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AB LESTO investicijų planas 2015–2025 m. 1

Turinys

AB LESTO INVESTMENT PLAN

FOR 2015-2025

AB LESTO Investment Plan for 2015 – 2025 2

Contents

CONTENTS

Chief Executive's Letter 3

Introduction 5

1. Stakeholder Expectations 7

Stakeholder Model 7

Stakeholder Model application to LESTO 8

Analysis of expectations 9

Customers 10

Society 13

Regulators 17

Energy Sector 20

Shareholders 21

The interrelationship between stakeholder groups and their

expectations 22

2. Analysis of LESTO distribution network problems 23

PROBLEM No. 1: Deterioration of network elements 23

PROBLEM No. 2: Poor automatic control of medium voltage

distribution network 35

PROBLEM No. 3: Non-resistant distribution network to weather

conditions 37

PROBLEM No. 4: Substandard voltage in the power supply network 40

PROBLEM No. 5: Energy accounting lacking details 42

PROBLEM No. 6: Stealing of network elements 43

PROBLEM No. 7: Insufficient compensation of fault currents 44

The interrelationship between stakeholder expectations and

network problems 45

3. Financial estimation 46

4. Investment programmes 48

PROGRAMME No. 1: Climate Resilient Network 48

PROGRAMME No. 2: Safe and reliable network 49

PROGRAMME No. 3: Reliable power supply network 51

PROGRAMME No. 4: Smart Network Control 52

Terms and abbreviations 54

Annexes 55

ANNEX 1. Pictures of deteriorated equipment 55

ANNEX 2. LESTO questionnaire for stakeholders 60


Chief Executive‘s Letter

CHIEF EXECUTIVE'S LETTER

Dear Customers, Employees and Shareholders,

The daily goal of LESTO employees is safe and reliable

electric power supply to every Lithuanian consumer. This

task is of top priority for me and other LESTO employees in

our daily activities. We set to our work with great

responsibility because only by getting to know customer

needs and expectations we will contribute to the growth of

consumer welfare.

Already now, looking forward to the future, we are

thoroughly planning the main works of the electricity

network modernisation and renovation. This will improve

the quality of our services even more, open up new

opportunities for existing and new electricity consumers.

With this objective in view, we have prepared LESTO

Investment Plan for the period of

2015–2025. This document contains our utmost and

extremely important works for the upcoming decade. We

have prepared this document based on the needs of our

customers, state and authority institutions, organisations

representing consumers, investors, and other parties

concerned.

We are planning to upgrade the power distribution

network every year based on the best international

practices and with regard to the infrastructure lifetime.

The major part of the electrical economy was built four or

five decades ago, and typical lifetime of the distribution

network elements is about 50 years; therefore, the period

of 2015-2025 will be a significant stage in LESTO operation

- to renew the part of the wearing-out electrical assets,

which consists of more than one hundred thousand electric

lines, more than one thousand transformer substations,

distribution points, and almost thirty-six thousand

transformer rooms.

By the end of the useful service period of our network, it

will just become incapable to meet customer expectations

and safety requirements. That is why it is necessary to take

a major step in the near future, and set to the works aimed

to achieve the future goals. The introduction of smart

technologies will provide us with an opportunity to

consume power in a more efficient and economical way,

we will integrate more renewable resources, and what is

most important, to meet the growing needs of our

customers.

The network managed by LESTO had no substantial

upgrade from the beginning of the electrification, thus

planned investments are necessary. When assessing the

need for investments, we have taken a responsible

approach to the calculation of its effect on the tariff. We

will replace only wearing-out, unsafe and unreliable

facilities, and exert all possible efforts to avoid any

essential changes to the tariff.

Reliability of electric power supply is one of the main

evaluation indexes of our activity. Our aim is to provide

customers with a possibility to use electricity on one-click

of a button, take care of network reliability from them, and

ensure prompt power recovery in case of power

interruption.

For that reason, we have provided for four Investment

Programmes:


Chief Executive‘s Letter

Program for building a climate resilient network aims

to make 40% of our network to become cable. We

endeavor to secure our customers confidence about

the reliability of electric power supply. These changes

will also contribute to more beautiful landscape of our

country.

A Program for a provision of safety and reliability aims

at continuous replacement of old and wearing-out

elements by modern and safe facilities.

A Program for the quality of the voltage aims at the

renewal of network segments with the vast voltage

losses, thus not capable of assuring an adequate

quality of electric power voltage for customers.

Smart Network Program covers the implementation of

the projects aimed to improve the operational

efficiency, distribution network control and the

reliability of electric power supply. Immediate tasks

include the installation of the Unified Dispatch Centre

and Distribution Management System (DMS),

automated accounting for private and business

customers.

LESTO Investment Plan for a period of 10 years is a solid

foundation for the stable and harmonious development of

the Company that will meet the needs of the future

generations.

Aidas Ignatavičius

CEO LESTO AB


Introduction

INTRODUCTION

Application of the long-term business planning principles in

the energy infrastructure companies is considered de facto

Best Management Practice. Distribution Network Operator

LESTO is no exception, as the infrastructure managed is

with relatively long accustomed depreciation terms of

tangible assets (30-50 years), high requirements for

equipment reliability and safety, and smooth running.

After LESTO Business Strategy for the period of 2014-2020

was approved in May 2014, there is a need to prepare a

long-term strategic document in order to specify, explain

and summarize the goals expressed in the Strategy and the

Long-Term Financial Plan related to the long-run

investments into LESTO distribution network

The Document has been prepared with a view to present

LESTO long-term investment goals, directions and its scope

for as wide circle of parties concerned as possible (Society,

Customer, Regulators, and Energy Sector).

The following presents Document's position in the

hierarchy of legislative acts:

It also embodies relations between this Document and

other documents for planning used in LESTO and Lietuvos

energija, UAB (hereinafter - LE) commercial activities. It is

significant to note that the Investment Plan is a part of an

integrated strategic planning process, making an integral

part of other significant long-term planning documents

LE and LESTO Strategies for 2014-2020.


Introduction

The Investment Plan provides for a specific number of the

objects planned for replacement. The number has been

determined based on information available about current

network state and expert assessment. The Document will

be reviewed and updated prior to each regulation period,

i.e. every 5 years, as set forth in the Law on Electricity.

According to the scheme, LE and LESTO Strategies for

2014-2020 establish the main goals and specific financial

indexes for this Document.

LE and LESTO Sector Strategies also establish general

principles of operation in specific business fields and

specific measures that constitute the Document to the

extent that relates them to the long-term investments (for

example, IT). LESTO Strategy for Technological Network

Development and LESTO Investment Ranking Scheme

comprise the tools used in this Document to present the

Investment Programmes and their financial estimation.

Monitoring of the implementation of the Programmes and

measures described herein is conducted in LESTO 3-year

Business Plan.

The Document is divided into four main parts:

Part 1. Stakeholder mapping identifies LESTO main

stakeholders, describes, summarizes and prioritizes their

expectations.

Part 2. Analysis of LESTO distribution network problems

identifies and describes the main problems existing in

LESTO distribution network infrastructure, and relates

them to the stakeholder expectations.

Part 3. Investment Programmes contains descriptions of

the Investment Programmes with their goals, indexes,

terms, financial appraisal and profit generated for

stakeholders.

The following presents the process of the Document preparation:

AB LESTO Investment Plan 2015 – 2025 7

Stakeholder expectations

1. STAKEHOLDER EXPECTATIONS

LESTO manages the distribution network, serves customers

on the entire territory of the Republic of Lithuania, and has

a wide circle of various customers. Due to LESTO business

specifics and its geographical location, it is influenced by

many different stakeholders (for example, customers,

National Commission for Energy Control and Prices

(hereinafter - NCC), Ministry of Energy, State Forestry

Services, Municipalities, foreign investors, etc.) with

different interests. Decisions made and actions taken by

LESTO can exert significant influence on its activities as

well.

For these reasons, the Stakeholder Theory was selected for

the preparation of LESTO Investment Plan for 2015-2025.

This Model is universal, flexible and with an easily grasped

structure that perfectly fits for the analysis of different

expectations, and for the substantiation of the actions

arising therewith on the part of the Company.

Stakeholder Model

This model allows stepping beyond the traditional Agency

theory applied in the preparation of strategies, in which

Company shareholders mean the most important

stakeholder, and making profit the main reason of the

Company's existence. The stakeholder theory emphasizes

that the company operates in a far broader environment

and interconnects with a vast number of stakeholders.

With such a great number of stakeholders, their

expectations differ, and sometimes even contradict each

other. The task of the Company managers is to balance

stakeholder interests. One of the stakeholder model

cornerstones is balancing stakeholder expectations that

lead to the stable development and long-term

performance of the Company.

Based on the Stakeholder Model, planning is conducted for

a long-time period (510 years). The following presents the

main steps of the stakeholder analysis used for the

preparation of the Document (refer to Figure 1):

Figure 1. Investment Plan for 2015-2025 Preparation Chart



The stakeholder model or application of its principles in the

strategic planning with time becomes one of the most well

-known ways to reflect the relation between an

organisation and its environment gaining in strength. The

stakeholder model in business planning is particularly

relevant and applied to the companies that provide

regulated services, monopolistic or state governed

companies. Many stakeholders exert influence on the

activities of such a company; often these companies

include non-profit organisations, and one must find a

balance between significantly different expectations.

One of the relevant examples preparation of business

strategies based on the principles of this model by

distribution networks operators in the United Kingdom in

2013.

Stakeholder Model Application to LESTO

LESTO Investment Plan for 2015-2025 outlines five main

stakeholder groups and specifies stakeholders herein; refer

to Figure 2. These stakeholder groups have already been

analysed, when preparing LESTO long-term Strategy for

2014-2020. An additional group “Energy Sector” was

added, while “Employees” and “Contractors” were

removed, since these groups are not considered the cause

of long-term investment implementation; the expectations

of these groups are examined during detailed action

planning of investments and risk assessment.

Figure 2. Map of LESTO stakeholder groups



Expectations of some stakeholders coincide, for example,

all regulators virtually exist for protection and security of

interests of customers and different society groups. In

spite of it, in order to conduct a more detailed analysis,

expectations of each stakeholder group were separately

analysed and then put into general groups.

Analysis of expectations

Stakeholder expectations have been identified based on

the following information sources:

1. Surveys on the request of LESTO (LESTO Customer

Satisfaction Survey in 2013, LESTO Reputation

survey in 2013).

2. Public information on stakeholders' websites or

their public documents.

3. Stakeholder survey (detailed information about

the survey is presented in the Annex No. 2

“Stakeholder survey questionnaires”).

4. During interviews at the meetings with

stakeholders.

5. Analysis of claims and calls received from LESTO

customers.

The following presents a brief summary of each identified

stakeholder group, its relations with LESTO activities and a

summary of expectations of the stakeholder groups.



LESTO has over 1.6 million customers. Company customers

are widely different: from large enterprises to summer

houses, owners of households, which consume electric

power (hereinafter EP) on a seasonal basis, so their needs

and expectations in respect of the Company are different.

Large corporate customers. A large corporate customer is

a commercial customer that consumes more than 1 million

kVh per year. By the end of 2013, LESTO had 810 large

corporate customers that were supplied with 4 TWh of EP

or almost 50% of the distributed amount of EP from the

Company.

LESTO provides only the distribution service to them

because almost (96%) all of the customers purchase the EP

from independent suppliers. These customers take an

active part in the management of their EP costs, almost all

of them (99%) have been equipped with an automated EP

meters and 95% of them use the self-service portal “My

electricity”. Approximately 45% of them belong to the

second consumer category, i.e. EP recovery must be

ensured in 2.5 hours, and 40 customers comprise the first

consumer category with a right for an uninterruptible

electricity supply.

Changes in the consumption pattern of large corporate

customers (for example, business termination, redirection,

connection of new facilities) can exert significant influence

on the Company's network load.

Small corporate customers. A small corporate customer is

a commercial customer that consumers less than 1 million

kVh of electric power per year. By the end of 2013, LESTO

had more than 50 thousand small corporate customers.

The Company sent 1.8 TWh or 22% of all amount of

distributed EP to them. LESTO operates as both an EP

distributor and supplier (83% of their total EP consumed)

for a group (~30%) of small corporate customers, 8% of

which have been equipped with automated EP meters,

88% of them use the self-service portal “My electricity”.

2,3 thousand small corporate customers belong to the

second consumer category, i.e. EP recovery must be

conducted in 2.5 hours, and 30 customers comprise the

first consumer category with a right for an uninterruptible

power supply.

Private customers. A private customer is a natural person

that purchases electric power for personal, family or

domestic needs unrelated to economic, commercial or

professional activities. By the end of 2013, LESTO had 1.55

million private customers. The Company sent 2.6 TWh or

almost 30% of the total amount of distributed EP to them.

LESTO operates as both an EP distributor and supplier to

the majority of private customers (99.5%).

A small number of private customers use the self-service

portal “My electricity” (4.5% of users). On average, a

private customer consumes EP to the amount of

EUR 19. EP costs of private customers make a relatively

small part in comparison with household income (3%), but

an uninterruptible power supply is especially important for

everyday life.

State Consumer Rights Protection Authority. Authority

coordinates state institutions' activities on protection of

consumers, represents Lithuania in the international

organizations, protects consumers' public interest,

examines complains, and performs educational activities.

LESTO customers who are not satisfied with the quality of

the services provided can protect their interests with the

help of this institution. The main expectation of this

institution is provision of high-quality services by LESTO.

Lithuanian National Consumer Federation. Federation

represents consumers' public interest, seeks for integration

of consumer policy to state management and educates

consumers. Federation sees energy services as “the most

important services for Lithuanian consumers in terms of its

price and quality. Energy services are mainly provided by

monopolistic companies, so consumers' rights are most

vulnerable in this sector”.

Consumer Federation implements many projects in relation

to promotion of responsible consumption and energy

efficiency (for example, the Project on Education of Multi-

storey Apartment House Residents, “Top-10” Project on

Efficient Energy Consumption, preparation of

recommendations for efficient energy consumption).

Lithuanian Confederation of Industrialists. Confederation

of Industrialists unites more than 2.700 enterprises

operating in Lithuania. Confederation represents the rights



of its members, encourages application of ecological

requirements, business development with a common

platform to reach business companies. Almost all

companies are LESTO customers as well. For his reason,

Federation of Industrialists has been identified as a

stakeholder capable of effective representing of business

companies and expressing its opinion on business

expectations related to electric power.

Customer Expectations

GCSI. LESTO customer satisfaction index is measured once

per year by customer satisfaction survey. From 2012

customer satisfaction is measured according to GCSI Global

Customer Satisfaction Index) methodology. The index

reflects both general satisfaction of LESTO customers and

assessment of separate branches of LESTO activities.

According to the survey findings in 2013, connection of a

new consumer, timely fault handling and the quality of

electric power supply have the most profound effect on the

general satisfaction of both private and corporate

customers.

These three fields both play a key role and, according to

private and corporate customers, are subject to

improvement in the first place.

Private customers gave 7.6 points, while corporate

customers 6.7 out of 10 for the easiness of a new

consumer connection to the network.

8.2 points were given by private customers and 7.8

points out of 10 by corporate customers to evaluate

timely fault handling during power supply

interruptions.

The quality of power supply (stable voltage, no

flickering) received 8.5 points from private customers,

and 8 points out of 10 from corporate customers.

Taking into consideration the importance of these fields for

customers and their poor evaluation, they must be put on

top of the priority list in order to ensure customer

satisfaction in LESTO services.

GCSI research trends were supported by the analysis of

customer complaints conducted in 20132014. Almost

one-fourth (24%) of all complaints is related to recurring

failures and/or voltage fluctuations, i.e. complaints about

the quality of EP supply received from consumers.

Additionally, 14% of complaints relate to the new

consumer connection.

GCSI research results were supported by the survey

findings conducted among large corporate customers.

Timely failure handling, uninterruptible and reliable EP

supply are important for the large corporate customers.

Large corporate customers, when answering the

questionnaire, marked as “very important” the energy

efficiency, provision of consulting services and prompt

information exchange with LESTO. Visual reduction of

pollution and reduction of the network impact on nature

and fauna are of medium importance for corporate

customers.

LESTO Reputation Survey. According to LESTO Reputation

Survey (2013), the quality of electric power supply only

partially satisfies or does not satisfy one-fourth of LESTO

customers, i.e. 24%. The most frequently stated reasons of

dissatisfaction include power supply interruptions, power

failure and voltage fluctuations.

Stakeholder Survey. Lithuanian National Consumer

Federation and State Consumer Rights Protection Authority

completed the Stakeholder Expectations Questionnaire

(refer to the Table 1) in this group. Lithuanian National

Consumer Federation specified reduction of the network

impact on nature and fauna, reliable and uninterruptible EP

supply, equipment safety and visual reduction of pollution

as their key expectations. State Consumer Rights

Protection Authority's key expectations include reliable and

uninterruptible EP supply, energy efficiency and safety of

network facilities.

Stakeholders in the customer group evaluated the invisible

physical network in picturesque places and protection of

stork nests as the least important expectations.



Table 1. Stakeholder expectations of different customer groups

Large corporate

customers

Lithuanian

National

Consumer

Federation

State Consumer

Rights

Protection

Authority

Average score

Energy efficiency and sustainable consumption 4 4 4 4.0

Reliable power supply (excluding power surges) 4 3 4 3.7

Uninterruptible power supply 4 3 4 3.7

Prompt settlement of legal disputes 3 4 4 3.7

Prompt power supply recovery after storms 4 3 4 3.7

Safety of power network facilities 3 3 4 3.3

Consulting on LESTO services 4 3 3 3.3

On-line information exchange with LESTO 4 3 3 3.3

LESTO performance 3 3 4 3.3

Cooperation in the implementation of the energy

efficiency surveys and application of innovations 3 4 2 3.0

Cooperation in the implementation of social

responsibility projects 2 4 3 3.0

Detailed information about LESTO Investment Projects 2 3 4 3.0

Reduction of the network impact on nature and fauna 2 4 2 2.7

Noise level from LESTO facilities 2 3 3 2.7

Visual reduction of pollution, removal of overhead

lines and worn-out rests 2 3 2 2.3

Protection and safe transfer of stork nests 2 3 1 2.0

Invisible physical network in picturesque places,

national parks, settlements 2 2 1 1,7



Many organisations with different objectives represent

public interests. For a more effective analysis,

organisations were divided into four groups according to

their interests: nature protection, self-management,

science and research, and other.

Nature protection

State Service for Protected Areas. One of its key objectives

is to ensure the security of the protected areas, their

sustainable usage and landscape stability, preservation of

landscape and biological diversity, and creation of

conditions for educational tourism in the protected areas.

Pursuant to the Law on Protected Areas of the Republic of

Lithuania, the general system of protected areas consists

of:

The areas protecting unique or typical objects of

natural cultural landscape. These include strict

reserves, reserves and objects of cultural heritage

(monuments).

Territories under ecological protection are identified in

order to avoid adverse impact on the protected

objects of nature and cultural heritage or adverse

impact of anthropogenic objects on the environment.

This category includes zones of ecological protection.

Restorative protected areas intended for restoration,

enhancement and protection of natural resources.

These include restorative and genetic plots.

Complex protected areas cover areas under

preservation and protection, recreational and

economic areas. These include state (national and

regional) parks, strict biosphere reserves and

biosphere grounds.

Some part of protected areas is under particular protection

for its significance, complexity and uniqueness, which

currently covers more than 1.023 thousand ha, i.e. about

15.67 % of the country area.

The elements of LESTO distribution network, namely

overhead and underground power lines, transformers,

underground power lines and metering cabinets comprise

the perimeter of protected areas. LESTO used the data of

Service for Protected Areas to identify the number and the

type of network elements present in the protected areas,

refer to Figure 3 “LESTO overhead power lines and

substations in protected areas”. Network elements

produce a negative impact on flora, fauna, and decrease

the value of landscape.



Figure 3. LESTO overhead power lines and substations in protected areas

Protected areas are represented in green colour on the

Figure 3. According to the Figure, LESTO operates 4.133

(9%) substations and 10.5 thousand km (11%) of overhead

power lines.

Directorate General of State Forests and State Forest

Service organise and coordinate restoration, maintenance,

protection and usage of forest resources. Lithuanian

forests cover approximately 33% of the country area and

account for 20% of the Company overhead power lines. A

major part of failures in the overhead power lines ( 80%)

occurs during storms on the territories covered by forest.

Lithuanian Ornithological Society. Ornithological Society

aims at provision of efficient protection to birdlife1,

conducts researches on birdlife and its living environment.

LESTO and Lithuanian Ornithological Society started

cooperation in 2011. Currently they participate in the

implementation of the Project on Preservation of White

Storks, whereby more than 3200 of stork nests have been

transferred to special nesting platforms. According to the

1 DIRECTIVE 2009/147/EC OF THE EUROPEAN PARLIAMENT AND

OF THE COUNCIL of 30 November 2009 on the conservation of wild birds

studies2 , collision with overhead power lines is one of the

main causes of non-natural bird deaths. Three bird deaths

account for each kilometre of lines per year3, or about 280

hundred thousand birds in LESTO overhead grid. This

problem is particularly topical in habitat of birds (Žuvinto

Reserve, the Lower Nemunas, at the beach, etc.) and on

the territories covered by forests. Distribution network is

extremely dangerous for large birds (owl, geese, and

eagles). They do not notice the wires while flying and

because of large size of the wings, they die after coming

into contact with the wires. Replacement of the overhead

electricity lines is a solution to this problem.

Self-management

Municipalities. There are 60 local municipalities in

Lithuania that coordinate education, territory planning,

provision of information to society and recreation.

Municipalities are aware of the city development plans

best of all, and LESTO coordinates plans for development

and reconstruction of streets and territories with them.

2UN Convention on migratory species. 2011. Guidelines for

mitigating conflict between migratory birds and electricity power grids

3 Rubolini, D., Gustin, M., Bogliani, G., Garavaglia, R.. 2005. Birds

and powerlines in Italy: an assessment



Local Authorities. Lithuanian Association of Municipal

Local Authorities. Association consists of 443 Lithuanian

Local Authorities. Association coordinates and encourages

cooperation with Local Authorities, strengthens

partnership with local authorities, business and non-profit

organisations, encourages active participation of residents

in decision-making, and strengthens communal movement.

Local Authorities are closely connected with residents and

can best convey to them the challenges they face. Through

the Local Authorities LESTO educates the society on the

maintenance of planting in the network protected areas

and safe conduct with electricity.

Science and Research

Research and education bodies (Kaunas University of

Technology, Vilnius Gediminas Technical University, Vilnius

University, Klaipėda University). Every year about 175

hundred thousand students study at Lithuanian

universities. This is a large, young and active community.

LESTO maintains close ties with Kaunas University of

Technology due to the particularity of university's

activities, i.e. the widest range of engineering professions.

LESTO experts participate in lectures as external lecturers

and guests, and help improving study programmes.

In 2013, 92 students from 34 different higher education

schools from Lithuania and Europe did the practical

training at LESTO. Universities operate as scientific and

research centres, so mutual cooperation provides benefit

to both parties.

Lithuanian Energy Institute carries out scientific research

activities for sustainable development of Lithuanian energy

sector and other branches of economy, integration into

European energy systems and European scientific

environment, encourages economic development based on

innovations and knowledge, participates in the installation

of modern processes and facilities, which ensure efficiency

and safety of energy objects and systems, efficient usage,

conservation of energy resources and reduction of

pollution. LESTO considers Lithuanian Energy Institute as

its partner and adviser in the implementation of innovative

projects.

Lithuanian Hydrometeorological Service collects, stores

and analyses meteorological and hydrological information

on Lithuanian climate. This information is necessary for

Lithuanian national needs and for discharge of

international commitments in mitigating negative impact

of adverse hydrometeorological conditions on natural

environment and human population.

Other

State Department of Tourism carries out strategic planning

of tourism, submits proposals on the issues of the state

tourism policy and its implementation to the Government

of the Republic of Lithuania, assists in the implementation

of the National Tourism Development Programme,

coordinates the activities of the ministries and

Governmental institutions, county governors, municipal

institutions, and state park management bodies in tourism

development. One of the important fields of Department

activities is the development of the objects as an attractive

tourism destinations and their popularisation.

Replacement of LESTO overhead electricity lines by

underground network contributes to this objective.

Society Expectations

Different stakeholders share common expectations. It is

important to note that we took a broad view on the

analysis of the society expectations, i.e. a broader circle of

stakeholders with certain organisations representing their

expectations. To gather information about stakeholder

expectations, we sent 48 questionnaires to stakeholders

that represent a public interest and received 38 responses

with the answers provided in the Table 2 below. We also

organised meetings with Lithuanian Hydrometeorological

Service, Lithuanian Ornithological Society and the Forest

Owners Association of Lithuania and carried out the

analysis of public documents.

After summarizing the survey data and public information,

we can state that reliable power supply, equipment safety,

energy efficiency and sustainable usage are first in

importance for the stakeholders representing the public

interest (refer to the Table 2). These statements have been

valued as extremely important. Such statements as visual

reduction of pollution, reduction of the network impact on

nature and fauna, cooperation in the implementation of

the energy efficiency surveys and application of

innovations are also very important for the society.



Table 2. Expectations of the separate stakeholders in the society group

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Energy efficiency and sustainable

consumption 4 4 4 4 4 4 4 3 4 4 3.9

Uninterruptible power supply 4 3 4 3 4 4 4 4 4 4 3.8

Reliable power supply (excluding

power surges) 4 3 4 3 3 4 4 4 4 4 3.7

Safety of power network facilities 3 3 4 3 3 4 4 4 4 4 3.6

Prompt power supply recovery

after storms 4 3 4 2 3 4 3 4 4 4 3.5

On-line information exchange with

LESTO 4 3 3 3 3 4 4 4 4 3 3.5

Reduction of the network impact

on nature and fauna 2 4 2 4 3 3 4 3 4 3 3.2

Cooperation in the implementation

of social responsibility projects 2 4 3 3 3 3 4 4 3 3 3.2

LESTO performance 3 3 4 3 2 3 3 4 3 3 3.1

Cooperation in the implementation

of the energy efficiency surveys and

application of innovations

3 4 2 3 3 3 4 3 3 3 3.1

Prompt settlement of legal disputes 3 4 4 2 3 3 3 3 3 3 3.1

Consulting on LESTO services 4 3 3 2 2 3 3 4 3 3 3

Protection and safe transfer of

stork nests 2 3 1 4 3 3 3 3 4 3 2.9

Detailed information about LESTO

Investment Projects 2 3 4 2 3 3 3 3 3 3 2.9

Noise level from LESTO facilities 2 3 3 4 2 3 3 3 3 2 2.8

Visual reduction of pollution,

removal of overhead lines and

worn-out rests

2 3 2 4 2 3 3 2 3 3 2.7

Invisible physical network in

picturesque places, national parks,

settlements

2 2 1 4 2 3 2 3 4 3 2.6



National Commission for Energy Control and Prices

(hereinafter NCC) is one of the most significant

institutions in LESTO activities that LESTO cooperates with

in order to ensure the quality of the services in line with

consumer expectations and increase its performance.

Due to considerably low purchasing power, Lithuanian

residents are particularly sensitive to even minor price

adjustments for electricity, so NCC aims at making the price

of EP as low as possible for the end users and seeks to find

any possible way to reduce each constituent of the price of

EP, including the constituent of distribution.

LESTO coordinates the key investments planned (more

than 1.5 million euro) with NCC and the basic pricing

principles of electric power supply. This institution

regulates almost all practical aspects of LESTO activities,

establishes methodologies for calculation of maximal tariffs

for electric power, and the procedures for submission and

examination of requests for adjustment of new prices or

tariffs for electric power, and afterwards checks the

calculations of prices and tariffs according to respective

requests. NCC also monitors the application of the prices of

electricity and implementation of energy saving

programmes, including the Energy Efficiency Directive of

the European Commission and its accompanying legislative

acts in Lithuanian national legislation.

In the activities of any company, a part of customers pays

attention to the problems related to the quality of the

services and the processes. Should LESTO consumers have

complaints about the above-described fields, NCC shall

examine consumer complaints and disputes that arise,

protecting consumer interests. This institution has broad

powers, and submits reports and proposals conducted

within its competence

to the ministries, Seimas and the Government of the

Republic of Lithuania.

State Energy Inspectorate. The key objective of the State

Energy Inspectorate (hereinafter SEI) is to conduct

technical state control of power facilities owned by legal

and natural persons in order to ensure reliable, efficient

and safe supply and consumption of energy resources.

LESTO maintains close cooperation with SEI in solving

technical issues in this field.

SEI issues to LESTO and its subcontractors certificates

granting the right to operate power facilities, terminates

and annuls its validity, monitors the observation of the

operational conditions set in the said certificates and the

requirements of legislative acts. SEI also monitors the

reliability of power distribution and supply, including

consumption efficiency and observation of the

requirements set for the quality of energy. In case if

technical issues arise, LESTO consults SEI to find the best

solution.

SEI examines complaints regarding failures of power

objects, facilities and metering devices, requirements for

power quality, violations of electric power accounting and

payments for the energy consumed, accidents,

termination, suspension or restriction of power supply.

Ministry of Energy of the Republic of Lithuania

(hereinafter ME) develops the state policy in the energy

sector and organises its implementation, i.e. develops the

legal framework significant for LESTO activities in relation

to power supply, safety of power objects and facilities,

mounting of power facilities, operation, usage and other

technical aspects.

ME approves the rules for distribution, supply and

consumption of energy and energy resources, establishes

requirements for the energy and energy resources. One of

its key functions is related to the approval of plans for the

development of the state energy objects and the policy for

the usage of sustainable sources. ME establishes

conditions and procedures for connection of users and

producers to the objects (networks, facilities, systems) of

operating power companies and that is very important for

LESTO.

This stakeholder also establishes conditions and

procedures for certification of persons entitled to operate

power facilities. LESTO and ME representatives have been

cooperating for many years already in different working



groups and initiating changes in Lithuanian electric energy

system.

Ministry of Economy of the Republic of Lithuania. Ministry

of Economy of the Republic of Lithuania (hereinafter - ME)

plays a significant role in LESTO activities because the

ministry submits to the Government proposals for the

priorities and objectives of economic development of

Lithuanian economy, manages support to business

development, participates in the implementation of long-

term state strengthening programmes, in the assessment

of cost impact of climatic changes on the economy, and in

the development of the principles and guidelines for good

management for companies.

ME participates in the development of the consumer

protection policy. LESTO is the company that has the

greatest number of customers in Lithuania of 1.6 million

that is why the guidelines of the policy are topical for the

Company and have significant influence on the

arrangement of its activities. Ministry also coordinates the

metrology of all Lithuanian economy branches, i.e.

activities of EP metering devices, prepares technical

regulations and other standard documents in this field.

The price of electricity for the end users is substantial for

the Ministry of Economy, so this is the reason why LESTO

cooperates with ME to make Lithuania more attractive for

local and foreign investors, which is one of the key

priorities of the Ministry activities. ME monitors the

implementation of the proposals for the improvement of

business conditions submitted by state institutions and

establishments, organises expert appraisals of national and

international research on business conditions, summarizes

the results of the analyses and submits the reports and

proposals for the improvement of business environment to

the Government and other state institutions. These

recommendations are partially related to one of LESTO

services connection of new users to LESTO distribution

network.

ACER. The main functions of the Agency for the

Cooperation of Energy Regulators (ACER):

To issue general recommendations for the usage and

development of cross-border gas pipelines and

electricity networks to serve as the grounds for laying

down specific rules by operators of EU states.

To monitor the implementation of the network

development plans for a period of 10 years throughout

the European Union and to plan the development of

the national networks.

To decide on the matters substantial for several states,

in the case when national regulators fail to agree or

apply for ACER opinion.

LESTO receives the major part of ACER decisions and

recommendations from the local regulator (NCC) or

through legislative acts adopted by ME.

The European Commission’s Directorate-General for

Energy. The European Commission’s Directorate-General

for Energy (hereinafter DE ENER) is responsible for the

development and implementation of the European Energy

Policy. The main objective of the DE ENER is to ensure that

the European Energy Policy serves for all economy sectors,

public entities and citizens. With this objective in view DE

ENER:

Contributes to setting up an energy market providing

citizens and business with affordable energy,

competitive prices and technologically advanced

energy services.

Promotes sustainable energy production in line with

the EU 2020 targets and with a view to the

decarbonisation objective until 2050.

Enhances the conditions for secure energy supply in a

spirit of solidarity and cooperation between EU

Member States.

DE ENER carries out its tasks in many different ways. For

example, it develops strategic analyses and policies for

certain energy sectors; promotes the completion of the

internal energy and other types of markets; supports the

reinforcement of energy infrastructure, ensures that

indigenous energy sources are exploited in safe and

competitive conditions. Another very important field of

supervision is to ensure that markets can deliver agreed

objectives, notably in efficiency and renewable energies

(hereinafter RE).

Directorate-General also monitors the transfer of EU

legislation standards (directives, network codes, etc.) to

Lithuanian national legislation acts. Some of them exert

direct influence on LESTO. For example, the Energy

Efficiency Directive that requires from LESTO and other

obligated parties of the energy sector to use energy more

efficiently to achieve Union’s 2020 headline target.



Government of the Republic of Lithuania. Government of

the Republic of Lithuania is currently updating the National

Energy Independence Strategy and will select the most

economically advantageous and consumer reasonable

strategic decision for the state energy self-sufficiency that

will influence LESTO activities.

The Governmental Programme aims to increase the

efficiency of energy consumption, develop distributed

generation, and promote setting up small cogeneration

plants closer to consumers. EU support will be used for

modernisation of electricity networks based on smart

network solutions that will enable more efficient usage of

various generation sources, create favourable conditions

for the development of the electromobile economy,

production of heat pumps and other facilities regulating

production and consumption of electricity.

It is planned to amend legislative regulation of energy

transmission and distribution so that Regulator would

consider the criteria of energy consumption efficiency prior

to the approval of tariffs on transmission and distribution

services.

The State expects smooth participation in the above-

mentioned processes from LESTO, including:

Transparent and profitable operation for contributions

to the State Budget with dividends on a regular basis.

Positive brand of monopolistic company with priority

given to the high-quality services.

Implementation of the projects aiming to increase the

value of the managed property and company

performance.

Fast and flexible readjustment to the new and subject

to changes requirements of Lithuanian and EU

legislation.

Regulator Expectations

In summary, stakeholder key expectations related to

Regulation with regard to LESTO are as follows:

Reasonable and competitive price of services.

Improvement of the quality of services in line with user

expectations.

Safety and reliability of the electricity network.

Business transparency and improvement of

performance.



Litgrid, AB (hereinafter LITGRID) is an electricity

transmission system operator (hereinafter TSO). The

company manages Lithuanian electricity transmission

market and is responsible for its development. Its main

function is to ensure an efficient and reliable operation of

the national power system.

LITGRID manages the national electricity balancing in real

time and ensures the quality of electricity in the

transmission network. Lithuanian electricity transmission

networks are connected with the neighbouring electric

energy systems: Lithuania is connected with Latvia by four

330 kV and three 110 kV electricity lines, with Belorussia -

by five 330 kV and seven 110 kV electricity lines, with

Kaliningrad district by three 330 kV and three 110 kV

electricity lines. At present time, the company is

implementing strategic projects on the construction of

power links with Poland (LitPol Link) and Sweden

(NordBalt).

LITGRID is responsible for planning of the national

electricity transmission network, accident prevention and

liquidation, ensures that the quality of the transmitted

electricity meets the standards.

Since LITGRID directly transmits the EP only to 11 users,

LESTO services the majority of customers and is an

intermediary between them and LITGRID. Therefore,

stable operation of LESTO transformer substation

(110/35kV) is of great importance for LITGRID. Prompt

restoration of power supply after storms and natural

disasters is crucial for LITGRID.

Small producers. According to the data of the national

balance of electricity production and consumption in 2013,

15% of electric power consumed in Lithuania last year was

produced by using various RES. Considering rapid

technological progress and herewith related decrease in

costs of RES installation (especially solar and wind farms),

world's and EU targets on reduction of climatic changes, it

is obvious that this part of the sources will be constantly

increasing in the general balance of the state energy.

Customer expectations in this growing segment with

regard to LESTO could be as follows:

Prompt connection of RES to the distribution network.

Application of efficient technological solutions.

Independent suppliers. In 2010, a free electricity market

was set up in Lithuania and the electricity supply services

were separated from the electricity distribution services.

Independent suppliers of electric power entered the

liberalized supply market, whose main function is to buy

the electricity from producers and importers, and then

resell it to consumers. Competition between suppliers

encourages them to reduce the price of electricity to the

end users. Seventy-four companies held independent

electric energy supplier's licenses as of 30 September 2014.

Independent suppliers, acting as representatives of

consumer interests, negotiate the purchasing price of the

electric energy with producers and importers, and assume

the risks of fluctuations of its consumption. Independent

electricity suppliers mainly work with corporate customers.

Since consumers provide information about the electricity

consumed to LESTO, timely receipt of the necessary data is

vital for independent suppliers. In the transition period,

the history of EP consumption data of specific domestic

users is equally important because independent suppliers

can use it in order to develop a portfolio of the targeted

customers. Independent suppliers are particularly

interested in receiving hourly consumption schedule in the

real time. For example, by means of smart meters.



Ministry of Finance of the Republic of Lithuania. Ministry

of Finance (hereinafter MF) is both a principal

shareholder of Lietuvos energija, UAB, and LESTO owner.

MF is responsible for the performance, improvement of

efficiency and business transparency of the entrusted

companies.

The area of competence of the Ministry of Finance, which

is related to preparation and coordination of the EU

funding programmes for the period of 2014-2020, is

significant in LESTO activities. LESTO has great scope to use

the support from the EU Structural Funds for

modernisation of the network objects.

Lietuvos energija, UAB (hereinafter LE), holds the

majority of LESTO shares (94.39%). The remaining shares

are listed on the Stock Exchange. LE as direct shareholder’s

key expectations directed towards achievement of its main

Business Strategy for 2014-2020 objective – sustainable

increase of value – are as follows:

Constant improvement of operational efficiency

reduction of operational costs by optimization of

business processes.

High-level customer servicing, introduction of the

state-of-the-art technological developments and

expansion of the remote channels for customer

servicing.

Provision of high-quality EP distribution services

ensure proper technical state of network facilities and

systematically modernise and automate the

distribution network.

Reduction of adverse effects of the energy objects on

the environment and human population.

NASDAQ OMX Vilnius is a sole securities market

infrastructure operator in Lithuania offering services of

securities trade, listing and information. The operator is

headed by Nordic Northern Europe’s securities market

operator NASDAQ OMX (including the Copenhagen Stock

Exchange, the Stockholm Stock Exchange, the Helsinki

Stock Exchange, Riga and Tallinn Stock Exchanges). The

mission of the NASDAQ OMX Vilnius is to organize and

develop Lithuanian securities market by creating the most

favourable conditions for issuers, investors, and financial

intermediaries to exploit efficiently the advantages of the

capital market.

LESTO is listed on NASDAQ OMX Stock Exchange from the

beginning of the company establishment in 2011. Each

quarter LESTO informs its shareholders through the Stock

Exchange about its performance, provides its comments on

the results and publishes the annual performance reports.

NASDAQ OMX key expectations for issuers include high

reputation, business transparency and effective

communication.

Minority shareholders. LE owns 94.39% of LESTO shares,

while the remaining shares belong to the minority

shareholders. Minority shareholders are shareholders that

do not have the voting control due to the minor quantity of

the owned shares and thus cannot influence any decisions,

but they are entitled to attend shareholder meetings and

receive dividends.

Minority shareholders are interested in:

Transparent and profitable LESTO activities.

Regular dividend payments.

Stable or increasing prices of LESTO shares.

Investors Association represents and protects small

investors, provides recommendations and carries out

educational activities. Association's expectations virtually

coincide with the interests of minority shareholders.



The interrelationship between stakeholder groups and their expectations

Figure 4 reflects summarized stakeholder expectations and

stakeholder groups, indicating which expectation is

important for each group. Figure 4 presents a summary of

LESTO stakeholder expectations

Figure 4. Stakeholder Expectations


Analysis of LESTO Distribution Network Problems

4: ANALYSIS OF LESTO DISTRIBUTION NETWORK PROBLEMS

The analysis of the distribution network involved the

evaluation of technical parameters of the equipment (age,

number of failures, types of equipment) and application of

the expert appraisal. The findings revealed the existing

problems of the network that hamper the satisfaction of

the stakeholder expectations:

PROBLEM No. 1: Deterioration of network elements

PROBLEM No. 2: Poor automatic control of medium

voltage distribution network

PROBLEM No. 3: Non-resistant distribution network to

weather conditions

PROBLEM No. 4: Substandard voltage in the power supply

network

PROBLEM No. 5: Energy accounting lacking details

PROBLEM No. 6: Network thefts

PROBLEM No. 7: Insufficient compensation of fault

currents

The problems listed above have significant influence on the

main indexes of LESTO activity: SAIDI, SAIFI and customer

satisfaction. The following presents a detailed analysis of

each problem.

PROBLEM No. 1: Deterioration of network elements

Deterioration of 35 kV overhead power lines

The average lifetime of 35kV overhead power line is 41

year, if property depreciation period of 45 years is applied.

According to the Figure

5, only 87 km or a bit more than 2% of lines of 35 kV

overhead power lines were rebuilt from 1989.

Figure 5. Age histogram of 35 kV overhead power,

km

LESTO operates 20.7 thousand poles of 35 kV overhead

power lines, 58 types of different poles (the pole differs by

shape: square or round, by material: metal or reinforced

concrete, type of structure). 4 types of them (PB35-1,

PB35-1V, TKA ir TKA-1) are particularly unsafe. In general,

almost a half, 42%, of all poles of 35 kV overhead power

lines operated by the Company are unsafe.

Wearing-out

until 2014

Wearing-out

until 2025



PB35-1 and PB35-1V-type poles from reinforced concrete

were mounted in 1954-1989. Their average lifetime is 40

years. This type of poles have a shape of a square, and

they are usually very crumbled, cambered, so there is risk

of tumbling down, especially during storms, refer to the

Annex No.1 “Pictures of depreciated equipment”.

TKA and TKA-1-type poles from reinforced concrete were

mounted in 1954-1989, the majority of them was built in

1960-1965, and their average lifetime is about 51 year.

This type of poles have many cracks along its full length

with crumbled tops, so there is risk of tumbling down,

especially during storms.

The poles of 35 kV overhead power lines weigh 4-6 tons,

they are 14-23 m high, so tumbling down is particularly

dangerous, even in the case of automatic voltage

disconnection. On average, the pole of 35 kv overhead

power line is erected in one day, but the process of

ordering and delivering them may take up to several

months.

Table 6 presents the elements of 35 kV overhead power

lines that have worn-out due its age or technical features.

Table 6. Deficiencies of LESTO 35 kV overhead power lines



Ageing of 10 kV network lines

10 kV network consists of overhead and underground

power lines. The average lifetime of 10 kV line is about 30

years. 70% of 10 kV network length consists of the

overhead power lines. Depreciation period of 10 kV

overhead line is 30 years, and the underground line’s 40

years. The average lifetime of the overhead line's kilometre

is 43 years, i.e. 13 years more than the depreciation period.

The average lifetime of the underground line's kilometre is

29 years.

Figure 7. Age histogram of 10 kV overhead lines, km

10 kV line network consists of more than 10 different

elements. The following three groups of them have been

distinguished to analyse the age:

Poles of the overhead power lines. LESTO 10 kV

network contains more than 570 hundred thousand

poles and about 90 different types of them. 51% of

poles are of SNV 2.7 type. A part of poles (such as C-2

and SN-2a) is unsafe. Production technology (used

concrete) of this type of poles is of poor quality, poles

quickly become crumbled and cramped. Poles of this

type account for 1% of the total quantity of the poles.

The major problem in the age of 10 kV poles lies in

the overlong period of their service, i.e. 84% of

poles continue operation after expiration of the

depreciation period and are older than 30 years. A

significant part of the worn-out poles consist of

crumbled, canted and cramped poles and they will

most likely tumble down in storms and cause

network failures and danger to the environment.

Cables of underground lines. LESTO 10 kV network

consists of more than 12 thousand kilometres of

underground lines or 30%

of the entire 10 kV line network. A part of

underground line cables (such as AAŠpsU, AAŠv,

AAŠvU or ASB) is unsafe due to the poor quality of the

materials and poor control during the production

process. ~9% of 10 kV underground network consist of

the said cables. Unsafe cables were produced in the

period of 1989-1998 with its insulating material being

unsafe too, and for this reason, underground lines

frequently deteriorate.

Switching devices switch on/off the line or change the

direction of the current in it. Usually switching devices

are mounted on the pole lines and exist in two types:

Wearing out

until 2014

Wearing-out

until 2025



reclosers and mechanical limiters. In the event of

failure on the line and temporary interruption of EP

supply to customers, switching devices help to reduce

the consequences of the failure: if the failure is behind

the limiter, after disconnecting the limiter it is possible

to supply the EP to customers on the line section from

the substation up to the limiter, thus improving SAIDI

index.

There are about 20 thousand of limiters with

manual operation or, on average, one limiter per 6

km of the lines in LESTO network. The average

lifetime of the limiter is 21 year, and its period of

service is about 30 years. 3RN-1-10, 3RN-1-20 or

3RN-2-20-type limiters are particularly unsafe

because they are worn-out and rusty, so they jam

and break while attempting to switch them on.

Approximately 49% of the total quantity of limiters

consists of the mentioned limiters.

Table 8 presents the elements of 10 kV overhead lines that

have worn-out due its age or technical features.

Figure 8. Deficiencies of LESTO 10 kV overhead lines



Ageing of 0.4 kV network lines

0.4 kV network consists of the overhead and underground

lines. 77% of 0.4 kV network length consists of the

overhead lines. The average lifetime of 0.4 kV overhead

line's kilometre is about 34 years. Depreciation period of

0.4 kV overhead line is 30 years, and the underground

line's 40 years.

Figure 9. Age histogram of 0.4 kV lines, km

Low-voltage 10 kV line network consists of more than 10

different elements. The following two groups of them have

been distinguished to analyse the age:

Poles of the overhead lines. LESTO 0.4 kV network

consists of more than 1.260 thousand poles and about

70 different types of them. About 50% of the overall

quantity of the poles consist of the 10 most frequently

used poles. A part of the poles (such as SN-2a, Pa-1, A-

1a or A-1T) is unsafe. Production technology (used

concrete) of this type of poles is of poor quality, poles

quickly become crumbled and cramped. ~16% of the

overall quantity of the poles are unsafe.

The major problem in the age of 0.4 kV poles lies in

the overlong period of their service, i.e. 74% of

poles continue operation after expiration of the

depreciation period and are older than 30 years. A

significant part of the worn-out poles consist of

crumbled, canted and cramped poles and they will

most likely tumble down in storms and cause

network failures and danger to the environment.

Cables of underground lines. LESTO 0.4 kV network

consists of more than 16 thousand km of the

underground lines or 23% of the entire 0.4 kV line

network. A part of underground line cables (such as

AAŠpsU, AAŠv, APSVG, APŠVu, APVB) is unsafe due to

the poor quality of the materials and poor control

during the production process. 8% of 0.4 kV

underground network consist of the said cables.

Unsafe cables were produced in the period of 1989-

1998 with its insulating material being unsafe too, and

for this reason, underground lines frequently

deteriorate.

Table 10 presents the elements of 0.4 kV overhead lines

that have worn-out due its age or technical features.

Wearing out

until 2014

Wearing out

until 2025



Figure 10. Deficiencies of 0.4 kV lines



Ageing of 110/35/10 kV and 35/10 kV transformers

LESTO has 360 pcs. of 110/35/10 kV and 260 pcs. of 35/10

kV transformers. These transformers mark the limit of

LESTO distribution network with LITGRID transmission

system operator and they are particularly important

facilities, on which the reliability and the quality of

electricity supply depends on.

Approximately 29 years make the average age of the

transformers used in LESTO network. The depreciation

period of 40 years applies to them. At the present time,

LESTO operates 620 transformers. 22% of them are

completely worn-out, refer to the

Figure 11.

Figure 11. Age histogram of 110/35/10 kV and 35/10 kV transformers, pcs.

Most of the transformers (about 62%) were produced in

the Soviet Union and do not meet technical requirements

of the present day: winding insulation is worn-out, they

generate heavy idling and short circuit losses, make too

much noise, have too big dimensions, voltage regulators do

not meet the requirements, 110 kV inputs, controllers and

control devices are worn-out. Oil seeps through power

transformer's seams, gasket and valves.

Three main transformer's parts have been distinguished

and included in the analysis of equipment age:

Power transformer for electric voltage earthing in the

network.

Power transformer's switches and their actuators for

voltage control.

Oil tanks for collection of oil that flows out from the

transformer in the event of accident or theft. Tanks are

placed under the transformer, below the ground level.

In the event of oil discharge, it flows into the tank and

does not penetrate into the ground and underground

water.

The ageing problem of other devices (insulators, relay

protection and automation, compensating facilities, etc.) is

not so critical; hence, they were not included in the

analysis. Table 12 presents the deficiencies of 110/35 kV

and 35/10 kV transformer substations.

Wearing out

until 2014

Wearing out

until 2025



Figure 12. Deficiencies of 110/35/10 kV and 35/10 kV transformers



Ageing of 35 kV and 10 kV distribution points

LESTO network consists of 221 pcs. of 35 kV and 394 pcs. of

10 kV distribution points. Distribution point is a constituent

part of the substation to distribute electricity from one

point to separate lines of the same voltage.

Distribution points consist of several single cubicles. The

average age of 35 kV distribution point cubicle is about 24

years, 10 kV distribution point cubicle 25 years. The

depreciation period of 30 years applies to the distribution

points. Now the Company operates almost 3.7 thousand or

45% of worn-out distribution points' cubicles, refer to the

Figure 13.

Figure 13. Age histogram of 35 and 10 kV distribution points' cubicles

Wearing-out

until 2014

Wearing-out

until 2025



Ageing of 10 kV distribution points

LESTO network consists of 523 distribution centres (10 kV).

This assembly is designed to distribute the electric power

from one point to the separate line taps of the same

voltage.

The average lifetime of the distribution center is

approximately 24 years. The depreciation period of 30

years applies to the distribution points. At present, the

Company operates 213 pcs. or 43% of worn-out

distribution points, refer to Figure 14.

Figure 14. Age histogram of 10 kV distribution points, psc.

Wearing-out

until 2014

Wearing-out

until 2025



Ageing of 10/0.4 kV transformer substations

LESTO operates more than 47 thousand 10/0.4 kV

transformers mounted in 39 thousand transformer

substations. Transformer substation contains delimiters,

closers, insulators, constructional part and other

equipment.

Two types of transformer substations have been

distinguished that face the critical problem of ageing:

Unit transformer substations make up to 38% of the

overall quantity of the transformer substations. The

types of 88% of the unit transformer substations are

"Šiaulių" or "Minsko" (housings of these transformer

substations with some equipment were produced at

the factories in the cities of Šiauliai and Minsk); refer

to the Annex No. 2 “Pictures of depreciated

equipment”. New transformer substations of the

mentioned types have not been produced for 20-30

years already; the Company only repairs the old

substations. The housing of the most part of

substations is rusty, and due to metal that grew

thinner, it is difficult to fix insulators to them;

reinforced concrete poles that support them became

crumbled, they are no more hermetically sealed and

leak water and snow; they are easily accessible to steal

the oil.

Stationary transformer substations belong to the

second largest category of transformer substations,

which makes up 33% of the overall quantity of the

transformer substations. Transformer substations of

this type have been rarely erected lately, only in those

locations where it is difficult to set up a modular

transformer substation. There are two main types of

the stationary transformer substations: immovable

two-storeyed usually located in the suburbs or next to

the abandoned collective farms or one-storey made

from concrete and located in the city.

The average age of the transformer as of the main

assembly of 10/0.4 kV transformer substation is 25 years.

The depreciation period of 30 years applies to all

transformers. LESTO operates more than 18 thousand

worn-out transformers (refer to the Figure 15), and

approximately a half of them consists of the transformers

from Minsko and Šiaulių transformer substations.

Figure 15. Age histogram of 10/0.4 kV transformers

Wearing-out

until 2014

Wearing-out

until 2025



Figure 16 presents the elements of 10/0.4 kV transformer

substations that have worn-out due its age or technical

features.

Figure 16. Deficiencies of 10/0.4 kV transformer substations



PROBLEM No. 2: Poor automatic control of medium voltage distribution network

Current situation

With the development of the smart network technologies

and reduction of their prices, economically developed

countries introduce and integrate advanced solutions to an

increasing extent into distribution network management to

improve and increase its efficiency. They enable to identify

failures and eliminate failures in a prompt manner, to plan

the network modes more accurately, to use the available

capacities more efficiently, i.e. to improve the quality of

the services and to reduce the operating costs in time.

Automated grid control presents an improvement in the

segment of the distribution network by means of smart

technology that has one or several of the following

features:

Remote status monitoring of the separate grid

elements.

Remote switch on/off the device, change of its

parameters or modes.

Programming separate elements to respond to certain

unusual situations, automatic switching (self-healing

grid).

Over the past decade, the major emphasis in LESTO

distribution network has been made on the automation of

the elements of the higher voltage grid (110/35/10 kV

substations, 35 kV lines and 35/10 kV substations) because

of the relatively small amount of investments due to the

small number of these elements and considerable return

on these investments.

During this period, LESTO 110/35/10 kV and 35/10 kV

substations, 35 kV and its 10 kV switching devices have

been connected to SCADA Remote Control Equipment,

with reclosers having been partially set up on 10 kV line

enabling monitoring operation of substations in real time,

and if necessary, switching in the separate segments of the

grid.

In order to explore every avenue of the smart grid

technologies and to prepare for the installation of the new

Dispatch Control System (DMS) in 2016-2018 accordingly, it

is necessary to start applying the smart technologies more

extensively in the principal segments of the medium-

voltage grid (10 kV lines, 10 kV distribution points and

10/0.4 kV transformer substations).

The scope of the problem

Following presents information on the automation of

LESTO medium-voltage distribution network elements.

Table 3. Automation of of LESTO medium-voltage distribution network elements in 2014.

Group of network elements Number of elements Facilities with remote or off-line automatic control

10 kV lines 7.180 pcs.

Controllable line-circuit breaker - 5.233 pcs.

Short circuit indicators with information transfer to SCADA - 185 pcs.

Reclosers – 98 pcs.

10/0.4 kV transformer

substations 39.351 pcs. 32 pcs.



Possible solutions

After analysing the specific segment of the network, the

following technical solutions or a combination of them

could be used to resolve the problem:

Installation of SCADA Dispatch Control in new 10/0.4

kV substations and 10/04. kV substations under

reconstruction.

Installation of SCADA Dispatch Control in 10 kV

distribution centres.

Installation of reclosers in 10 kV lines.

Installation of short circuit indicators with

telecommunication.

Automatic power and voltage control equipment for

newly connected RES producers.

Detailed information on the application of these technical

solutions, selection criteria of segments and selection of

equipment is presented in the Section hereof “Strategy for

Technological Network Development”. Extensive

information on the resolution of this problem in

2015-2025 is presented in the in the description of the

Investment Programme “Smart Grid”.



PROBLEM No. 3: Analysis of the network weather resistance

Current situation

SAIDI and SAIFI indexes show the reliability of the power

distribution network operators. SAIFI shows the average

number of interruptions that a customer experiences

during a reporting period (per calendar year). SAIDI shows

the average outage duration per customer (per calendar

year). The more higher values these indicators reach, the

more frequent and longer outage durations customers

experience, refer to the Figure 17.

Figure 17. The values of SAIDI and SAIFI indexes in 2008-2013.


Within the period of 2011-2013, 154 hundred thousand

failures occurred in LESTO network that prevented from

supplying corporate and private customers with

6.329 MW of electric power or as much as Širvintos Region

consumes per 2 and a half months.

Force Majeure events cause the major part of unplanned

interruptions4. Storms usually result in tree or tree

branch breaking, and when they fall down, they cause

abruption of wires. The major number of the described

failures take place in the areas covered by forest.

4 Force Majeure means circumstances of an extraordinary nature,

beyond human control, and which could not have been reasonably expected or prevented, or eliminated in any possible way. These circumstances include storms, hurricane, sleet, lightning, fire, soil settlement or landslide, a flood greater than annual long-standing, temperature or weather changes exceeding the requirements of the standard technical documents, ice-slick exceeding the requirements of the standard technical documents, governmental action impeding energy supplies due to state of emergency in the country, war, terrorism, sabotage operations or other situations alike.

The principal causes of the failures:

Poor resistance of the overhead line network to winds

and storms causing the major part of outages during

storms.

The major part of the network located in the areas

covered by forest.

Equipment ageing, worn-out or deteriorated network

elements break more frequently.

The causes listed above are interrelated because worn-out

network elements break down more rapidly, and therefore

wires abrupt more easily or cause outages at the

substations during storms.

20% of LESTO overhead lines are located in the areas

covered by forests,

refer to the Figure 18. These lines have the least resistance

to storms, so they are exposed to the biggest risk of power



cut. Vilnius and Utena Regions cover the most part of the Company's overhead lines.

Figure 18. The part of 0.4-35 kV overhead lines in the areas covered by forest, km and %

About 80% of all outages occur in 0.4 kV voltage network,

the remaining 20% in 10 kV network. Less than 1% of

outages occur in 35 kV network. It is important to

emphasize that although the number of failures occurring

in 35 kV and 10 kV networks is relatively small, in the event

of failure and cut-out of 35 kV transformer substation, EP

supply will be cut to those customers who are connected to

10 kV and 0.4 kV networks because the grid of the lower

level of voltage depends on the grid of higher voltage. The

following table presents the most frequent causes of

failures in 10 - 0.4 kV network.

Table 4. The principal causes of failures according to different groups of facilities

10 kV

overhead

lines

0.4 kV overhead lines 10 kV underground

lines

0.4 kV

underground lines

10/0.4 kV

transformer

substations

Equipment deterioration

and changes in the

properties of materials

+ + + + +

Impact of natural disasters + +

Failures of reclosers in input

terminals +

Ingrown plants, tree

branches + +

Lack of oil (including thefts)

+

Damages of insulators +

+



The non-resistance of the overhead lines to climatic

conditions (the wind and storm) will remain the utmost

problem for LESTO. According to the forecast of Lithuanian

Hydrometeorological Service, increase in the average

temperature and the maximal differences between

temperatures in the period of 2015-2030 will bring more

extreme climatic conditions, i.e. cyclones, vortexes, storms,

frost to the territory of Lithuania.

Possible solutions

LESTO incur losses of approximately 1 million euro from

one average storm and power supply recovery can last a

week or even longer. Underground electricity cables have

been used for a while in Western Europe to solve this

problem because underground network has better

resistance to climatic conditions and requires less

maintenance. At present time, underground and overhead

isolated lines make up to 25% of the entire network. It is

planned to increase it by 40% in the next 10 years ahead by

complementary investments. Extensive information on the

solution to this problem is presented in the description of

the Programme No. 1 "Climate Resilient Network".



PROBLEM No. 4: Substandard voltage in the power supply

network

Current situation

In some segments of LESTO distribution network voltage

fluctuations occur short- and long-term voltage drops

that cause deviation over -10% from 230 V standard5.

These fluctuations disrupt normal operation of electric

equipment and shorten its period of service. These

fluctuations produce particularly adverse effect on the

equipment driven by electric motors, because voltage

drops cause irregular operation of motors, thus shortening

their period of service and increasing the number of

failures. Voltage fluctuations also cause flickering of

incandescent light bulbs, evoking eyestrain and fatigue of

the human body.

Although it is almost impossible to avoid voltage

fluctuations in the distribution grid, network designers

make all possible provisions to maintain the least

amplitude of the fluctuations in the normal mode. The

main cause of voltage fluctuations noticed in LESTO

network over-long lines connecting users and

transformers, and wires with too short sections in these

lines.

This situation was predetermined by the design of the

major part of LESTO network made in the period of 1960 -

1980. Social and economic changes

that occurred in 1995 - 2010 made changes in the profile

of suburban electric users by decreasing the number of

permanent dwelling houses in towns and increasing the

number of single homesteads for leisure rentals. With the

connection of the remote homesteads, the average length

of the low-voltage lines that connect users with

transformer substations has increased. Even though the

number of the consumers decreased on these territories,

there has been a significant increase in the average

consumer demands due to the increased number of

electric appliances used in the household, what in its' turn,

challenges the maintenance of voltage capacities at an

adequate level.

5 In the part LST EN 50160:2010 "Voltage characteristics of

electricity supplied by public electricity networks"


LESTO uses two information sources to identify the

problem:

Electrical Network Design software with a voltage

control module that contains stored data on LESTO

distribution network with an integration into the

database of actual consumptions.

Consumer complaints about observed voltage

fluctuations and equipment failures.

Following presents the results of the simulation of the

voltage deviations and the data of the complaints

received from consumers.

According to these data, 9.092 km of LESTO 0.4 kV lines

with 43.324 consumers connected to them take a lead in

the list of the critical objects with voltage fluctuations.

Possible solutions

The following technical solutions could be used to solve the

problem:

To redesign the network configuration to reduce the

length of 0.4 kV line, and exclude the usage of the

unnecessary line segments.

To redesign the network configuration to transfer

the transformer substation closer to consumers.

To replace the line wires with the wires of a larger

section.

To erect a new transformer substation.

It is a common practice to use a combination of the above-

listed methods adapted to the specific area. Extensive

information on the solution to this problem is presented in

the description of the Programme No. 2 “Reliable voltage

maintenance”.



Table 5. The scope of the voltage fluctuations on the regional level

Region The number of customers experiencing

voltage fluctuations, pcs.

The length of lines under voltage

fluctuations, km

Panevėžys 15.823 2318

Utena 9.334 2.216

Klaipėda 5.337 1.187

Kaunas 4.421 1.299

Šiauliai 3.330 774

Alytus 2.636 667

Vilnius 2.443 632

All regions 43.324 9.092



PROBLEM No. 5: Energy accounting lacking details

Current situation

1.66 million metering devices is used in LESTO distribution

network to maintain the records of the electric energy

supplies. The major part (~98%) of them include standard

induction or electronic meters without telecommunication,

which readings customers declare themselves each month

according to the indications of the meter screen. Some of

the largest LESTO customers have already been equipped

with more expensive and multifunctional, automatic smart

electricity meters, which transfer the collected data of

consumed amounts of electricity to LESTO via the mobile

telecommunications, but these meters make less than 2%

of the total number of devices.

This operation model is relatively cheap due to a low price

of the standard meter and low telecommunication costs,

but it provides almost no exact information on the actual

and instant electricity consumption and has no features of

monitoring consumptions in the separate segments of the

distribution network. This information is particularly

topical for the identification of electricity thefts, i.e. for

mitigation of commercial loss of electricity. As of today,

the sources of electricity loss are usually detected during

inspections of consumer meters or after receiving calls via

the trust line. Furthermore, the major part of consumers is

not able to analyse the data of electricity consumption as

often as established in the up-to-date standards (standard

established in the EU directive electricity consumption

readings must be provided to the consumer every 15

minutes), and therefore cannot change electricity

consumption pattern in order to use energy more

efficiently.

LESTO has yet made no decisions on the installation of

smart electricity meters on the large scale (a pilot project

will be carried out in 2015-2016 to update the assumptions

of the cost-benefit analysis of the smart measurements), so

in the event if we continue applying the above-described

operation model, there will be no possibility of observing

the actual electricity consumption in the real time in the

separate network segments.


The following presents the smart metering features of

LESTO distribution network:

Possible solutions. The most efficient technical solution in

the transition period, unless public installation of smart

electricity meters begins, is to install supervision counters

of electricity with functions of data collecting and

telecommunicating in the intermediate elements of the

electricity grid:

In 110/35/10 kV transformer substations.

10 kV distribution points.

10/0.4 kV transformer substations on the outgoing

lines.

This solution with an appropriate software makes it

possible to segment the electricity grid into parts, to select

the critical sources of loss and conduct a rapid loss analysis.

Extensive information on the resolution of this problem in

2015-2025 is presented in the description of the

Investment Programme No. 4 “Smart Grid”.

Table 6. Smart meters in LESTO network

The total number of elements,

psc.

Including telecommunication,

% Including data collection, %

Customer meters 1.66 million 1.5 1.5

10/0.4 kV transformer

substations 39.351 0.2 0.2

10 kV distribution points 497 47 47



110/35/10 kV and 35/10 kV

transformer substations 620 100 100

PROBLEM No. 6: Analysis of thefts of the network elements

Current situation

LESTO incurred losses for 1 million euro due to the thefts in

the electricity network in the period of 2011 - 2013. LESTO

conducts a population education initiative “Campaign

2020", cooperates with police and scrap metal dealers to

reduce the number and scale of the thefts.


Oil thefts from 10/0.4 kV transformer substations remain

the most crucial problem for the Company. Oil thefts

cause interruptions in the normal operation of the

transformer substations, which burn out and cause

outages. 303 transformers or 0.6 % of the total amount of

transformers have burned out over three years. 63

thousand customers were disconnected due to the

transformer failures because of oil thefts.

Figure 19 presents the distribution of losses incurred due

to thefts.

Figure 19. Losses incurred due to thefts

Possible solutions

It is almost impossible to avoid thefts in the distribution

networks because the major part of transformer

substations is located in the remote villages, is of out-to-

date model and has no alarm system. One of the possible

solutions is to equip the most significant transformer

substations with an alarm system. LESTO also plans to

replace the substations of the out-of-date model (unit

transformer substations) by modern modular substations

of closed type (refer to the Investment Programme No. 2:

“Safe and reliable network”).



PROBLEM No. 7: Insufficient compensation of fault currents

Current situation

LESTO 10 kV electricity grid was designed with an isolated

neutral and still undergoes further development with it. It

was a common practice in the Soviet Union and Finland,

whereas an earthed neutral is being used in the most

countries of Western Europe.

The significant advantage of this technical solution lies in

the uninterruptible power supply to consumers even in the

case of a failure, breakdown or other type of malfunction

in the network caused by the single phase-to-earth fault,

i.e. cable or wire contact with earth. It enhances the

reliability of the electricity network.

The biggest disadvantage of this solution is related to an

electric current flowing through the earth fault

within a radius of ~8 meters that could be life threatening.

According to the Operational Regulations for Electric Power

Stations and Electricity Networks, earth fault current

compensating devices that ensure the safety in 10 kV

electricity networks must be installed in the case if the

summary earth fault current of all lines connected to the

transformer substation exceeds 10 A.

The parameters of the distribution networks vary due to

the lines being connected and disconnected; therefore, a

distribution network is a constantly changing system due to

the connection of new consumers, disconnection of

unexploited objects, constant changes in consumer

demands; thus it is necessary to maintain constant

monitoring and install proper earth fault current

compensating devices in order to ensure the sufficient level

of compensation of the earth fault current. It is required to

install more fault current compensating devices when

expanding the underground cable network because plastic

cables in aluminium sheath increase the fault current per 1

km of section line by 2,3 A on average, i.e. 20 times more

than conductors of the overhead line.


LESTO uses two information sources to identify the

problem:

Electrical Network Design software with a fault current

module that contains stored data on LESTO

distribution network, network charts, information on

the reconstruction and repairs; conducts mathematical

calculations based on the data of line lengths.

The results of the actual measurements taken in the

concerned network segments on a regular basis.

According to the results of the fault current calculations

and measurements made in 2012-2014, LESTO distribution

network contains 71 transformer substations with the

insufficient fault current compensation that could lead to

an unsafe operation.

Possible solutions

The following technical solutions could be used to solve the

problem:

Installation of modern fault current compensation

devices compensating coils with an automatic

current control.

Transfer of the operational earth fault current

compensating devices from the transformer

substations under reconstruction to the transformer

substations with a higher earth fault current or

substations that have no compensating devices at all.

Extensive information on the solution to this problem is

presented in the description of the Programme No. 2

“Reliable and safe network”.



The interrelationship between stakeholder expectations and network problems

Figure 20 presents the interrelationship between the

stakeholder expectations, problems of LESTO distribution

network and the Investment Programmes. The diagram

shows how solutions of the current network problems

serve the interests of the stakeholder expectations. It also

reflects the Investment Programmes provided for the

period of 2015-2015 in four different colours:

PROGRAMME No. 1: Climate Resilient Network

PROGRAMME No. 2: Safe and reliable network

PROGRAMME No. 3: Reliable power supply network

PROGRAMME No. 4: Smart Network Control

A more detailed review of the programmes is presented in

the Section 6 “Investment Programmes”. Planned

Investment Programmes cover and take into consideration

all stakeholder expectations at least one time. For example,

the solution of the problem of the distribution network

“Non-resistant distribution network to weather conditions”

to replace the overhead lines by underground or isolated

overhead lines contributes to promoting the stakeholder

expectations. Programme No. 1 “Climate Resilient

Network” has been developed to solve this problem.

Figure 20. The interrelationship between problems of LESTO distribution network and stakeholder expectations

AB LESTO investicijų planas 2015 – 2025 m. 46

3. FINANCIAL ESTIMATION*

The demand for investment into the distribution network

was planned in 4 steps, see. Figure 21. In order to

determine the direction and the energy asset groups in

worst-state, there were stakeholders' expectations, the

main distribution network, and foreign distribution

network best practices taken into account.

Figure 21. Investment planning scheme

Based on the four steps of the evaluations and analysis,

demand for investment from 2015 to 2025 is 1.7 billion

EUR. The investment will be gradually increased, taking

into account the likely pace of the development of market

participants and their ability to perform larger amounts of

work.

Investments are planned in four investment programs. The

total investment requirement according to the programs

for 2015 - 2025 m. is set in the Table 7.

Table 7. LESTO investment 2015 – 2025 according to the programs, million EUR

Program 1: Climate Resilient Network

Program 2: Safe and Reliable

Network

Program 3: Reliable power supply

network

Program 4: Smart Network

Control

New customers

Other investment

511

426

132

34

521

59


Financial estimation

The main part of the company is built in 1960 – 1980, while

implementing the electrification of Lithuania. At that time

most of the network lines and transformer stations were

built (see. eg. 5, 7, 9, 11 figures Problem 1: Network

elements aging).

The company, while planning the investment, aims to

eventually even-out the unevenness caused by

electrification investment. While planning the investment

every year, the detailed plans for equipment replacement

after an in-depth inspection of equipment and selection of

objects of the worst condition will be drawn. The

replacement of elements that can still serve will delayed,

although the economic life reached its end of the period6.

The company's long-term goal (outside the scope of this

programming period) is to eventually reduce the amount of

wearing-out assets and to have an insignificant remaining

number of outdated assets (depending on the equipment

condition).

During the investment planning, special attention was paid

to the impact assessment of investment on the electricity

tariff. While the demand for investment is growing

(compared to 2014), the company is looking for ways to

minimize its impact on the consumers of electricity:

6 Lifetime of individual network element depends on the

environmental conditions, previous repairs, quality and type of device (eg. the underground line lasts longer if there is a dry sandy ground). Therefore, part of the items can be used after the expiry of the period of economic lifecycle, while others need to be replaced before their economic lifecycle reaches the end of the period.

1. The approach is that by replacing the worn-out

elements of the network with new ones, makes it

possible to decrease the need for operational

costs. For example, by replacing the overhead

lines with the underground lines it is easier to

operate them, the inspections are simpler, the

security zone is reduced, and, therefore, the cost

of plant pruning is reduced. Part of the increased

investment is covered by the reduction of

operating costs.

2. Investments are only dedicated to the

replacement of unreliable and insecure network

elements. The company selects objects after each

year routine check-ups on the basis of the actual

condition assessment of the objects. Moreover,

with this long-term plan LESTO aims to equalize

the accumulation of obsolete assets as a result of

electrification period and to replace constant

number of the elements (about 2% of the network

every year).

3. Part of the increase of the tariff will be

compensated by the GDP growth, which increases

the electricity consumption in the country, ie,

increasing the amount of electricity distributed by

the Company makes it possible to receive more

income without changing the tariff.

*The investment plan is solely for information purposes

and should not be considered any advice,

recommendation or other forms of incentive to invest

or perform other actions.

AB LESTO Investment Plan for 2015 – 2025. 48

Investment Programmes

4. INVESTMENT PROGRAMMES

This section presents the description of each Investment

Programme in accordance with the following structure:

1. Description of the Programme and technologies.

2. Why is this Investment Programme under

implementation?

3. Goals.

4. Financial appraisal.

PROGRAMME No. 1: Climate Resilient Network

Description of the Programme and technologies. With the

ageing of the distribution network, a part of the overhead

lines reaches the end of their lifetime and must be

replaced. This Investment Programme covers the

replacement of the existing worn-out (those that reached

the end of the physical existence) overhead lines by

underground or isolated overhead lines. Changing the line

technology helps reducing the risk of tree falls, growing-in,

interruptions caused by animals; therefore, consumers

experience less frequent outages, i.e. increasing the

System Average Interruption Frequency Index - SAIFI.

Why is this Investment Programme under

implementation? With the implementation of this

Programme, the following stakeholder expectations are

taken into account:

Uninterruptible power supply. Reduction of power

outages due to the falling down or ingrowing trees by

replacing the overhead lines by underground lines.

Safety of facilities. Cable networks for reduction of

danger being injured by electric current.

Fast supply recovery after storms. A major part of

power interruptions in the network occur during

storms due to tree or tree branch breaking. A

replacement of the overhead line by an underground

line will eliminate this risk.

Reduction of the network impact on nature and fauna.

Underground networks, particularly those located in

the areas covered by forests produce less impact on

animal and bird habitats.

Visual reduction of pollution and invisible power

network. Replacement of the overhead lines by the

underground network helps reducing the area of the

line security zone from 2-15 meters to

2 meters and the need for pruning the trees or

plantings of greenery. Underground cable lines

contrary to the overhead lines are invisible and do not

reduce the value of the landscape.

Performance and transparency. Replacement of the

overhead lines by the underground network helps

reducing the need for frequent repair, thus curtail the

operational costs.

Goals. The implementation of the Programme “Climate

Resilient Network” aims to increase the part of the

underground and isolated overhead lines from 25% up to

~40% by the year of 2025.

Financial estimation. During the 2015 - 2025 it is planned

to allocate 511 million EUR investment for this program.

The largest part of the investment will be allocated to 10

kV and 0.4 kV worn overhead lines replacement by the

underground lines. The largest part of disruptions occur in

10 kV and 0.4 kV overhead lines, therefore, this part of the

network is a priority



PROGRAMME No. 2: Safe and reliable network

Description of the Programme and technologies. With the

ageing of the distribution network, a part of the lines and

transformer substations reaches the end of their lifetime,

break down more frequently and become unsafe for the

environment. Worn-out elements are replaced by modern

equipment in conformity with up-to-date standards.




taken into account:

Uninterruptible power supply. Replacement of the

worn-out equipment by new equipment helps

reducing the number of failures of network elements.

Fast supply recovery after storms. A large number of

failures occur during storms. It takes a longer time to

repair out-of-date equipment; the spare parts of some

equipment have been taken out of the production.

Reduction of the network impact on nature and fauna

and the noise level from facilities. New facilities are

quiet in operation, more efficient and heat up less.

Visual reduction of pollution, invisible electric power

network and safety of the electric power network

facilities. Replacement of the old equipment, for

example, Minsko or Šiaulių type transformer rooms

with modern modular rooms, will make power

facilities less visible and safer because of its modular

design thus preventing oil thefts.

Reliable power supply. Equipment upgrade helps

solving the problem of the voltage quality to some

extent.

Performance and transparency. Replacement of old

elements by new elements reduces electric power

losses.

Goals. About one third of the network will be worn-out

within the period of 2015-2025, refer to the Table 8. Such a

sudden increase in deterioration is predetermined by the

electrification in 1960-1980, when the major part of the

network was designed and built. LESTO aims to reduce of

the operation of the depreciated property by 16% at most

by the year of 2025 (calculating in accordance with the

lifetime of elements).

Table 8. The part of LESTO depreciated property in 2014 and 2025 in accordance with the selected groups

The part of the depreciated property in 2014

The remaining part of the depreciated property

after planned investments in 2015

35 kV lines 51% 21%

110-35 kV transformers 24% 6%

10 kV lines 60% 24%

10 kV transformer substations 47% 3%

0.4 kV lines 70% 16%

A part of the total assets 60% 16%

Financial estimation. During the 2015 - 2025 for this

program it is planned to allocate 426 million EUR of

investment. The biggest part of them will go to 10 / 0.4 kV

for replacement of wearing-out transformer substations

and distribution points. Part of the funds will be allocated

to the major high-voltage transformer substation

equipment upgrade. It is also planned that some of the

existing underground lines will reach the end of the period

of their lives, therefore, there will be a need to change

them.

When planning the program "Safe and reliable network"

investment will also include investments into the network



elements, that will make it possible to prevent the thefts

and their consequences. There are funds foreseen, in order

to solve the problem of insufficient earthing, while

installing newly purchased equipment for earthing

compensation and moving the existing equipment during

the planned reconstruction works.



PROGRAMME No. 3: Reliable power supply network

Description of the Programme and technologies. Changes

in the number of electricity consumers and their demands

in the suburban territories in the period of 1995-2010

resulted in the increase of the average amount of

electricity consumption and the average length of the

medium-voltage lines that connect the consumers with

transformer substations. For this reason, regular voltage

fluctuations occur in some segments of LESTO network and

existing equipment fails to ensure the level of voltage of

the corresponding standards.

This Investment Programme covers the reduction of the

network line length, excluding the usage of the

unnecessary line segments, transfer of the transformer

substations closer to consumers, erection of the new

substations and replacement of line wires by wires of wider

section.




taken into account:

Reliable power supply. Performance of the above-

described steps helps reducing the average course

made by the current to reach consumers, thus

reducing voltage fluctuations and enhancing the

quality of the voltage.

Visual reduction of pollution and invisible power

network. Since it is planned to transfer a part of the

lines for operation to trajectories that are more

efficient by reducing the length of the lines, the

underground network will replace the existing

overhead lines to help reducing visual pollution.

Safety of the electric power facilities. Under this

Programme, a part of the transformer substations will

be replaced by new substations that will better meet

the consumer needs and enhance the safety and

reliability of the electricity network.

Goals. The Programme of the reliable power supply

network provides for putting the lines of 9.092 km total

length affected by voltage drops into order by the year of

2021, thus solving the problem of poor voltage quality with

41.157 (or 95%) consumers connected to them.

Financial estimation. During the 2015 – 2021 it is planned

to allocate for this program almost 132 million EUR

investment. The biggest part of them will go to shortening

of 0.4 kV overhead lines and trimming lines of 10 kV on

new optimal trajectories, as well as for installation of new

transformer stations.



PROGRAMME No. 4: Smart Network Control

Description of the Programme and technologies. The

scope of the Smart Network Control Programme covers the

following measures:

1. Pilot Projects of Network Automation. The

introduction and installation of the smart

technologies in LESTO distribution network has

been limited so far (remote control has been

installed only in high-voltage network elements -

110/35/10 kV substations, 35/10 kV substations,

35 kV distribution points) and has been

implemented only in certain locations (for

example, short circuit indicators with

telecommunication were installed in some

regions).

Today LESTO is preparing to install the smart

technologies in the selected network segments fully.

One of the first steps to achieve the goal is the

“Strategy for Technological Network Development”

prepared by virtue of good practices and results of

scientific research that outlines the smart technologies

suitable for LESTO network. Another step is a

thorough analysis of LESTO network elements,

selection of most effective individual solutions from

the list of the solutions described in the Strategy for

Technological Network Development and

determination of specific amount of the necessary

solutions. Preparation for this step provides for the

implementation of pilot projects of network

automation under the Programme in the period of

2015-2017 with a view to test specific technologies,

which could be installed fully in the future. These

projects aim at the evaluation of the usability of the

smart technologies and testing the practical aspects of

the installation. Upon establishing the needs and

directions of installation of the smart network

elements, the scope of the Investment Programme will

be corrected accordingly.

2. Smart Accounting Pilot Project. This project aims

to equip 3.000 Lithuanian residents with smart

meters in 2015 and to test

them in real time in 2015-2016 and update the

assumptions used for the cost-benefit analysis of

public installation of smart meters. The results of

this project will be used for making the decision

on the possible scenario of public installation of

smart meters. Upon establishing the needs and

directions of installation of the smart metering,

the scope of the Investment Programme will be

corrected accordingly.

3. Project on installation of supervision counters.

The project provides for the installation of the

supervision counters in 10 kV network and

connection to special-purpose software that will

help to identify the precise courses of losses in the

single network zones.

4. Installation of Technological Property

Management System. The project provides for an

installation of an advanced and customised IT tool

designed to make inventories by various sections

and to classify the managed property with all

other necessary financial and technical data. The

tool will be completely integrated into the newly

installed Resource Planning and Accounting

Systems. By introducing these new systems, we

will move to using the advanced solutions instead

of out-of-date TEVIS information system that we

have used for more than a decade in the

management of sectional network development.

5. Installation of the Unified Dispatch Centre and

Distribution Network Management System

(DMS). It is planned to set up LESTO Unified

Dispatch Centre in 2015-2017 with two dispatch

offices in Vilnius and Kaunas that will gradually let

waiving the regional dispatch offices, unite the

network information of different IS and enable

monitoring and managing the grid up to the level

10 kV in the real time.

6. SCADA Control System Update. The project aims

to replace

different SCADA systems purchased in separate

regions during the period of 1995-2005, move to

the unified advanced standard, and subsequently

prepare for DMS installation.




implementation? In summary, the implementation of the

measures of the Smart Grid Programme is concurrent; they

will enable a synergy and satisfy the following consumer

expectations:

1. Uninterruptible power supply, fast power supply

recovery after storms smart solutions will lead

to faster responses to faults and malfunctions and

enable to prevent some failures by changing the

network modes as preventive treatment.

2. Reliable EP supply smart solutions will enable

monitoring more parameters of the quality of the

EP supply in the separate network segments and

make the corresponding decisions on the

management.

3. Prompt reporting and decision-making in

resolution of problems smart solutions will help

locating faults in a prompt and precise manner,

communicating more accurate information to

consumers and prompt network resuming.

4. Operational efficiency and transparency

integration of smart solutions will result in the

decrease of operational expenses for network

maintenance, better planning of recoveries after

breakdowns and better decision-making on the

investments.

Goals. The following presents goals of each programme

measures:

1. Pilot Projects of Network Automation. To test

smart technologies prior to public installation.

2. Smart Accounting Pilot Project. To test the

assumptions and the benefit of the cost-benefit

analysis of public installation of smart meters

conducted in 2012.

3. Project on installation of supervision counters. To

install the supervision counters in the entire

LESTO network until

2020.

4. Installation of Technological Property

Management System. To install the state-of-the-

art tool for the technological property

management.

5. Installation of the Unified Dispatch Centre and

Distribution Management System (DMS). To install

a unified dispatch centre until 2018.

6. SCADA Control System Update. Move to the

single SCADA standard throughout the network.

Financial estimation. During the 2015 - 2025 for this

program nearly 34 million EUR investment is planned.


Sąvokos ir sutrumpinimai

TERMS AND ABBREVIATIONS

Abbreviation Definition

LESTO or Company LESTO AB

RES Renewable Energy Sources

DG ENER The European Commission’s Directorate-General for Energy

EP Electric power

ME Ministry of Energy of the Republic of Lithuania

EU European Union

MF Ministry of Finance of the Republic of Lithuania

LITGRID LITGRID, AB

LE Lietuvos energija, UAB

LRAIC model guidelines

NCC Resolution No. O3-287 as of July 5, 2013 REGARDING THE METHODOLOGICAL GUIDELINES FOR

BUILDING THE ACCOUNTING MODEL BASED ON THE FORWARD-LOOKING LONG-RUN AVERAGE

INCREMENTAL COSTS OF THE SERVICES RENDERED BY THE TRANSMISSION SYSTEM OPERATOR AND

POWER DISTRIBUTION NETWORK OPERATORS

TSO Transmission System Operator

MEC Ministry of Economy of the Republic of Lithuania

SEI State Energy Inspectorate

NCC or the Regulator National Commission for Energy Control and Prices

Methodology for upper limits Resolution of No. O3-139 PRICING METHODOLOGY FOR ELECTRIC POWER TRANSMISSION AND

DISTRIBUTION SERVICES AND ESTABLISHMENT OF THE PRICE CAPS

NCC Investment Coordination

Procedure

04 08 2014 NCC Project "PROCEDURE FOR COORDINATION OF THE INVESTMENT PROJECTS OF ENERGY

COMPANIES AT THE NATIONAL COMMISSION FOR ENERGY CONTROL AND PRICES"

Government Resolution

Regarding the Principles for

Setting the State-Regulated

Prices in the Energy Sector

(2014)

Government Resolution No. 1026 as of September REGARDING THE APPROVAL OF PARTICULARS OF

THE PRINCIPLES FOR SETTING THE STATE-REGULATED PRICES IN THE ENERGY SECTOR

http://www3.lrs.lt/pls/inter2/dokpaieska.showdoc_l?p_id=453461

http://www.lrs.lt/pls/proj/dokpaieska.showdoc_l?p_id=250804&p_org=212&p_fix=n&p_gov=n


Annexes

ANNEXES

ANNEX 1. Pictures of deteriorating equipment

Wearing-out, crumbled reinforced concrete poles of 35 kV overhead lines


Annexes

Worn-out, crumbled reinforced concrete poles of 10 kV and 0.4 overhead lines


Annexes

Worn-out 10/0.4 Minskas and Šiauliai type transformer substations


Annexes


Annexes

ANNEX 2. LESTO questionnaire for stakeholders

LESTO sent the questionnaire to 95 stakeholders and received 49 replies.

Our Company operates as an electricity distribution network operator in Lithuania. We maintain the electricity distribution network,

supply electricity and connect new consumers. Our mission is reliable electrical energy creating value for everyone.

We are currently preparing an Investment Plan for 10 years. The Document will outline LESTO investment goals, directions and its scope

until 2025.

We would like to set the investment goals after a throughout analysis of stakeholder expectations mostly related to LESTO activities. We

would like to develop an Investment Plan based on present and future needs of stakeholders that would assist in solving the current

problems and would rely on the best practices of foreign companies.

You are a significant stakeholder for us and your opinion would be of great help in the preparation of this Document; therefore, we are

kindly asking you to evaluate the importance of the following expectations for your entity, activities or community. Any suggestions

and/or comments that you have would be greatly appreciated. The findings of this survey will be used in setting up the priorities of LESTO

Investment Plan for 10 years.

Thank you,

Please evaluate the importance of the expectations for your entity, activities or community:

# Expectation

Importance

1 – least important, 4 – very

important

1 2 3 4

1 Reliable power supply (excluding power surges)

2 Uninterruptible power supply

3 Energy efficiency and sustainable consumption

4 Prompt settlement of legal disputes

5 Prompt power supply recovery after storms

6 Visual reduction of pollution, removal of overhead lines and worn-

out rests

7 Reduction of the network impact on nature and fauna

8 Protection and safe transfer of stork nests

9 Noise level from LESTO facilities

10 Safety of power network facilities

11 Cooperation in the implementation of the energy efficiency surveys

and application of innovations

12 Cooperation in the implementation of social responsibility projects

13 Consulting on LESTO services

14 Invisible physical network in picturesque places, national parks,

settlements

15 On-line information exchange with LESTO

16 LESTO performance


Annexes

17 Detailed information about LESTO Investment Projects

Your suggestions and comments:


Annexes

Summary of LESTO stakeholder responses:

Stakeholder Expectations

Larg

e c

orp

ora

te

cust

om

ers

(>

1

mill

ion

kV

h)

x 6

Lith

uan

ian

Nat

ion

al

Co

nsu

me

r

Fed

era

tio

n

Stat

e C

on

sum

er

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Pro

tect

ion

Au

tho

rity

Stat

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erv

ice

Fo

r

Pro

tect

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Are

as

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s x

30

Kau

nas

Un

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of

Tech

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Un

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Nat

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2

Ave

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sco

re

Energy efficiency and sustainable

consumption 4 4 4 4 4 4 4 3 4 4 4 3 4 4 3.9

Reliable power supply (excluding

power surges) 4 3 4 3 3 4 4 4 4 4 4 4 4 4 3.8

Uninterruptible power supply 4 3 4 3 4 4 4 4 4 4 4 4 4 3 3.8

Safety of power network facilities 3 3 4 3 3 4 4 4 4 4 4 4 3 2 3.5

Prompt power supply recovery after

storms 4 3 4 2 3 4 3 4 4 4 4 3 3 3 3.4

On-line information exchange with

LESTO 4 3 3 3 3 4 4 4 4 3 3 3 3 4 3.4

LESTO performance 3 3 4 3 2 3 3 4 3 3 4 3 3 4 3.2

Cooperation in the implementation of

the energy efficiency surveys and

application of innovations

3 4 2 3 3 3 4 3 3 3 4 3 3 3 3.1

Reduction of the network impact on

nature and fauna 2 4 2 4 3 3 4 3 4 3 3 3 2 3 3.1

Prompt settlement of legal disputes 3 4 4 2 3 3 3 3 3 3 2 2 3 3 2.9

Consulting on LESTO services 4 3 3 2 2 3 3 4 3 3 3 2 3 3 2.9

Protection and safe transfer of stork

nests 2 3 1 4 3 3 3 3 4 3 3 2 2 2 2.7


Annexes

Stakeholder Expectations

Larg

e c

orp

ora

te

cust

om

ers

(>

1

mill

ion

kV

h)

x 6

Lith

uan

ian

Nat

ion

al

Co

nsu

me

r

Fed

era

tio

n

Stat

e C

on

sum

er

Rig

hts

Pro

tect

ion

Au

tho

rity

Stat

e S

erv

ice

Fo

r

Pro

tect

ed

Are

as

Lith

uan

ian

Hyd

rom

ete

oro

logi

cal

Se

rvic

e

Mu

nic

ipal

itie

s x

30

Kau

nas

Un

ive

rsit

y

of

Tech

no

logy

Viln

ius

Un

ive

rsit

y

Nat

ure

Re

sear

ch

Ce

ntr

e

Lith

uan

ian

Co

nfe

de

rati

on

of

Ind

ust

rial

ists

.

Inve

sto

rs'

Fo

rum

Lith

uan

ian

En

erg

y

Inst

itu

te

Lith

uan

ian

Ass

oci

atio

n o

f Lo

cal

Au

tho

riti

es

Ind

ep

en

de

nt

sup

plie

rs x

2

Ave

rage

sco

re

Invisible physical network in

picturesque places, national parks,

settlements

2 2 1 4 2 3 2 3 4 3 4 3 3 2 2.7

Detailed information about LESTO

Investment Projects 2 3 4 2 3 3 3 3 3 3 3 2 3 1 2.7

Visual reduction of pollution, removal

of overhead lines and worn-out rests 2 3 2 4 2 3 3 2 3 3 3 3 2 2 2.6

Noise level from LESTO facilities 2 3 3 4 2 3 3 3 3 2 3 1 2 2 2.6

Values of the survey scores:

Least important 1

Moderately important 2

Important 3

Very important 4

LESTO AB

Žveju g. 14

Vilnius

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