FBPQ and building blocks FBPQ and building blocks Mark Drye - - PowerPoint PPT Presentation

SLIDE 1

FBPQ and building blocks FBPQ and building blocks

Mark Drye Director of Asset Management Director of Asset Management

SLIDE 2

CE Electric UK

The building blocks of investment planning

Investment plans are built from a consideration of the motives driving investment and not from a requirement to ensure a nominally periodic turnover of asset classes

132kV ww VTs Generation (EHV) 132kV Isolators Industrial / commercial (EHV) Earthing Non-domestic (HV & LV) S ervices S / S fire detection Domestic (developer) O/ H lines O/ H line safety refurbishment PFI EHV 11kV and above Distribution Improving Resilience Asbestos ES QCR clearances Oil bunding Unmetered HV Primary HILP Primary HV remote control Buchholz Asbestos meter boards Visual amenity S treet lighting LV Grid Flood defences Grid Protection

• f O/ H line

networks LV switchgear S ubstation security Noise abatement BT21C Connections Diversions Load related Reinforcement Fault Level and DG management Maj or system risk Asset replacement Quality of S upply Operator S afety Legal Environment Enabling Technology (IT) Meters Replace failed assets Restoration & Repairs Inspection & Maintenance

Customer-driven investment (non-discretionary) Network operating costs Asset-driven investment (discretionary)

Panel 2

Network Costs

( y)

SLIDE 3

CE Electric UK

Ofgem building block approach

The FBPQ is comprehensive but is more reflective of how plans are plans are actually assembled

Panel 3

SLIDE 4

CE Electric UK

Opportunities and risks

Opportunities Opportunities Better informed discussion between DNO and Ofgem

Fall Plan 2006: Load related capex

30.0 40.0 50.0 60.0 70.0

pex (£m)

Demonstration of the choices each DNO has taken with

0.0 10.0 20.0

2007 2008 2009 2010 2011 2012 2013 2014 2015 2016

year

ca LR Grid LR Primary LR 20kV & Below Cnctn's & Dvrsn's Fall Plan 2006: Non load related capex

DNO has taken with respect to risks Allows Ofgem to challenge DNO’ s

0.0 20.0 40.0 60.0 80.0 100.0 120.0 140.0

2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 capex (£m)

challenge DNO s plan at the disaggregated level Risks

2002/2003 Regression - Final Proposals

year

AR Grid AR Primary AR Distribution AR Cables AR OHL AR Services

Risks Potential for ‘ cherry-picking’ Unit costs analysis

Southern CNW LPN UU CNE EPN SPN SCP y = 1.9964x + 20.798 R

2 = 0.7308

60 70 80 90 100

le C osts (£m )

will be plagued by definitional issues Individual DNO

YEDL WPD Wales Hydro WPD West NEDL Manweb

20 30 40 50

A djusted C ontrollab

OLS

Panel 4

assumptions may not align

10 0.0 5.0 10.0 15.0 20.0 25.0 30.0 35.0

CSV (25% Unit, 25% Customers, 50% Length)

COLS Frontier Upper Quartile Frontier

Regression analysis unlikely to yield legitimate results at the disaggregated building block level

SLIDE 5

CE Electric UK

Integration with conventional modelling

Ofgem can use the building block

Asset Replacement Modelling

building block approach to benchmark each company against its

• wn planning
• wn planning

assumptions and to test the efficiency

• f its resultant plan

£100m

However, we need

Health Indices Load

£100m £120m

, to be mindful of the potential conflicting results that will arise in

NEDL Primary Substation Utilisation 2005/06 & 2015/16 25 30 bstations

Load Forecasting Fault Rates

LV Other Underground Cable Total Faults

that will arise in comparison to strategic asset replacement model

• utputs

5 10 15 20 %

• 9

% 1 %

• 1

9 % 2 %

• 2

9 % 3 %

• 3

9 % 4 %

• 4

9 % 5 %

• 5

9 % 6 %

• 6

9 % 7 %

• 7

9 % 8 %

• 8

9 % 9 %

• 9

9 % 1 %

• 1

9 % 1 1 %

• 1

1 9 % 1 2 %

• 1

2 9 % 1 3 %

• 1

3 9 % 1 4 %

• 1

4 9 % 1 5 %

• 1

5 9 %

Number of Primary Sub 2005/06 2015/16

g 2 4 6 8 10 aults per 100 km

Panel 5

• utputs

1 1 1 1 1 1

Utilisation (Percentage)

2001-02 2002-03 2003-04 2004-05 2005-06 2006-07 F LV Cable Faults 3-year moving average

SLIDE 6

CE Electric UK

Closing remarks

• We are supportive of the ‘ building block’ approach that

Ofgem have proposed and believe it is a step forward

• Utilise the building block approach to understand

individual DNO assumptions and resultant plan Do

• Benchmark the DNO against its own assumptions
• Ensure ‘ definitions’ are appropriately documented
• Recognise the requirement for j udgement in forecasting

Use analytical benchmark comparisons across DNOs Don’ t

• Use analytical benchmark comparisons across DNOs
• ‘ Cherry-pick’ what might appear to be best practice
• Accept outputs of ‘ crude’ forecasting models

Panel 6

• ‘ Joined-up’ thinking is paramount