Asset Management Plan

Transcription

1 Asset Management Plan April 2012 safe, reliable, hassle free service

2 safe, reliable, hassle free service

3 Table of Contents Section 1: Summary Section 2: Background and Objectives Section 3: Assets Covered Section 4: Service Levels Section 5: Network Development Plan Section 6: Life Cycle Asset Management Plan Section 7: Risk Management Section 8: Evaluation of Performance Section 9: Expenditure Forecast and Reconciliation Appendix A: Glossary of Terms Environment ISO Quality ISO 9001

5 Section 1: Summary

7 Section 1 Summary 1-1 Section 1: Summary Northpower Company Profile Overview Our Company Values are heart, balance, family, future, Key Industry Metrics Ownership and Governance Northpower Electricity Distribution Network Asset Management Plan Structure Summary Background and Objectives Assets Covered Service Levels Network Development Plan Life Cycle Asset Management Planning Risk Management Evaluation of Performance Expenditure Forecasts and Reconciliation Appendix A: Glossary of Terms Key Stakeholder Information Customer Service Levels Consumer Oriented Performance Targets Asset and Business Oriented Performance Targets Major projects currently underway or planned to start in the next 12 months Stakeholder Feedback 1-11

8 1-2 Section 1 Summary Section 1: Summary 1.1 Northpower Company Profile Overview Northpower Limited ( Northpower ) is proudly New Zealand owned and is the largest service provider to New Zealand s electrical distribution sector. With a history steeped in community, innovation, engineering expertise, award winning safety initiatives, renewable energy and electricity network ownership and management, Northpower has matured immensely from humble beginnings in rural New Zealand early last century. It has expanded from a consumer-owned and operated Northland electricity distribution network to become one of the largest multi-utility contractors in New Zealand, with a demonstrated commitment to safety, delivery and innovation. In the last decade alone, Northpower s growth has been illustrated by the establishment of business units in Western Australia and Melbourne, along with forays into electricity and renewable energy project work in the Pacific Islands. Added to this is expertise in fibre network design and build, signified by Northpower securing New Zealand s first Government-backed Ultra-Fast Broadband contract - to construct Whangarei s fibre network. Northpower had first established its own award winning, world class fibre network in Others now seek Northpower s guidance on network infrastructure design and build. Exporting Northpower s expertise, project management, IP and engineering capability has been a logical step for a company that has grown so quickly and captured such a large slice of the New Zealand electricity contracting market in little over a decade. Yet Northpower continues to own, operate and maintain the electrical distribution network within the Whangarei and Kaipara Districts. The Northpower Network is made up of over 54,000 connected consumers - from Topuni in the south, to Bland Bay in the north - with an asset replacement value of $337M. With such sizeable customers as the New Zealand Refinery, Golden Bay Cement and Fonterra s Kauri Dairy Plant, Northpower understands implicitly the needs of major corporations - here and abroad. In addition to the electrical distribution network, Northpower owns, operates and maintains a 5MW hydroelectric power plant, is trialling a solar PV unit and is also investigating other renewable opportunities. Northpower is recognised within the New Zealand, Australian and Pacific Island s electricity sectors as a trusted and reliable service provider, with a strong ethos of safely delivering on commitments backed by an innate understanding of network ownership and management, along with the implicit need for efficiencies. With long term contracts to four of NZ s five largest electricity distribution companies Wellington Electricity and Vector included Northpower has captured over 30% of NZ s outsourced service market in the electricity distribution sector. Northpower Contracting provides a competitive multi-disciplinary contracting service in design, construction and maintenance for electrical transmission, distribution, and telecommunication networks. Northpower now has eight substantial service agreements with major utilities in New Zealand and Australia. Outside of the distribution sector, Northpower also performs capital works and maintenance services for many industrial customers (e.g. Pacific Steel, Auckland District Health Board) and transmission utilities like New Zealand s national grid owner Transpower.

9 Perth Melbourne Section 1 Summary 1-3 All of Northpower s contracting operations assist with contributing to best practice, security of electricity supply and industry productivity and ultimately plays a part in economic prosperity of those countries in which we work - ensuring the longevity of critical infrastructure for Wellington the communities we work in. Head Office With 28 revenue Mt Pleasant topping Road $200 Raumanga million Whangarei annually, Northpower s 0110 Private growth Bag 9018 path Whangarei is solid. A Mail vision Centre to become Whangarei a $ New Zealand million company is Ph: in 09 sight 430 and 1803 with Fax: over employees info@northpower.com sharing that belief; the Northpower journey is an exciting one. Pacific Auckland Waikato Whangarei Head Office Coromandel Bay of Plenty Central Plateau Perth Melbourne Wellington Our purpose Northpower s purpose is to generate a commercial return from its business activities and will invest in profitable growth and distribute profits to our shareholders. Through our business activities we support the development, prosperity and well being of the people of Whangarei and Kaipara. Who we are We are a dynamic infrastructure management and services company that delivers exceptional value through exceptional people and processes. We believe that safety is critical to our success. We have expanded from a Northland-owned and operated electricity distribution network to become one of the most capable utility contractors in New Zealand, with a demonstrated commitment to safety, delivery and innovation.

10 1-4 Section 1 Summary Northpower has two distinct activities: NETWORK OWNERSHIP, OPERATION AND ASSET MANAGEMENT CONTRACTING SERVICES Northpower owns, operates and maintains the electrical distribution network within the Whangarei and Kaipara Districts. The Northpower Network is made up of over 55,000 connected consumers from Topuni in the south to Bland Bay in the north - with an asset replacement value of $337M. In addition to the electrical distribution network, Northpower owns, operates and maintains a 5MW hydroelectric power plant. Northpower is also currently working with Meridian Energy to provide a turnkey 70km, 220kV transmission line to support Meridian s Pouto wind farm development. Northpower is also a prominent player in NZ s growing fibre optic sector. Northpower has built a Next Generation Fibre Optic Network in Whangarei, wholly designed and constructed in 2008 by the company s own engineers and technicians. In 2010, Northpower was the first company in New Zealand to enter into a joint venture with the Crown as part of the government s Ultra Fast Broadband initiative. Northpower contracting provides a competitive multi-disciplinary contracting service for design, construction and maintenance for electrical transmission, distribution, and telecommunication networks. Northpower has over 1000 full time staff, including 125 staff in Australia. Our capability and experience ranges from engineering and project management through to multi-skilled field staff for distribution/transmission sub-station and lines activity and fibre design and installation. Northpower s depots are located across the North Island of New Zealand with 15 depots in total and a further two depots based in Perth and Melbourne in Australia. Our values Heart HEART We show care, respect, loyalty, openness and empathy towards one another and those that interact with our family. Trust and integrity underpin all that we do. FUTURE Future We will secure our future by creating value for our shareholders through providing customers with hassle free service, investing in our people and taking a proactive approach. BALANCE Balance We believe in balance in all we do from our business goals and commercial objectives, to our personal aspirations and our community responsibilities. DELIVERY Delivery We strive to be the best we can be. This means delivering consistently reliable performance and adding value for our customers. FAMILY Family We treat people like a family. We support each other's needs, accept our differences, take personal responsibilty for our actions and are always fair and just in our interactions. RELATIONSHIP Relationship Through our actions we strive to build good will in our relationships with customers and employees.

11 Section 1 Summary Key Industry Metrics The table below provides further information on the Northpower network according to key industry metrics: Metric Description Value (2009) Value (2010) Value (2011) Trend Consumers connected Total Installation control points (ICP s) connected to the network 53,331 53,707 54,416 System length Total length of livened circuits 5,627 km 5,829km 5,829km Sub-transmission length Distribution system length Low voltage system length Total length of livened 33kV circuits 235km 237km 237km Total length of livened 11kV circuits 3,424km 3,615km 3,697km Total length of all livened LV circuits 1,968km 1,977km 1,890km Percentage underground The proportion of total system length that is undergrounded 13% 14.2% 17.22% Asset value Optimised Deprival Value (ODV) of Northpower s asset base $186,000 $194,000 $208,632 Faults per 100km Average number of unplanned interruptions per 100km of high voltage circuits per annum SAIDI System Average Interruption Duration Index. A measure of the number of minutes per year the average consumer is without electricity supply SAIFI System Average Interruption Frequency Index. A measure of the number of interruptions per year that affect the average consumer. (Regulatory target in parentheses) CAIDI Consumer average interruption duration index. A measure of the average length of an interruption that affects the average consumer (the quotient of SAIDI and SAIFI) Electricity supplied Electricity entering system for supply to consumers 997GWh 986GWh 993GWh Loss factor Proportion of electricity lost on the high voltage network 3.2% 3.6% 3.6% Capacity utilisation Maximum demand on distribution transformers as a proportion of installed capacity 21% 20.6% 18.9% Northpower Network as per Key Industry Metrics

12 1-6 Section 1 Summary Ownership and Governance Northpower is 100% owned by the Northpower Electric Power Trust (NEPT) on behalf of the electricity consumers in the Whangarei and Kaipara Districts. The company s Board of Directors is appointed by the NEPT Northpower Electricity Distribution Network Northpower owns, manages and maintains the electricity distribution network in the Whangarei and Kaipara Districts in Northland supplying 54,416 customer installations over 5,800km s of network. The current replacement cost of the network is $337 million and the depreciated replacement cost of the network is $208 million. Approximately 50% of the electricity supplied via the network is consumed by five major loads which include heavy chemical, timber and dairy processing. In addition, there is one relatively large urban centre, and seven smaller urban centres. The balance of the network is primarily rural with some small coastal settlements, which experience seasonal loadings. The majority of the electricity supply is from Transpower at five grid exit points (GXP s) located at Bream Bay, Dargaville, Kensington, Maungatapere and Maungaturoto. Northpower s 5MW Wairua Hydro Power Station and a privately owned 1MW generation plant are both connected to the Northpower network which is connected to the Transpower grid at the Maungatapere grid exit point. The electricity is distributed from these points through 239km of 33kV sub-transmission network which links 19 zone substations. Ninety three 11kV distribution feeders totaling 3,697km in length provide a supply to 6,833 distribution transformers. These transformers in turn feed into 1890km of 400V line and cable from which the majority of the 54,416 premises are supplied. There are 5 customers supplied at 33kV and 3 customers supplied at 11kV. 1.2 Asset Management Plan Structure The structure of this Asset Management Plan (AMP) follows the format prescribed in the Electricity Information Disclosure Handbook 31 March 2004 (as amended 31 October 2008). An outline of the content of each section is provided below, along with any significant structural changes that have been made to the plan since the previous disclosure Summary This section provides an overview of Northpower and its distribution network, reviews performance trends against key industry metrics and summarises the content of each section of the AMP. The summary also includes an overview of key stakeholder information Background and Objectives The background and objectives section outlines the purpose of the AMP and clearly depicts how the AMP is interrelated to Northpower s strategic and operational planning processes. In this section, stakeholder interests are identified, the responsibilities for the delivery of the asset management within the business are described and a high level overview of the systems and processes used in asset management is provided.

13 Section 1 Summary 1-7 Section Changed 2.2 Relationships with other business plans and goals 2.5 Accountabilities and responsibilities 2.6 Asset Management Systems and Process Description Revised and updated to align with the Statement of Corporate Intent and the Strategic Plan Revised to reflect the changes to the Network team structure Asset management systems information revised and updated Assets Covered This section provides details on the assets that make up the Northpower Network. A high level overview of the network footprint and a description of the network configuration is provided. Detailed information on the diverse groups of assets including, age, value and condition is provided along with the technical and financial justification for these assets. Section Changed Description 3.3 Network Assets Asset group categories revised Service Levels The service levels section details Northpower s customer orientated service targets, asset performance and efficiency targets and provides justification for these targets. Section Changed Customer orientated performance target Other related performance target 4.2 Justification of target levels of service Description Revised and updated Revised and updated Revised and updated Network Development Plan This section details the planning criteria, the prioritization of network projects and the demand forecasting process. Details of zone substation loading and expected growth forecasts are provided together with a 10 year demand forecast and expected future capacity constraints. Northpower s distributed generation policy and alternative options to addressing network constraints are presented as well as an analysis of the network options available and decisions made to satisfy and meet the service level targets. A description of the current or planned projects for the next 12 months, a summary of the planned projects for the next 4 year period and an outline of projects being considered for the remainder of the period is provided together with a 10 year capital expenditure forecast.

14 1-8 Section 1 Summary Section Changed Substation load growth expectations Significant projects currently underway or planned to start in the next year Significant projects planned to start in the next 5 years Description Added tables for each zone substation with details of feeder loadings and premise connections Project details expanded Project details expanded Life Cycle Asset Management Planning The Life Cycle Asset Management Planning section describes Northpower s maintenance and renewal programme, outlining the planning criteria and assumptions, the inspection condition monitoring and routine maintenance processes and Northpower s asset renewal and refurbishment policies. A 10 year asset maintenance expenditure (opex) forecast is also provided Risk Management This section provides an overview of Northpower s risk policies, assessment and mitigation strategies. The company s network planning risk assessment criteria and a number of network specific risks are considered Evaluation of Performance The Evaluation of Performance section reviews Northpower s physical progress against the capital and operational expenditure plans and compares actual expenditure against forecast expenditure. Service level key performance indicator actual versus target values are compared and a gap analysis and review of the quality of asset management planning is provided. Section Changed Description 8.4 Evaluation of performance Changes made to KPI s Expenditure Forecasts and Reconciliation Northpower s 10 year capital and operational expenditure forecasts and previous forecast variances are presented in accordance with Appendix A of the Electricity Disclosure Handbook March 2004 (as amended October 2008) as well as the assumptions upon which the forecasts are based. Section Changed Description 9.2 Assumptions Assumption considerations added The assumptions section addresses the requirement 7(2) of the Electricity Distribution (Information Disclosure) requirement 2008, which requires that where the AMP provides prospective information, certain details about the assumptions made to derive this information are provided Appendix A: Glossary of Terms Appendix A provides a Glossary of Terms used in the AMP.

15 Section 1 Summary Key Stakeholder Information Northpower believes that the AMP should be accessible to readers of varying levels of technical understanding and that all stakeholders should be able to extract the information they require. For many stakeholders, including the majority of our consumers, key asset management information includes the level of service that can be expected and projects that have been initiated to improve the quality of electricity supplied in the region. This section provides an overview of these three areas. Under each subheading a reference to the more detailed discussion later in the plan is provided Customer Service Levels In order to provide a service, Northpower is required to understand the stakeholder expectations and where possible deliver a cost effective solution to meet these expectations. Service standards include not only quality of electricity supplied but also health and safety, account management, project management, environmental outcomes, general communication and all interactions with Northpower. This philosophy is supported by the mission statement, which has as a cornerstone goal providing excellence in customer service. Customer service standards that Northpower monitors its performance against are grouped into two categories namely customer oriented performance targets and asset and business oriented targets Consumer Oriented Performance Targets The delivery of a safe, reliable hassle free electricity supply of appropriate quality to consumers is Northpower s core business. In order to measure effectiveness in achieving this goal, a number of performance targets are used. These include network average reliability indices (SAIDI, SAIFI and CAIDI), faults per 100km of circuit, improvement of worst performing feeders, consumer grouping targets and quality of supply on individual feeders. Further detail on Northpower s Consumer Oriented Performance Targets is provided in section 4.2. Evaluation of performance against targets for the previous year is provided in Section 8. The table below summarises Northpower s consumer orientated performance targets Service Standard Measure Target Overall Customer Satisfaction Score Network Reliability Rating (SAIDI) Colmar Brunton Customer Perceptions Survey combined overall customer satisfaction level System average interruption duration index measures the number of minutes per year the average customer is without electricity LTI FR Lost time injury frequency rate 0 Overdue Unsafe Service Lines Internal Customer Satisfaction Score The number of unsafe service lines that are overdue for repair Internal service provider performance ranked monthly over various service aspects (KPI Score) > 85% <130 mins Faults per 100km Faults per 100km by voltage level <10 (33kV network) Shutdown Restoration Times Annual number of shutdowns that exceed the advertised restoration times by more than 15 minutes 0 >1 < 7 (11kV network) < 50

16 1-10 Section 1 Summary Asset and Business Oriented Performance Targets As well as delivering a high quality of supply, Northpower must prove to its shareholders and the regulator that it is operating in an efficient and cost effective manner. Asset and Business Oriented Performance Targets are used to measure the efficiency of Northpower s asset management practices. Measures employed include network losses, load factor and capacity utilisation Major projects currently underway or planned to start in the next 12 months The planning period considered in this AMP sees a continuation of capital investment in the network to meet customer driven growth, maintain network security, meet customer service levels and network reliability targets and ensure compliance with regulatory requirements. The following table lists significant projects currently underway or planned to start in the next 12 months. Project Name Kamo zone substation 6th 11kV feeder 11kV air break switch upgrades Whangarei South-Kioreroa 33kV T reconfiguration (stage 1) Maungatapere 33kV circuit breaker upgrades Project Description Installation of new feeder cable 2012 Replacement of air break switches with enclosed gas switches Completion Year 2013 Reconfiguration of 33kV lines and protection schemes 2012 Replacement of 4 old bulk oil circuit breakers 2013 Kioreroa additional 11kV feeder Installation of a new 11kV feeder panel and cable kV earth switch replacement Whakapara 11kV feeder express line extension Remote control 11kV pole mounted switches Replace 33kV earth switches at Chip Mill and Ruawai substations with circuit breakers 2012 Extension of express line back to Hikurangi substation 2013 Installation of SCADA communications and switch controls kV CT and VT upgrades Replacement of end of life equipment 2013 Bream Bay new 11kV feeder Installation of new feeder cable 2013 Communications and RTU upgrades 11kV O/H line conductor replacement Replacement of end of life communications assets 2013 Replacement of end of life HDBC and corroding ACSR conductor 2014

17 Section 1 Summary Stakeholder Feedback Northpower encourages feedback on all aspects of the AMP to enable continued improvement in meeting the needs of consumers and stakeholders. Feedback should be addressed to: Russell Watson, Network Planning Manager, Northpower, Private Bag 9018, Whangarei Mail Centre, Whangarei, russell.watson@northpower.com

19 Section 2: Background and Objectives

21 Section 2 Background and Objectives 2-1 Section 2: Background and Objectives Purpose Purpose of the Asset Management Plan Objectives of Asset Management Planning Relationship with Other Business Plans and Goals Our purpose Who we are Our focus Our vision Documented Plans Produced in Annual Planning Process Relationships between Plans, Processes, Models and Stakeholders Period Covered by the Plan Stakeholder Interests Identification of Stakeholders Accommodating the Interests of Stakeholders into Asset Management Planning Managing Conflicting Interests Accountabilities and Responsibilities Governance of Asset Management Northpower Asset Management Executive Team Managing Field Operations Asset Management Systems and Processes Asset Management Systems Geospatial Information System (GIS) EMS WASP Siemens SCADA Power System Modelling and Analysis Gentrack Outage Recording Integration Services Data Completeness and Accuracy Data Quality Initiatives Plans for Improvement in Information Quality Business Processes Managing Routine Asset Inspections and Network Maintenance Planning and Implementation of Network Development Processes Measuring Network Performance (SAIDI, SAIFI) for Disclosure Purposes 2-23

22 2-2 Section 2 Background and Objectives Section 2: Background and Objectives 2.1 Purpose Purpose of the Asset Management Plan The primary purpose of the AMP is to make visible Northpower key objectives, network planning techniques and asset maintenance practices to key stakeholders. The AMP addresses goals and objectives which relate to asset management by focusing on levels of service, life cycle asset-management planning and the resulting long term cash flow requirements. The AMP also establishes and evaluates performance, benchmarks and demonstrates responsible ownership and management of assets to the wider community. Public comment and feedback is both welcomed and valued. Northpower s Annual AMP is published to satisfy the regulatory requirement, describing the methodology adopted to manage the assets in accordance with the Electricity Disclosure Handbook 2004 (as amended October 2008). Northpower s asset management philosophy is encapsulated in the vision of being a proven high performing utility which meets the key requirement of Northpower s owners - to provide electricity distribution services for the social and economic enhancement of the region. The relationship between this philosophy, planning processes and company objectives collectively forms the Northpower concept of best practice asset management. This is achieved by: Ensuring that the performance of the assets meets the needs of broad customer groups Ensuring that the long term functionality and value of the assets is maintained Treating all customers with respect and being responsive to individual customer s needs Maintaining ongoing price stability Focusing on operational efficiency and performance improvement Objectives of Asset Management Planning From an internal perspective Northpower s AMP is a live document which undergoes continuous adjustment in response to environmental changes which may affect the lines business or the assets it manages. The AMP along with the Development and Maintenance plans (which are based on future network capacity and performance requirements) and associated budgets and spend forecasts are prepared annually then reviewed and updated quarterly. Northpower has a continuous improvement philosophy and is a process driven organisation. The company is ISO 9001 and ISO certified. The asset management processes are aligned within these standardised frameworks. Planning is supported by the ongoing development and integration of core information systems together with the continuous improvement of the asset data (including type, volume, age and condition). Specialist asset management software is used to trigger, monitor and support maintenance management activities.

23 Section 2 Background and Objectives 2-3 Vision Mission Strategic Issues Stakeholder Interests Regulatory Demands Strategic Plan AMP Guiding Principles Annual Plan Development Plan Maintenance Plan 2.2 Relationship with Other Business Plans and Goals Our purpose Northpower s purpose is to generate a commercial return from its business activities and will invest in profitable growth and distribute profits to our shareholders. Through our business activities we support the development, prosperity and wellbeing of the people of Whangarei and Kaipara Who we are We are a dynamic infrastructure management and services company that delivers exceptional value through exceptional people and processes. We believe that safety is critical to our success. We have expanded from a Northland-owned and operated electricity distribution network to become one of the most capable utility contractors in New Zealand, with a demonstrated commitment to safety, delivery and innovation Our focus AMP Planning Process Northpower is present in New Zealand, Australia and Pacific Island providing services to and investing in key infrastructure within the following industries: distribution, transmission, generation, telecommunication and retailing.

24 2-4 Section 2 Background and Objectives Our vision Northpower s goal is to secure profitable growth within the Australasian utility sector. Our Purpose To generate a commercial return from our business activities, investing in profitable growth and distributing profits to our shareholders. Through our business activities we support the development, prosperity and wellbeing of the people of Whangarei and Kaipara Values Heart, Family, Balance, Future, Delivery and Relationship Our Focus Northpower is present in New Zealand, Australia and Pacific Island providing services to and investing in key infrastructure within the following industries: distribution, transmission, generation, telecommunication and retailing Our Immediate outcomes Consolidation Platform for Growth Growth Impacts Consistent achievement of performance targets Development of opportunities for future profitable growth Increased revenue from new or existing clients or in new or existing service/ infrastructure areas Documented Plans Produced in Annual Planning Process The relevant documented plans that Northpower produces as part of the annual business planning process are: Annual Planning Document Statement of Corporate Intent (SCI) Strategic Plan Annual Network Management Plan (NMP) Company Risk Register Description Northpower s SCI is published annually and approved by the Northland Electric Power Trust on behalf of the consumers. The SCI sets out the goals and objectives for the business The Strategic Plan sets goals, objectives and key performance indicators for the business The Network Asset Management Team annually produces the internal NMP which includes policies, standards and strategies The Risk Register is a live database that is used to document key business risks. Risk mitigation strategies are reviewed annually Relationship with AMP The AMP describes the way in which the goals and objectives embodied in the SCI will be achieved from an asset management perspective The forecasts in the AMP are based upon the forecasts approved annually by the Board of Directors The NMP informs Sections 5 and 6 of the AMP (network development and lifecycle asset management planning) Risks related to asset management within the Risk Register inform Section 7 of the AMP Annual Planning Process Plans

25 Section 2 Background and Objectives Relationships between Plans, Processes, Models and Stakeholders GOVERNANCE Central /Local Government GOVERNANCE GOVERNANCE PLAN Consumers Regulation NEPT Statement of Corporate Intent Board of Directors Vision, Mission, Objectives, Policies and Risk STRATEGIC Resource Constraints Strategy Long Term Cashflow Modeling Gap Analysis Network Business Plan Technical requirement and specifications Load Forecasts Risk Assessment Asset Management Plan Technology Health and Safety Environmental Stakeholder Interests Annual Maintenance and Development Plans and Budgets (O d C ) Service Levels Systems and Processes OPERATIONAL Maintenance and Construction Network Operations Engineering and Costing Works scheduling and material procurement Project Management and Work execution Information System Update Monitoring and Control Operations Permits Faults Resolution Review and Feedback Relationship between plans, process and stakeholders

26 2-6 Section 2 Background and Objectives 2.3 Period Covered by the Plan The planning period covered by this AMP is the 10 year period from 1 April 2012 to 31 March This version of the AMP was completed in February 2012, approved by Northpower s Board of Directors during February 2012 and made available for public disclosure 31 March Specific projects and activities included in this AMP represent Northpower s best estimates of optimal solutions based on projections of present day drivers, issues technologies and available network data. Given that drivers and network data will change over time, inclusion of specific activities and projects, particularly toward the far end of the planning horizon, does not represent a firm commitment by Northpower to proceed with those activities and projects. Rather it is to be recognised as a demonstration of a robust methodology for addressing long term capacity, reliability and security of supply requirements. Network development plans and associated financial forecasts and budgets are essentially determined by load growth. Developments at subtransmission level tend to have more long term inertia and therefore tend to be less dynamic and more predictable than those at distribution level, with the result that projects relating to the former tend to have longer planning lead times and can normally be fairly accurately defined 5 years out. On the other hand, projects at distribution level are more closely linked to short term economic activity, with the result that confidence beyond the two to three year mark is difficult to achieve. Network maintenance related activity is far more predictable than development needs, and plans can be developed with a fair degree of confidence as there is a direct relationship with historical expenditure and present network performance. However, to ensure optimal long term maintenance planning it is essential that a good asset knowledge base exists, together with appropriate maintenance regimes, and Northpower is busy increasing resources in this area. 2.4 Stakeholder Interests Identification of Stakeholders Stakeholders are persons, groups, organisations, or systems, who affect or can be affected by Northpower actions, activities and or performance. Northpower s key principles listed below are derived from the fundamental values and business behaviours and apply to all actions and activities: Health and Safety Financial Strength Customer Satisfaction People and Commitment Environment and Communities Operational Excellence Consideration of these key principles in relation to identities that interact with the company defines their level as a stakeholder. The following table identifies the major stakeholders in the electricity lines business and which series of the six key principles are applicable to the stakeholder.

27 Section 2 Background and Objectives 2-7 Stakeholder Health and Safety Customer Satisfaction Financial Strength Environment and Communities People and Commitment Customers Northpower Trust and Board Energy retailers Suppliers Staff and Contractors Public and Communities Land owners Territorial Authority Regional Authority New Zealand Transport Agency Teleco s Commerce Commission Electricity Authority Transpower Grid owner Transpowersystems operator Identification of Stakeholders Operational Excellence There is no single policy or documented process which fully captures every situation where stakeholders should be identified. Rather, the importance of stakeholders and their interests is entrenched within many processes for many activities across several disciplines. The underpinning principles are the same, in all projects and activities consideration of who and what will be affected and how is necessary. Any issues identified are to be addressed in a respectful and considerate manner.

28 2-8 Section 2 Background and Objectives The following table provides an overview of what each stakeholder s interest is and how the stakeholder s interests are identified. Stakeholder Key Interest Method of Interest Identification Consumers Northpower Trust Northpower Board of Directors Electricity Retailers Suppliers Staff Contractors Network reliability Quality of supply Speed of restoration Hassle free service Line charges Reliability/price balance Tariff options Fair commercial return on investment Sustainability of business Performance of Directors Achievement against the Statement of Corporate Intent Security of supply to region Protection of shareholder s interests Performance of business operation Long term business direction and outcomes Performance of Chief Executive and Executive Management Team Creation of shareholder value Contractual relationship Clear data to support billing Accurate and timely billing Minimisation of line losses Risk mitigated network Timely response to service and information requests Network standards Advance notice of Network requirements Payment in accordance with the terms of trade Partnership approach Risk mitigated network and work practices Forward visibility of requirements Involvement in company direction Challenging work Fair reward Visibility of forward work load Standards Risk mitigated network Return on investment Partnership approach Annual Northpower Customer Perceptions Monitor survey Formal and informal feedback Dedicated Customer Advisor Dedicated Communications Manager Dedicated Network Commercial and Operations Manager Trade shows Direct line function service agreements with large industrial sites Faults free phone directly to dispatch/ network system operators Pentennial ownership review Triennial Trustee elections AGM Annual review with Directors Six monthly meetings with Directors and Executive Team Monthly meetings Direct feedback from consumers Annual review by Trust Annual review with CEO Annual business strategy sessions Quarterly risk reviews Quarterly field visits Monthly meetings with Executive Team Use of System Agreement Annual relationship meetings Direct consultation periodically throughout the year Regular relationship meetings with Logistics Manager Supply agreements Structured terms of trade Survey feedback Biennial Best Places to Work survey Annual strategic planning sessions Open forums at biannual Safety Days Monthly Safe Team meetings Hazard ID and Near Miss process Weekly team meetings Regular relationship meetings with Union representatives Annual employment contract negotiations Biennial Contractor review process Annual service level agreement negotiation Open forums at biannual Safety Days Monthly Safe Team meetings Monthly relationship meetings with major contractors Regular relationship meetings with minor contractors

29 Section 2 Background and Objectives 2-9 Stakeholder Key Interest Method of Interest Identification Communities and Public Land owners District Councils Regional Council NZ Transport Agency Telco s Commerce Commission Electricity Authority Transpower - Grid Owner Transpower - System Operator Risk mitigated network Responsible corporate citizen Protection of property values Protection of areas with cultural or historical significance Risk mitigated network Capability of network to service growth Forward visibility of significant Network additions/alterations Environmental impact of the network is in accordance with district plans and is minimized Environmental impact of the network is in accordance with regional plans, the Resource Management Act and is minimised Emergency response capability Risk mitigated asset No harm to public from actions of Network contractors Value added propositions Protection of their assets from electrical interference Protection of their assets from physical interference Synergies regarding access and asset placement Legislative and regulatory adherence Information disclosure Legislative and regulatory adherence Information disclosure Payment in accordance with commercial terms Provision of connection assets Response to operating requests and conditions Annual Northpower Customer Perceptions Monitor survey Formal and informal feedback from interest groups Dedicated Customer Advisor Joint support of community sponsorship initiatives such as the Rescue Helicopter and Native Bird Recovery Centre Public meetings Direct consultation with interest groups Consultation with affected or potentially affected landowners Dedicated lines inspectors and vegetation officers in the field Direct consultation between CEO s District plan Joint planning sessions RMA Growth strategy documentation Direct consultation Member of Northland Lifelines Group (Civil Defense and infrastructure disaster relief planning) Regulations Direct consultation and co-operation Regulatory and legislative protection Relationship meetings Information sharing sessions Legislation laws and regulation Disclosure documentation Published rules Electricity Commission updates published weekly Annual notification of prices Relationship meetings Price/quality trade off consultation Relationship meetings Annual plan Monthly monitoring Direct contact with local network System Operators Stakeholder Interests and Method of Interest Identification

30 2-10 Section 2 Background and Objectives Accommodating the Interests of Stakeholders into Asset Management Planning Northpower has a number of systems which assist the accommodation of stakeholder interests, these are supported by satisfaction surveys and meetings with stakeholders. These include plans, policies and procedures along with relevant standards legislations and regulations. Of particular significance is the Northpower risk register (which details stakeholders and potential risks to sections of the business) and the interest s register (which details other interests that Northpower directors have, thus protecting against conflicting interests within decision making). Northpower is ISO 9001 and ISO certified, ISO is new and significant as it focuses on environmental stakeholders in a climate of increasing environmental concern. Northpower is working towards certification for Asset Management. A gap analysis using international standard PAS 55 has been completed and work is currently underway to improve alignment with PAS 55. Northpower uses the guides in the table below to aid sound decision making, Northpower understands that good decision making processes are required to support both best practice asset management and the needs of stakeholders. Category Description of Guide Type of Decisions to be Guided Policies Plans Procedures Vision Mission Non-asset solutions Distributed generation Redeployment & upgrade of assets Acquisition of new assets Adoption of new technology Disposal of assets Statement of Corporate Intent Strategic Plan Asset management Plan Risk management Plan Business Continuity Plan Internal manuals and specifications All organisational decisions All organisational decisions Whether non-asset solution should be used Whether DG should be installed and on what terms and conditions Whether and how assets should be redeployed or upgraded Whether new assets should be acquired Whether new technology should be adopted How assets should be disposed of High level direction for the company High level corporate decisions such as growth and investment Asset investment, maintenance and operational decisions Whether the level of risk implicit in decision options is acceptable to Northpower Responses to defined events, allocation of resources in preparation for events Operation and maintenance requirements

31 Section 2 Background and Objectives 2-11 Category Description of Guide Type of Decisions to be Guided Standards Legislation Regulations Codes ISO 9001 ISO NZS 7901 AS/NZS Risk Application Guide AS/NZS Risk Management Various technical standards (IEC, BS etc) Various financial reporting standards PAS 55 Commerce Act 1986 Electricity Act 1992 Energy Companies Act 1992 Companies Act 1993 Electricity Act 2010 Electricity Industry Reform Amendment Act 2001 Health & Safety In Employment Act 1992 Resource Management Act 1992 Electricity Industry Participation Code Electricity Information Disclosure Requirements 2004 (as amended to 31 March 2007) Electricity Governance Regulations NZECP s Quality assurance decisions Environmental decisions Public safety Risk assessment Risk assessment Operation and maintenance of network assets What information needs to be reported to various entities, and when Network improvement Guides to Aid Sound Decision Making Disclosure of information, anti-competitive behaviour, setting tariffs that comply with the price path thresholds, ensuring reliability does not materially decline Organisational and operational decisions Organisational and operational decisions Requirement to file various returns Requirement to separate line and energy activities Organisational and operational decisions Organisational and operational decisions Organisational and operational decisions Distributed generation requirements What needs to be disclosed to the Commerce Commission and the public, and by when Metering and supply quality requirements Guides to ensure compliance with regulations

32 2-12 Section 2 Background and Objectives Managing Conflicting Interests Northpower understands the importance of appropriate consultation of stakeholders in order to ensure proper planning coordination, dissemination of information and maintenance of good relationships. Conflict of interest is treated seriously at Northpower. Wherever possible, Northpower will endeavour to resolve conflict of interest in a responsible and amicable way. In the event of a major conflict of interest, where an amicable solution cannot be found, Northpower is obliged to follow approved policy and process in order to discharge its responsibilities and obligations with regard to electricity supply. In general when there is a conflict between the interests of stakeholders, Northpower will prioritise interests in the following way: Decisions and actions required to ensure safety take priority over other interests at all times Electricity distribution is a core activity Northpower is committed to delivering quality to consumers, therefore decisions and actions which protect supply quality are fundamental Decisions taken to protect supply quality must be financially responsible and meet compliance requirements These interests form the parameters around which supply quality is prioritised Financial interests will be considered on their merits and outcomes will depend on overall best position for Northpower Northpower is committed to 100% compliance with the law and relevant industry regulations The only acceptable reason for a compliance breach is action necessary to ensure safety in unforeseen circumstances 2.5 Accountabilities and Responsibilities Board of Directors Chief Executive General Manager Network Assets Network Planning Manager Network Contracts Manager Network Commercial/ Operations Manager The responsibilities for asset management at Northpower are shown in the above. Accountability of the positions is described below.

33 Section 2 Background and Objectives Governance of Asset Management The Board of Directors is ultimately responsible for governance at Northpower. A significant proportion of the responsibility for governance and related decision making is delegated to the Chief Executive. Board approval is required for: High level plans including: 10 year AMP Maintenance Plan Development Plan Annual budgets including: Proposed preventative maintenance Follow up and remedial maintenance Asset renewal expenditure Sanction for expenditure approval for significant individual projects and expenditure that exceed budget. Board sign off is required for projects over certain values or for unusual projects. Examples include: Switchboard upgrades Power transformer upgrades New zone substations New technologies Research and development projects Safety, reliability and security of supply initiatives The Chief Executive provides a business report to the Board Meeting each month. The report includes an outline of the Asset Management Division performance, business status and other significant issues. Specific examples include: Overall Network division financial position Wairua power station (note that although not part of the lines business, Northpower network division is responsible for managing this asset) Network performance Sub-divisional reports including: Network Planning Commercial Operations Contracts Fibre network (note that although not part of the lines business, Northpower network division is responsible for managing this group of assets) Metering (note that although not part of the lines business, Northpower network division is responsible for managing this group of assets)

34 2-14 Section 2 Background and Objectives Northpower Asset Management Executive Team The Network Assets division carries responsibility for the Asset Management functions at Northpower. Responsibilities within the division are as follows: The General Manager for the Network Assets division is the principal point of day-to-day responsibility for the asset management function which includes improving and managing Northpower s image and relations with the Northpower Trust, community and other key stakeholders. The General Manager for Network Assets is accountable to the Chief Executive for meeting the network operational and financial targets. The Network Planning Manager (which encompasses Network Planning, Development and Information Analysis) is responsible for network policy, standards and asset management systems, together with the network development and maintenance plans (and associated annual budgets) which form part of the Asset Management Plan. The Network Commercial and Operations Manager is responsible for the operations of the network and manages the interface between Northpower s network and the Transpower grid, Northpower s larger customers and the energy retailers. He also manages the interface with the Electricity Authority and determines the line charges. The Network Contracts Manager is the interface with the in-house field services division. This relationship is managed by way of a Service Level Agreement Managing Field Operations The Network Contracts Manager is the interface with the in-house field services division. The Network Contracts Manager is responsible for the interface with the in-house field services division. This relationship is managed by way of a Service Level Agreement. The Network Contracts Manager is assisted by Northpower s control centre which operates 24 hours and 7 days a week. The control centre is responsible for the day to day operation of the network and the safe management of all contractors working on the network. A significant function of this role is to monitor and audit key projects and required outcomes but, within the parameters of the Service Level Agreement. Northpower Contracting is the primary contractor operating on the Northpower network. This is advantageous firstly because the values, standards and operating practice are aligned with Northpower s asset management practice, the two operations share the same governing factors. Secondly, a wide and mobile workforce is available if additional resources are necessary. From time to time other contractors carry out work. These contractors are subject to the same safety and work criteria expected of Northpower Contracting. They are required to demonstrate this for approval to work on the Northpower network. External contractors are also engaged to carry out services that are not available internally. Examples include civil engineering and construction services.