits requiring additional SIM cards and data allowances which is inefficient and costly.

Costs are based on fitting data concentrators at 2000 distribution substations during RIIO- ED2 on the basis that each concentrator negates the requirement for separate communications to at least four remote sensors and caters for all potential measurements required at the distribution substation during RIIO-ED2.

Distributed Edge Compute Capability

Guidance – Draft RIIO-ED2 Business Plan Data Template Commentary

Our core SCADA data network for telemetry data backhaul runs over our own physical network made up of optical fibre, copper and radio and provides high bandwidth IP based communication to our Grid, Bulk and Primary substations whilst our secondary communications data network to distribution substations runs over commercial 3G/4G networks using a private APN. In order to further reduce the number of commercial communications circuits to our distribution substations and hence data and connection charges, we intend to leverage our core SCADA data network to backhaul data from the distribution substations connected to each primary substation.

This requires fitting of communications equipment and data concentration capabilities at each of our primary substations (530) to effectively scan its distribution substations using lower or zero cost technologies such as Digital Mobile Radio, private LTE networks or unlicensed radio.

Communications for Switching and Monitoring (£15.8m)

Core Network Technology Refresh

During RIIO-ED2 we expect to upgrade the firmware on our access and distribution switches and replace an estimated 50 units on failure. We also expect to replace our core ADMS switch blocks (four) and our ADMS production environment load balancers. Firmware needs to be upgraded on a regular basis in order to ensure compliance with current protocol standards and, in some cases, address security flaws discovered in earlier versions. With regards to physical hardware, support from suppliers diminishes as technology advances and newer, more capable units are developed, typically 5-7 years.

Transmission Equipment Technology Refresh

We expect to replace 70% of our operational data network transmission technology during RIIO-ED2 which includes 243 units. Most commercial operators are now using packet switch technology, therefore, pure SDH technology is becoming increasingly difficult to source.

We also intend to replace our current Wave Division Multiplex (WDM) equipment which is now approaching obsolescence and was supplied by a vendor that no longer trades and, as a consequence, we see this as a significant risk to key operational services. During the period we also expect to fix-on-fail approximately 10% of our substation-based IP equipment asset base (switches and routers) amounting to approximately 800 units.

Bearer Circuit Technology Refresh

A number of our high bandwidth backhaul radio links (20) will require replacing during RIIO-ED2 in order to maintain support for critical network components such as hardware, operating systems and application software. As per the transmission equipment above, the age of these assets varies however, first installations were in 2009 as part of our response to the BT21CN issue and many of the components are now end-of-life with minimal supplier support.

Power Systems and Data Centre Environments

We own and operate two core Operational Data Centres and a number of communications gateways at several remote locations that are generator backed in order to provide black start compliance to our core data communications network. Costs included here are for ongoing support and maintenance of these generators. Costs also include ongoing maintenance and support of data centre and comms room environmental systems including air conditioning (AC) and uninterruptable power supplies (UPS).

Guidance – Draft RIIO-ED2 Business Plan Data Template Commentary

1.4 GHz Microwave Replacement (Ofcom Driven)

Following consultation, Ofcom have recently taken a decision to re-purpose the radio spectrum in the 1.4 GHz band where many of our point to point operational telemetry links in rural areas (45) currently reside. This includes four Grid Supply Points and 35 primary substations with eleven carrying protection circuits and ten carrying CLASS services. Ofcom have indicated that users are required to exit this spectrum by 30 April 2024. We are the biggest DNO user of point to point technology in this spectrum.

Black Start Voice Capability

Previous large-scale power outages in Lancaster and Carlisle have shown that mobile operator coverage during such incidents is very poor as the commercial mobile infrastructure has limited, if any, backup power provision. During RIIO-ED1 we replaced our obsolete analogue PMR system with a modern equivalent DMR system to service our telemetry data requirements. Costs included here reflect extending the DMR system to include voice communication capabilities as our DMR system is already Black Start capable.

Telecommunications Network Management System

Technology refresh of all servers, communications and software comprising the Telecommunications Network Management System to reflect the change in transmission technology and to maintain support for key components such as hardware, operating systems and application software.

Telephony Network Refresh

Our core telephony system will require a technology refresh during the period to maintain support for key components such as hardware and operating systems as the components approach end of life support from the supplier. We also expect to upgrade the telephony software on the refreshed platform during RIIO-ED2. In addition, as a consequence of the Public Switched Telephone Network (PSTN) switch off we have a small number (200) substations telephony circuits that will require new internal telephony to replace the existing PSTN telephones.

Control Centre Hardware and Software (£29.6m)

ADMS Upgrade to v3.10

In order to deliver DSO functions including flexible service market integration, ancillary service provision, enhanced hosting capacity analysis, low voltage flexibility and transmission system integration we intend to influence and follow the supplier roadmap and upgrade our ADMS to version 3.10 during RIIO-ED2. The implementation strategy very much depends on how the supplier roadmap aligns with the UK DSO roadmap and what capability is available through third-party alternative suppliers.

New ADMS Applications

We intend to develop a number of new applications with our ADMS supplier during RIIO- ED2 in order to enhance capability we developed during the initial ADMS implementation in RIIO-ED1 and through our innovation portfolio. All costs include supplier development, ENWL and supplier programme management and our commissioning and testing resource. Initiatives include:

Guidance – Draft RIIO-ED2 Business Plan Data Template Commentary

• Scaling up our Smart Street deployment to many more sites and refining our voltage control algorithms within our ADMS system; • Enhancing our ANM capability to combine Transmission and Distribution ADMS algorithms, include additional capability to address voltage and reactive power constraints and, to take account of the most economical whole system merit order through use of flexibility and curtailment trading platforms; • Deploying the ADMS Field Client application to enable digital field switching dispatch and confirmation; • Develop System Wide Command Arbitration between automated algorithms; and • Develop enhanced data extraction, transformation and storage tools to enable data visualisation and sharing.

New Interface Technology

• Develop ICCP links to ESO Systems for real time exchange of Operational Data • Develop ENTSO-E CIM compliant model exchange between systems and third parties • Develop Web Services interfaces to Aggregator, Market and Settlement Platforms • Develop links to EV Charging Infrastructure

This enables whole system operation through real time data exchange. Developed through the ENA Open Networks Project, there is a requirement to exchange data regarding capacity and constraint in near real time with adjacent and embedded networks to determine available capacity at cross boundary sites in real time. In order to support the EDTF output these data need to conform to open standard protocols such as Common Information Model (CIM).

Enhanced Flexibility Management and Commercial Flexibility Trading

During RIIO-ED1 we implemented systems to manage our commercial contracts with Flexibility providers and to calculate and supply merit orders to our ANM system taking into account both pre-procured flexibility services and those provided through curtailment contracts. During RIIO-ED2 we intend to enhance this capability through interfaces to flexibility market trading platforms in order to take account of the most economic dispatch sequence in whole system terms. We anticipate market participants will bilaterally trade flexibility with each other close to near real time through these systems as we move towards a market driven flexible services model.

ADMS Hardware Infrastructure Refresh

The current ADMS infrastructure was implemented as part of our NMS Implementation project during RIIO-ED1(2018) and as a consequence, will require a technology refresh during RIIO-ED2 in order to maintain support for key components such as hardware, operating systems and relational database products. As the current infrastructure supports our core operational systems it is not possible to carry out the ADMS product upgrade within the existing environments without impacting critical services. As part of this infrastructure refresh, we intend to work with our supplier to simplify the environment and investigate alternative sourcing strategies to ensure lowest cost.

Advanced Modelling Tools

Our existing suite of modelling tools (IPSA and DINIS) are not appropriate for modelling flexible connections and ANM actions and DINIS, used for 11kV planning, is obsolete and unsupported. Modelling tools need to be rationalised around a single version of the data and enable DER/Flexible connections and the impact of ANM to be modelled during the planning phase. We intend to implement a single tool for use across all voltage levels that

Guidance – Draft RIIO-ED2 Business Plan Data Template Commentary

provides appropriate functionality and reduces model maintenance using a single CIM based network model that can be exported from our ADMS or GIS systems.

Time Series Historian

Our real time data is currently stored in an online historian which forms part of the ADMS product suite and is sized to store such data for up to two years. Due to the anticipated increase in time series monitoring data during RIIO-ED2 and a requirement to store time series data for at least five years for regulatory reporting and strategic planning purposes, this data will require archiving to reduce the burden on real time systems performance and to meet our data retention requirements. We intend to leverage the ADMS historian to facilitate additional storage capability in order to reduce costs versus a standalone historian such as OSIsoft PI which can incur significant cost based on system size and number of real time tags.

Cyber Resilience (£6.3m)

Redacted in website version of commentary and tables

LV network monitoring (£20.8m)

The expected rapid proliferation of LCTs over the next regulatory period together with the associated load growth is likely to put our distribution network under ever increasing strain. Visibility of the LV network using measurements that can capture unbalances and earth return currents (not captured via smart meters) are critical to:

• target reinforcement interventions only where and when needed; • optimise the network planning approach by identifying the most cost efficient and at the same time risk averse interventions on a case specific basis; • facilitate a “Connect & Manage” approach for accurate planning that releases network capacity for LCT connections and avoids unnecessary reinforcement based on cautious assumptions; and • release up to 20% additional capacity on LV circuits as our work on the “Connect and Manage” project (Management of LCT Clusters, SMART Street Network Innovation Competition Project, Electricity North West) has shown.

RIIO-ED1 performance

The RIIO-ED1 programme prioritises the installation of monitoring at the ground mounted substations distribution sites with largest number of customers. This system uses low cost “LV PRESense” devices manufactured by Kelvatek that are able to measure the loading of each phase and earth return currents on the neutral conductor. Capturing unbalances is critical as the uptakes of LCTs can be seen as a numerous single-phase load exacerbated and increasing significantly the earth return currents that flow though neutral conductors.

PRESense has been trialled at several sites and the learning from these installations has been incorporated into a comprehensive policy including the safe retrofit of monitoring equipment on live LV boards and cabinets.

Proactive management of electricity networks is becoming ever more important in the current energy market landscape. Expanding permanent monitoring from primary substations to lower voltages can allow us to facilitate targeted flexible services by knowing when (seasonality, time duration and days required) and where (location in HV and LV network) these are required.

Guidance – Draft RIIO-ED2 Business Plan Data Template Commentary

The RIIO-ED1 programme will cover over 3,500 ground mounted secondary substations which are estimated to supply 46% customers.

RIIO-ED2 Forecast

The RIIO-ED2 programme will cover over 8,250 ground mounted secondary substations which are estimated to supply an additional 52% of customers bringing us in a position to monitor LV loading of 98% of our customers. Regarding potential deliverability concerns in data gathering due to large volumes, it should be highlighted that based on the high-level review and our existing experience in installation and use of the preferred LV monitoring system, along with the use of a turnkey contract, there is low risk associated.

Given the real risks of customers not informing us around LCT installations (EV chargers, heat pumps etc) and potential delays in access to adequate volumes of smart meter data, it is critical that the programme is front end loaded. Therefore, the programme is planned to have approximately 80% of the ground mounted secondary substations being covered in the first two years of the RIIO-ED2 period. This will maximise the benefits of the programme as the collected data will allow for optimum timing of reinforcement.

Additional information on RIIO-ED2 LV monitoring programme using the PRESense system for secondary networks can be found in the associated EJP (LRE EJP9 – LV Monitoring) and how this fits in the optimisation of secondary network planning in Annex 19 - Load Related Investment Planning Methodology.

Investment Proposals

A detailed overview of how we have developed the forecasts is provided in the form of four individual Investment Proposals, which are provided as annexes to this document.

Because of the commercial and security aspects of these documents they are not included in the version of our plan published on the web.

The investment proposals are:

• Commentary Annex 11 - Op IT Investment Proposal - Substation RTU Marshalling Kiosks and Receivers • Commentary Annex 12 - Op IT Investment Proposal - Communications for Switching and Monitoring • Commentary Annex 13 - Op IT Investment Proposal - Control Centre Hardware and Software • Commentary Annex 14 - Op IT Investment Proposal - Operational IT Cyber

Guidance – Draft RIIO-ED2 Business Plan Data Template Commentary

CV12 - Black Start

Commentary

Average annual costs in 2020-21 Change from

money RIIO-ED1 to RIIO-ED2 DPCR5 RIIO-ED1 RIIO-ED2 Black Start 0.16 0.44 - -100%

We do not anticipate any capital expenditure in response to the revised standards issued by BEIS, so this table only shows historical data.

The activities associated with meeting the new standard will require additional staff in our control room. These costs are captured in the Closely Associated Indirects table.

CV13 - BT21CN

Commentary

Our investments related to the BT21CN programme of work were completed in DPCR5 and were treated as a High Value Project, so the costs and activities are reported in Table ‘CV24 - HVP DPCR5’.

CV14 - Legal and Safety

Commentary

Average annual costs in 2020-21 Change from

money RIIO-ED1 to RIIO-ED2 DPCR5 RIIO-ED1 RIIO-ED2 Legal & Safety 3.59 2.91 13.12 457%

As our base cost we have used our average spend on Legal and Safety in the first five years of the RIIO-ED1 period, which was £3.3m per year. We are seeing reduced levels of spend in the final three years, resulting in the lower RIIO-ED1 number quoted in the table above.

We expect to reduce our programmes on Cable Pits and Fall Arrestors in RIIO-ED1 but will be adding additional activities at a net cost of £9.7m per year. The following table details differences between our base cost and our final:

Cost driver Amount in plan (£m) Cable Pits -2.6 Fall arrestors -0.8

Guidance – Draft RIIO-ED2 Business Plan Data Template Commentary

Rural transformers 4.0 Low Frequency relays for LFDD 5.1 132kV Cable Sealing End Replacements 2.4 Sentinel 24.0 LV Auto Recloser at PMT 4.9 Earthing upgrades 7.3 Fire protection at substations 4.4 Total 48.7

Specific programmes of work include:

Sentinel

The Sentinel project will see the roll-out of our successful NIA project, installing monitoring devices on overhead lines to ensure legal compliance, but also provided added resilience during storms.

More details on Sentinel are given in proposal 5.2.3.4 of our Business Plan.

Borrowdale transformers

‘Borrowdale transformer’ is a generic term we use for ground mounted transformers less than 100kVA and with no local HV protection. These transformers have been predominantly installed in the Lake District.

Due to their distance from a protection device and the number of other transformers on the circuit, many of these transformers are not properly electrically protected in accordance with the requirements of the ESQCR, such that the protection cannot effectively identify and react to a fault on one of these transformers. Their design and location factors preclude their replacement with standard HV plant.

To address these issues in the most effective way, we have worked with a transformer manufacturer to develop a pad mounted transformer design incorporating HV and LV protection to act as a direct replacement for unprotected Borrowdale transformers. Our proposed replacement profile is shown in the table below:

Year RIIO- 2024 2025 2026 2027 2028 RIIO- Total units ED1 ED3 replaced

Units replaced 9 16 23 24 24 25 102 223

We plan to spend £4m in these replacements during RIIO-ED2.

More details of this programme can be seen in EJP L&S EJP 2 Borrowdale Transformers.

Cable Pits

Many of our older cable installations in towns and cities are ducted systems which were provided in order to limit the need for subsequent excavation for network expansion.

Guidance – Draft RIIO-ED2 Business Plan Data Template Commentary

In order to facilitate the installation, and in some cases jointing, of cables in these ducts, pits were incorporated at appropriate intervals. Cables in this kind of installation were often of an unarmoured type and were normally supported on metal brackets where they passed through these pits. Our modern cable installation techniques no longer incorporate use of these pits, so their future availability is not required.

Failure of the cable joints within the pit or ducted cable system can cause the pavement cover to be forcibly ejected many metres along with associated smoke and flame.

As the pits are no longer required, our strategy is to fill them in using a blast absorbing aggregate.

This programme commenced in RIIO-ED1 and is expected to be completed during the early part of RIIO-ED2 with an estimated spend of £1m during this period.

HV Earthing upgrades

Earthing systems associated with distribution HV substations have historically been designed and installed to a number of different standards and policies. It is likely that some existing substations which have been designed against obsolete policies do not meet current standards which results in a potentially dangerous situation existing on the network.

To address this, we are preparing a programme of works to upgrade the HV earthing connections at substation sites, where the earthing does not comply with current requirements, to meet the current standards.

The total cost of this proposed programme in RIIO-ED2 is £7.3m.

More details of this programme can be seen in EJP L&S EJP 4b – HV Earthing Upgrades.

Enhancements due to Fire Risk Assessments

Under the Regulatory Reform (Fire Safety) Order 2005, we have a responsibility to carry out general fire safety precautions for all of our premises.

We will be carrying out a programme of Fire Risk Assessments (FRAs) at all of our substations using a combination of desktop and on-site assessments.

These on-site risk surveys and risk assessments will not only identify the fire risk posed by the substation but will also identify any remedial works to mitigate the identified risks thus ensuring we bring the risk to an ALARP (as low as reasonably practical) condition.

Based on the outcome of the FRAs, we will identify the works required to ensure that the fire risk at each substation is as low as reasonable practicable.

Previous experience of enhancements ensuing from FRAs is that these works are likely to include installation of fire resistant doors in place of timber doors, sealing of wall penetrations and improvement to the fire protection of ceilings.

Guidance – Draft RIIO-ED2 Business Plan Data Template Commentary

Our analysis shows that the following numbers of substations will require remediation work:

Year RIIO- 2024 2025 2026 2027 2028 RIIO- ED1 ED2

Sites to remediate 273 299 298 298 298 298 1,491

Cost (£m) 0.61 0.88 0.87 0.87 0.87 0.87 4.36

The cost of this programme in RIIO-ED2 will be £4.4m.

More details of this programme can be seen in EJP L&S EJP 7 – Enhancements due to fire risk assessments.

Full details

The following EJPs support the forecasts provided in the Legal and Safety table:

L&S EJP 2 Borrowdale transformers L&S EJP 3 Cable Pits L&S EJP 4b HV Earthing Compliance L&S EJP 5 Transformer mounted Auto-recloser units L&S EJP 7 Fire Enhancements due to Risk Assessments L&S EJP 6 132kV Sealing End replacement

CV15 - QoS and North of Scotland Resilience

Commentary

Average annual costs in 2020-21 Change from

money RIIO-ED1 to RIIO-ED2 DPCR5 RIIO-ED1 RIIO-ED2 QoS & North of Scotland 10.25 6.28 - ? Resilience Vulnerable customers - - 4.0 100%

Quality of Supply

We include no investment forecast for quality of supply in this table as we plan to fund all investment from IIS incentive revenues.

Vulnerable Customers

As detailed in proposal 5.2.1.5 of our Business Plan, we have included £4m per year provision for projects to improve reliability for vulnerable customers.

Because the adverse consequences of a power cut can be considerably greater for customers in vulnerable circumstances, one of the most impactful things we can do to support communities with a large number of vulnerable customers is to improve the reliability of the local network.

Guidance – Draft RIIO-ED2 Business Plan Data Template Commentary

We consider 236,000 of our 2.4m customers (10%) to be in the most vulnerable circumstances, including customers with a chronic serious illness. Some of these customers live in areas (often highly urbanised) which already enjoy a very reliable electricity supply, but many will suffer the inconvenience of more frequent power cuts.

In RIIO-ED2 we plan to complete a targeted programme of network investments that will:

• reduce the future likelihood of a loss of supply for groups of customers with known high vulnerabilities fed from known poorly performing parts of the network. This will total £3m and benefit 844 customers with a known vulnerability at an average cost of £3,393 per vulnerable customer. Other customers in these areas will also benefit from the improvements

• mitigate the impact of high voltage faults on customers with a known high vulnerability. This will be focused at areas which, whilst they may have reasonable current reliability, are vulnerable to extended power cuts due to the network construction. This will be achieved by means of automation, introducing remote control to distribution substations and ensuring the availability of alternative routes to provide power if there is a fault. This will total £16.6m and benefit 16,617 highly vulnerable customers at an average cost of £1,000 per vulnerable customer.

Further details of this programme can be found in the associated EJP – QOS_EJP_1_Network_Reliability_to_Vulnerable_Customers.

CV16 - Flood Mitigation

Commentary

Average annual costs in 2020-21 Change from

money RIIO-ED1 to RIIO-ED2 DPCR5 RIIO-ED1 RIIO-ED2 Flood Mitigation 1.89 1.66 0.73 -56%

We have identified the 35 sites to be flood mitigated in RIIO-ED2 from the flood risk assessments carried out by our consultant, JBA Consulting, on our whole portfolio of grid and primary substations. These volumes are similar to our RIIO-ED1 programme where, to date, we have completed flood mitigation works at 36 grid and primary substations and 15 distribution substations. Works are in progress at 10 grid and primary substations and one distribution substation and we expect to complete these by end of RIIO-ED1.

We have also made provision for 10 distribution sites in our plans, based on the volumes delivered in RIIO-ED1. These address highly localised flooding issues, often only revealed by actual events.

In addition, we plan to carry out a similar flood risk assessment exercise within the RIIO- ED2 period to inform ED3 planning.

More details are included in the commentary to table M1.

Guidance – Draft RIIO-ED2 Business Plan Data Template Commentary

CV17 - Rising and Lateral Mains (RLMs)

Commentary

Average annual costs in 2020-21 Change from

money RIIO-ED1 to RIIO-ED2 DPCR5 RIIO-ED1 RIIO-ED2 Rising and Lateral Mains 0.31 1.50 3.45 131%

Rising and Lateral Mains describes low voltage mains and services installed in multi-occupancy buildings.

A survey of RLM installations in our operating area was completed in 2012 which confirmed the poor condition of many of these assets and prompted the initiation of a programme to replace those in poor or obsolete condition which commenced during the DPCR5 period.

This programme has continued throughout RIIO-ED1 and, due to the number of known and suspected RLM installations requiring inspection and remediation, will continue through RIIO-ED2 and beyond into at least RIIO-ED3.

We plan to spend £17m on our Rising and Lateral Mains Programme in the RIIO-ED2 period. This is part of a £37m programme over three price control periods.

This programme of work aims to deliver the following objectives:

• To replace cable types that, due to their age and installation condition, create a risk to people living in multi-occupancy dwellings where the ownership of the installations may not be clear; • Ensure compliance with the requirement of the ESQCR Regulation 3; and • Provide additional protection to the highest risk buildings by installing portable circuit breakers (Weezaps) with condition monitoring thus alerting us to a potential danger and reducing the fire risk should the installation fault.

We have used a risk-based approach to identify the properties to prioritise in our programme using the following categories:

Risk Category Risk criteria Risk subcategories Higher Building constructed of more Higher High – all buildings more than 3 storeys than 15 storeys AND Higher Medium – 11 to 15 Contains more than 50 MPANs storeys AND Higher Low – 3 to 10 storeys RLM more than 20 years old Medium Up to 3 storeys N/A AND More than 10 MPANs Lower Up to 10 MPANs N/A Less than 3 storeys

Converting the categorisations above into specific building types, we plan to deliver the following programme of work in RIIO-ED1 (customer numbers):

Guidance – Draft RIIO-ED2 Business Plan Data Template Commentary

Building type 2024 2025 2026 2027 2028 Total Houses 0 0 0 0 0 0 Flats 0 734 1561 366 0 2,661 Multi-Storey 2638 2326 2751 2175 1552 11,442 Total 2638 3060 4312 2541 1552 14,103

Which will give the following spend profile (£m):

Building type 2024 2025 2026 2027 2028 Total Houses 0 0 0 0 0 0 Flats 0 0.62 1.44 1.13 0 3.19 Multi-Storey 3.22 2.59 1.82 2.36 3.25 13.25 Total 3.22 3.21 3.26 3.49 3.25 16.44

In addition to the buildings to be intervened upon, we will also carry out a programme of inspections to determine the condition of the RLM at buildings in our programme and those identified for future years.

2024 2025 2026 2027 2028 Total Condition inspections 300 300 300 300 300 1,500 Inspection cost (£m) 0.165 0.165 0.165 0.165 0.165 0.825

More details of the scheme can be found in EJP RLM_EJP_1_Rising_Lateral_Mains.

CV18 - Overhead Clearances

Commentary

Average annual costs in 2020-21 Change from

money RIIO-ED1 to RIIO-ED2 DPCR5 RIIO-ED1 RIIO-ED2 Overhead Line 7.45 2.60 1.71 -34% Clearances

We have a legal responsibility to ensure our network remains safe. Part of this requires us to ensure adequate clearances of live electrical apparatus from buildings and the ground to minimise the risk of accidental contact.

Since 2006, we have been rectifying these clearance issues where they are known to exist and have largely eliminated them. We do however regularly check our overhead lines for any new issues, such as the construction of new buildings near an overhead line and take steps to ensure adequate clearances are maintained.

We plan to resolve all known issues in the four-year period starting in 2023, but recognise that we will continue to identify new issues so our plan includes provision for costs in the

Guidance – Draft RIIO-ED2 Business Plan Data Template Commentary

final three years of RIIO-ED2 to resolve these potential non-compliances. We expect that by this stage we will have achieved ‘steady-state’ – the number of clearances resolved each year will match the number that we find.

We expect to deliver these volumes of work at a similar unit cost to those delivered in the RIIO-ED1 period for each voltage.

Our proposed spend profile for the end of RIIO-ED1 and RIIO-ED2 is as follows:

2021 2022 2023 2024 2025 2026 2027 2028 1.4 0.7 3.1 3.6 2.8 0.7 0.7 0.7

CV19 - Worst Served Customers (WSC)

Commentary

Average annual costs in 2020-21 Change from

money RIIO-ED1 to RIIO-ED2 DPCR5 RIIO-ED1 RIIO-ED2 Worst Served 0.30 0.26 4.25 1564% Customers

The forecasts in our Worst Served Customers table relate to our proposal ‘5.2.1.4 Improving reliability for those with a poor service’.

We have a significant minority of customers, predominantly in rural areas, who receive a performance that is worse than the average. This is often due to the presence of a large number of overhead cables, combined with greater exposure to storms, wind-borne debris and falling trees.

While the average time to locate and repair these faults is relatively short compared to those on underground networks, the overall pattern remains one of significantly better performance in urban areas.

To improve the levels of service we provide to these customers we will deliver a targeted programme of enhancements to improve the reliability of the poorest performing parts of the network.

We have designed a programme which will benefit 3,770 Worst-Served Customers and a further 27,785 customers on the same circuits for a cost of £21.3m over RIIO-ED2, ensuring that all customers who would have qualified under Ofgem’s new definition in RIIO- ED1 have their performance substantially improved. As part of this programme, we are committing to delivering a minimum 50% performance improvement across 26 specific circuits.

EJP WSC_EJP_1_Worst_Served_Customers’ gives details of our proposals.

Guidance – Draft RIIO-ED2 Business Plan Data Template Commentary

CV20 - Visual Amenity

Commentary

Average annual costs in 2020-21 Change from

money RIIO-ED1 to RIIO-ED2 DPCR5 RIIO-ED1 RIIO-ED2 Visual Amenity 1.17 1.26 1.25 -1%

Aligned with the approach set out in Ofgem’s SSMD, we expect that total funding for undergrounding for visual amenity across all DNOs will continue at current levels.

With the expansion of the Lake District and Yorkshire Dales national parks in August 2016 we now have an additional 188 square miles of National Park in our distribution area. (https://www.gov.uk/government/news/lakes-and-dales-decisions-create-largest-area-of- english-national-park-land).

This has resulted in an increase in the amount of overhead line in our area, which has risen from 6.8% of the national total to 7.6.

As the allocation of undergrounding funding to DNOs is based on a combination of the number of customers and the amount of overhead lines in National Park and Areas of Outstanding Natural Beauty (AONB) in their area, we are estimating that on a like-for-like basis our share of the total allowance for undergrounding for visual amenity will rise slightly. We have assessed the size of the pot to total £76.9m, of which we will receive £6.3m in 2020-21 money.

The forecast allowance of £1.25m per year is slightly lower than our current entitlement of £1.35m each year.

Our current practice is that the programme of work associated with this funding is entirely stakeholder led. We have included forecasts for individual asset that will be added and disposed as part of this programme based on run-rate, but we will not know the actual plans until we have confirmed the level of funding and consulted with stakeholders.

CV21 - Losses

Commentary

Average annual costs in 2020-21 Change from

money RIIO-ED1 to RIIO-ED2 DPCR5 RIIO-ED1 RIIO-ED2 Losses 0.21 1.52 2.00 32%

Expenditure in this table relates to our proposal ‘5.3.2.4 Reducing losses from the network’.

To reduce electrical losses in RIIO-ED2, we will spend £2m each year to upsize cables and equipment to lower loss equivalents when we are undertaking work for other purposes and

Guidance – Draft RIIO-ED2 Business Plan Data Template Commentary

also proactively replace the highest loss equipment on our network, even if the equipment does not require replacement for any other reason.

This investment will save around eight Gigawatt hours of electricity (GWh) per year by 2028.

Details of our strategy on losses can be found in our Losses Strategy which is Annex 27 of our Business Plan.

The summary of actions from the strategy is as follows:

Proactive key actions:

• We will proactively replace old (pre-1990) large (800kVA and 1000kVA) ground- mounted, secondary network transformers with lower loss EU Eco-design 2015 specification transformers.

Opportunistic key actions:

• Whenever we are required to install or replace one of our primary transformers, we will undertake a CBA. Where the assessment is beneficial, we will install a lower loss transformer unit which complies with the latest EU Eco-design 2015; • Whenever we are required to install or replace one of our grid transformers, we will undertake a CBA. Where the assessment is beneficial, we will install a lower loss transformer unit which complies with the latest EU Eco-design 2015; • Whenever we are required to install or replace one of our larger pole-mounted secondary network transformers, we will do so with a lower loss unit which complies with the latest EU Eco-design 2015 specification; and • Where necessary we will install large cross-section cables (300mm2) at HV and LV as standard, instead of the current mix of smaller (95mm2 and 185mm2 cables).

Specific details of how we will address losses in our transformer fleet can be found in ‘NARM EJP 1 - Transformers Intervention Programme’.

CV22 - Environmental Reporting

Commentary (up to 5 pages)

Average annual costs in 2020-21 Change from money RIIO-ED1 to RIIO-ED2 DPCR5 RIIO-ED1 RIIO-ED2 Environmental Reporting 0.68 0.45 4.75 961%

Whilst some of our environmental activities will continue into RIIO-ED2, we plan small reductions in three areas of activity, outweighed by the increase in activity in two areas, as seen below:

Guidance – Draft RIIO-ED2 Business Plan Data Template Commentary

Cost driver Change from Area of reporting run rate (£m) Management of PCBs 21.0 Persistent Organic Pollutant asset changes and oil testing Biodiversity 1.0 Free format line 152 Oil pollution -0.4 Oil Pollution Mitigation Scheme - Operational Sites Noise pollution -0.2 Noise Pollution Contaminated land -0.7 Contaminated Land Clean Up Total 20.6

Polychlorinated Biphenyls (PCBs) Polychlorinated Biphenyls (PCBs) are a family of Persistent Organic Pollutants (POPs) which, whilst being good electrical insulators, were never specified for use by electricity network operators. They were, however, used in some industrial electrical applications because of their chemical stability, fire resistance and low vapour output.

PCBs can harm human and environmental health and there is a legal requirement to remove from use all PCB contaminated equipment by 31 December 2025.

Environment Agency (EA) guidance is that it must be assumed that all ground mounted and pole mounted transformers are PCB contaminated if manufactured before 1987 unless it is certain that they are uncontaminated e.g. if they have been tested to show that they contain 50ppm or less of PCBs.

Whilst some PCB contaminated and potentially contaminated transformers will be replaced due to their condition, or as part of other pro-active programmes, a separate programme of testing and replacement is required to enable us to comply with the legal deadline to no longer hold PCBs by 31 December 2025.

The most effective way to establish the PCB content of oil in equipment is to take an oil sample and test it in a laboratory to establish its PCB level. However, whilst practical for Ground Mounted Transformers (GMTs), oil samples cannot reasonably be taken from in- service Pole Mounted Transformers (PMTs).

Our approach to removing PCBs from service is to test GMTs and remove those which are contaminated and, for PMTs, to use a statistical model developed with the Energy Networks Association (ENA) to identify those PMTs which should be replaced and those which, in agreement with the EA, can be left in service.

Our GMT testing programme began during RIIO-ED1 and will continue for the first two years of RIIO-ED2. We will test transformers at 598 sites in conjunction with our maintenance programme plus a targeted sample of 5,573 transformers. The total cost of taking these samples and testing them for PCB content at our laboratory facility at the Central Oil Reprocessing Depot (CORD) is £716k.

Our asset replacement programme will start in RIIO-ED1 and run for the first three years of RIIO-ED2. There are two distinct sections to this programme: GMTs and PMTs.

Guidance – Draft RIIO-ED2 Business Plan Data Template Commentary

The volumes, unit costs and total costs for each category are set out below, together with a summary for the whole programme.

RIIO- RIIO- GMT Programme 2023/24 2024/25 2025/26 Total ED1 ED2 Volumes 16 43 43 43 145 129 Unit Cost 17.5 17.5 17.5 17.5 Cost 0.3 0.8 0.8 0.8 2.5 2.3

RIIO- RIIO- PMT Programme 2023/24 2024/25 2025/26 Total ED1 ED2 Volumes 64 1,765 1,998 1,700 5,527 5,463 Unit Cost 3.4 3.4 3.4 3.4 Cost 0.2 6.1 6.9 5.8 19.0 18.7

RIIO- RIIO- Total Programme 2023/24 2024/25 2025/26 Total ED1 ED2 Volumes 80 1,808 2,041 1,743 5,672 5,592 Blended Unit Cost 6.2 3.8 3.7 3.8 Cost 0.5 6.8 7.6 6.6 21.5 21.0

More details of the scheme can be found in EJP ENV_EJP_1_PCBs.

Biodiversity In 2019/20 we transformed nine of our substation sites into low-maintenance, self- pollinating spaces following a suggestion from one of our grounds workers. This not only benefits the local area but can also reduce the amount of maintenance needed. Unlike a site with grass that needs regular trimming and weeding, a site filled with self-pollinating wildflowers does not need regular visits.

We plan to create another 25 ‘bio-diversity and community green space sites’ in RIIO-ED2 at a total cost of £1m.

We have reported these costs and volumes in the free-form text section of the table.

Other areas of cost change Our programmes for oil pollution site management, noise pollution and contaminated land will all be at a lower level than that seen in RIIO-ED1.

Sulphur Hexafluoride (SF6) We have not included any specific programmes for SF6 mitigation in this table, but we will be investing in SF6-free switchgear as part of our asset replacement programme. This is detailed in tables ‘CV7a – Asset Replacement NARM’ and ‘M26 – Incremental Costs’, together with EJP ENV_EJP_2_SF6_Mitigation_Programme.

Guidance – Draft RIIO-ED2 Business Plan Data Template Commentary

CV23 – RIIO-ED1 High Value Projects

Commentary

We have no High Value Projects in RIIO-ED1, but we are using this table to report the costs associated with the Innovation Rollout Mechanism to deliver the first stage of our Smart Street programme.

CV24 - DPCR5 High Value Projects

Commentary

The costs shown for DPCR5 are previously reported costs inflated to be shown in 2020-21 money.

These cover the Wigan 132kV Reinforcement project and our BT21CN programme.

CV25 - RIIO-ED2 High Value Projects

Commentary

Average annual costs in 2020-21 Change from

money RIIO-ED1 to RIIO-ED2 DPCR5 RIIO-ED1 RIIO-ED2 High Value Projects - - 15.60 New RIIO-ED2

Whilst we are not planning any High Value Projects in RIIO-ED2, we are planning programmes of work that have significant cost but do not fit easily into any single reporting category.

One of these is the continued roll-out of our Smart Street programme. This initiative is strongly supported by stakeholders, so we are planning to spend £78m over the RIIO-ED2 period. We have presented these costs in this table but do not expect it to be treated as a HVP.

Smart Street is our award-winning initiative to reduce customers’ electricity usage and bills by managing the voltage on the local network. It forms proposal ‘5.5.1 Rolling out our Smart Street project to reduce cost and carbon for customers’ in our Business Plan.

By using technology at our substations to subtly alter the amount of electricity flowing to homes, we can reduce consumption and save customers’ money, without affecting their usage behaviour in any way.

Smart Street has been proven to reduce customers’ energy consumption by up to 8% – equivalent to a £60 reduction in annual energy bills for the typical domestic customer.

Guidance – Draft RIIO-ED2 Business Plan Data Template Commentary

We are currently rolling the project out to 64,000 customers in the North West, as part of a £18m project funded under the Innovation Rollout Mechanism (IRM) in RIIO-ED1. In RIIO- ED2, we will extend Smart Street to a further 250,000 households in our region, through a £78 million investment programme. We will target the deployment of this technology to areas where there are higher populations of customers in fuel poverty.

This technology also increases the available capacity of the network and therefore we will also target the deployment where we expect clusters of low carbon technologies such as solar panels and heat pumps so that more costly network upgrades can be avoided.

Annex 16 of our Business Plan and Engineering Justification Paper SS_EJP_Smart_St give more information on our Smart Street deployment.

CV26 - Faults

Commentary (up to 7 pages)

Average annual costs in 2020-21 Change from

money RIIO-ED1 to RIIO-ED2 DPCR5 RIIO-ED1 RIIO-ED2 Faults 29.74 27.16 26.34 -3%

Our forecasts for the remainder of RIIO-ED1 are based on the detailed forecasts of costs and activities from our company business plan.

For the RIIO-ED2 period we have established a business-as-usual forecast based on run- rates for the three years from 2018 to 2020. As part of our benchmarking exercise we have reviewed our unit costs against those reported by the other DNOs and adjusted them to reflect our ambition to deliver at a competitive unit cost.

We have then looked at the initiatives that we have identified in discussions with stakeholders and produced a list of additional costs that will impact on our costs and performance in the RIIO-ED2. We have classified these as either impacting the volumes of faults that we will have to deal with or the unit cost of addressing those faults.

Cost driver Added Category Voltage Equip cost Initiatives to improve restoration times for 1.3 Unit cost HV All HV faults requiring an increased number of responders. The legislative move to extend the guarantee 2.5 Unit cost All Cable period for streetworks from two to five years will increase contractor costs. The increase in automated devices on the HV 1.0 Volume HV All network will lead to an increase in failure rates and call outs/ There is a risk that the increased number of 1.3 Volume EHV/ Plant tap change control operations as a result of 132kV the implementation of CLASS will lead to lead to an increased failure rate.

Guidance – Draft RIIO-ED2 Business Plan Data Template Commentary

Increased pressure from Highway Authorities 2.5 Unit cost All Cable to reduce the duration of streetworks will lead to increased costs. The implementation of Rapid Reinstatement 0.5 Unit cost All Cable incentive will lead to increased contractor costs The implementation of Rapid Reinstatement -2.5 Unit cost All Cable incentive will lead to a reduction in lane rental costs Total 6.5

These changes to volumes or unit costs have been allocated across the appropriate fault categories in proportion to the levels of activity in the RIIO-ED1 period.

The same approach has been taken in the forecast of the additions and disposals at an asset class level.

CV27 - Severe Weather 1 in 20

Commentary

Average annual costs in 2020-21 Change from

money RIIO-ED1 to RIIO-ED2 DPCR5 RIIO-ED1 RIIO-ED2 Severe Weather 1 in 20 - - 0.34 New

Whilst the cost of recovering from a 1-in-20 storm is difficult to estimate because of the diverse nature of the possible events, we have used a figure of £7m as the basis of our forecast. We have then allocated one twentieth of that cost to each of the remaining years of RIIO-ED1 and each year of RIIO-ED2.

We have not attempted to forecast the volumes of assets that would be added or disposed as a result of a 1-in-20 storm as there is no meaningful way of doing this.

CV28 - Occurrences Not Incentivised (ONIs)

Commentary

Average annual costs in 2020-21 Change from money RIIO-ED1 to RIIO-ED2 DPCR5 RIIO-ED1 RIIO-ED2 ONIs 5.87 9.21 10.43 13%

Our forecasts for the remainder of RIIO-ED1 are based on the detailed forecasts of costs and activities from our company business plan.

For the RIIO-ED2 period we have established a business-as-usual forecast based on run- rates for the three years from 2018 to 2020. As part of our benchmarking exercise we have

Guidance – Draft RIIO-ED2 Business Plan Data Template Commentary

reviewed our unit costs against those reported by the other DNOs and adjusted them to reflect our ambition to deliver at a competitive unit cost.

The only area of cost pressure that we have identified for the RIIO-ED2 period is the potential increase in costs associated with the completion of the Smart Meter Roll Out programme. Cut-out changes that are currently captured as part of that programme will be categorised as ONIs in future. We have made an estimate of an additional £5m associated with this change in treatment.

CV29 - Tree Cutting

Commentary

Average annual costs in 2020-21 Change from

money RIIO-ED1 to RIIO-ED2 DPCR5 RIIO-ED1 RIIO-ED2 Tree Cutting 3.96 5.00 9.52 91%

Tree cutting programme Wood pole lines are well established and comprise of poles, conductor, stays, insulators, transformers and switchgear. Managing the vegetation clearances around these lines requires a maintenance programme which will both identify areas requiring action and carry out the removal of vegetation. This accommodates rectifying compliance issues such as decaying trees which may fall onto an overhear line, as well as recording and managing trees and vegetation growth. This programme is a cost-effective option to ensure network reliability and reduce the possibility of network outage, thereby increasing customer satisfaction. In some cases where a refusal has occurred, there may be solutions that are lower cost than undergrounding that enable compliance. These typically involve shrouding conductors and the application of mechanical protection over the shroud. We have increased the utilisation of this solution over the past two years and will continue to use this as an option where cutting is not possible.

We have proposed a programme of vegetation inspection, maintenance and action to deal with business as usual maintenance activities and respond to identified hazardous situations. This is our preferred option as it allows us to comply with all regulations and provide a resilient network for our customers.

There will be an increase in vegetation cuts per year in RIIO ED2, which is due to the management of the Ash Die Back trees and as a response to increased growth rates due to the changing climate. The type of work associated with Ash Die Back was not carried out in RIIO ED1 and the removal of diseased trees has seen the volumes grow by 15,445 in RIIO ED2.

To achieve this, it is planned that in RIIO-ED2 we inspect 432,931 spans, cut 57,933 spans and carry out resilience cuts on 312km of 132 and 33kV OHL network at a total cost of £47.6m to ensure our network remains compliant.

LIDAR We have investigated the use of LIDAR to survey trees in comparison with more traditional methods. We compared samples of LIDAR trial data with our existing records in three

Guidance – Draft RIIO-ED2 Business Plan Data Template Commentary

different areas. These showed a correlation of around 95%, which has given us the confidence that our existing inspection methods are cost effective and that we do not need the added expense of a widespread LIDAR survey. Consequently, there are no costs shown on those lines.

Details Engineering Justification Paper Tree_EJP_Vegetation_Programme gives more details on our vegetation management approach.

CV30 - Inspections

Commentary

Average annual costs in 2020-21 Change from

money RIIO-ED1 to RIIO-ED2 DPCR5 RIIO-ED1 RIIO-ED2 Inspections 2.77 1.93 3.39 75%

Our volume forecast for the RIIO-ED2 period is largely based on run-rates for the three years from 2018 to 2020.

As part of our benchmarking exercise we have reviewed our unit costs against those reported by the other DNOs and adjusted them to reflect our ambition to deliver at a competitive unit cost.

We have identified that we need to establish a programme of cut-out inspection to meet for responsibility for main fuse safety. We have added £6.1m to or business as usual programme to cover the costs of this activity. This will cover the cost of an additional 25,000 inspections each year.

CV31 - Repairs and Maintenance

Commentary

Average annual costs in 2020-21 Change from

money RIIO-ED1 to RIIO-ED2 DPCR5 RIIO-ED1 RIIO-ED2 Repair and Maintenance 9.51 8.84 12.40 40%

We have then looked at the initiatives that we have identified in discussions with stakeholders and produced a list of additional costs that will impact on our costs and

Guidance – Draft RIIO-ED2 Business Plan Data Template Commentary

performance in the RIIO-ED2. We have classified these as either impacting the volumes of repairs and maintenance that we will have to deal with or the unit cost of addressing those faults.

Cost driver Added Category Voltage Equip cost Distribution plant modifications 1.8 Volume HV Switchgear associated with minor switchgear repairs and oil sampling. Significant increase in automated 2.5 Volume HV Plant devices on network leading to increased volumes of maintenance. Significant increase in CLASS 1.5 Volume G&P Plant installations on network and increased number of tap change control operations leading to increased tap changer maintenance. G&P plant modifications associated 1.0 Unit Cost G&P Switchgear with minor switchgear repairs and oil sampling. Significant increase in automated 0.5 Volume All Protection devices on network leading to increased volumes of function testing Increased civil maintenance costs 3.8 Unit Cost All Substation associated with fire risk assessments at substations Increased civil maintenance costs 1.0 Volume All Substation associated with substation wiring installation testing Ageing building assets leading to 2.5 Volume All Substation increased civil maintenance costs Policy changes relating to assisted 1.5 Unit Cost G&P Cable cable gas installations (Gas Pressure Regs) leading to increased inspection and maintenance costs. Total 16.1

These changes to volumes or unit costs have been allocated across the appropriate repair and maintenance categories in proportion to the levels of activity in the RIIO-ED1 period.

The same approach has been taken in the forecast of the additions and disposals at an asset class level.

Further details on the distribution plant elements are included in our associated EJP RM_EJP_Distribution_Plant.

Guidance – Draft RIIO-ED2 Business Plan Data Template Commentary

CV32 - Dismantlement

Commentary

Average annual costs in 2020-21 Change from

money RIIO-ED1 to RIIO-ED2 DPCR5 RIIO-ED1 RIIO-ED2 Dismantlement 0.19 0.41 0.37 -10%

We anticipate that dismantlement activity will continue at the same average levels as we have experienced in the first five years of RIIO-ED1.

CV33 - Substation Electricity

Commentary

Average annual costs in 2020-21 Change from

money RIIO-ED1 to RIIO-ED2 DPCR5 RIIO-ED1 RIIO-ED2 Substation Electricity 1.70 1.99 2.06 3%

In the period to 2038 we plan to spend £4.7k per site to improve energy efficiency at 26 substations each year. This would result in a reduction of around 29% in energy consumption at each substation, or about £1.2k per substation per annum saving on energy bills, assuming there is no increase in retail energy costs.

The savings in both costs and consumption will phase in as the measures are rolled out. In total we would see a total of £0.5m saving in energy bills across the five-year period and a saving of around 3GWh of electricity against a current annual usage of about 13GWh under this initiative.

This will be offset to some extent by the initiatives to move to metered primary substations and the introduction of electric vehicle charging at substations. We forecast that this will cost us about £50k per year with an additional consumption of about 1.6GWh.

Guidance – Draft RIIO-ED2 Business Plan Data Template Commentary

CV34 - Smart Meter Intervention DNO

Commentary

Average annual costs in 2020-21 Change from

money RIIO-ED1 to RIIO-ED2 DPCR5 RIIO-ED1 RIIO-ED2 Smart Metering Roll Out 0.06 4.33 2.19 -49%

In line with government projections we expect the Smart Meter Roll Out programme to continue until 2025 so we have rolled over our provision for expenses associated with Smart Meter installation to 2025.

We expect the roll out to continue at similar volumes and costs to those we have seen prior to the pandemic until the programme is completed.

CV35 - Operational Training (CAI)

Commentary

Average annual costs in 2020-21 Change from

money RIIO-ED1 to RIIO-ED2 DPCR5 RIIO-ED1 RIIO-ED2 Operational Training 7.27 5.41 5.08 -6% (CAI)

Operational training consists of recruiting, training and upskilling new and existing staff.

Expenditure for RIIO-ED2 arises in the following areas:

• Training facility – building costs such as electricity, water etc • People costs o Trainers that deliver the training on site. o Managers and administrators that manage the training schedules for the business. • Material costs – to be used on the training courses. • Contractor costs – external third-party trainers that are used to deliver the training on site, to be used when internal trainers don’t have the capabilities. • Craft apprentices – 54 new apprentices before the end of RIIO-ED2 through looking at attrition rates within the company and future requirements. Total costs will rise and fall in line with how many apprentices there are on average throughout each financial year. • Engineer apprentices – 62 new apprentices before the end of RIIO-ED2 through looking at attrition rates within the company and future requirements. Total costs will rise and fall in line with how many apprentices there are on average throughout each financial year.

Guidance – Draft RIIO-ED2 Business Plan Data Template Commentary

• Operational upskilling - this is the cost of upskilling operational employees by looking at an hourly rate from their annualised costs, along with the durations for on-job training and classroom training. • Operational refreshers – the costs identified by the business of competences that will need to be refreshed between now and the end of RIIO-ED2.

Volumes consist of:

• The average number of apprentices each year for both Craft and HLA. • The number of new apprentices each year for Craft and HLA, based on attrition rates to work out the required number, calculated so that they complete their training in time for when they are needed within the business. • Upskilling courses estimated for the duration. • Refresher courses identified for the duration. • Expected leavers for both Craft and Engineers to the end of RIIO-ED2. o Retirement o Any other reason

Assumptions that have been made:

• There are provisions in place of £0.15m a year for any new training requirements that may arise (Grid Digitalisation Strategy etc), offset by any efficiencies through trying to reduce waste and bringing some of the training in house. • Any staff at the training academy will be replaced on a like for like basis in the event of any leavers. • There are no cost shocks expected with regards to the running costs of the training academy.

CV36 – NIA

Commentary

Average annual costs in 2020-21 Change from

money RIIO-ED1 to RIIO-ED2 DPCR5 RIIO-ED1 RIIO-ED2 Network Innovation Allowance (NIA) - 3.31 - -100%

We have successfully invested 99% of our allocated funding for NIA innovation projects to date and have plans in place to invest our full allowance for the rest of RIIO-ED1. In comparison, other DNOs have invested an average of 70% of their allowances to date. Further details about our RIIO-ED1 portfolio can be found in Section 3.2 of Annex 3 - Innovation Delivery Plan.

To the end of FY21, we have spent £18.6m on NIA projects. In RIIO-ED1, we were allocated a total of £25.3m of NIA funding, which we will fully invest. We monitor and track all our innovation spending on a monthly basis and report on project costs in the RRP process and in project close down reports.

To allow completion of the tables for the remainder of RIIO-ED1, we have allocated our allowance across the categories in the tables (e.g. labour, contractors) by using a

Guidance – Draft RIIO-ED2 Business Plan Data Template Commentary

percentage split based on an average of the actuals from previous years. This is shown in cells 015 to 026, P15 to P26 and Q16 to Q26 on RIIO-ED2 table CV36 – NIA. We currently have registered 25 NIA projects, of which 12 are complete and 13 are ongoing. We have plans to register further projects in the remainder of RIIO-ED1; we will use our full allowance to deliver the maximum benefits for our customers.

A list of our key NIA projects can be found in Figure 3.3 in Annex 3 – Innovation Plan, which includes details of our investments and the outcomes of these projects. The investments we have made in all innovation projects to date have delivered £46.4m in benefits for our customers in RIIO-ED1, as reported in RRP. Figure 6.9 of Annex 3 shows the projected benefits for RIIO-ED2 from all our innovation projects.

Our innovation projects have delivered benefits to customers either directly, through deferment of reinforcement, cheaper connections, improved fault response, energy consumption reduction, or indirectly, through improved forecasting and optimised investment planning. We share NIA project ideas through ENA to ensure there is no duplication, to promote collaboration, and to share project learning. We also attend ENA’s Energy Network Innovation Conference annually.

When deciding on the most appropriate funding route for innovation ideas, we will assess the Technology Readiness Level (TRL) at the start and end of the project, the anticipated benefits, and when the benefits will accrue.

If the proposed solution is at the lower end of the TRL scale, we will then test the idea against the NIA eligibility criteria. If the criteria are met, we will pursue that project through the NIA route.

CV36a– Innovation ED2

Commentary

Average annual costs in 2020-21 Change from

money RIIO-ED1 to RIIO-ED2 DPCR5 RIIO-ED1 RIIO-ED2 Innovation in ED2 - - 5.00 New (NEW)

Section 6 of Annex 3– Innovation Plan details our plans for innovation delivery in RIIO-ED2 and includes our proposed innovations. It provides a high-level snapshot and presents the detailed plan, which includes information on the areas in which we intend to innovate.

Our innovation commitments are detailed in our Innovation Strategy2. These commitments represent our innovation promise to our customers and stakeholders. Figure 6.1 in Annex 3

2 Innovation strategy - https://www.enwl.co.uk/go-net-zero/innovation/our-innovation-strategy/

Guidance – Draft RIIO-ED2 Business Plan Data Template Commentary

– Innovation Plan provides further details on these commitments, including what we will do during RIIO-ED2 to ensure that we meet them.

As set out within our Innovation Strategy, we have adopted ENA’s five network innovation themes, under which we will pursue new and exciting innovation projects. This allows us to ensure we focus on the challenges that are most important to our customers and secure the most substantial benefits and savings through RIIO-ED2.

The five themes are: • Consumer vulnerability • Net zero and the energy system transition • Optimised assets and practices • Flexibility and commercial evolution • Whole energy system

Each of our projects will tackle one or more of these themes, and Section 6.2 of Annex 3 – Innovation Plan defines what these themes mean to us and our intentions in greater detail.

We are seeking a Network Innovation Allowance of £25m for the duration of RIIO-ED2, rather than an annual allowance. In RIIO-ED1 our contribution was 10%, equating to approximately £2.3m over the 8-year period; however, to reflect the confidence we have in our proposed portfolio for RIIO-ED2, we are committing to increasing our contribution in RIIO-ED2 to 15%, which represents a contribution of £3.75m for the five-year period.

Figure 6.7 in Annex 3 – Innovation Plan shows the high-level view of proposed NIA innovation spend, spread across the five themes, as per the Business Plan Data tables. Our detailed innovation plan in Section 6.13 of Annex 3 – Innovation Plan explains the scope, purpose and aim of what we intend to achieve, and the benefits we expect for these five areas.

We have profiled our spend equally over the whole RIIO-ED2 period, as shown in table CV36a – Innovation ED2, columns R to V. Owing to the nature of innovation project delivery and the variability in activities across years, it is considered unlikely that we will maintain an even split; however, the precise profile is, at this stage, unknown, and given we intend to spread our activities evenly across the period, we believe this is the most appropriate way to show our spend profile. In apportioning across labour, pensions, etc, we have used an average of previous years spend, (2016 to 2020), and this is shown in rows 15 to 26, columns R to V.

As set out in Annex 3 – Innovation Plan, our activities for NIA in RIIO-ED2 will include stakeholder engagement, calls for innovation, national engagement, and the creation of an innovation oversight panel.

Guidance – Draft RIIO-ED2 Business Plan Data Template Commentary

CV37– NIC

Commentary

Average annual costs in 2020-21 Change from

money RIIO-ED1 to RIIO-ED2 DPCR5 RIIO-ED1 RIIO-ED2 Network Innovation Competition (NIC) - 1.32 0.67 -49%

We have one completed NIC project, Celsius, in which we invested £4,901,000. This project aimed to deliver a co-ordinated approach to managing the temperature of electrical assets in distribution substations. Managing the temperature of assets can release additional capacity, reduce long-term costs for customers, and avoid early asset replacement. The outcome of this project was new targeted distribution transformer ratings.

In November 2020, we were awarded £7,946,019 through the NIC for our QUEST project. This project uses a novel application of proven technology combined with innovative software to build an overarching system, which operates a holistic voltage control methodology. This will co-ordinate existing and future voltage management techniques, establishing efficient network operation and promoting low-cost connection and use of Low Carbon Technologies, to deliver significant customer benefits. The project will be delivered over four years – it started in April 2021 and will complete in April 2025.

We have included the current forecast for the remainder of RIIO-ED1 for QUEST in the RIIO-ED2 table CV37 – NIC.

A list of our key NIC projects can be found in Figure 3.3 of Annex 3 – Innovation Plan, which includes details of our investments and the outcomes of these projects. The investments we have made in all innovation projects to date have delivered £46.4m in benefits for our customers in RIIO-ED1, as reported in RRP. Figure 6.9 of Annex 3 shows the projected benefits for RIIO-ED2 from all our innovation projects. We use NIC funding wisely, by making use of incremental innovation and building learning through a series of projects. For example, QUEST builds on the learning gained from CLASS and Smart Street, two of our LCN Fund projects and, in turn, Smart Street used learning from one First Tier and two IFI projects – Voltage Management on Low Voltage busbars, Bidoyng Development and Weezap Development.

We are also working as Project Partners on NIC projects led by other DNOs; namely, Transition with SSE and DC Share with WPD.

SSE is the funding licensee for the Transition NIC project. SSE were awarded £14.5m for this project; the package of work we will deliver is valued at £750k, of which we have made 10% contribution of £75k. Transition will help progress the move to DSO by developing and demonstrating a Neutral Market Facilitator (NMF) Platform to test the operation of market models being produced by the ENA Open Networks Project.

Guidance – Draft RIIO-ED2 Business Plan Data Template Commentary

WPD is the funding licensee and Ricardo is the project lead for DC Share, a £5.5m NIC project. We have made a contribution of £50k and will deliver a package of work valued at £100k. DC Share is a network equalisation solution designed to share system capacity across AC secondary substations with different load profiles, to facilitate rapid charge points for electric vehicles via a new, high capacity DC network.

CV38– IFI & LCN Fund

Commentary

Average annual costs in 2020-21 Change from

money RIIO-ED1 to RIIO-ED2 DPCR5 RIIO-ED1 RIIO-ED2 IFI & LCN Fund 7.83 1.95 - -100%

We have completed four IFI & LCN Fund projects, as described below:

Capacity to Customers (C2C)

C2C combined new technology with innovative commercial contracts to increase the amount of electricity we can transmit through our existing network. £211 904 invested, SDR received £0.9m.

CLASS

The aim of the CLASS project was to demonstrate that electricity demand can be managed by controlling voltage without any discernible impact on customers. The project was further extended to look into the commercial benefits of CLASS. £1,500,370 invested, SDR received for CLASS £1.7m and for the CLASS commercial extension £0.8m.

Smart Street

This project combined innovative technology with existing assets to make networks and appliances perform more efficiently. The purpose of the project was to reduce customer energy consumption, reducing network losses and increasing the ability to connect LCTs through active voltage management and meshing of the Low Voltage network. £7,316,735 invested, SDR received for Smart Street £0.9m.

Following the success of the Smart Street project we applied via the Innovation Roll Out Mechanism (IRM) for funding to implement Smart Street as BAU. The application was successful, and we were awarded £18m to roll out Smart Street across 180 sites. The project started in April 2020, and the 180 Smart Street IRM installations will target areas with high forecast LCT uptake, and within this selection will prioritise areas with a high concentration of fuel poor customers.

Respond

Respond is the first UK demonstration of an active fault level management solution that avoids traditional network reinforcement. £4,660,000 invested, SDR received £0.25m.

Guidance – Draft RIIO-ED2 Business Plan Data Template Commentary

The outcomes and that have been delivered through these NIC projects are outlined in Figure 3.3 of Annex 3 – Innovation Plan.

CV39– DRS

Commentary

Average annual costs in 2020-21 Change from

money RIIO-ED1 to RIIO-ED2 DPCR5 RIIO-ED1 RIIO-ED2 Directly remunerated 15.58 10.02 12.04 20% services

For DRS2 which relates to ‘Diversionary works under obligation’ we have developed a forecast alongside our forecasts for the diversionary work reported in tables CV5 and CV6, showing the costs of forecast work split between the two tables

For the other two categories of DRS where we offer services that are largely customer driven we have assumed that volumes and costs for the remainder of RIIO-ED1 and for the RIIO-ED2 period will continue at the RIIO-ED1 average level. These are:

• DRS3. Work required by any alteration of premises • DRS9. Miscellaneous

We no longer offer a Revenue Protection Service so we have entered no costs or revenues for DRS5.

DRS8 – Value Added Services – we have not included any costs or revenues associated with the deployment of our CLASS product. This will be reviewed following the outcome of Ofgem’s current consultation.

Volume Table Commentary

V1– Total Asset Movements

Commentary

This table is largely auto-populated based on the contents of other tables.

We have assumed that work on ‘Other assets’ will remain at similar levels to RIIO-ED1.

V2– Cleansing

Guidance – Draft RIIO-ED2 Business Plan Data Template Commentary

Commentary

We are not forecasting any data cleansing for the RIIO-ED2 period, so this table only contains historical values.

V3– Connections

Commentary

In addition to the actuals, we have provided a forecast which is proportional to the costs reported in table C2.

Of note are the forecast for the large number of interventions on LV Underground Services associated with our proposed unlooping programme.

V4– Other Asset Movements

Commentary

This table currently contains a run-rate forecast as well as actuals. We have not identified any other activities which will result in significant deviations from run rate.

AP1– Age Profile

Commentary

This table is an exact copy of the table which will be submitted as part of our 2021 Cost and Volumes pack.

RPEs and Ongoing Efficiency Table Commentary

RPEs and ongoing efficiency

Commentary

We are continuing to develop our forecasts for Ongoing Efficiency and RPEs but have included provisional figures for the Draft Business Plan.

Guidance – Draft RIIO-ED2 Business Plan Data Template Commentary

As discussed in Annex 23 to our Business Plan: ‘Costing and benchmarking our plan’ we have joined with other DNOs through the ENA to commission analysis and reports in these areas from economic consultants Oxera and NERA.

Ongoing efficiency values have been set to 0.5% per annum in all categories.

Memo Table Commentary

M1 - Flood Mitigation (site)

Commentary

We have completed flood mitigation works at 36 of the 46 grid and primary substations identified for intervention in RIIO-ED1. The remaining substations are aligned to other asset replacement and/or reinforcement works also taking place on the same sites. In addition, we have also completed works at fifteen distribution substations that were flooded during the period, mainly in Carlisle, Keswick and Appleby.

In preparation for our RIIO-ED2 submission, we engaged a consultant, JBA Consulting Ltd, to carry out flood risk assessments for our portfolio of 524 grid and primary substations in line with the Engineering Technical Recommendation (ETR138) and our own Code of Practice 355. This assessment incorporated the revised and updated flood data from the Environmental Agency, the National Flood Resilience Recommendations for assessing primary substations supplying more than 10,000 customers to a higher 1/1000 flood risk, and the remedial and mitigation works we have already completed at some of our sites.

The first stage of the assessment was a desk top exercise which identified 300 substations with a potential flood risk. More detailed flood mapping of these and comparing with existing levels of protection, followed by some site visits resulted in the production of 44 detailed flood risk assessments.

From these we have identified 35 sites (15 grids and 20 primaries), that would require flood mitigation in RIIO-ED2. This number of sites is similar to the ones we are intervening in RIIO-ED1.

Based on the volumes in RIIO-ED1, we have made further provision for ten distribution sites, which are anticipated to be mainly reactive. ETR138 does not require intervention on distribution substations, we have developed a reactive policy to mitigate on distribution substations that have been flooded.

In our submission we have made provision for carrying out a similar flood risk assessment exercise in FY26.

We have based the unit rates for flood mitigation work on the average costs for the specific type of flooding we have completed in RIIO-ED1.

The total flood mitigation work for RIIO-ED2 is estimated to cost £3.6m.

Guidance – Draft RIIO-ED2 Business Plan Data Template Commentary

M3 - ED1 WSC Schemes Commentary

This table replicates the M3 table from our 2021 RIGS Costs and Volumes Reporting Pack, with the exception that all costs are presented in 2020-21 money rather than outturn.

We are forecasting expenditure of £120k in each of the final years of RIIO-ED1, however due to the reactive nature of the scheme, the details have not been allocated at this stage.

ED1 Schemes

In RIIO-ED1 to date, we have initiated 18 WSC schemes. Eight schemes are now in the three-year monitoring stage and for various reasons, three schemes have been cancelled. Six are in the planning stage and one is under construction. The seven schemes in planning or construction are shown in the table below with their status update.

# Scheme Primary Feeder Customers Scheme details status ref

1 50015455 Midway Meadowfields 37 New switching in station, Cable construction Laying (HV & stage work LV), ABS, Pole, and ABS removal, expected to Automation, be GVRs completed by June 2021 2 50021542 Keswick Lairthwaite 12 OHL in design Refurbishment stage - pending wayleaves consent 3 50020965 Aspatria Hall Bank 156 Protection in design ABS mods, GVR, stage - automation, pending tree cutting wayleaves consent 4 50020967 Ingleton Ingleton Ind 43 Recommission in design comms, stage - automation pending wayleaves consent 5 50015774 Ambleside Borrans Court 3 Cable laying, in design Automation, stage Fuses, ASLs 6 50015496 Mintsfeet Ashleigh Rd 44 Cable laying, in design Automation, stage GVR 7 50016355 Little Horns 195 Surge in design Salkeld Bungalow arrestors, RC stage ABS removal, GVR, ABS, OHL uprating, Pole, Cable laying

Guidance – Draft RIIO-ED2 Business Plan Data Template Commentary

WSC identified 2021

In April 2021, for the three-year period up to 2020-21, we recorded an additional 774 WSCs affecting seven HV feeders. The number of customers affected, and our current proposed action are shown in the table below;

Feeder Customers Recommended action Primary MINTSFEET SHAP 1 No further action at this RD/LAKELAND stage CREAMERIES SW STN NEW MILLS (GOW NEW ST/SIGNAL 111 Scheme being developed HOLE) BOX MARSH LN

NEWTONGATE ALEXANDRA RD - 3 Still under consideration Radial SILLOTH CHERITEX/SILLOT 14 Scheme being developed H AIRFIELD

TARLETON BOUNDARY 476 No further action at this LN/NEW HS stage NURSERIES WINDERMERE HEATHWAITE 145 Scheme being developed

HAVERTHWAITE HAVERTHWAITE 24 Scheme being developed ABS

Plans for 2022 and 2023

We plan to spend around £120k in each of the final years of RIIO-ED1 as detailed in table CV19 of the pack.

Because of the reactive nature of these schemes the details of these schemes have not been allocated at this stage.

M4 – Vulnerability Strategy

Commentary

This table lists ten specific initiatives which support our vulnerability strategy at a cost of £46.9m.

Guidance – Draft RIIO-ED2 Business Plan Data Template Commentary

M5 - Connections Strategy Delivery

Commentary

Our assessment of competition in Connections in our area is described in Annex 7 of our Business Plan – ‘Major Connections Customers Strategy’.

As noted in the strategy, in the 2013 Ofgem Competition Tests, we successfully passed in seven of the nine market segments which were assessed. The two market segments we didn’t pass are ‘Distributed Generation Low Voltage’ and ‘Unmetered Other’. These two segments are relatively small and represent less than 5% of our connections activity and just over 1% of the value of work accepted.

Our ‘Major Connections Strategy’, Annex 7 to our Draft Business Plan covers these two activities and non-contestable activities in all the market segments.

We have developed a list of actions and metrics in our plan to improve our business-as- usual service, but we are not proposing any deliverables in the form reported in this table, so it is intentionally left blank.

M6 - Metal Theft

Commentary

Whilst we have invested in measures to reduce the occurrence and impact of metal theft, which should reduce incidences of theft, we are also seeing significant increases in the costs of copper and other metals which will make them increasingly attractive to criminals.

As there is no reliable methodology to predict criminal activity we have assumed that the costs and activities associated with metal theft will continue at similar levels to those we have seen so far in RIIO-ED1.

M7 - Protection Summary

Commentary

This table is auto-populated from other tables in the pack. No data entry is required.

M8 - Link Boxes

Commentary

This table is auto-populated from link box information in other tables. We have added no ‘other’ areas of work to those listed.

Guidance – Draft RIIO-ED2 Business Plan Data Template Commentary

M9a - Trad Streetworks (ex ante)

Commentary

Costs for traditional streetworks will reduce in importance in RIIO-ED2 so this table is largely blank.

We provide forecasts in this table for Suspensions and Closures which are all reported in this table for all Highway Authorities. We anticipate that costs will vary with our total levels of activity.

During RIIO-ED2 costs associated with fines and penalties will be reported in this table. We will aim to minimise these costs, so do not feel that it is appropriate to provide a forecast in this area.

M9b - Permit & Lane (ex ante)

Commentary

St Helens are the only local authority in our area whose permit scheme qualifies as an “Existing Permit Scheme”. We expect the volumes for RIIO-ED2 to vary in similar proportions to the rest of our region so forecast volumes in proportion to those reported in M9c.

Wherever possible we have used a five-year average unit cost, but where activities have been introduced in the latter years of RIIO-ED1 we have used a two-year average.

M9c - Permit & Lane (Re-opener)

Commentary

All permit schemes in our area have been established and are reported in the 2021 RIGs Cost and Volumes pack. We do not expect any further set up costs.

We are aware that authorities across our region are considering introducing lane rental schemes during RIIO-ED2 but we have seen no firm plans, so we have based our forecast costs on the existing permit schemes.

We are not forecasting any costs for fines and penalties.

The remaining forecasts are constructed in the following manner, which is based on the methodology we used as part of the Streetworks Re-Opener process:

Costs and volumes Inside Price Control

In order to manage the permit process internally we divide the work into three areas: • Capital Programme • Fault Volumes

Guidance – Draft RIIO-ED2 Business Plan Data Template Commentary

• Maintenance and Tree Cutting

We know that the volume of streetworks permits will vary with the amount of relevant work in these three areas, so our RIIO-ED2 forecast combines the knowledge we have gained from permit schemes in RIIO-ED1 with our RIIO-ED2 forecasts for capital, faults and maintenance.

For each of the three areas of work we can identify the volumes of work which could result in permit costs from our historical regulatory returns. These generally relate to work on the underground network or to tree cutting.

From our internal systems we can identify how many permits were issued for each area of work and the associated costs. Comparing these to the total volumes of work allows us to develop a metric based on permits per activity for each area of work

The year 2019-20 was the first year that all the highways authorities in our area had permit schemes in place, so we have chosen that year as the basis for our volume calculations.

Using our RIIO-ED2 forecasts of activity on the network we have identified the relevant programmes of capital, faults and maintenance work. We have then multiplied these volumes by the 2019-20 metrics to produce a forecast for each area of work.

We have also developed unit costs for each activity based on the average unit cost for the first five years of RIIO-ED1 where available. For newer activities we have used the average for years where there has been activity.

Multiplying the unit costs by the volumes gives the costs shown on each line.

Costs and volumes Outside Price Control (Connections)

This area of work is largely customer led, but we have provided a forecast based on the relation between our total spend for Connections Outside Price Control and previous volumes of permits, condition and variations.

We have used the same unit costs as for activities inside the price control.

M13 – Uncertainty Mechanisms

Commentary

As the framework for uncertainty mechanisms is still being developed we have not included any costs in this table.

Guidance – Draft RIIO-ED2 Business Plan Data Template Commentary

M14 - Drivers

Commentary

Exogenous Totex Drivers

Peak demand and electricity (energy) consumption are expected to increase significantly within RIIO-ED2 with large variations in the amount that peak demand grows on individual circuits and substations across our network and region. This is due to some areas attracting local developments, differences in uptakes, and the diversity in when our customers use their new LCTs. Using proper bottom up analysis in forecasting following our ATLAS methodology and using a cycle of interaction with local stakeholders to produce our Distribution Future Electricity Scenarios (DFES), we can properly capture local trends.

The demand forecasts are reported based on our Central Outlook scenario from DFES 2020. As described in our Load Related Investment Planning Methodology – Forecasting and Planning Processes Annex, Central Outlook is the highest certainty scenario that has informed our baseline (ex-ante) allowance and used for all associated reporting in RIIO- ED2 BPDTs. Variations with other scenarios and how other scenarios have been used to inform our RIIO-ED2 submission are further explained in the load related investment annex.

The forecasted increase in demand is mainly driven by:

• the uptake of electric vehicles (EVs) influenced by national policies; and • planned developments supported by strong local authority backing, secured funding and ongoing developers’ work.

Increases in the volumes of customers have been modelled using national data on household projections provided by local authorities and has less effect on demand growth.

Factors reducing peak demand include:

• efficiencies due to heating insulation and appliance improvement; • demand shifting away from times of peak load driven by time-of-use tariffs; and • increasing levels of smart EV charging.

Quality of Service (planned and unplanned)

As stated in section 2.6 and throughout our Business Plan we propose to reduce the frequency and duration of power cuts by 20% from 2021-2023 levels during RIIO-ED2.

We expect that this will give us a performance of around 20 CI and 20 CML for incidents excluding exceptional events by 2028 and we have presented a straight-line path to arrive at that performance level.

We used the three-year average from 2018 to 2020 as the basis for our forecast for exceptional events, which we have added to our ‘excluding exceptional events’ figures to give the ‘including exceptional events’ figure.

Network Operating Characteristics and Installed Network Assets

These figures are auto-populated using figures provided elsewhere in the pack.

Guidance – Draft RIIO-ED2 Business Plan Data Template Commentary

M15 - MEAV

Commentary

This table is auto-populated other than the unit costs which Ofgem have previously advised that they will populate.

M18 - FTE

Commentary

Our working assumption in developing the plan is that we will maintain our staffing levels at around current levels and additional workload will be captured through contractors.

We are showing growth of 60 FTEs between 2021 and 2028 to cover specific activities where we feel that it is more appropriate to recruit internal resources.

We will continue to develop our delivery strategy as we prepare our Final Business Plan submission.

M19 – DSO

Commentary (up to 7 pages)

Introduction

The M19 table is a collation and summary of those costs related to DSO embedded in the cost tables. In the FY20 RIGs submission there was uncertainty within the industry on the scope of the DSO functions and activities which made the table open to interpretation; this has been clarified with the publication of the RIIO-ED2 Sector Specific Methodology Decision (SSMD) in December 2020 and the RIIO-ED2 Business Plan (BP) Guidance in February 2021.

In the last four years of RIIO-ED1 our annual spend is expected to average £1.2m. In RIIO- ED2 it increases to an annual spend of around £12.2m due to the costs of delivering the prescribed DSO roles, activities and baseline expectations in the RIIO-ED2 BP Guidance.

RIIO-ED1

For FY21 we have predominantly used the same cost categories as in the previous year. Our judgement is based on the highlighting of resources that were clearly identifiable as costs relating to the delivery of DSO functions; this was the whole of the DSO Transition team in Engineering Management and Clerical support, Network Design and Engineering has 75% of the costs of teams responsible for leading, participating and supporting the various strands of work being undertaken in the ENA Open Networks project as well as partially funding the programme of work - WS1A (Flexibility Services), WS1B (Whole System Electricity System Planning & Data Exchange), WS2 (Customer Information Provision & Connections), WS3 (DSO Transition) to inform our programme of work for DSO

Guidance – Draft RIIO-ED2 Business Plan Data Template Commentary

in RIIO-ED1 and into RIIO-ED2 and supporting and guiding the WS4 (Whole Energy Systems) discussions and a small percentage of costs from our Strategic Planning team.

In FY21 we have included the costs for the provision of the Customer Support team in the Business Support costs which sees an increase of £500k between FY20 and FY21. A slight dip in FY21 is due to the impact COVID-19 has had on our operations, including staff movement and retirements. FY23 sees a rise of £250k as we begin the preparation to deliver the DSO baseline expectation as defined by the ED2 BP Guidance.

RIIO-ED2

The collective costs for RIIO-ED2 total £61.2m. In RIIO-ED1 stakeholder feedback consistently told us we need clear separation between DNO and DSO activities to ensure we have no conflict of interests. Throughout RIIO-ED1 we have been preparing for this separation and by the start of RIIO-ED2 this will be fully in place and the DSO Directorate will be created (see Section 3.3 of Annex 17 - DSO Transition). This sees the teams for Customer Support, Forecasting and Planning, Real Time Systems, Innovation, DSO Commercial and Data sat in a separate DSO Directorate in the main business.

A more detailed breakdown and assumptions made on the costings for each sub category are detailed below.

Load Related Costs

These costs total £1.7m for RIIO-ED2 and are expected to be incurred to procure flexibility in Primary Reinforcement, as detailed in table CV1. These reflect the continuation of the payments to existing service providers plus additional payments to new providers who are required to support single primary sites which are not included in the list of named schemes for which asset-based solutions have been costed

We have not reported costs in the flexible service costs line of table CV2 – Secondary Reinforcement. This reflects that we do not yet have any providers of flexible services to resolve HV or LV network issues, but it doesn’t mean that we do not expect to see any during the RIIO-ED2 period. We have no feel for the magnitude of these costs yet but have reflected the anticipated savings in CV2.

Non-load Costs

These costs total £21.1m for RIIO-ED2 and all relate to Operational IT and telecoms. Our Network Management System (NMS) implementation project in RIIO-ED1 incorporated a restricted Active Network Management (ANM) application. In RIIO-ED2 an upgrade of ANM is required to ensure all key components are fully functional and operating as expected. During the refresh we will work to simplify the environment and investigate alternative sourcing strategies to ensure lowest cost. To deliver DSO functions including flexible service market integration, ancillary service provision, enhanced hosting capacity analysis, low voltage flexibility and transmission system integration we intend to influence and follow the supplier roadmap.

Please note in the Annex 17 (DSO Transition) we refer to NMS, ANM and MOM (Merit Order Management) individually and in the Annex 26 (IT Strategy) these are grouped and known collectively as ADMS (Advanced Distribution Management System).

Non-op Capex

These costs total £10.9m for RIIO-ED2, split as follows:

Guidance – Draft RIIO-ED2 Business Plan Data Template Commentary

IT and Telecoms (Non- Op): The success of DSO is reliant on us having the tools to prepare and share more data. For more information see Annex 26 – IT Strategy and Annex 18 -Data Strategy.

Network Modelling tool: We currently run a range of network modelling tools for different voltage levels and for different purposes using multiple standalone network models. Some of these tools are no longer under supplier support. During RIIO-ED2 at a cost of £1.8m we intend to implement a full set of consolidated modelling tools that enable the accurate modelling of flexible connections and ANM connections and simulate the impact of ANM and flexible services on the network These tools will also support the import and export of network models in open format (such as a standard interoperable protocol) and the ability to fully support network models from both embedded and adjacent networks costing £2.4m.

Evaluation tool: At a cost of £187k our Real Options Cost Benefit Analysis tool (ROCBA) will be updated to ensure it remains as the industry leading evaluation tool to ensure we have the most cost-effective solution to a capacity or network health issue.

Flexibility provision tool: Flexibility Management and Commercial Trading will enable us to facilitate local energy trading or exchange and curtailment obligations. During RIIO-ED1 we implemented systems to manage our commercial contracts with flexibility providers and to calculate and supply merit orders to our ANM system considering both pre-procured flexibility services and those provided through curtailment contracts. During RIIO-ED2 we intend to spend £2m enhancing this capability through interfaces to flexibility market trading platforms to take account of the most economic dispatch sequence in whole system terms. We anticipate market participants will bilaterally trade flexibility with each other close to near real time through these systems as we move towards a market driven flexible services model.

Data repository tool: Our real time data is currently stored in an online historian which forms part of the NMS product suite and is sized to store such data for up to two years. We have requirements to store time series data for at least five years for regulatory reporting and strategic planning purposes, this data will require archiving offline to reduce the burden on real time systems performance and to meet our data retention requirements. This will require a separate offline historian or an extension to the capabilities of the NMS historian and will cost approximately £1.5m.

Forecasting tool: We will continue to develop our ATLAS forecasting methodology and tools so that it incorporates smart meter data and data from other sources; we estimate we will spend £900k throughout RIIO-ED2 to achieve this.

Flexibility platform tool: In RIIO-ED1 we utilised Piclo Flex as our market placed platform to share our flexibility requirements with potential flexibility providers. In addition, we joined the Flexible Power consortium to utilise Flex power to dynamically dispatch flexibility resources; this simplified our approach to flexibility provision to encourage participation. We estimate that throughout RIIO-ED2 we will spend £2m to develop our approach and enhancing these systems.

Closely Associated Indirects

These costs total £11m, split as follows:

Network Design and Engineering: Data and how we use and share it is pivotal to the success of DSO (see Section 3.2 of the Annex 17 – DSO Transition) and £255k will enable the purchase of additional data to enhance network visibility and accuracy for the benefit of our customers within our proposed heatmaps.

Guidance – Draft RIIO-ED2 Business Plan Data Template Commentary

The personnel within the Planning, Forecasting, Flexibility and Data teams will all sit within this category due to the roles they undertake:

• The Planning function, costing £800k pa, will require additional study time for flexible connections including curtailment, increased planning data; • The Forecasting and Flexibility functions, costing £546k pa, will prepare forecasts at all voltage levels and assess solution options, including flexibility and energy efficiency, facilitate local energy trading and secondary trading of exchange capacity and curtailment obligations. Two additional FTEs on the existing team of seven will be required; and • The Data function will require two additional FTEs to manipulate the data for sharing to ensure we achieve our objective of all data is presumed open and available to everyone.

Engineering Management and Clerical Support: The team that manages and delivers our centralised DSO functions, such as the DSO Implementation, sit within this category due to the roles they undertake. Costing £580k per year they will have an additional FTE, the new DSO Compliance Officer (see section 3.3 of Annex 17 - DSO Transition) added to the existing team of four.

Network Policy: We estimate a cost of £93k pa to support projects which require combined working with other licensees eg DNOs, IDNOs, TOs, ESO, Suppliers, GDNs etc and Regulators and HM Government through industry forum e.g. Open Networks.

Control Centre: An additional £140k pa of strategic planning resources working on DSO planning for emergency scenarios and DSO actions in the event of an emergency scenario.

Business Support Costs (excluding IT)

These costs totalling £2.6m sit in Finance and Regulation. Customer support and stakeholder involvement is critical to the success of DSO. The formation of the DSO Directorate sees the Customer Support team sit within the DSO arena. The Customer Support team, costing £280k pa, will provide the necessary support and guidance to customers wishing to adopt Low Carbon Technologies, prior to navigating the connections process.

The newly created DSO Stakeholder Panel is estimated to cost £100k pa. For more information see section 3.3 of Annex 17 – DSO Transition.

For managing and coordinating the DSO commercial contracts we estimate £100k pa which includes an additional FTE in the team.

We will continue to support industry coordination and estimate this will costs £50k pa, like the current ENA costs for Open Network Project.

Business Support Costs (IT & Telecoms)

We have included £13.8m in the plan to cover all the DSO element of IT &Telecoms Business Support.

Specific initiatives that this covers include:

• Net Zero Carbon driven sourcing and IT operating model optimisation to support more 24x7 services and additional DSO capabilities. This amounts to an increase of £3.9m;

Guidance – Draft RIIO-ED2 Business Plan Data Template Commentary

• Net Zero Carbon driven Operational IT Opex increases to support additional DSO capabilities. This amounts to an increase of £3.5m; and • Net Zero Carbon Telecom increases to support growth in Telemetry units to enable increased monitoring and control of the distribution network as well as growth in the network. This amounts to an increase of £5.3m.

Summary

The total costs for RIIO-ED2 is £61.2m. Year on year the amount varies between £10.1m and £14.0m dependant predominantly on the delivery of the necessary IT infrastructure to deliver the DSO functions.

M20 - LCT

Commentary

The UK transition to net zero carbon by 2050 at the latest requires an extensive use of Low Carbon Technologies (LCT), given that the electricity generation sector is expected to be among the first to be fully decarbonised in mid 2030s,and the electrification of transport and heating is needed to support the transition to net zero.

Currently, there is high certainty that the electrification of transport for light vehicles such as cars and vans will be the dominant pathway in the transition to net zero. This certainty is reinforced by the existing national policies for a 2030 ban on sales of new internal combustion engine vehicles. Our EV forecasts have been produced using consumer choice models that are maintained for the Department for Transport (DfT) and forecast EV sales. These are combined with DfT forecasts of the total vehicle stock to produce the EV uptake forecasts.

Similarly, as described in our ATLAS forecasting methodology and our DFES publications (online: www.enwl.co.uk/dfes) consumer choice models are used for heat pumps and discrete choice models are used for the forecasting of renewable generation.

Unlike EVs, the heat pump uptakes are not as high due to the associated uncertainties around the future role of hydrogen in the energy mix of the heating sector. Especially for our region, the heat pump uptakes are expected to be below the national average due to the high penetration of gas networks and the highest poverty levels across the country.

PV and onshore wind farms will continue being the dominant types of renewable generation. Their forecasting for non-domestic projects has considered local factors such as availability of land and available network capacity. Reduced uptakes of generation running on bio-fuels has been forecast as these would need to have relatively expensive carbon capture storage installations for distribution connected projects in order to be zero or negative carbon technologies.

It should be noted that the LCT volumes in M20 tables do not include any forecasts of battery storage, both domestic and larger non-domestic/grid-scale installations.

Additional information on how the LCT forecast affect our RIIO-ED2 load related investment programme for primary and secondary networks can be found in the Annex 19 - Load Related Investment Planning Methodology.

Guidance – Draft RIIO-ED2 Business Plan Data Template Commentary

We have assumed that all load related expenditure to reinforce our network is driven by LCTs since they have the dominant effect on our forecast future demand. On this basis the total investment values in M20 match those given in tables CV1, CV2 and CV3.

Since we do not yet have detailed visibility on the mix of smart solutions which we shall determine and deliver during the RIIO-ED2 period, we have used two categories of reinforcement interventions; conventional and our additional category “smart/innovative/flexible”. We have split the value of the load related investment plan based on the cost of only asset solutions between these categories by assuming relative costs of conventional and smart flexible solutions and on achieving 20% discount compared to all conventional interventions for EHV and 5% for secondary networks.

The splits we have employed are tabulated here:

Percentage split of asset-based investment plan (pre-smart and flexible discount) EHV Secondary network Conventional 94% 77% Smart/innovative/flexible 1% 3% Total investment as percentage of all conventional asset-based interventions 95% 80%

M21 - Bespoke Activities

Commentary

We have identified three activities as Bespoke to Electricity North West:

• Roll out of Smart Street - £78.0m; • Roll out of Sentinel - £24.0m; and • Network improvements targeting customers in vulnerable circumstances (CIVC) - £20.0m

More details on these initiatives can be found in sections, 5.5.1, 5.2.3.4, 5.2.1.5 and 10.2.2 of our Business Plan.

They are summarised as follows:

Area Our plan Smart Street To roll out the Smart Street programme to 250,000 customers in RIIO- ED2, reducing energy costs for those customers. Sentinel To roll out the Sentinel technology on rural overhead line circuits to improve safety and the ability to restore supplies during storm events. Electricity users in vulnerable To deliver a programme of work to materially reduce circumstances network the risk of power cuts in areas with higher relative improvements levels of vulnerability.

Guidance – Draft RIIO-ED2 Business Plan Data Template Commentary

M23 – Environmental Action Plan

Commentary

More information on how we will be addressing environmental issues can be found in our Environmental Action Plan which is Annex 14 in our Business Plan

Completion of table

To be able to build our future targets and initiatives we will be working with science-based targets. These targets are not available for the Draft Submission and the numbers have not been finalised, so these figures have been omitted from this submission but will be included in our Final Submission.

For all of the figures included in Table 1: ‘Environmental baseline measures under RIIO- ED1’, we have taken figures from reporting documents for the measure for start of RIIO- ED1 (2016) and Measure for latest year of RIIO-ED1 which we have taken as 2020. We have taken all known data for each one of the categories and created an average to fill in the Average Measure for RIIO-ED1 to date.

The following information should be noted:

• Our calculations for ‘Total – Scope 1 emissions’ include our underground contractor emissions which includes operational transport and fuel combustion. • Our ‘Total emissions – building energy usage’ include the emissions from substations • Our ‘Total emissions – Operational transport’ include the underground contractor emissions. • ‘Business Transport’ includes emissions from road, rail and air travel • We only have equipment which contains SF6 in fugitive emissions we have no other GWP IIGs. • We are unable to calculate our percentage of total losses at substations at this moment in time. • To calculate our ‘Total oil leakage from local pollution’ we have only included oil lost from fluid-filled cables. • We are also unable to provide calculations of ‘Our embodied carbon, waste and biodiversity at network sites’.

All initiatives found in table 3 can be found in Annex 14 - Environmental Action Plan.

M24 - Losses Snapshot

Commentary

As noted in table CV21 and in our Losses Strategy, which is set out in Annex 27 of our Business Plan, we intend to spend £10m in RIIO-ED2 to save 8GWh per year.

The summary of actions from the strategy is as follows:

Proactive key actions:

Guidance – Draft RIIO-ED2 Business Plan Data Template Commentary

• We will proactively replace old (pre-1990) large (800kVA and 1000kVA) ground- mounted, secondary network transformers with lower loss EU Eco-design 2015 specification transformers.

Opportunistic key actions:

As noted in table CV21 the pro-active element of this plan will see us replace 100 HV Transformers each year.

We have not provided the details of these plans in table M24 for the Draft Business Plan, so the table only presents the costs and activities which we will report in the 2021 RIGs Environment pack.

M25 – Company Specific Factors

Commentary

This table is intentionally blank as we have not identified any costs relating to company- specific factors that might result in the efficient level of costs being higher for us than other DNOs.

M26 – Incremental Costs

Commentary

In this table we have recorded the incremental costs of replacing our 33kV and 132kV Switchgear with modern equivalents which do not contain Sulphur Hexafluoride (SF6).

The figures show that we expect 33kV ‘SF6 free’ switchgear to be at a 20% premium to the current equivalent. For 132kV we expect the premium to be 76%.

100

Guidance – Draft RIIO-ED2 Business Plan Data Template Commentary

M27 – Cyber Security Op IT

Commentary

Due to delays in releasing this table in the template we will not be completing M27 for the Draft Business Plan submission. We will provide a completed version in the Final Business Plan.

M28 – Cyber Security Non-op

Commentary

Due to delays in releasing this table in the template we will not be completing M28 for the Draft Business Plan submission. We will provide a completed version in the Final Business Plan.

NARM1 – Risk Index Weightings

Commentary

This lookup table contains the 5x4 matrices developed in the Common Network Asset Indies Methodology V2.1 and is wholly populated by Ofgem from their methodology. These tables enable the volumes in NARM2 and 3 to be multiplied out hence producing the risk and risk delta values as a result of our NARM proposal.

NARM2 – ED1 NARM Profiles

Commentary

This table presents our asset risk positions with and without intervention for the period to the end of RIIO-ED1 expressed in Long Term Risk as calculated by CNAIM V2.1. We have provided a report for all assets where we currently have assets and can produce data, however for the 33 and 132kV cables and LV Circuit breakers we are still developing data sets and this is an initial view which will be subject to revision in the final submission.

The values presented for the end of FY21 are aligned to our RRP reporting so far as possible but as this report has not been submitted these again may be subject to further alteration in the final submission. This particularly relates to the volumes within the matrix.

The values presented for the end of the RIIO-ED1 period with no intervention are simply produced by running the CNAIM model for the future year required and reporting the values.

The final set of data (the end of RIIO-ED1 with Interventions) is also subject to the same variations as already detailed, but also confirmation of the volumes to be delivered in the

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last two years of the regulatory period. Whilst we have made every effort to reflect the work we propose to deliver, this is still subject to alteration as the needs of our customer change due the ongoing changes to the network brought about by faults and additional data which in our opinion requires the diversion of resources.

We will review and revise this table where appropriate before final submission in December 2021.

NARM3 – ED3 NARM Profiles

Commentary

This table recorded our proposed work programme for the RIIO-ED2 period for Replacement and Refurbishment. It takes into account the extent of the work already know and makes assumptions where we will develop the programme through the RIIO-ED2 period. The selection of asset movements is limited by the available volumes within the matrices and has been selected to ensure there are no cells which return a negative volume. This has to some degree been based on the returns made in the RRP reporting to then end of FY20.

Where these proportions cannot be met the assumptions have been tweaked so that the criteria for no matrices cell with negative volumes are achieved. For the refurbishment activities we have assumed that the pre-intervention will be on assets with a Heath Index of 4 and a post intervention Health Index of 2. This is representative of our experience in RIIO-ED1. Again, where this leaves negative cells the assumptions have been adjusted to ensure this does not occur.

As with the completion of NARM2, we will review and where appropriate revise the table where necessary to provide the best view of our proposed NARMs incentive targets in our Final submission I December 2021.

The tables also take into account where we will intervene on an asset in one CNAIM Asset Register Category and replace it with an asset in another Asset Register Category. An example of this is we will overlay poorly performing oil and gas assisted cables with non- pressure designs so there are no additions to the Gas and oil cables but there are additions to the non-pressurised categories.

Annex 25 – RIIO-ED2 NARMs includes further details of our overall ED2 NARMs targets and their derivation by each major asset type.

LI - Substations

Commentary

LI definitions in RIIO-ED2 are based on the standard definition of LI and methods for calculating firm capacity and maximum demand are consistent with those used in RIIO- ED1. They can be seen in the figure below:

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RIIO-ED2 LI Definition

Calculation of the LI for a site or group begins with collecting the maximum demand information for each substation/group and this is compared against the firm capacity of that site. The firm capacity for a substation / group is based on both the assets in place at that location and the contribution from any connected distributed generation.

Columns P and Q make reference to capacity committed through Connection Agreements not utilised in year and Connected non-firm demand adjustment to observed maximum demand. In column P where applicable entries have been made for identified unused maximum import capacity’s (MIC) which could have had to be accounted for in maximum demand figures. In practice design and planning studies take this unused MIC figure into account via the application of confidence factors to MIC uptake from accepted connections. Work is ongoing to review customer MIC figures post connections to potentially tap into this unused capacity.

Column Q contains entries for non-firm connected demand. Currently these are battery energy storage contracts which are offered under a system intact only connection agreement, so figures for the BESS capacity have been included at the sites where these are located. As RIIO-ED2 develops it is anticipated that this flexible control of demand will develop leading to a more widespread deployment of this technology.

Distributed generation can take many forms so to calculate the contribution of DG to the capacity of a substation or interconnected group, the total DG for each substation/group is

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assigned to one of fourteen categories. Each of these categories are then assigned a contribution factor based on the minimum figures from P2/7. The total DG contribution to the firm capacity is then calculated as the sum of the declared net generation capacity multiplied by the appropriate contribution factor. These contribution factors can be seen in the table below.

DG Contribution to Firm Capacity

The methodology detailed above can then be used to obtain an accurate evaluation of future LI data based on the forecast data. The forecasts are built up using weather corrected measured half hourly demand data with accepted connections included. Further to this the predicted profiles for LCT uptake and identified specific strategic projects are also included in the forecast.

The connections demand uptake included in the forecasts for RIIO-ED2 are based on the existing pipeline of work. Historic realisation / confidence factors are applied to the accepted connections pipeline across our footprint to ensure that a realistic evaluation of demand connections uptake is factored into the demand forecasts and this ensures that the contribution is not over stated.

LI Tables

The LI and P2/7 figures reported for the RIIO-ED2 period are based on the ENWL Central Outlook forecast which is one of five scenarios used to determine the investment for RIIO- ED2. The Central Outlook scenario is the highest certainty scenario which supports our Load Related Investment programme which has an average risk level. This allows us to balance risk accordingly while supporting the transition to net zero. The reinforcement prioritisation is based on LI indications for the RIIO-ED2 period with total forecast expenditure based on various reinforcement solutions and the 20/21 price base.

Lower certainty scenarios are used as part of the sensitivity analysis to allow for a detailed review of the path to net zero to be taken. The sensitivity analysis also reveals the narrow range of investment between the Central Outlook forecast and other RIIO-ED2 compliant scenarios that are driven by national policies and local factors.

The data entered in Tables 168 and 169 for the years 2015-2019 are consistent with the Regulation Reporting Pack data submitted as part of the annual RRP reporting. The 2020

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data is the previous year’s data and is the baseline for the calculation of the LI data for each substation/group. LI data and calculations covering the period from 2021 to 2028 are based on the ENWL Central Outlook forecast for the region. The detail behind the determination of the Central Outlook forecast is described in Annex 19 - Load Related Investment Planning Methodology – Forecasting and Planning Processes.

Review of the data shows that based on the Central Outlook forecast for demand at the outset of RIIO-ED2 there are predicted to be two substations / groups rated at LI5, rising to twenty should no intervention take place in the period. Our target is for there to be no sites classed as LI5 by the end of the RIIO-ED2 regulatory period. The table below shows that by applying a combination of asset-based reinforcement, demand transfers and deploying flexibility the number of sites classified as either LI4 or LI5 is reduced to zero.

No of LIs 2028 - Substations and Groups 450 401 411 400

350

300

250

200

150 107 93 100

50 17 20 11 7 0 0 0 LI1 LI2 LI3 LI4 LI5 Number of LI - Subs & Groups No Intervention Number of LI - Subs & Groups after Intervention

Bar Chart showing forecast numbers of LI in 2028 with and without intervention in RIIO-ED2

The detailed forecasts as described in our methodology document allow us to view the emerging picture of reinforcement that is likely to be required not just in RIIO-ED2 but also into RIIO-ED3 and beyond. We publish annually the Distribution Future Energy Scenarios document where detailed analysis of these forecasts and what they mean to us are described. These show that as the pathway to Net Zero ramps up the requirement for energy increases significantly to support the de-carbonisation of heating and transport which consequently results in an increased requirement for reinforcement in the future.

LI – Substation Groups

Commentary

The commentary for the table above, ‘LI – Substation’ also applies to this table

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Additional Commentary

2.2. DNOs should include additional supporting commentary on the BPDT where they consider it necessary to aid Ofgem’s understanding of the BPDT submission. Please insert any additional commentary below using headings and commentary boxes.

Additional commentary

Commentary

This document provides comments which are designed to aid the readability of the tables in the BPDT. It is designed to be read alongside the Business Plan narrative document and with reference to the series of Engineering Justification Papers which give details on the major investment areas in our plan.

FY21 entries in the BPDT are based on current draft data being compiled as part of the annual RIGs process. As this data has not completed its review and governance processes (as not due until 31 July 2021), there may be some areas of difference when the BPDT supporting our Final Business Plan is submitted in December 2021 due to its alignment to final rather than draft FY21 figures.

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