CUSTOMER-FACING PERFORMANCE MEASURES

Transcription

1 CUSTOMER-FACING PERFORMANCE MEASURES CUSTOMER FEEDBACK AND RESPONSE Transpower New Zealand Limited March 2013 Customer-facing performance measures Transpower New Zealand Limited All rights reserved. i

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3 Table of Contents Executive Summary... iv 1 Introduction and purpose Note on terminology Overview of original proposal Overview of feedback Our general approach Our proposed measures Proposed categories Number and duration of unplanned interruptions Information provision Comparisons with distribution Other issues and possible measures Voltage sags Economic impact Planned outages and the impact on the market Risks of non-supply Qualitative customer service Feedback: other issues Customer-facing performance measures Transpower New Zealand Limited All rights reserved. iii

4 Executive Summary We are developing new measures and targets for grid performance based on what matters to our customers and to end consumers. We published proposed new measures at the end of October 2012 and invited customers and their representatives to provide feedback either at meetings or in writing. This document provides a summary of customer views on the proposed measures and targets. It outlines the way we intend to develop grid performance measures in light of the feedback. We experienced widespread support for our approach and the measures we proposed. The key measures focus on the number and duration of interruptions and the information we provide during interruptions. Customers provided suggestions for improving the measures and highlighted other areas that are important to them. Key issues raised by customers were: Whether interruptions caused by extreme events and those that are less than one minute long should be included. The importance of power quality, in particular voltage sags. The impact on the market of both planned and unplanned outages this was of particular importance to generator-retailers. The financial impact of interruptions. Information on the risks of non-supply and improved communication after interruptions. A separate paper describes our revised proposal, how the performance measures fit with our next regulatory control period proposal and the next steps. It is available on our website iv Customer-facing performance measures Transpower New Zealand Limited. All rights reserved.

5 1 Introduction and purpose We are introducing new measures and targets for grid performance based on what performance matters to our customers and end consumers. These targets will be used to report our performance, to prioritise our expenditure and to inform the revenue incentive regime applying to Transpower in our next regulatory control period ( ). We prepared a draft proposal 2 for review by our customers and end-consumer representatives in October We met with representatives of 30 customers over a series of meetings, and received written feedback from 13 parties. We also met with Commerce Commission representatives to discuss the proposal and consultation process. Written feedback is available on our website 3. Our customers generally supported the overall approach we are taking in introducing measures focusing more directly on the service that customers receive and the shift away from system average-based measures. Customers welcomed the opportunity to comment and we would like to thank all those customers and their representatives for their time and expertise. These performance measures involve a change in emphasis for us and the consultation has been a critical part of making sure that we target efforts and spending on performance that our customers value. This paper summarises the feedback, discusses issues raised by customers or consumer representatives and outlines the way we intend to progress these measures and targets in light of the feedback. A separate paper describes our revised proposal, how the performance measures fit with our next regulatory control period proposal and the next steps. It is available on our website Note on terminology In our proposal we used the term outage to mean an event that causes a loss of supply or loss of generation connection. We used this term because we thought it was more relevant to consumers and is often used by distributors in communication with their customers. This confused some customers because the term outage is often used to mean when assets are out of service, but there is no loss of supply, and it can be used to describe both planned and unplanned outages. The term interruption is used internationally and by the Commerce Commission to refer to a loss of supply. 2 Transpower: Customer-facing grid performance measures consultation paper, October 2012, available at: ibid Customer-facing performance measures Transpower New Zealand Limited. All rights reserved. 5

6 In this paper we have reverted to the standard terminology to avoid confusion. An interruption is a loss of supply; an outage is an equipment outage. Both interruptions and outages can be planned or unplanned. 1.2 Overview of original proposal The proposal that we set out in our consultation paper described performance measures and targets that are significantly different from our existing measures. The main differences were: A change in emphasis from measures that are focused on the performance of our assets to measures of the service received by customers. Different targets reflecting different categories of customers at grid connections. Forward-looking targets that reflect what customers expect rather than targets based on historical performance. The measures focused on the ability of the grid to transmit power without interruption and not on power quality aspects of grid performance or power losses or constraints. Table 1 provides an overview of the original proposal. For a more detailed description of the proposal refer to the consultation paper 5. Table 1 Overview of original proposal Proposed customer-facing measures (Measured at the customer point of service) Number of unplanned interruptions Average and 90 th percentile duration of unplanned interruptions Information provision during unplanned interruptions: - Time to provide first notice - Time to provide updates - Accuracy of restoration estimates Comparisons with distribution companies Proposed long-term targets Different for different categories: highpriority, important, standard, generator and N security connections. Common targets for all customers. A national target for number and duration of unplanned interruptions relative to distribution networks Customer-facing performance measures Transpower New Zealand Limited. All rights reserved.

7 1.3 Overview of feedback Both the customer meetings and the written feedback support the direction and emphasis that we proposed in the consultation paper. Distributors and large users support concentrating on the number and duration of interruptions but some have suggested improvements or further measures. Generator-retailers also consider these measures are appropriate for off-take, but want to see development of market impact measures and consideration of planned outages. All customers value the information provision measures. For these reasons, we will continue with the core parts of our published proposal measures focused on the number of interruptions, the duration of interruptions and information provision. We will refine these measures to reflect suggestions. In addition, we will look at ways to develop our performance measures and targets in the future to respond to customer feedback through consultations and trials. The three following sections summarise customers views and our response. Customer-facing performance measures Transpower New Zealand Limited. All rights reserved. 7

8 2 Our general approach Customer views There was significant support from distributors and large users for our overall approach which involves: a change in emphasis to measures of the service received by customers rather than system averages using different targets for different categories of customers using forward-looking targets that reflect what customers expect rather than targets based solely on historical performance, and concentrating on the number and durations of unplanned interruptions. The generator-retailers supported the approach for off-take, but would like to see measures that reflect the impact of both planned and unplanned outages on the market. Individual customers made the following comments about our general approach. Measures should be meaningful to Transpower and our contractors as well as to customers. Measures should encourage learning from all events, not just high profile events. We should be mindful of the end-plan and trial reporting and measures that customers would like to see in the future Our response Reflecting on the feedback, we consider that our measures and targets should first be meaningful to our customers and ensure we are managing our assets to deliver the service valued by our customers. They should focus on measurable outcomes, not on inputs. Efforts to achieve these outcomes will be embedded into our asset management approach and will be important in driving improvements. We have structured the measures so that they are meaningful to both us and our contractors. 8 Customer-facing performance measures Transpower New Zealand Limited. All rights reserved.

9 3 Our proposed measures 3.1 Proposed categories Customer views: categories Customers were generally supportive of introducing categories for different customer loads. We proposed a relatively simple method of categorisation that most customers or their representatives thought was broadly sensible. Customers widely supported treating N security sites separately. However, customers made the following comments or suggestions: Finer differentiation or use of an economic metric. Some customers said we should introduce further categories and one suggested we should have individual customer targets. Some recommended a closer alignment of the categories with an economic metric such as the Value of Lost Load (VOLL). Price-quality trade-off. A small number of customers commented that with different performance categories customers should be able to make a pricequality trade-off. Feedback on categories and targets. Some customers asked for more transparency on how we will determine categories and the opportunity to discuss their categories and targets with us before they are finalised. Use of the term essential. At one of the customer meetings, customers pointed out that ranking a point of service as essential implies that it should never lose supply. One customer suggested high priority may be better. Generation targets. Two generators objected to the generator targets being set at the same level as the standard off-take categories. One generator suggested that the generator performance targets should reflect the different securities at generator points of connection and the other considered that the targets should be the same as the important or essential load categories, as least for those Grid Injection Points (GIPs) where the loss of generation would have a significant impact on the market (eg 100 MW or greater) Our response: categories Finer differentiation or an economic metric We think the proposed three off-take and one generator categories, with particular consideration of N security sites, is a pragmatic way to introduce different targets for different customers. It is easily understood and relevant to customers as well as being relatively easily translated into objectives for our asset management strategy, staff and contractors. Some customers suggested using size of load (eg peak demand in MW) or value of the load (ie based on some value of VOLL) as the basis for defining criticality. Using size of load alone does not take into account the different values of the supply to different customers. Explicitly using VOLL values that reflect the different values to Customer-facing performance measures Transpower New Zealand Limited. All rights reserved. 9

10 different customers may be theoretically correct but is limited by the approximations inherent in VOLL calculations and does not capture effects not currently considered in VOLL calculations. VOLL will vary hugely by season, time, length of outage and type of customer and we doubt that the classification which results would be either significantly different or any more correct. The Electricity Authority is undertaking a study to determine a value, or range of values, for VOLL that is relevant to New Zealand electricity consumers. When this is completed, we will consider integrating VOLL into the off-take criticality framework - providing the overall VOLL framework is sufficiently robust. In the meantime, our proposed categories provide a proxy for economic impact. They take into account the number of customers connected at a point, whether there are large industrial customers or CBDs connected for whom an interruption is more costly, and whether there are loads of national significance connected. Price-quality trade-off The nature of transmission networks means that the same assets are often used to supply many customers, and the grid is designed as an interconnected network. This makes it difficult to provide different levels of service at different points of within the grid, beyond negotiated connection assets. The different categories may invite useful discussions on price and quality and potentially open up further development of price-quality trade-offs. Feedback on categories and targets During the consultation period, we published a spreadsheet showing the full list of points of service and the method of allocating categories to points of service. We received very little feedback on the detail in the spreadsheet. We have made this spreadsheet available again and invite more detailed feedback by Tuesday 16 April A copy of the spreadsheet including details of how to provide feedback are provided on our website 6. Use of the word essential We agree that high priority is a better term to describe the essential category. Generator targets We have ignored the nature of the network when categorising off-take points of service and considered solely the nature of the customer and therefore the impact of an interruption. We will do the same for generation. However, there is already some reflection of the different security levels at different generators as N and N-1 points of service are treated differently as they are for off-take. We will set the generator targets at the level of the standard off-take category rather than important or high priority as generally the impact of an interruption on a Customer-facing performance measures Transpower New Zealand Limited. All rights reserved.

11 generator is lower than on off-take as foregone revenue is partly offset by avoided costs. The instantaneous reserves regime already provides financial incentives on Transpower to maintain the performance of grid assets connecting large generating units. The causer of under-frequency events is liable for the event charge. Transpower is the causer when the unplanned outage of transmission assets causes the under-frequency event through the disconnection of generation. 3.2 Number and duration of unplanned interruptions All customers supported the use of the number and duration of unplanned interruptions as performance measures. Customers made the following comments or suggestions on three key aspects of the definitions of the two measures. Whether interruptions less than one minute should be included. Whether interruptions caused by extreme events should be included. How back-feeding and load management should be considered when measuring the duration of an interruption Customer views: less than one minute interruptions Our consultation paper proposed that only those unplanned interruptions longer than 1 minute should be reported and included in the targets. This would be consistent with the definition of an interruption for information disclosure and other Commerce Commission and Electricity Authority purposes. It is clear from the feedback that shorter interruptions are a problem, particularly for both directly connected large users and for industrial and other customers embedded in the distribution networks. For example, Powerco noted that: for some major process-intensive industrial connections, momentary outages of as little as thirty seconds can have a substantial negative impact on their business operations. NZSteel commented: after only 0.5s, NZSteel loses load and the damage is done. The large users and a number of distributors all requested that interruptions less than one minute be included. Other distributors considered that definitions of interruptions should be consistent with those used by distribution companies the SAIDI and SAIFI measures which exclude interruptions less than one minute Our response: less than one minute interruptions Over the last five years, we have recorded 289 interruptions of less than one minute these are known as momentary interruptions. This compares with 712 longer interruptions over the same period. We do not measure the length of interruptions less than one minute and they are recorded with a duration of zero (All durations are rounded down to the nearest minute). However, most 281 out of 289 of the momentary interruptions were the result of protection systems acting to remove faulted circuits from service followed by Customer-facing performance measures Transpower New Zealand Limited. All rights reserved. 11

12 a successful autoreclose operation. The vast majority of these momentary interruptions will have durations of 1 to 2 seconds 7. These momentary interruptions generally have little impact on all but sensitive consumer loads. We report these momentary interruptions to our customers under the Benchmark Agreement requirements, and we will continue to do so. At this stage, we will not include these interruptions in our targets, but will investigate how we could do so in the future. Customer concern about momentary interruptions was related to concerns about voltage sags (which are covered in section 4.1.) Momentary interruptions and voltage sags can have similar impacts on our customers. We will set up an industry working group to look at how we might introduce voltage sag, momentary interruptions and other power quality reporting Customer views: extreme events Our proposal raised the issue of whether we should include unplanned interruptions caused by extreme events in our measures and targets. Customers held different views but generally agreed that whether the events were included or excluded, we should provide information on them. For example Meridian commented: We consider it is reasonable to exclude outages caused by extreme conditions with respect to targets for outage frequency and duration, however we consider targets relating to information provision should still apply. Further, we consider that it is important to measure the frequency and duration of outages caused by extreme conditions in order to track long-term system resilience, even if such measures are not used as targets. Customers supporting the inclusion of the events said that since, in at least some cases, an economic solution to mitigating the impact of extreme conditions can be found, these interruptions should be included in the performance measures. While it is accepted that extreme conditions can and do have an impact on interruptions, it is possible to at least mitigate the impact of some extreme conditions. Customers supporting the exclusion of the events recognised that in some cases such as earthquakes our assets are not designed to withstand severe events. To exclude extreme events, we would need to develop a definition of what comprises an extreme event. Customers had suggestions about how to define an extreme event, however some noted the difficulties in agreeing a definition and that the present extreme events regime used by the Commerce Commission is causing problems for distributors Our response: extreme events We agree that we should report all events, and on balance consider that it is appropriate to include all events in our targets partly due to the problems in defining 7 The majority of the reclose time delays on our protection relays are set for 1s. 12 Customer-facing performance measures Transpower New Zealand Limited. All rights reserved.

13 extreme events and because it is possible to take account, at least partly, for extreme events in our asset management Customer views: measuring duration (back-feeding and load management) We sometimes restore supply gradually through load management or a staged restoration. In other cases, distributors have arrangements in place to back-feed from other grid connections or from generators within their own network until we can restore supply. Our proposal raised the issue of how to measure the duration of an interruption. Customers responded with a range of suggestions: Interruption duration should end when the issues with Transpower assets are resolved. Duration should not be measured to the time when restoration is achieved through customer back-feeds and load management as this distorts Transpower s interruption duration statistics. The duration should be measured from when the customer loses supply to when the customer has full supply restored (ie no load management is required, but supply may be by back-feed or alternate configuration). Transpower could report to the customer when the supply is restored, but have an internal KPI to restore assets to service. It would be more appropriate to weight the restoration based on time to restore and customers affected rather than when first restoration occurs. In addition, customers made related comments: Back-feeding through the network places strain on distributor equipment which has a cost. If customers incur an additional cost of back-feeding or load management as a result of a transmission service fault, then that cost should be measured. The measurement should be in economic terms; though a time lapsed measure could be designed initially. Do unplanned interruptions include planned interruptions that are extended? Where a distribution solution is used to provide supply an avoided customer minutes could be recorded to provide an indication of how severe the interruption could have been if a distribution solution was not available/present Our response: measuring duration (back-feeding and load management) We record two different durations; initial duration (which we generally report) and final duration. Initial duration is the elapsed time until the first significant tranche of customers have their supply restored, whether through bring assets back into service or through backfeeding. This is typically at least 50 percent of the load lost and possibly 80 to 100 percent. Customer-facing performance measures Transpower New Zealand Limited. All rights reserved. 13

14 Final duration is the elapsed time until, for example, the last feeder is closed or, if restoration is by backfeed, all of our assets are back in service. Back-feeding or load management is often a cost-effective alternative to investing in N-1 reliability. We discuss these options with customers, and take account of them in our planning. There may be a cost associated with providing the backfeed, but there is also the avoided cost of paying for higher security. For this reason, it makes sense to measure the duration of an interruption to the initial restoration even though our assets may not be restored to full operation. That reflects the outcome to the customer: to use an intermediary measure, such as our restoration time, could encourage us to invest when there is no change in outcome to the customer. In addition, the nature and speed of our response to an interruption is sometimes governed by the availability of a backfeed, so the duration to final restoration might be longer than would be the case without a backfeed being in place. We will continue to measure final duration but propose to continue reporting initial restoration. Unplanned interruptions include all interruptions with less than 24 hours notice. Planned interruptions that overrun are not included in the unplanned interruptions. It is appropriate to report planned overruns separately from unplanned interruptions. Planned outage overruns are covered in more detail in section Information provision Customer views: information provision Customers strongly valued clear and timely information provision and generally supported the proposed information provision measures and targets. Some noted that the quality of the information is more important than the timing and that information should be given as soon as it is available regardless of targets. Customers made the following suggestions: Information should include information on what is the worst that can happen. There should be a target for providing post-event information including what happened and what we are doing to prevent it happening again. There is a need to coordinate and avoid parallel paths of communication (distributors/retailers/system operator/grid operator). Information should be available even if it is not in the customer s area as out-ofarea customers may experience voltage sags. Information provision targets should also track communications when planned outages are delayed unexpectedly. Although customers widely supported the proposed measures, they differed in their views on the proposed targets. Here is a sample of views: The proposed targets for accuracy of restoration time might be too challenging with one customer suggesting that a window of two hours is more realistic. 14 Customer-facing performance measures Transpower New Zealand Limited. All rights reserved.

15 The target should be to provide some information within 15 minutes, with updates every 30 minutes. 30 minutes to get information on estimated restoration time is too long as most interruptions are restored in less than 30 minutes. Provision of information about the interruption as soon as possible after the event is critical preferably in a timeframe much less than the 15 minutes proposed Our response: information provision We propose to report the information provision measures for unplanned interruptions as described in the consultation paper which were: Time to provide an initial notice. Time to provide follow-ups. Accuracy of restoration estimate. We will set targets for the first of these two measures, but at this point we are proposing to report the accuracy of the restoration estimates without targets. We expect that reporting these measures will provide both us and our customers with useful information and will encourage discussions around the types of information customers value during unplanned interruptions. Reporting accuracy of restoration estimates is new for us and we want to build experience in reporting this measure. Setting targets now may drive compliance with targets at the expense of quality and timely information. Customers provided useful feedback on other aspects of our communication and we propose to include these concerns in a wider review of what we communicate and how we communicate to customers. The review should involve: discussions with customers on coordination of communication and on post-event information, and discussions with the Electricity Authority on the requirements set out in the Benchmark Agreement and Part 12 of the Electricity Industry Participation Code. 3.4 Comparisons with distribution Customer views We received mixed views on this proposed measure. Some customers saw these measures as interesting but we received the following feedback: Cross-New Zealand averages hold little relevance; different regions may have very different performance. We could consider comparisons by distribution company region, but these may not be statistically significant. It is not clear how these measures would influence behaviour. If these measures are to be used we need to ensure we are comparing like with like. Horizon summed up the pitfalls in interpretation of this measure: With the addition of relative cost comparisons the measure may help inform future investment decision making, however without access to a lot of background material it will be interpreted incorrectly. For example it does not provide a valid Customer-facing performance measures Transpower New Zealand Limited. All rights reserved. 15

16 comparison of relative asset performance due to the differing nature of transmission and distribution grids Our response There are some practical problems in calculating these measures. As they are comparisons with distribution company numbers and durations of interruptions we need to ensure that we are comparing like with like. For example, SAIDI and SAIFI calculations require knowledge of the number of ICPs (Installation Control Points) connected to the point of service. For small remote points of service this is sometimes straightforward, but if the customer has a meshed system and routinely transfers customers to one point of service or the other, we would not know how many ICPs are affected. Our discussions with customers suggested that it is unlikely that these measures will provide information we or our customers can usefully act on. We are not proceeding with these measures. 16 Customer-facing performance measures Transpower New Zealand Limited. All rights reserved.

17 4 Other issues and possible measures 4.1 Voltage sags Customer views: voltage sags A number of customers cited power quality and voltage sags in particular as just as important an issue as losses of supply. Voltage sags are caused mainly by faults or large, sudden changes in load. A fault can depress voltages a long distance away for up to several seconds until the fault is removed. Large changes in load can cause voltage drops which will remain until voltage regulating equipment can act to improve voltages. Some equipment and appliances cannot ride out these voltage sags and either operation is affected for a short time, protection systems trip, or the equipment itself fails. These types of voltage sags can occur more frequently than full losses of supply. This comment from Carter Holt Harvey was typical of comments from large users: For many customers, a momentary loss or even a momentary voltage dip has an impact on them that is similar to a total loss of supply of a minute or more so these types of outage should be included in any assessment or measure of outages. Whilst voltage quality is not a problem for all distributors, a number gave examples of problems: a voltage fluctuation can turn lights off in freezing works causing injuries, cause flaws in weave at a woollen mill, or cause wastage for a preserving works. Distributed generation can also be affected. One customer said that it is essential to include measures on voltage sags and suggested reporting against statistical limits. Other customers commented that it is important to at least start reporting and providing information on voltage quality Our response: voltage sags We will not include voltage sag as part of our RCP2 performance measures and targets. We do not yet have enough understanding about voltage sag to be able to set meaningful targets. While we currently have a fully developed, formal system for recording and reporting primary equipment outages and interruptions, there is nothing similar in place for voltage sags or other aspects of power quality such as harmonics or transients. However, we are installing new revenue meters at grid exit points that come complete with the built-in capability to automatically record (and analyse) power quality. The nationwide meter replacement programme will be completed by around May We already have access to the power quality information from some of the meters. There is also a back-office software system we have deployed to manage access to the power quality information. Customer-facing performance measures Transpower New Zealand Limited. All rights reserved. 17

18 Given the infrastructure that is in place, or will shortly be in place, it would be possible to design and develop a power quality monitoring and reporting service. This might take a range of forms, and we need to identify what would be of most use to customers. At this point, we will not include voltage quality in our performance measures and targets for the next regulatory control period (RCP2) because there are too many uncertainties around what would be the most useful, our ability to record and report any measures and our only partial of control over power quality. We will set up an industry working group to analyse the voltage disturbance information becoming available with the end goal of determining voltage sag measurements and targets that are meaningful and valuable to customers and end consumers. This working group will also look at reporting and targets for momentary interruptions. We may trial some measures and targets and incorporate them in a later regulatory control period proposal. 4.2 Economic impact Customer views: economic impact A number of customers (including generator-retailers, distributors and large industrials) would like to see a measure that more closely reflects the financial impact of interruptions. Customers suggested that we include a financial loss measure based on VOLL. One suggested that every event should be followed up and a financial impact recorded. Another suggested a MWh or unserved energy measure would be useful 8. Customers acknowledge the limitations of VOLL. For example, MEUG made the following comment in its feedback: We accept that. VOLL is prone to wide error bounds. Nevertheless publication of a dollar impact range with wide probability distributions provides another measure to prioritise effort to reduce USE [Unserved Energy] in the future Our response: economic impact Ideally, our performance measures should reflect the economic impacts on our customers and the wider impacts on New Zealand. At present, the Electricity Authority and Commerce Commission use a $20,000/MWh value for VOLL, but as mentioned in section 3.1.2, the Electricity Authority is undertaking a study to establish appropriate VOLL ranges for New Zealand electricity consumers. When this study is complete, assuming it provides a more robust and wider assessment of VOLL, we can report the value of lost load for interruptions in order to provide an indication of the potential economic impact of interruptions. 8 We report annual unserved energy for planned and unplanned interruptions under the Benchmark Agreement, although this report does not show the unserved energy for individual events. We also report to customers breaches of the service levels for unserved energy. 18 Customer-facing performance measures Transpower New Zealand Limited. All rights reserved.

19 4.3 Planned outages and the impact on the market Customer views: planned outages and impact on the market The three generator-retailers who provided feedback were concerned that our proposed measures did not cover planned equipment outages and the impacts that our performance can have on the electricity market. In summary, their concerns were: That asset availability can have impacts on the electricity market and therefore our customers. When assets are not available through planned or unplanned outages, this can restrict generators ability to provide electricity to the market and can increase prices. Over time, any market impacts faced by generators are likely to be passed on to end consumers. Outage frequency and duration will contribute to the size of market impacts, but outage timing (eg peak or offpeak) is also critical. Meridian particularly mentioned the impact on the market from the unavailability of the HVDC. Minimising and avoiding planned outages is important; these outages comprise a majority of total outages. Unplanned extensions to planned outages should be included as unplanned outages. The existing net-benefit test 9 applying to grid outage decisions does not provide sufficient incentive for Transpower to take account of market impacts. Generators suggested possible measures that could be introduced: Targets for planned outages completed on time. Targets for information provision for planned as well as unplanned outages, including the quality and notice period of information provided. Such targets might include churn (i.e. how many times an outage schedule is revised), and variations between actual and estimated return times Our response: planned outages and the impact on the market In our proposal we did not include measures that related to market impact. This is not because we do not recognise the importance of optimising grid availability with respect to the market: rather, it is because of the difficulty in doing it so it positively influences our performance. Losses and constraints are heavily affected by the behaviour of generators and retailers - not just Transpower performance - and the wholesale market includes pricing mechanisms to take account of losses and constraints. In addition, the Electricity Authority is implementing Financial Transmission Rights which will enable the market to better manage some costs and risks associated with constraints. 9 The net benefit test is specified in part 2 of Appendix A of the Outage Protocol. If an interested participant does not think a planned outage meets the net benefit principle, Transpower must carry out a net benefit test on the planned outage. Customer-facing performance measures Transpower New Zealand Limited. All rights reserved. 19

20 We also did not include measures related to planned outages as the outage protocol 10 prescribes the process and considerations involved in planning outages 11. However, general availability measures provide reporting that covers both planned and unplanned outages. We are required to have at least one asset performance measure in our RCP2 performance targets. We intend to include HVDC branch availability targets as the availability of the HVDC link has a major effect on market outcomes. We will also include some availability measures for some other core grid branches with a significant market impact as part of our RCP2 proposal. Possible branches are the 220kV circuits from Haywards to Bunnythorpe through to Whakamaru (including those that are part of the Wairakei Ring.) We recognise that extensions to planned interruptions can be disruptive to customers, but it is appropriate to report them separately from unplanned interruptions. They have different impacts on customers than unplanned interruptions and they are driven by different aspects of our performance. Currently, we notify customers directly when a planned interruption overruns through the interruption to connection notices. We also report planned interruption restoration performance, under information disclosure requirements. We do not at present compile reports on planned outage overruns but we will introduce reporting planned outage restoration and set targets. We have some work to do to develop the measure and to set targets. 4.4 Risks of non-supply Customer views: risk of non-supply Both through discussions at meetings and written feedback it is clear that understanding the risks of non-supply is an important matter to customers. Customers commented that they want to know when planned or unplanned equipment outages place them at higher risk of interruption. A number of customers suggested we report when the security of their supply moves from N-1 to N Our response: risk of non-supply We consider the ability to signal future risks of non-supply to be more valuable to customers and end customers than analysis of historic risks (although these are informative). We communicate our upcoming outage plans to customers as part of our outage planning processes. However, the risks of non-supply that these outages pose are not necessarily presented clearly. Upon request we can arrange notice of upcoming outages that cause individual customers to be placed on N security to be provided. As part of a wider review of 10 The Outage Protocol is incorporated into the Code bv reference and is available at: 11 Planned outages and interruptions are those for which at least 24 hours notice has been given, all remaining outages and interrupions are unplanned. 20 Customer-facing performance measures Transpower New Zealand Limited. All rights reserved.

21 what and how we communicate to customers, we intend to look at options for communicating risks of future non-supply to customers. We will also report on a national time on N security measure and are investigating ways to measure and report this. 4.5 Qualitative customer service Customer views: customer service Powerco suggested that we should include a measure that reflects our customer service and interactions with customers. Powerco commented that meaningful interaction with customers, the on-going provision of information even when no particular problem exists and the perception that a constructive approach is being taken to customer relationships are all important. Powerco proposed that an overall target rating from Transpower s annual customer satisfaction survey should form part of the set of customer-facing grid performance measures but should not be linked to revenue Our response: customer service We already include this as an important internal performance indicator and plan to continue to do so rather than include it in our grid performance measures. 4.6 Feedback: other issues There were a number of issues that customers provided views on that we will consider as we progress our work. These are summarised here Customer views: targets We did not ask customers specifically about the proposed targets, however, customers made the following comments and we will take these into account as we finalise the targets: The objective should be to target a downwards trend in interruptions or an improvement in service. One approach may be to have both average and maximum targets. Targets should be what we tell you, not what you tell us. Targets should be driven by business targets, not historical performance. Indicative targets shown for generation connection locations are broadly in line with those for standard (rural) loads. Many generation connection locations, particularly those on the 220 kv grid and interconnected grid, enjoy a high level of transmission security via multiple circuits. In comparison, many rural connection locations would fall into the category of relatively low security connection grid spurs. Performance targets should therefore be relatively ambitious for high security generation connection locations, scaling downwards as the level of redundancy decreases. Customer-facing performance measures Transpower New Zealand Limited. All rights reserved. 21

22 4.6.2 Customer views: Benchmark agreements Transmission customers Transmission Agreements (based on the Benchmark Agreement) currently include a schedule on service measures. A number of customers noted that they would support Transpower and the Electricity Authority amending these service measures to align with the final performance measures that we develop. Some customers were dissatisfied with the current Benchmark Agreement measures noting that: They were imposed on both customers and Transpower rather than negotiated. They are based on historic performance rather than forward-looking objectives. The performance reporting required under the Benchmark Agreement is not of value Customer views: price-quality and getting the incentives right Customers have concerns that: Incentives should be aligned with the costs of interruptions and not encourage inefficient spending. That the performance targets will be different for different points of service, so customers should be given the ability to make price quality trade-offs. That there is no direct compensation to individual customers for poor performance. 22 Customer-facing performance measures Transpower New Zealand Limited. All rights reserved.