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Gas Transmission Gas Transmission Our Performance: 2019/2020 National Grid Gas plc 30 September 2020 National Grid Gas Transmission Our Performance for 2019/20 Table of Contents I. Strategic Performance Overview (SPO) for 2019/20 ............................................... 2 II. Operational Context ................................................................................................. 17 III. Outputs ...................................................................................................................... 20 IV. Outputs – Safety ....................................................................................................... 21 V. Outputs – Reliability and Availability ..................................................................... 24 VI. Outputs – Environment ............................................................................................ 34 VII. Outputs – Customer Satisfaction ............................................................................ 40 VIII. Outputs – Customer Connections .......................................................................... 43 IX. Totex (TO and SO) .................................................................................................... 47 X. Load Related Capital Expenditure (TO) .................................................................. 51 XI. Non Load Related Capital Expenditure (TO) .......................................................... 54 XII. Non Operational Capital Expenditure (TO) .......................................................... 101 XIII. Capital Expenditure (SO) ....................................................................................... 104 XIV. Operating Costs (TO and SO) ................................................................................ 106 XV. Innovation ................................................................................................................ 109 XVI. Market Facilitation .................................................................................................. 115 XVII. Operational Review ................................................................................................ 127 Appendix I – Totex Tables .................................................................................................. 136 Appendix II – Published Outputs ....................................................................................... 137 - 1 - National Grid Gas plc 30 September 2020 I. Strategic Performance Overview (SPO) for 2019/20 1. This report describes the financial and operational performance of National Grid Gas Transmission (hereafter abbreviated to National Grid) against the stakeholder outputs we have committed to deliver. Director update on Business Plan, risks and future strategy Performance Overview 2. I am proud to report that we have delivered good output performance, which is consistent with last year in most areas. We continued to deliver our reliability and safety outputs, setting a good foundation on which to begin the next period of price control. We have demonstrated further improvement in our environmental incentives and our customer and stakeholder satisfaction scores. 3. Overall our Totex performance has improved by £33m compared to last year. Our forecast allowances were affected by the St Fergus and Hatton needs case decision. However, we have mitigated the impact of this; at St Fergus, changing approach to optimise works with proposals in our RIIO-T2 plan, and more widely, seeking scope changes and identifying further opportunities for efficiencies. We have achieved £14.1m in Opex cost efficiencies linked to our Performance Excellence (PEx) value programme and other cost saving initiatives. 4. This year we continued to deliver our asset health investment plans; balancing our position between managing network risk, delivering Network Output Measures (NOMs) and delivering against our allowances. Overall through the period, we will have invested £99m over our asset health allowances to ensure the safety and reliability of the network for customers and consumers. As we move into the final year of the period, our focus now moves to final completion and close out of projects, as well as undertaking the preparatory works including feasibility studies and survey work for the RIIO-T2 period. 5. In June 2019, we made a Needs Case submission to Ofgem for the Industrial Emissions Directive (IED) investments at St Fergus and Hatton. We received approval of the Hatton needs case in November 2019, and have continued to progress works. The cost assessment forms part of our RIIO-T2 business plan. For St Fergus, our plans to achieve compliance with the requirements of the IED legislation have evolved following Ofgem’s decision not to approve the St Fergus needs case at this time, noting this would be needed in the future. The previously phased approach has now become combined with the investments proposed in the RIIO-T2 business plan submission. 6. In December 2019, we submitted our RIIO-T2 business plan to Ofgem. In developing our plan over the last few years, we have carried out our most extensive ever engagement exercise to understand our stakeholder’s priorities and future - 2 - National Grid Gas plc 30 September 2020 requirements. The plan reflects stakeholder priorities which include keeping bills affordable whilst maintaining a safe, resilient and reliable gas network during this period of transition to a sustainable energy future. We have worked to define and determine the network capability stakeholders need and we are proposing £553m per year of investment (39% higher than RIIO-T1) to maintain a safe, reliable and resilient transmission system. We have challenged ourselves to ensure our proposals deliver efficiently and create optionality as we develop the lowest cost pathway to net zero. We have tested the acceptability of our plan with consumers, finding that 88% of domestic and 82% of non-domestic consumers find the average impact of our RIIO-T2 plan acceptable. Output Delivery 7. We have continued to deliver good performance for our customers against our five output categories. Table 5 summarises our performance against each individual output and provides a comparison to our 2018/19 performance. 8. In 2019/20, we were compliant with our safety related outputs. There were three employee and one contractor lost time injuries. We have focused on a number of initiatives to promote and encourage safety and wellbeing at National Grid. Two serious process safety events occurred and these have been fully investigated in line with Health and Safety Executive (HSE) legislation, with measures being implemented to minimise the likelihood of similar issues occurring in the future. 9. This year we have continued to provide high levels of reliability and availability ensuring the efficient delivery of 99.99% of our customers’ gas requirements. We have continued to maintain strong communication with our stakeholders, presenting to industry forums on topics such as constraint management, using a simulation to increase understanding of how we manage capacity constraints and commercial tools, and providing an overview to explain the different tools at our disposal when managing an entry or exit capacity constraint. 10. In 2019/20, we have delivered £155.5m of investment to deliver a safe and reliable gas transmission network for our customers. We are forecasting to meet our target for the number of Replacement Priority 1 (RP1) assets reported through the current NOM regime and remain on target to deliver all NOMs in aggregate by the end of RIIO-T1, thus maintaining the health of the network for the benefit of current and future consumers. 11. In 2019/20 we made good progress with our key investment projects such as our River Humber Gas Pipeline Replacement Project, which will replace an underwater section of the Feeder 9 pipeline with a tunnelled solution. This pipeline section is one of the most critical to UK gas supplies on the National Transmission System (NTS) and these works are essential in continuing to provide a reliable and secure gas supply to our customers. The Tunnel Boring Machine (TBM), broke through into the pre-constructed reception shaft on 10 September 2019, marking the completion of 18 months of continuous tunnelling activities. Following the removal of the TBM from site in October 2019, the installation of the complex and bespoke Cathodic Protection system has been completed, and the tunnel water filtration and - 3 - National Grid Gas plc 30 September 2020 filling operations have now commenced. The pipeline is planned to be commissioned in Autumn 2020. 12. Changing supply patterns have the potential to have a significant impact on our environmental outputs. In 2019/20, the network experienced a continuation of the diverse supply of gas into the NTS, close to the centres of demand. Liquefied National Gas (LNG) terminal flows increased once more, with the number of LNG cargoes received increasing from 109 in 2018/19 to 189 in 2019/20. This demonstrates the highly variable nature of gas flows on to the NTS, which are dependent on prevailing supply and demand conditions both in the UK and the global market. 13. As a result of these demand and supply patterns, usage of our compressor fleet reduced by 32%, allowing the network to be operated in a more economic manner. This resulted in a subsequent reduction of CO2 emissions from compressors by 46% compared to 2018/19 levels. Our electric drive compressors have also taken a bigger
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