ASSET MANAGEMENT PLAN 2013 Disclaimer: The information in this document has been prepared in good faith and represents Powerco’s intentions and opinions at the date of issue. Powerco however, operates in a dynamic environment (for example, the changing requirements of customers, deteriorating asset condition and the impact of severe weather events) and plans are constantly evolving to reflect the most current information and circumstances. As a result, Powerco does not give any assurance, either express or implied, about the accuracy of the information or whether the company will fully implement the plan or undertake the work mentioned in the document. None of Powerco Limited, its directors, officers, shareholders or representatives accepts any liability whatsoever by reason of, or in connection with, any information in this document or any actual or purported reliance on it by any person. Powerco may change any information in this document at any time. CONTENTS 1 1 EXECUTIVE SUMMARY .................. 3 4.6 Cost Efficiency ................................. 59 6.17 Integration of Renewal and Growth APPENDICES 1.1 Purpose of the Document................... 3 4.7 Summary of Objectives Drivers............................................ 127 1 Appendix 1: Glossary 1.2 Key Challenges .................................. 3 and Measures .................................. 62 6.18 Improvements in Maintenance and (Key Definitions) .............................. 201 Renewal Strategy Development ...... 128 1.3 The Structure of the 2013 AMP .......... 3 5 GOVERNANCE AND DELIVERY .... 63 2 Appendix 2: Information Disclosure Schedules 11a-14a ........................ 203 1.4 Operational Context ........................... 4 5.1 Introduction ...................................... 63 7 NETWORK DEVELOPMENT ........ 129 1.5 Our Assets ......................................... 5 5.2 Responsibilities for Asset 7.1 Introduction .................................... 129 3 Appendix 3: Stakeholder Interests .. 225 1.6 Network Performance and Levels of Management .................................... 63 7.2 Approach to Network 4 Appendix 4: Major Customers ........ 229 Service ............................................... 5 5.3 Asset Management Governance ....... 66 Development .................................. 129 5 Appendix 5: Subtransmission 1.7 Our Asset Management Framework ... 6 7.3 Area Plans ...................................... 131 5.4 Strategic Direction ............................ 68 Maps.............................................. 232 1.8 Key Drivers of Expenditure.................. 7 5.5 Planning ........................................... 69 7.4 Distribution Development ................ 154 6 Appendix 6: Non-Network Assets ... 239 1.9 Forecast Capex and Opex .................. 8 5.6 Delivery ............................................ 74 7.5 Planning Considerations ................. 158 7 Appendix 7: Summary of 1.10 Asset Management Improvement ..... 11 5.7 Non-Network Project Governance 7.6 Non-network Options ..................... 163 Performance Against 2012 1.11 Conclusion ....................................... 11 and Management ............................. 76 7.7 Asset Capacity ............................... 165 AMP Measures ............................... 243 5.8 Risk Management ............................ 77 7.8 Demand Forecasting ...................... 168 2 INTRODUCTION ............................ 13 8 Appendix 8: Physical Works 5.9 Contingency Plans ........................... 81 2.1 Purpose and Objectives of the Plan .. 13 8 ENHANCEMENT INITIATIVES ..... 173 Programme Completion ................. 247 2.2 Overview of Powerco ....................... 13 6 MAINTENANCE AND RENEWAL .. 85 8.1 Introduction .................................... 173 9 Appendix 9: General Network Risk 2.3 Powerco’s Vision, Mission and Values 13 6.1 Introduction ...................................... 85 8.2 Safety and Environmental-focused Issues ............................................ 250 Enhancements .............................. 173 2.4 Powerco’s Stakeholders ................... 14 6.2 Approach to Maintenance and 10 Appendix 10: Renewal & Maintenance 2.5 Approach to Asset Management ...... 15 Renewals ......................................... 85 8.3 Asset Stewardship-focused Project Descriptions ....................... 253 6.3 Fleet Plans ....................................... 86 Enhancements ............................... 175 2.6 Key Assumptions of the AMP ........... 21 11 Appendix 11: Demand Forecast 8.4 Cost Effectiveness-focused 2.7 Structure of the Plan ......................... 22 6.4 Subtransmission Fleet Plan ............... 87 Tables ............................................ 256 Enhancements – Business 6.5 Zone Substation Fleet Plan ............... 91 3 POWERCO’S ASSETS ................... 23 Processes ...................................... 177 12 Appendix 12: Subtransmission 6.6 Distribution and LV Overhead Lines 8.5 Cost Effectiveness-focused Feeder & Zone Substation 3.1 Introduction ...................................... 23 Fleet Plan ......................................... 96 Enhancements - Smart Networks Constraints ..................................... 261 3.2 Network Overview ............................ 23 6.7 Distribution and Low-voltage and Automation .............................. 179 13 Appendix 13: System Growth Underground Cables Fleet Plan ...... 102 3.3 Area Network Descriptions ............... 25 Project Descriptions ...................... 264 3.4 Asset Fleet Summary ....................... 32 6.8 Distribution Substations and 9 EXPENDITURE FORECASTS ...... 185 Transformers Fleet Plan .................. 105 9.1 Executive Summary ........................ 185 14 Appendix 14: Regulatory 3.5 Powerco’s Customers and Service ...... Requirements Look Up ................... 275 Levels .............................................. 44 6.9 Distribution Switchgear Fleet Plan ... 108 9.2 Background ................................... 185 3.6 Historical Performance ..................... 48 6.10 Other System Fixed Assets 9.3 Interpreting the Forecasts ............... 188 15 Appendix 15: Compliance Certification .................................... 284 Fleet Plan ....................................... 112 9.4 High-Level Summaries ................... 189 4 OBJECTIVES .................................. 53 6.11 Non-network Assets Fleet Plan ....... 118 9.5 Maintenance .................................. 191 4.1 Introduction ...................................... 53 6.12 Reliability Projects Summary ........... 120 9.6 Renewal ......................................... 195 4.2 Background ..................................... 53 6.13 Network Safety Improvements ........ 121 9.7 Growth ........................................... 196 4.3 Safety............................................... 53 6.14 Maintenance Strategy ..................... 122 9.8 System Enhancement .................... 198 4.4 Reliability .......................................... 56 6.15 Renewal Strategy ........................... 124 9.9 Expenditure Forecast Summaries ... 199 4.5 Asset Stewardship ........................... 58 6.16 Operation Strategy ......................... 126 2 THIS page HAS BEEN LEFT intentionally BLANK. 1. EXECUTIVE SUMMARY 3 1.1. PURPOSE OF THE DOCUMENT drives the need for asset replacement and maintenance. The upward trend in asset age indicates that asset-related investment may need to increase. Powerco’s networks provide an essential service to the communities we serve and they need to be reliable and sustainable. The electricity distribution infrastructure • The operational margin around our SAIDI and SAIFI quality targets is eroding due assets we manage are capital-intensive and have very long lives. Ours is a to increased faults associated with our deteriorating assets. Parts of our network stewardship role that relies on effective and efficient long-term asset planning and appear to be becoming more vulnerable to severe weather and exceptional storm investment. events. At current levels of expenditure we are able to manage SAIDI and SAIFI close to the target, but we are unable to build operational margins to provide a This Asset Management Plan (AMP) outlines our long-term strategy for the electricity buffer against severe weather events. distribution services under Powerco’s management. The AMP is an essential part of • Our on-going analysis indicates an approaching need to lift both opex the company’s planning and investment framework. It is used throughout the year as (maintenance) and renewal expenditure (capex) in targeted areas across our the reference point for prioritising and approving work programmes. networks in order to begin to reverse the above trends. In addition, the AMP is a useful summary document for us to demonstrate to • All things being equal, increased investment will place upward pressure on prices our stakeholders, including our regulators, customers and end-consumers, the and may need to be approved by the Commerce Commission. Given our focus on effectiveness of the company’s asset management and decision-making processes. delivering a sustainable and cost effective service, we are working hard to minimise the cost impact on customers. The plan covers a period from 1 April 2013 to 31 March 2023, with a particular focus on the work programmes planned for the next three to five years. It reflects • Powerco is actively considering applying for a Customised Price Path (CPP), which Powerco’s focus