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

FBPQ and building blocks FBPQ and building blocks Mark Drye Director of Asset Management Director of Asset Management

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 132kV Isolators (EHV) Industrial / commercial Earthing (EHV) Non-domestic S / S fire S ervices (HV & LV) detection Domestic O/ H line safety O/ H lines (developer) refurbishment Improving ES QCR PFI EHV 11kV and above Distribution Asbestos Oil bunding Resilience clearances Asbestos HV remote Visual Unmetered HV Primary HILP Primary Buchholz meter control amenity boards Protection S treet Flood S ubstation Noise LV Grid Grid of O/ H line LV switchgear BT21C lighting defences security abatement networks Fault Level Enabling Replace Load related Maj or Asset Quality of Restoration Inspection & Connections Diversions and DG Operator S afety Legal Environment Technology Meters failed Reinforcement system risk replacement S upply & Repairs Maintenance management (IT) assets Customer-driven investment Asset-driven investment (discretionary) Network operating costs (non-discretionary) ( y) Network Costs Panel 2

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

CE Electric UK Opportunities and risks Opportunities Opportunities Better informed Fall Plan 2006: Load related capex 70.0 discussion between 60.0 50.0 pex (£m) DNO and Ofgem 40.0 30.0 ca 20.0 10.0 0.0 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 Demonstration of year LR Grid LR Primary LR 20kV & Below Cnctn's & Dvrsn's the choices each DNO has taken with DNO has taken with Fall Plan 2006: Non load related capex 140.0 respect to risks 120.0 100.0 capex (£m) 80.0 60.0 Allows Ofgem to 40.0 20.0 challenge DNO’ s challenge DNO s 0.0 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 year plan at the AR Grid AR Primary AR Distribution AR Cables AR OHL AR Services disaggregated level 2002/2003 Regression - Final Proposals Risks Risks 100 y = 1.9964x + 20.798 2 = 0.7308 R Potential for 90 EPN le C osts (£m ) ‘ cherry-picking’ 80 70 UU SPN CNW Unit costs analysis SCP CNE LPN Southern 60 A djusted C ontrollab will be plagued by YEDL WPD West Manweb 50 definitional issues NEDL 40 WPD Wales OLS Hydro 30 Individual DNO 20 assumptions may Regression analysis unlikely to yield COLS Frontier 10 Upper Quartile Frontier not align legitimate results at the disaggregated 0 0.0 5.0 10.0 15.0 20.0 25.0 30.0 35.0 building block level CSV (25% Unit, 25% Customers, 50% Length ) Panel 4

CE Electric UK Integration with conventional modelling Asset Replacement Modelling Ofgem can use the building block building block approach to benchmark each company against its own planning own planning assumptions and to test the efficiency of its resultant plan £100m £100m Health Indices £120m However, we need , Load Load to be mindful of Forecasting the potential NEDL Primary Substation Utilisation 2005/06 & 2015/16 conflicting results Fault Rates bstations 30 25 that will arise in that will arise in LV Other Underground Cable Total Faults g Number of Primary Sub 20 2005/06 comparison to 15 10 2015/16 10 aults per 100 km 8 strategic asset 5 6 0 replacement model % % % % % % % % % % % % % % % % 4 9 9 9 9 9 9 9 9 9 9 9 9 9 9 9 9 1 2 3 4 5 6 7 8 9 0 1 2 3 4 5 - 1 1 1 1 1 1 % - - - - - - - - - - - - - - - % % % % % % % % % 0 % % % % % % 0 0 0 0 0 0 0 0 0 0 2 1 2 3 4 5 6 7 8 9 0 0 0 0 0 0 1 2 3 4 5 outputs outputs 1 1 1 1 1 1 1 1 1 1 1 1 F Utilisation (Percentage) 0 2001-02 2002-03 2003-04 2004-05 2005-06 2006-07 LV Cable Faults 3-year moving average Panel 5

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 • Benchmark the DNO against its own assumptions Do • Ensure ‘ definitions’ are appropriately documented • Recognise the requirement for j udgement in forecasting • Use analytical benchmark comparisons across DNOs Use analytical benchmark comparisons across DNOs Don’ t • ‘ Cherry-pick’ what might appear to be best practice • Accept outputs of ‘ crude’ forecasting models • ‘ Joined-up’ thinking is paramount Panel 6