rcp2 maintenance forecast

AP02

of 49

RCP2 MAINTENANCE FORECAST

31/10/2013

AP02 RCP2 Maintenance Forecast October 2013

RCP2 MAINTENANCE FORECAST

© Transpower New Zealand Limited 2013. All rights reserved. of 49

C O P Y R I G H T © 2 0 1 3 T R A N S P O W E R N E W Z E A L A N D L I M I T E D . A L L R I G H T S R E S E R V E D

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RCP2 MAINTENANCE FORECAST © Transpower New Zealand Limited 2013. All rights reserved. of 49

Table of Contents

1 INTRODUCTION ....................................................................................................................... 1

1.1 Purpose ................................................................................................................................. 1

1.2 Scope ..................................................................................................................................... 1

1.3 Key Drivers ............................................................................................................................ 2

1.4 Document Structure ............................................................................................................... 3

2 RCP1 PROGRESS .................................................................................................................... 4

2.1 Summary of Main Improvements........................................................................................... 4

2.2 Maintenance Approach .......................................................................................................... 5

2.3 Activity Improvements ........................................................................................................... 7

3 RCP2 MAINTENANCE FORECAST ....................................................................................... 14

3.1 Forecast Objectives ............................................................................................................. 14

3.2 Routine Maintenance Activities ........................................................................................... 14

3.3 Routine Maintenance Forecasts .......................................................................................... 18

3.4 Model Governance and Forecast Approvals ....................................................................... 23

3.5 Deliverability ........................................................................................................................ 23

3.6 RCP2 Cost Savings ............................................................................................................. 24

4 RCP2 IMPROVEMENTS ......................................................................................................... 25

4.1 Maintenance Requirements ................................................................................................. 25

4.2 Reliability Improvement ....................................................................................................... 26

4.3 Performance Improvement .................................................................................................. 28

4.4 Works Planning ................................................................................................................... 29

4.5 Work Management .............................................................................................................. 31

4.6 Inventory Management ........................................................................................................ 31

4.7 Safety Management ............................................................................................................ 31

4.8 People Capability ................................................................................................................. 32

4.9 Service Providers ................................................................................................................ 33

4.10 Systems Capability .............................................................................................................. 33

APPENDICES ..................................................................................................................................... 35

A REVIEW OF INFORMATION REQUIREMENTS .................................................................... 36

B MAINTENANCE ACTIVITY AND COST MODEL (MACM) ..................................................... 38

C SERVICE PROVIDER INFORMATION ................................................................................... 42

D ROUTINE MAINTENANCE RISKS ......................................................................................... 45


RCP2 MAINTENANCE FORECAST © Transpower New Zealand Limited 2013. All rights reserved. Page 1

1 INTRODUCTION

1.1 Purpose

This document sets out our routine maintenance expenditure for RCP2 and explains how we developed our forecasts. It also addresses RCP2 operational expenditure (Opex) information requests1 we have received from the Commerce Commission. Appendix A shows how we have addressed the information requests throughout the document.

This document complements our Maintenance Lifecycle Strategy,2 which describes our maintenance approach and objectives for RCP2.

1.2 Scope

Four categories of Grid Opex are included in the RCP2 Submission. Of these four, this document only covers routine maintenance.

For information, the other three categories are:

Maintenance Projects: a programme of works to address prevalent asset condition issues identified through routine maintenance. They typically consist of programmes of small repairs or replacements of components of larger assets.

Operating: field switching associated with customers including requests for feeder isolation and post customer faults.

Training: our in-house training programmes for staff and service providers.

The main proposal, Programme Overview Documents (PODs) and relevant fleet strategies provide further information on these three Grid Opex categories.

Scope of Routine Maintenance 1.2.1

Routine maintenance is work to deliver preventive maintenance and condition-based work resulting from inspections and condition analysis. It also covers corrective work raised to rectify an unforeseen asset condition or performance issue. Corrective work includes our response to faults to ensure the timely return to service of assets to minimise disruption to customers. Routine maintenance addresses the following asset classes.

AC Stations: those assets within the boundary of our substations, including primary equipment (for example, power transformers, circuit breakers) and secondary systems (for example, protection). It also includes major transmission cables such as the 220 kV North Island Grid Upgrade (NIGUP) and North Auckland and Northland (NAaN) circuits, as well as AC cable circuits located at or near substations.

Transmission lines: overhead lines, associated structures and foundations used to transmit power between our substations and customers. Transmission line routine

1 Section 53ZD Notice, Commerce Commission, 2 July 2013.

2 AM06 – Maintenance Lifecycle Strategy.



maintenance includes vegetation control near lines and maintenance of access roads and bridges.

HVDC equipment: the substation and cable assets used to convert and transmit HVDC power between the North and South Islands.

For this forecast, routine maintenance excludes the maintenance of communications equipment at substations and dedicated communications sites, the nationwide communications backbone, or IT assets.

1.3 Key Drivers

The key drivers for our routine maintenance activities include the following.

Safety

Safety management underpins our approach to maintenance as it affects the inherent safety of the Grid, the safety of our customers, stakeholders, and our workforce. Ensuring we can safely operate the asset base is a key driver for our routine maintenance.

Service Performance

We undertake maintenance to ensure reliability and availability of the network to meet our customers’ requirements. Establishing a cost-effective level of maintenance that supports our service performance targets is a major focus. A key driver is the need to quickly return assets to service to minimise the impact of outages on our customers.

Asset Condition

Maintenance activities identify and address asset condition issues. This ensures the assets are kept in appropriate condition, reducing the risk of forced outages and potential safety risks.

Resources and Competency

Ensuring we have the skills and competencies in the right locations to maintain our assets drives expenditure. This involves an extensive training programme to maintain necessary competencies for skilled staff, who are in short supply globally, and developing new resources.

Statutory Requirements

Statutory requirements and regulations are key considerations when undertaking maintenance. These include public and employee health and safety, access to and impact on environmental resources, access to transmission lines, and the management of hazardous substances.



1.4 Document Structure

The rest of the document is structured as follows.

Chapter 2 – RCP1 Progress summarises improvements to our maintenance approach made to date during RCP1.

Chapter 3 – RCP2 Maintenance Forecast details the maintenance we will undertake during RCP2 and the associated expenditure forecasts.

Chapter 4 – RCP2 Improvements sets out our plans for further improvements during the remainder of RCP1 and RCP2.

Appendix A – Review of Information Requirements shows how we have addressed relevant Opex information requirements.

Appendix B – Maintenance Activity and Cost Model (MACM) describes the model we used to develop our forecasts.

Appendix C – Service Provider Information provides additional information on our service providers.

Appendix D – Routine Maintenance Risks summarises the routine maintenance risks we currently manage.



2 RCP1 PROGRESS

Chapter 2 describes the improvements we have made to our maintenance approach during RCP1. It includes:

a summary of our main RCP1 improvements

a description of our updated maintenance approach (framework)

detail on improvements made to our maintenance activities.

These improvements informed our RCP2 maintenance forecasts, as discussed in Chapter 3.

2.1 Summary of Main Improvements

During RCP1, we have focused on delivering better outcomes for customers through a wide-ranging maintenance improvement programme as part of our refined asset management approach. We will build on these improvements to further develop our maintenance approach during the remaining 18 months of RCP1 and throughout RCP2 (our planned improvements are discussed in Chapter 4).

Recognising the need to improve a number of our asset management processes, we are undertaking a range of improvement initiatives during RCP1. Many of these impact on our routine maintenance capabilities. A number of these are listed below.

1. Safety management: focuses on safety awareness, training, work practice reviews and Safety by Design.

2. PAS 55 accreditation: we are developing our asset management capabilities to ensure our maintenance activities are more closely integrated with our renewal and project work. This is discussed further in the Maintenance Lifecycle Strategy.

3. Core Asset Management Information System (Core AMIS): we have replaced our maintenance management system with Maximo. This will enable improvements to the specification and delivery of our maintenance activities.

4. Standard Maintenance Procedures (SMP): we have implemented mandatory procedures covering all maintenance field work on the Grid. A total of 450 new controlled documents are now in use.

5. Service Provider Contracts: we established new commercial agreements with our maintenance service providers in 2012. These ensure a more collaborative relationship with a shared goal of improving service to our customers and stakeholders.

6. Asset Health and Criticality: we have established asset health indices and a criticality framework to enhance our asset management decision making. Over time we will embed these in our maintenance requirements analysis (see Chapter 4).

7. Service Performance Measures: we have developed service performance targets for RCP2. These will inform our maintenance requirements and help us to target assets that most heavily influence the service received by customers.

8. Service focus: we have strengthened our focus on service delivery by further integrating our maintenance and operations activities. This has seen a range of changes including insourcing and consolidating our operational control function.



9. Reliability management: we have established a new reliability management capability, undertaking analytical activities that will underpin the continuous improvement of our maintenance practices.

10. Workforce competency: we are leading the introduction of nationally recognised qualifications for maintenance field work.

These initiatives are consistent with our asset management objectives for RCP2.

2.2 Maintenance Approach

In late 2012, we commissioned a study to guide development of our maintenance approach within the context of our asset management improvement programme (Maintenance Study). That study examined good industry practice in maintenance, recommended a long-term maintenance approach, and proposed steps to achieve that approach. The report has informed our improvement work during RCP1 and the development of our Maintenance Lifecycle Strategy.

AM06 – Maintenance Lifecycle Strategy sets out a framework for our maintenance approach and activities. Figure 1 summarises this framework.

Figure 1: Framework for our Maintenance Approach

We distinguish between maintenance specification activities and maintenance delivery activities. These activities are supported by a common set of enablers, which are described below.

Maintenance Delivery

Inventory Management

Maintenance Specification

Enablers

Performance Improvement

Reliability Improvement

WorkManagement

Works Planning

Systems Capability

Service Providers

People Capability

Safety Management

Maintenance Requirements




Maintenance specification addresses the formal specification of our maintenance regimes. It considers asset performance, age, criticality and condition, and the analysis of reliability and cost data to constantly refine the maintenance regimes. It involves three main activities.

Maintenance requirements: the detailed technical definition of the asset maintenance requirements, and how and when that maintenance work should be undertaken. This includes the monitoring and assurance of maintenance being delivered by the field teams in accordance with the specifications.

Reliability improvement: the range of analytical activities undertaken to better understand asset condition, performance and failures, and so improve our maintenance practices and achieve improved asset reliability.

Performance improvement: activities that involve assess the trade-off between service performance and the maintenance practices applied, to optimise risk management in a cost-effective manner.


Maintenance delivery is the actual delivery of the work in accordance with the maintenance requirements. It involves the following activities.

works planning: collating and scheduling upcoming maintenance work and expenditure

work management: delivering maintenance work on Grid assets, and updating asset and work records

inventory management: supporting work management through the purchasing and use of inventory as required.

Enablers

Enablers are a third group of activities that provide essential support to maintenance specification and maintenance delivery. Enablers include:

safety management: our safety practices underpin all our activities and safety is our top priority when undertaking maintenance work

people capability: ensuring the availability of the specialist skills to support effective and safe work delivery.

service providers: our maintenance work is undertaken by service providers and we seek long-term contractual relationships with them.

system capability: our systems are critical in managing our extensive asset and performance information, and planning and work transactions.



2.3 Activity Improvements

The following sections describe the specific initiatives and improvements undertaken to build our maintenance capability, referenced to each of the maintenance activities identified above. In Chapter 4, we describe the future developments we will undertake within each activity area.

Safety Management 2.3.1

Maintenance and project field work involves hazards that we must continuously manage, most notably those associated with high voltages, use of mobile equipment, and working at heights.

Achieving a safe workplace and zero harm to any person as a result of maintenance activities is our pre-eminent objective. Effective safety assessment and management underpins everything we and our service providers do.

We have lifted safety standards throughout the business over the last few years through concerted improvements in safety governance and leadership, procedural effectiveness and reporting. There have been material improvements in the total recordable injury frequency rate over the last five years, and we have raised safety to a high level of consciousness in all work teams. Specific initiatives and achievements include the following six examples.

Public Safety Management System: external certification of our Public Safety Management System (PSMS). Our PSMS provides a framework for good practice for our safety and operating processes, and demonstrates that all practicable steps have been taken to ensure our assets do not present a significant risk of serious harm to any member of the public or significant damage to property.

STAR programme: implementation of our Safety Thanks and Recognition and Reward (STAR) programme. Our STAR awards recognise the importance of safety in our business and promote a positive safety and health culture in our industry.

ACC workplace safety management practices: we continue to maintain tertiary accreditation status with ACC.

Personal safety action plans: we have introduced personal safety action plans for all our employees. These are linked to the employee performance programme.

Random drug and alcohol testing: since June 2012 we have extended our coverage of random drug and alcohol testing and updated our policies and procedures.

Service provider safety survey: in 2013 we undertook the first annual survey of service provider attitudes to safety, an essential tool for informing field safety improvement. We will repeat the survey annually to monitor our progress.



Maintenance Requirements 2.3.2

Maintenance Procedures

We have an extensive suite of service specifications which are our cornerstone technical references.

Service providers previously operated day-to-day using their own work procedures derived from our overarching specifications. This included the potential for inconsistent approaches across the network.

We have now developed a suite of approximately 450 Standard Maintenance Procedures (SMPs) that define the current appropriate practice for preventive maintenance on all asset types. SMPs promote consistent practices over a diverse asset base, and by a field workforce that is geographically spread and managed by different service providers.

SMPs define the maintenance that will ensure equipment and systems deliver a safe and reliable service taking into account the environment in which they operate. SMPs reflect safe practices, available resources, access to assets and lifecycle cost-effectiveness. We retain ownership and technical management of the SMPs.

Operations and Maintenance Advisory Function

We have established an operations and maintenance advisory function with accountability for the ‘standing definition’ of maintenance, including:

the stewardship of SMPs, including change management

optimising the preventive maintenance delivery schedule (as an input to works planning)

managing the configuration of our asset information systems

improving maintenance service to further integrate our operational and maintenance delivery.

Reliability Improvement 2.3.3

We have made significant progress in establishing a dedicated reliability management capability since the start of RCP1. This includes a new Grid Reliability and Performance group. Specific initiatives and achievements of this group are outlined below and in Section 2.3.4.

a corrective and preventive actions process to track improvement actions to resolution, which was implemented as a business application in late 2013

the capability to directly advise our maintenance delivery teams, including through field work, to facilitate maintenance improvement (to include ‘embedding’ reliability engineers in regional teams)

critical input into the analysis of significant failure events, which is achieving a higher level of responsiveness and precision in event investigation

the ‘Asset Information Portal’, which has been developed to access data from various systems and databases and to display collated information in an accessible web environment.



The group has developed the foundations of our reliability improvement capability. Importantly, this group has taken a key role in delivering the Maximo project (and, in particular, the specification of data structures and work types).

Performance Improvement 2.3.4

Performance improvement activities enable us to balance maintenance costs against performance risks to optimise our maintenance efforts and expenditure. Our eventual aim is to employ cost-risk modelling at an asset level. This will enable detailed scenario-based evaluation of maintenance options identified through reliability studies.

At this stage, performance improvement is a developing capability. We have nevertheless made material progress in establishing some important building blocks and practices, including the following.

Asset Health Indices (AHI):3 we have used AHI to inform our RCP2 expenditure forecasts. Our maintenance forecast model will expand its use of AHI.

Asset risk register: we are implementing a new risk register that will be fully aligned with our corporate risk framework. An Asset Risk Management policy and process has recently been approved and rolled out. Ongoing workshops ensure we are regularly monitoring routine maintenance risks.4

Maintenance efficiency study: we engaged a reliability consultancy to mentor the development of our reliability management capability. Within this engagement they analysed three years of maintenance work to identify potential cost savings. Our reliability team are now making field visits and further analysing operational records to validate the opportunities and define remedial actions such as procedural improvement, equipment modifications and changes to maintenance specifications. We are using this work to define our 3-year asset management plan. We have also used this study to set performance improvement targets for RCP2 (see section 3.3.1 and Appendix B).

Works planning 2.3.5

Works planning involves collating and scheduling upcoming maintenance work and expenditure. In contrast, work management involves more detailed planning for the delivery of maintenance jobs and projects.

Works planning activities focus on annual business planning and the annual outage plan, which details all scheduled work requiring access to the Grid. The process of assembling the outage plan5manages the need for safe access to the Grid, while maintaining service performance. The outage coordination process includes rigorous assessment of Grid security and performance and is our main maintenance planning optimisation process. This process includes wide consultation with customers and other affected parties.

3 AHI express the estimated remaining life of an asset based on information such as asset usage, degradation statistics,

age, and condition. 4 Appendix D summarises current high or extreme risks that could impact our ability to deliver routine maintenance.

5 The outage plan must take account of all work (enhancement, replacement and maintenance) requiring access to the

Grid.



Planning Lead Time

Historically, the works planning timeframe provided for a 12-month works forecast, four months ahead of the start of each planning year, to enable annual budgeting and advance notification of outages to the industry.

With the introduction of Financial Transmission Rights (FTRs), we are moving to a longer lead-time planning model to achieve a rolling 24-month outage plan for all outages on the Grid. The extended timeframe will enable better advice to the market and customers on network outages and configuration, and provide more opportunity to refine our works schedule.

Operations

During RCP1, we reverted to an in-house Operations function and we have invested in systems, skills and scheduling process development. This increasingly integrated operations-maintenance capability is enabling more stable scheduling of maintenance.

Work Management 2.3.6

Work management governs the methods and approach used to ensure maintenance work is approved, planned, scheduled, and then closed out appropriately. It is the day-to-day management and systematic delivery of maintenance work. The challenge within work management is to effectively manage multiple work types with their inherently different lead times and priorities, together with the changes in the schedule due to weather or system and customer considerations.

Routine maintenance planning is based on a forecast schedule of inspections, condition assessments, servicing, and scheduled condition-based repairs triggered by inspections and condition assessments. Work management oversees this scheduled work as well as fault and defect response. Fault response includes more urgent work to return the Grid to full availability and minimise the safety impact of any forced outage.

During RCP1 we transformed our approach to work management. The new principles have been incorporated into Maximo. We introduced the following stages for scheduling work to provide more rigour and visibility in delivery..

Back log: provides full visibility of identified new work, strengthening validation and prioritisation of corrective work. Previously, the detail of this work primarily resided in service provider systems.

Forward log: is the forward schedule of all approved work required for service provider resource planning and for outage approval. We are working towards achieving a stable forward log four months in advance of the work.

Monthly schedule: is a month-by-month schedule locked in one month in advance. It provides a definitive schedule for service providers to complete detailed execution planning, finalise outage arrangements, and is the basis for monthly budgeting.

We have also simplified our work-type hierarchy to enable more precision in work coding by our service providers and maintenance managers which, in turn, enables effective work history analysis by our reliability team.

In addition, our maintenance teams now run weekly reports on all work orders to notify trends and exceptions in work progress and the completion of records.



We now have the main structural elements for improved work management in place. We continue to refine and streamline our processes as we gather experience and familiarity with our new business systems. The forum we established during the Maximo project to engage with key maintenance users has continued and is central to maintaining progress.

Inventory Management 2.3.7

Inventory management is the procurement, stock management and materials supply for maintenance. Stock holdings should represent the minimum required to ensure reliable operations and enable planned work to proceed on time.

Our stock includes a significant holding of strategic spares of major equipment, which require controls ensuring their availability. These strategic spares are assets such as transformers, which we hold in reserve to use when we need to take assets out of service for refurbishment or for unexpected events.

During RCP1 we transferred our inventory management system to Maximo to combine work management and inventory management on the same platform. This was a like-for-like replacement and was a first step in optimising our inventory management, which will enable us to improve the quality of inventory data held, the efficiency of our management processes, and minimise spares holding.

People Capability 2.3.8

Delivery of maintenance activities depends on skilled and specialised personnel, particularly in our field workforce, engineering and analytical roles. During RCP1 we established systems and tools for a competency management programme that specifies the competencies we need for maintenance. To support training and maintain required competencies for staff and service provider personnel, we continue to develop our learning management systems.

Our training initiatives, one to support the development of core skills (Grid Skills) and one to support training required for new equipment or systems (Technology Training), are described below.

Grid Skills

We require competent field workers to build, maintain and operate the Grid safely, efficiently and reliably. These skills are in short supply, with the added complexity of an ageing workforce and changes in technology driving different ways of working. Providing field workforce training within a managed framework is essential if we are to meet our skills requirements and develop the next generation of field workers.

Through Grid Skills we provide all core training to build skills and knowledge. Service providers build on this by providing the requisite on-the-job experience for their staff that culminates in competency achievement and certification. Our staff undergo periodic refresher training in all relevant competencies.

Technology Training

Technology training is associated with the introduction of new business systems (for example, work and outage management processes) and new Grid equipment (for example, HVDC power electronics). We are formalising all new training material as a technology



training resource for the industry within our learning management systems, accessible to our own staff and service providers.

Service Providers 2.3.9

We have a long-term relationship with our service providers. This is recognised in agreements, which describe shared safety and quality values, joint ownership of continuous improvement initiatives, and a sustainable business model.

We established new commercial agreements with our maintenance service providers in 2012. These ensure more collaborative relationships, with a shared goal of improving service to our customers. This is supported by extended lead-time planning, accurate work specification, and project management.

The ongoing development of our relationship with our service providers is termed ‘One Team’ and reflects light-handed but conscious leadership and management by us to oversee, refresh and steer our relationships to the point where improvements are self-sustaining.

Our contracts with our service providers cannot stand still. Knowledge gained from monitoring the effectiveness of maintenance work will inform contract review, as provided for in the current terms.

Specific improvements within our new commercial agreements are summarised below.

Consistency of labour rates across service providers: a greater level of disclosure and transparency has improved confidence in bottom-up pricing, and enabled pricing consistency across service providers.

Rate escalation: this is now more transparent and consistent being based on published indices.

New entrant: a new service provider has displaced an incumbent provider based on an evaluation of capability and price. The new provider has proven to be an innovative and proactive influence within our change initiatives.

Relationship Charter: a new charter is in place, with each service provider expressing a commitment to maintenance improvement in areas such as safety, quality, stakeholder relationships, and resource management. Developing the charters has improved our engagement with service providers.

KPI measures: we are establishing a set of KPI measures relevant to the revised contractual and work management environments. These will include an effective performance management framework.

Appendix C provides more information on service providers.

Systems Capability 2.3.10

A key achievement to date during RCP1 has been the introduction of our core asset management information system (Maximo) and the associated Outage Management Systems (IONS).

Maximo provides access to technical asset data, work history, and maintenance transactions. Its capabilities are pivotal to the improvements we are seeking within work management, inventory management, cost control and reliability management. A key feature of the implementation was frequent, structured engagement with key maintenance



users during the planning and implementation phases. The forums established during the initial project have continued and are important in achieving the ongoing improvement in asset management decision making and asset information.

IONS provides the means to request safe access to the Grid so that work requiring a network outage can be undertaken. We have simplified the core processes for planning and approving outages. The main advantages are communication and risk management benefits, enabled by improved visualisation of outage schedules and planning status.

We have also introduced the Connect system, through which we manage our stakeholder relationships and record all landowner interactions. The central benefits of the system relate to ease of use and the integrity of information due to tighter transactional controls.

Our improvement to asset information systems is a long-term programme supporting the business change sought in our lifecycle strategies. The current stage of the programme involves exploiting the capabilities of our new systems to enhance:

operational risk management: incorporating event and hazard management into Maximo to link events, work and assets for effective risk management

reporting: introducing a broadly accessible reporting and analytics platform, allowing us to efficiently combine information from our primary asset information applications

information views: providing alternative views of information appropriate to particular maintenance roles. The initial emphasis will be geospatial visualisation of works and asset information from Maximo.



3 RCP2 MAINTENANCE FORECAST

3.1 Forecast Objectives

The aim for our routine maintenance forecast is to define the level of maintenance required to cost-effectively deliver a safe, reliable service to our customers during RCP2. We have also developed the forecast to support our asset management objectives.6

Safety: maintenance minimises the risk to safety of both workers and the public, at all times.

Service performance: the forecast levels of maintenance will support our service performance targets7 through improved prioritisation.

Cost performance: the delivery of routine maintenance is undertaken at an optimised cost, based on whole-of-life costs and integrated Capex/Opex analysis.

Communities: we will deliver the forecast levels of routine maintenance with minimum impact to the New Zealand environment, engaging the local community as appropriate.

We have sought a level of routine maintenance that balances performance and cost while ensuring safety of personnel and the public. We believe that the forecast outlined below is robust and reflects that of a prudent operator.

3.2 Routine Maintenance Activities

Together with our service providers, we carry out routine maintenance to ensure assets remain in an appropriate condition and to ensure that they operate as required. Routine maintenance seeks to proactively manage risk of failure, as well as responding to actual failures where these occur. For our RCP2 forecast, we categorised routine maintenance tasks as preventive or corrective maintenance.8 Routine maintenance expenditure also includes routine service charges such as site leases.9

Preventive

Preventive maintenance is undertaken on a scheduled basis to ensure the continued safety and integrity of assets, and to compile condition information for subsequent analysis and planning. It is generally our most regular asset intervention, so is a key source of effective feedback to the overall asset management system. Preventive maintenance comprises the following activities.

6 See AM02 – Asset Management Strategy.

7 See BR04 – Service Performance Measures.

8 We are transitioning to four routine maintenance categories: preventive, corrective, predictive and proactive. These

are defined in our Maintenance Lifecycle Strategy. For the RCP2 forecast, we have included activities in the new categories under preventive and corrective.

9 We are required to pay certain charges relating to our assets, primarily lease costs for station sites. These service

charges costs are allocated to the associated asset class (i.e., HVDC, AC stations or transmission lines).



Inspections: include checks, patrols and testing to confirm safety and integrity of assets, assess fitness for service, and identify follow-up work.

Condition Assessments: activities performed to monitor asset condition and to provide systematic records for analysis.

Servicing: routine tasks (such as lubrication) performed on the asset to ensure its condition is maintained at an acceptable level.

Corrective

We undertake corrective maintenance to restore an asset to service, make it safe or secure, prevent imminent failure, or address defects. The key distinguishing feature is that the work is initiated in response to an unforeseen event that causes damage, degradation or an operational failure. Corrective work is usually identified directly as a result of a fault or during preventive maintenance inspections. Failure to undertake corrective work increases the risk to network reliability, and the timing of repairs will impact this.

Corrective work activities include:

Fault Restoration: urgent repairs to equipment that has safety, environmental or operational implications

Repairs: unforeseen works to repair damage, or prevent failure or rapid degradation of equipment

Corrective Inspections: patrols or inspections used to check for public safety risks or conditions related to faults and events.

To provide context for our forecast, the next three sections describe the current maintenance regimes for each asset class.

Transmission Lines 3.2.1

Transpower maintains approximately 8,000 km of transmission line corridor with a wide range of transmission line types, age profiles, components and environmental conditions. We put a strong emphasis on preventive maintenance for line assets. The regime consists of a combination of annual routine patrols and less frequent condition assessments, in line with common industry practice.

The main types of routine activities are described below.

Line patrols: all lines are subject to routine patrols. We are amending patrol frequency to realise cost savings during RCP2. However, where a line or sections of a line are identified as a high-risk or critical location (for example, over motorways or due to environmental factors), we schedule patrols more frequently.

Condition assessment: these assessments involve a detailed inspection of all transmission line components, foundations and conductors to record asset condition (expressed as CA Codes). The default intervals are 8 years for lines supported by towers and 6 years for lines supported by wood poles. As with patrols, we may apply shorter cycles on a risk or criticality basis.

Corrective maintenance: we initiate corrective maintenance as a result of faults and defects identified during patrols or condition assessments. Our service providers submit an annual ‘Lines Maintenance Strategy’ that summarises the issues



associated with each line and proposed work to rectify. This takes into account observations from routine patrols, historical expenditure on the asset, and condition assessment trends.

Vegetation control: we manage this work using tree growth modelling techniques. Measurements taken during annual routine patrols inform the plan, but it also takes into account exception reporting such as landowner advice and fault reports where vegetation clearance is a factor.

Access tracks: we maintain approximately 2,000 km of access ways, made up of sealed and unsealed roads, spur tracks, bridges and walking tracks. The general maintenance standard is that vehicle access ways should be designed to 4WD utility vehicle standard operating under normal weather conditions. We inspect bridges and culverts in accordance with the NZ Transport Agency inspection criteria.

The frequencies for our line patrols, condition assessment and maintenance have been developed over a number of years in line with industry standards and good practice. We will further optimise these frequencies during RCP2, through cost-risk analysis as described in Chapter 4.

AC Stations 3.2.2

Transpower has 178 substations comprising a wide variety of equipment ages and types. Routine maintenance at AC Stations incorporates a wide range of asset fleets, including power transformers, indoor and outdoor switchgear, reactive equipment, and protection equipment. Our specific approaches vary between asset types, but for preventive maintenance will generally include the following activities.

Inspections: inspection of station assets aims to ensure that facilities and equipment are in a safe and serviceable condition and that any abnormalities that represent a risk to Grid reliability, safety of personnel or the security of the site are identified and rectified.

Condition assessments: these provide a standard assessment of the condition and expected remaining life of the assets.

Diagnostic testing: this involves measuring electrical and mechanical parameters such as insulation, mechanism timing checks and clearances.

Servicing: this involves periodic servicing, aligned with inspections and condition assessments, to maintain asset condition.

Corrective maintenance: this is work initiated as a result of faults, identified defects or condition assessments. The work also includes responding to remote monitoring (SCADA) alarms.

We have developed the frequencies for our inspection, condition assessment and servicing for AC Stations over a number of years, in line with common industry practice. We will further optimise these frequencies during RCP2, through the analysis as described in Chapter 4.

HVDC 3.2.3

The HVDC link provides a critical high-capacity connection between the North and South Islands. Preventive maintenance is particularly important for HDVC assets due to the



criticality of the asset and the inherent difficulty in undertaking remedial work. The prudent levels of redundancy in some components of the HVDC assets, in particular the control systems, means that failures of some components may not necessitate urgent corrective work.

HVDC routine maintenance covers thyristor valves, synchronous condensers, converting power transformers, circuit breakers and other switchgear, reactance and protection equipment dedicated to the HVDC system. The programme includes the following activities.

Inspections: these are undertaken at intervals appropriate for the equipment type and technology in use and can range from 1 month to 12 years. HVDC station assets (for example, electrodes) undergo visual inspections, servicing and condition/diagnostic testing in accordance with the asset’s characteristics.

Special inspections: these focus on the submarine cables and include patrols of the HVDC Cable Protection Zone, annual inspections of the cable using a submersible remote operating vehicle and divers.

Corrective maintenance: this includes minor repairs of HVDC station equipment identified during site inspections and condition assessment.

We have recently completed a major upgrade of the link with the commissioning of the Pole 3 converter stations at Benmore and Haywards. These have fully replaced the Pole 1 converters installed in 1965.

We have recently appointed an HVDC manager, who is overseeing the progressive review of HVDC maintenance requirements and costs. We will review the overall requirements for maintaining the converter stations and electrode stations, including introducing a substantial Pole 3 preventive maintenance regime specified under the terms of the 5-year supplier warranty. As a priority we are preparing SMPs to cover these requirements.. In addition we are continuing to manage the risk of damage to the HVDC submarine cables, described below.

We have developed the current frequencies for our inspections and the target rectification times for our corrective maintenance over a number of years with reference to industry standards and good practice. Some maintenance requirements for recently installed equipment (Pole 3) are dictated by warranty requirements. We will further optimise these during RCP2 using cost-risk analysis techniques as described in Chapter 4.

HVDC cable management

HVDC submarine cable management covers a range of contracted activities including maritime patrol and shallow water response, Remotely Operated Vehicle (ROV) availability (for deep water response), maritime markers and lights maintenance, and spares maintenance.

We are completing a review of the submarine cable risk management and related contract, equipment and vessel requirements. This will look at more effective patrol coverage of the Cable Protection Zone, and our capability to deliver a deep water cut-and-cap operation to limit water ingress in the event of cable damage.10 Our objective is to have new arrangements in place for the start of RCP2.

10

We have a target response of 60 days.



3.3 Routine Maintenance Forecasts

Forecast Approach 3.3.1

We have significantly refined our forecasting approach for RCP2. This in part reflects our increasing maturity as an asset management organisation, and also improvements in available asset and unit cost information. We have used a new forecasting model, known as the Maintenance Activity and Cost Model (MACM), which:

enables improved optimisation between Capex and Opex

accurately accounts for asset base changes including divestments

increases transparency and flexibility

leverages the outputs of work history analysis and similar initiatives

can incorporate ongoing improvements to our maintenance regime.

The forecasting process included the following main steps.

Work history and asset database: we built a new database to capture all routine maintenance activities for individual assets during the last 10 years. This included a wide range of information for each asset including location, type, installation date and future decommissioning or replacement date.

Base case: we extrapolated a base case forecast for corrective and preventive activities using the 2012/2013 asset base to provide a baseline for RCP2. This allowed detailed scenario and sensitivity analysis based on changes to the asset base and our maintenance approach.

Asset base: this step modified the base case forecast to adjust for known Capex works and planned asset divestments and disposals.

Targeted savings: this step applied efficiency targets, including those identified by the maintenance efficiency study detailed below.

Maintenance efficiency study

As discussed in Section 2.3.4, we engaged a reliability consultancy to undertake an efficiency study. This included a ‘data-mining’ exercise on historic maintenance transactions. The purpose of this exercise was to identify potential savings opportunities in routine maintenance expenditure. The analysis compared maintenance activity on a particular asset with average activity (and cost) for this type of asset throughout our asset base. Potential efficiency improvements were identified where the current activity exceeded the expected level of maintenance. The analysis provided saving targets for corrective spend, which have been applied to our forecasts.

Further information on MACM and the maintenance efficiency study are included in Appendix B.



Routine Maintenance Forecast 3.3.2

Proposed routine maintenance expenditure and equivalent historic spend is shown in Figure 2 below. Reflecting our RCP2 cost performance objective, we have targeted a reduction in annual routine maintenance from $70m to $65.4m (7% reduction) over RCP2.11

Figure 2: Routine Maintenance Expenditure Forecast

Figure 3 highlights the overall cost savings identified through the forecast stages outlined in Section 3.3.1.

Figure 3: Routine Maintenance Expenditure Reductions

The savings due to asset base changes equate to approximately $11.4m over RCP2. This includes:

$17.2m reduction due to divestments planned during RCP2, which will reduce the number of assets by 1,25012

11

The percentage changes over RCP2 are based on a comparison between expenditure levels at the start (1 July 2015) and end (30 June 2020) of the period. For some expenditure categories, we have used the forecast expenditure for 2014/15 as the initial value.

12 We used different methodologies for transmission line ‘asset’ counts versus AC station ‘asset’ counts. We recorded

station equipment assets on the basis of individual equipment items. For transmission lines, the stations approach was



$0.9m reduction due to the disposal of approximately 50 assets through RCP2

$3m reduction due to outdoor-to-indoor conversions

$1.6m reduction due to the replacement of single phase transformers with three-phase units

an increase of $4m due to asset additions or replacements

an increase of $7.3m due to additional maintenance activities reclassified as routine maintenance from maintenance projects.

In addition, we have included a $27.5m reduction based on the maintenance efficiency study.

Overall, if we compare the baseline with the final forecast, there is a total reduction of $38.9m in routine maintenance during RCP2.

The next sections give further detail on the forecast for each asset class.

Transmission Lines Forecast 3.3.3

Figure 4 shows the forecast routine maintenance expenditure for transmission lines during RCP2, including a comparison with historical costs. Annual expenditure reduces from $27.2m to $24.6m over the period. This is due to reduced corrective costs, primarily driven by planned improvements to vegetation management and structures maintenance.

Figure 4: Transmission Lines Routine Maintenance Expenditure by Work type

Figure 5 depicts the cost savings for transmission lines. Savings due to asset base changes equate to approximately $4.7m. This reflects:

$6.8m reduction due to the four transmission line divestments identified during RCP2 (this figure also includes approximately $0.8m of disposals)

an increase of $2m due to new transmission line assets being added to the Grid.13

not suitable because of the very large number of items that result from counting individual insulator strings, structures and so on. For each transmission line we recorded only one ‘asset’ for each work type category that applied to the transmission line, to facilitate the planned maintenance cost estimates.

13 This will accommodate short-term projects that could require a substation or tee off an existing line.



Savings targets based on the maintenance efficiency study, lead to a reduction of approximately $18m. This includes $0.8m in preventive maintenance costs, $8.9m in vegetation control and $8.2m in corrective maintenance costs.

Overall, if we compare the baseline with the final forecast, there is a total reduction of $22.7m in routine maintenance for transmission lines during RCP2.

Figure 5: Transmission Lines Routine Maintenance Improvements

AC Stations Forecast 3.3.4

Figure 6 shows forecast maintenance expenditure for AC stations during RCP2, compared with historical costs.

Figure 6: AC Stations Routine Maintenance Expenditure by Work type

Forecast expenditure on AC stations routine maintenance includes a 5% reduction in routine maintenance. This equates to a decrease in annual spend from $33m to $31.2m over the period. Figure 7 highlights the cost savings identified for AC stations during RCP2.



Figure 7: AC Stations Routine Maintenance Improvements

The savings due to asset base changes during RCP2 equate to approximately $6.6m for AC stations. This includes:

$11.3m reduction due to divestments identified during RCP2 (there is also a minor saving due to the disposal of assets)

a reduction of approximately $3m due to outdoor-to-indoor conversions

a reduction of approximately $1.6m by replacing single-phase transformers with three-phase units

initiatives to improve condition monitoring will lead to an increase of $7.3m during RCP2 (this includes re-categorising outdoor circuit breakers and reactive power maintenance projects as preventive work)

an increase of $2m due to new AC station assets.

Savings targets based on the maintenance efficiency study, lead to a reduction of approximately $8.8m. This includes $2.9m in preventive maintenance costs and $5.9m in corrective costs.14

Overall, if we compare the baseline with the final forecast, there is a total reduction of $15.4m in routine maintenance for AC Stations during RCP2.

HVDC Forecast 3.3.5

Figure 8 shows forecast maintenance expenditure for HVDC during RCP2, including a comparison with historical costs. Overall, HVDC maintenance costs have declined from 2010/11 with the decommissioning of Pole 1. As discussed earlier, these costs are currently under review and will be refined through the remainder of RCP1. Forecast expenditure on HVDC routine maintenance reduces from $9.8m to $9.5m over the period. We have included a targeted reduction in corrective maintenance cost of $0.8m during RCP2.

14

The key drivers of targeted corrective savings are reduced costs for building and grounds, disconnectors and earth switchers and protection. These account for over 40% of targeted corrective savings.



Figure 8: HVDC Routine Maintenance Expenditure by Work Type

3.4 Model Governance and Forecast Approvals

Recognising that routine maintenance is a material component of our overall expenditure, we used a dedicated governance approach to build a robust forecast consistent with good forecasting practice. This involved using specialist expertise, quality assurance processes, and formal challenge rounds. The main features of the approach are set out below.

Forecasting team: the team was led by a Senior Principal Engineer. It included an asset planner, management accountant, an information analyst, and third party technical and advisory support.

Specialist advice: we engaged external consultants to support the model build, undertake data analytics, and advise us on maintenance forecasting practice.

Quality assurance: a third party technical advisor provided a quality assurance role, including model version control, model reconciliation and model documentation (including traceability of material assumptions).

Forecast approvals and challenge rounds: the model outputs and forecasts went through three formal challenge and approval rounds. These were:

- General Manager challenge at the RCP2 Advisory Team (28 May 2013)

- CEO challenge at the Capital Governance Team (6 June 2013)

- Transpower Board (12 September 2013).

Based on the methodology used to develop the forecast and the level of cost optimisation included, we consider that the our routine maintenance forecast reflects the efficient costs of a prudent network operator. It is our view that they represent the minimum level of expenditure required to effectively manage asset condition and risk in support of our service performance targets.

3.5 Deliverability

Our delivery group challenged our forecasts to test the resource required for delivery. The review focused on critical resources such as linesmen and substation maintenance personnel. The review concluded that our overall resource requirements are similar to



recent past requirements. While there are some specific areas where present capacity is constrained, we are addressing these through targeted procurement and discussions with service providers. We are confident that we can deliver the levels of routine maintenance set out in this forecast.

3.6 RCP2 Cost Savings

The table below summarises the changes impacting our RCP2 maintenance costs. The structure is based on our maintenance framework.

Activity Area Description Change


Work Management

Stabilise job planning, fewer cancellations and less planning rework (avoided corrective work cancellations)

Consolidate work and reduce repeat visits

Corrective work prioritisation (e.g., by asset criticality)

Full restoration of equipment where practical, avoiding temporary fixes and repeat visits

Ongoing efficiency gains through continuous improvement


Stabilisation of Preventive Maintenance

Additional service codes introduced for low criticality assets

Criticality-driven adjustments to preventive scope and intervals

Smoothed resourcing within preventive schedule

Ongoing reset of preventive maintenance standards to address long-term failure modes (identified by Failure Mode and Effect Analysis (FMEA))

Ongoing review and implementation of revised preventive standards based on criticality alignment

Reliability Improvement

Predictive work levering maturing condition analysis programmes, displacing corrective work

Improvements and modifications (proactive work) recommended by reliability group

Enhanced preventive maintenance driven by performance targets (for example high criticality assets)

Improved materials and component quality specified

Target-Driven Cost Savings

Corrective work reduction – through preventive compliance and refinement (FMEA), predictive and proactive work

Enablers and Support

Service Providers

Skills and competency

Ongoing efficiency due to improved planning stability, capturing work management efficiencies and resource levelling

Reduced corrective work through improved work quality

Overheads, rationalising administration cost

Table 1: Areas of Maintenance Cost Change



4 RCP2 IMPROVEMENTS

Our Maintenance Lifecycle Strategy describes how maintenance contributes to our asset management objectives. Chapter 4 describes our improvement approach, which underpin the efficiencies identified in Chapter 3.

We will continue to embed the maintenance improvements and initiatives introduced in RCP1 for the remainder of RCP1 and work to optimise these throughout RCP2.

We will also continue to work throughout our organisation to develop a more integrated approach to asset management. In particular, we will work closely with the planning function to ensure the trade-offs between initial Capex and ongoing Opex are fully understood and taken into account.

The following sections describe our planned improvements for our maintenance activities. These have been set out under the maintenance activity headings in Chapter 2.

4.1 Maintenance Requirements

As noted in section 2.2, maintenance requirements refers to the development, stewardship and assurance of asset maintenance, and how and when that maintenance work is to be undertaken.

The integrity of this ‘standing definition of maintenance’ is critical to the maintenance improvement cycle. Improvements within this area depend on developing the change management processes for critical standards such as SMPs, optimising the preventive maintenance schedule, and methods for assuring work quality.

Change control and configuration management

We have begun processing recommendations received from service providers for changes to the SMPs based on the practical application of the procedures. We will use a responsive process to validate and formalise improvements arising from them, and analysis by the reliability and engineering teams. We will develop and implement rigorous configuration management processes, to assure data integrity in our new asset information systems.

Preventive maintenance schedule

The Preventive Maintenance Schedule (PM Schedule) is the live schedule in Maximo which assigns SMPs to individual assets and determines the timing for maintenance work. Within configuration management we must continually ensure that:

all relevant assets are covered by the PM Schedule

the preventive maintenance frequency for each asset aligns with the specified SMP interval. Where exceptions exist for criticality or environmental reasons, these should be traceable and justified.

Our Operational and Maintenance Advisory function is now accountable for aligning preventive maintenance jobs for efficient delivery, and will develop ways to:

consolidate the preventive maintenance work on related assets to assist efficient work management (including travel) and outage planning



form efficient ‘routes’ where the same team undertakes multiple small preventive jobs in the same area to streamline work delivery.

Field work quality management

Our renewed focus on detailed maintenance procedures together with reporting from Maximo are providing increased visibility of quality issues such as the variability within maintenance groups of application of our standards, the accuracy and completeness of records and measurements, acceptable limits when signing off work, and attention to appropriate follow-up actions. We will formalise data quality checking to achieve behavioural change and the proper application of the SMPs.

We will review our approach to field work auditing, which is currently provided by internal field assessors. We will consider independent auditing.

Continuous improvement

We will adopt a structured approach to analysing our maintenance requirements, incorporating Failure Mode and Effects Analysis (FMEA), which will ensure that maintenance tasks are appropriate for managing the identified failure modes and the consequences that can result from the failure modes. Our approach to this is set out in section 4.2 under the heading ‘Preventive Maintenance Optimisation’.

4.2 Reliability Improvement

We recognise the value of a reliability focus within asset maintenance. We have three main objectives for asset reliability:

improve equipment life

prevent unplanned failures

minimise the impact of failures.

We will investigate changes to our maintenance and operations practices, or potentially modifications to the assets themselves, which will allow us to achieve these objectives. We also need to understand the cost of implementing identified changes to assess whether they are worthwhile. Identified changes will be applied where the benefits outweigh the costs.

This section outlines particular areas for development during RCP2.

Operations support

We are placing a strong emphasis on close support between our operations and maintenance delivery teams. We will increasingly apply a range of decision support tools that allow us to identify emerging asset risks. Our engineering teams will build fleet-based views of operational data15 that report exceptions such as recurring alarm indications, atypical temperature trends and unusually high operations counts. We will combine these views with condition trend information to provide information that highlights operational risk, and is directly accessible by our operations and maintenance teams.

15

The operational data will come largely from SCADA and MAXIMO.



Reliability analyses

We will employ a range of analysis tools for statistical data mining, data history and cost analysis, and recognised reliability engineering techniques. We will use these to forecast the future condition and capability of the assets, identify ‘bad actors’ (cost and failure rate), and support maintenance requirements analysis leading to optimised preventive maintenance (further referred to below). Ultimately, our knowledge of asset reliability, combined with industry and manufacturers’ data, will support the practical derivation of ‘probability of failure’ statistics for individual assets – an essential building block for comprehensive risk and optimisation models.

Fault and event analysis

We have an established fault and event capability providing systematic collation of fault information, analysis and review. We will improve our processes and information systems for event capture, coding and cause investigation, and insourcing of the existing specialist event investigation role.

We are also seeking more immediate information and findings turnaround to most effectively bring those findings to bear within the mix of all available information used for post event decision making, and timely formation of recommendations for follow-up. Remote access to protection relay sequence data is a key enabler here.

Defect management

We recognise that we need to be more systematic in our approach to assessing defects as a leading indicator of potential failure events; including our methodology for root cause investigation, and tracking issues and recommendations to resolution. We must eliminate avoidable problems that recur as a consequence of incomplete follow-up.

Condition assessment

We have a vast range of opportunities for condition assessment through both automatic monitoring and feedback from our preventive inspection programme. We have a mature lines condition assessment approach, but a similar approach for substation equipment has been less effective to date. We are examining the application and rationalisation of the information we collect during equipment inspections, servicing and testing. We have a particular focus on identifying trends and tolerance of low-end exceptions.

Within automatic monitoring, as noted above, we have ample real-time information available to build further asset health and risk models that either measure condition directly or infer it through calculations of wear and ageing. There is a logical connection between this work and our work to date developing AHI, our predictive model of nominal remaining asset life. We can achieve a real-time measure of asset health, on those assets where it is justified.

Preventive maintenance optimisation

To optimise maintenance, we must systematically refine our PM baseline and target condition-based maintenance using proven reliability engineering techniques. Embedding a structured approach to maintenance requirements analysis is therefore a main objective during RCP2.



Good industry practice requires differentiation according to criticality to ensure that analysis is focused on the performance of assets and fleets that are most critical to delivering our asset management objectives. This may involve:

adopting FMEA as a key reliability tool and establishing FMEA models for key asset fleets

adopting Reliability-Centred Maintenance (RCM) for medium and high-criticality assets

a fully quantified risk-optimised approach for our most critical assets, potentially at individual asset level, on the back of appropriate loss and consequence analysis developed under our performance improvement activities.

This allows a tiered maintenance requirements structure that will support continuous optimisation. This is in contrast to a ‘one size fits all’ maintenance regime for a particular asset class.

We will develop ‘appropriate best practice’ along these lines during RCP2, progressively introducing the capabilities outlined above. We will apply reality checks as to the benefits of increasing complexity and reach across the asset base, at each step of development.

4.3 Performance Improvement

Within performance improvement we are concerned with clearly understanding the risk profiles of our assets. This informs our operational decisions, the settings we apply to our maintenance requirements analysis, and our investment decisions.

Work in this area during RCP2 is the logical continuation of our development of asset health and asset criticality frameworks. Our overall approach is explained below in terms of:

optimising the balance of Opex and risk

optimising the balance of Capex and Opex

a three-year view of the asset management plan.

Optimising Opex and risk

As noted above, cost-risk optimisation involves a clear understanding of asset risk. In principle we want to develop a strategic risk model with granularity to individual asset level. This is a significant undertaking, which will bring together a range of performance and reliability initiatives. Developing a model in which risks can be more simply compared will enable practical option and scenario development, and the risk visualisation necessary to demonstrate optimisation.

Developing some of the key building blocks is already providing benefits. We have used criticality and asset health to help prioritise our investment and maintenance planning, and to influence operational decisions. Our approach is to introduce practical working models early and then progressively extend their capability and reach across the asset base. We are already combining asset health and asset criticality to provide a ‘first-cut’ risk model for some assets.

In summary, we are developing the following building blocks.

Asset criticality: we have developed our criticality framework to align with our service performance measures. It links network or asset failures to the



consequences for customers. Currently we have specified criticality down to bus and circuit level, but ultimately we will extend to individual assets.

Consequences of failure/performance targets: we have set performance targets based on the service performance customers receive. We want to specify reliability and availability targets down to asset level, and consequently the maintenance required to support these.

Asset Health: our asset health modelling provides a repeatable, leading indicator of condition using age, degradation mechanisms, and environmental conditions (in particular). We are steadily developing the coverage, the condition assessment inputs, and the utility of our asset health model.

Probability of failure: through our reliability improvement stream, and FMEA in particular, we will learn about failure characteristics with respect to asset condition. We can draw on industry and manufacturer failure data as a first approximation. Ultimately, the relationship of these statistics with our granular asset health measures can provide a probability of failure picture across the asset base.

The summary above briefly introduces the degree of development work involved, and the staging of that development. During RCP2 we will make significant progress towards a mature asset risk model, which tangibly expresses asset risk and allows us to specify asset-based performance targets.

Optimising Capex and Opex

Whole-of-life cost modelling, a component of our planning activities, involves analysing the costs, risks and benefits over the full life of assets to establish long-term cost reductions, while assuring the necessary network performance levels in a sustainable manner.

Our ability to consider Opex over the life of an asset will ensure that capital investment decisions consider the longer-term operational and cost impacts in greater detail to identify and justify the optimum investment point. Maintenance costs, particularly for ageing assets, will also be balanced against the capital costs of new technologies and design or network configuration changes. This analysis will inform our next generation of fleet strategies.

We see the maintenance cost-risk modelling approach described earlier as integral to comprehensive whole-of-life cost modelling. In simple terms, we want to factor investment options alongside maintenance requirements analysis to achieve overall cost reduction. With this in mind it is important that the development of our planning models is coordinated from the outset.

Three-year view of Asset Management

Within performance improvement we will maintain a ‘tactical’ view of current (already committed) investment projects versus known asset and operational risks we are seeking to mitigate. In effect, this will fine tune the investment plan to meet significant changes in the asset risk profile.

4.4 Works Planning

The central purpose of works planning is to achieve the scheduling of required work on the Grid so it is delivered safely and efficiently, while maintaining service to customers.



We will improve our current approach to the overall scheduling of Grid works, and hence that of maintenance work.

We are introducing a national works planning approach that will include all work on the Grid. For context, we have addressed our intended development of maintenance works planning within our proposed approach to national works planning, as described below.

National works planning

These are the main elements of the national works planning capability we will develop during RCP2.

Consolidate all necessary work on the grid, irrespective of origin, within an identifiable rolling three-year national works schedule.

An overlay of the necessary outages (outage plan) required to deliver the works schedule.

Continuous optimisation of the works schedule by addressing the relative priorities of the work; and the constraints associated with operational safety, effects on customers, cost, Grid security, Grid performance, and compliance. A numerical model will be considered.

Provide a two-year view of the schedule that is continuously available to all relevant stakeholders, internal and external. Other views such as the forecast network configuration over the planning interval may also be considered.

Manage resources through levelling informed by our service providers.

Capability to analyse the cost-risk implications of work delivery timing changes, supporting transparent optimisation.

Formal governance of the three-year schedule informing tolerance to planning input changes relative to lead time, the authority to prioritise and reschedule work within optimisation processes and optimisation settings.

The works planning function is an integrated set of activities that relies on many people collaborating, including our customers and service providers. We will consider possible organisational changes to rationalise works planning accountabilities.

Maintenance works planning

The works plan for maintenance will be an extract of the national works plan developed above. Works planning activities specific to maintenance, include:

updating the long-term maintenance forecast annually, including updating asset base projections and tracking savings to support budget preparation

assembling the three-year maintenance budget on an annual cycle, including budget consultation and challenge

moderating prospective changes to the maintenance works plan proposed as a result of asset risk evaluation within performance improvement.



4.5 Work Management

Further improvement within work management during RCP2 will initially focus on maturing the new approach to maintenance.

We must achieve a clear shift of emphasis with our maintenance managers and service providers to attain more precision in record taking and decision making on defects and corrective work, and recognise how choices made during field work influence quality.

The improvements to works planning described previously will provide a stable definition of the work to be delivered, benefiting delivery planning within work management.

Ongoing asset information systems development, particularly the integration of functions and information, will enable a more complete view of asset and delivery risk and improved decision making.

4.6 Inventory Management

We transferred inventory management processes to Maximo as an initial step in developing materials supply and warehousing processes. This has enabled tighter integration of inventory and work management.

We have extensive stock holding and diverse warehousing arrangements.

We are planning a significant improvement initiative for inventory management. It will support key maintenance strategies for greater precision in our management of strategic spares and the cost-risk optimisation of our spares holdings.

Our proposed initiative should deliver four main improvements.

Assurance of stock holding: achieved through systematic re-cataloguing and a comprehensive stocktake. This will improve data quality, identify duplicate and missing items, and correct locational inaccuracies.

Confidence in stock level compliance: achieved through systematic tracking of replacement equipment and equipment under refurbishment, asset database updating and improved strategic spares management.

Optimised holding and ordering: achieved through replenishment analytics based on order lead-times, demand profile and cost.

Efficient staging: ensuring appropriate stock location and efficient movement of materials to where they are required.

Visibility of stock and spares usage: achieved through providing additional cost-risk indicators within reliability improvement.

4.7 Safety Management

Our approach to safety improvement during RCP2 will continue to focus on supporting our corporate workplace safety goals. Our immediate focus is on two areas: safety leadership and our safety management system.

Safety leadership: all staff and service providers must take personal ownership of safety management. We are addressing the engagement and commitment of service



provider personnel directly through internal training and leadership. Recent senior-level appointments in safety management are further driving these initiatives.

Safety management system: we will consolidate multiple safety management systems into an improved national safety management system that is consistent and highlighted throughout all our operations. As part of this development we are extending our new asset management information system, Maximo, and its integrated safety management module.

These are consistent with our primary safety improvement strategies for RCP2.

Achieve a safety leadership position and alignment of proactive safety approach and behaviour with our service providers.

Achieve safety and health alignment and consistency with our service providers and subcontractors.

Commitment to appropriate best practice investigation and corrective action of the root cause of all safety incidents.

Future improvement must address the personal commitment and values of both internal and service provider personnel. We will continue to introduce innovative and effective initiatives which constantly reinforce positive safety behaviour and attitudes.

4.8 People Capability

Grid skills

The availability of sufficient skilled personnel is a key factor in the continued deliverability of Grid maintenance. We will continue our leadership role in technical training for field personnel established during RCP1. We will provide all core and refresher skills training for our service providers. Service providers are accountable for on-the-job training.

During the remainder of RCP1 and RCP2 we will:

continue to work with the industry to develop and establish competency pathways and standards (both skills training and experience) for all key roles required to undertake work across the transmission sector

work closely with the Electricity Supply Industry Training Organisation (ESITO) to register training programmes for national qualifications and ensure that the competency outcomes from training programmes are linked to the national qualifications framework

ensure that competencies are current, updated and refreshed consistently through comprehensive monitoring of individuals across our service providers and other relevant personnel

work with service providers, manufacturers and other industry partners to systematically develop relevant competency standards and training associated with introducing new equipment, work methods and tools;

ensure the industry has agreed minimum common standards for assessing workplace learning (skills, knowledge and experience), aligned to the competency framework



enable our service providers to provide a competent workforce, by formally forecasting the resource levels and competency profile necessary to deliver work on the Grid.

Technology training

We will continue to develop our wider in-house technical training capability to support business systems and specialised Grid equipment (for example, HVDC electronics). Systems training provided during implementation of our technology projects will be formalised in our in-house training programme.

4.9 Service Providers

Contracts

Contracts introduced during 2012 and the corresponding changes to geographical management areas generally support the changes in maintenance practice we are leading. We will continue to assess the effectiveness of the contracts.

We expect that the overall impact of maintenance improvement will be reflected not only in work volumes, but also efficiencies that affect work scope and overhead cost. Where we achieve productivity and cost benefits, we will adjust contract mechanisms and rates as appropriate.

Some new methods within our improvement programme, such as work management-driven performance measurement, may also require agreement to contractual change as they are introduced. The new contracts provide for this.

Change management

Behavioural change (for both ourselves and our service providers) supporting maintenance improvement will be incremental. It will be achieved through a mix of steady improvements in our core practices, and one-off improvement initiatives targeting particular activities and behaviour. Our emphasis on consistent safety improvement will be a key influence.

4.10 Systems Capability

Maintenance depends on a range of information systems. In 2013 we introduced two significant systems: our core asset management information system (Maximo) and our outage management system (IONS). These systems have significantly improved our ability to collate relevant asset and work information, including asset condition information.

Data quality

Building on the asset data specification developed within our projects, we have placed renewed focus on configuration management to maintain the integrity of asset information. We will continue to develop and embed asset configuration review practices, asset knowledge standards, and collation of new asset data within business-as-usual data quality assurance across all roles that provide or use significant data.



Asset information systems development

During RCP2 we will develop our systems capability further; first by simplifying the integration of information from multiple sources, and then enabling more responsive provision of analytics to the business. Our initiatives in this area will increasingly link our asset management lifecycle activities, providing benefits beyond maintenance.

An example of future capability is routinely combining asset condition and work information in Maximo with operational information from the Plant Information (PI) System, to provide real-time analytical models of asset risk. This richer asset information will inform our evaluation of cost and risk, and hence our operations and maintenance decision making.

We have an ongoing maintenance change programme delivering a range of business system improvements. Many of the these improvements depend on information systems enhancements included in the Core AMIS Release 2 project approved in September 2013, which is a follow-up project to the recent implementation of Maximo.

We will deliver the Release 2 project progressively during 2014. It involves:

implementing the Maximo HSE16 module for health, safety and environmental management process support covering hazard communication, and incident reporting and management, all integrated with work management processes

developing maintenance workflow to progressively streamline and enhance work management and supply management processes, using the automated processing capability of Maximo

staged development of a reporting and business intelligence platform that assimilates information from each major AMIS application, initially targeting reporting capabilities that are either manually intensive or involve integrating many information sources

developing a unified maintenance and operations document framework, covering cataloguing of existing documents, standards and governance

enhanced geospatial views from within Maximo (integration between existing systems)

staged development of a replacement works planning business system supporting risk-based planning of Grid work up to 10 years in advance, including scenario-based options assessment. This will include all Grid project planning, including maintenance projects.

16

IBM MAXIMO Health, Safety and Environment module supporting hazard identification, risk and incident management.



Appendices



A REVIEW OF INFORMATION REQUIREMENTS

The table below shows in which section of this document we have addressed Opex information requirements from the Commerce Commission.17

Reference Commerce Commission requirement Section

RCP1 Opex

5

Please provide the following information concerning opex for RCP1:

5.1

a description of the key drivers of opex; and 1.3

5.2

in relation to RCP1 opex forecasts, evidence demonstrating if, and how, Transpower has:

5.2.1 pursued and is pursuing process improvements, including those identified as a business improvement initiative;

2

5.2.2 ensured and is seeking to ensure appropriate least-whole-of-life cost and efficient interventions;

2.3.4 & 4.3

5.2.3 pursued and is pursuing cost reduction strategies for each of its opex portfolios; and

2.3.4 & 3

5.2.4 ensured and is seeking to ensure that both internal and external suppliers of goods and services have incentives to perform well and identify cost savings.

2.3.9 & Appendix C

RCP2 Opex

6

Please provide the following information concerning opex for RCP2:

6.1

a description of Transpower’s objectives for its opex and the ways in which the opex proposal reflects the efficient costs that a prudent network operator would require to:

3.1

6.1.1 meet or manage the expected demand for electricity transmission services, and deliver proposed quality standards and grid outputs, during RCP2 and over the longer term; and

3.1 & 4.3

6.1.2 comply with applicable regulatory obligations of those services; 1.3

6.3

an overview of the methods used to develop the opex forecast for each of its opex portfolios and for opex portfolios in aggregate. This must include details of:

6.3.1 the forecasting approach that was used, eg, bottom up, trend, benchmarking analysis;

3.1 & Appendix B

6.3.2 how uncertainties were incorporated into forecasts; Appendix B

6.3.3 how synergies with other opex portfolios and capex have been taken into account;

2.3.4, 3.3 & 4.3

6.3.4 what business unit was responsible for developing the forecast; 3.4

6.3.5 the challenge and approval process employed for sign-off of forecasts; 3.4

6.3.6 the differences, if any, and improvements in the forecasting approach used to develop forecasts compared to that used for the RCP1 proposal;

3.3.1 & Appendix B

17

Section 53ZD Notice, Commerce Commission, 2 July 2013.



Reference Commerce Commission requirement Section

RCP1 Opex

6.3.7

ways in which Transpower has addressed concerns with its RCP1 proposal that were identified: (a) in the RCP1 final reasons paper; (b) in the Geoff Brown consulting report; and (c) by Transpower when developing its business improvement initiatives;

2, 3, 4 & Appendix B

6.4

a description of any efficiency assumptions that have been made in the opex proposal;

3 & Appendix B

6.5

a description of any contingencies that are included in the opex proposal, and the methodology for calculating those contingencies;

Appendix B

6.6

an overview that gives context to, and explains:

6.6.1 any linkages between Transpower’s historical opex, quality performance and capex, and Transpower’s forecast opex, proposed quality standards and grid outputs and capex for RCP2;

2 & 3

6.6.2 how Transpower is working to achieve the objectives it has set for its opex; and

3 & 4

6.6.3 any factors driving a material change in levels of opex for each of the opex portfolios forecast for RCP1 and forecast for RCP2;

3

6.8

an explanation of the overall deliverability of proposed levels of opex for each of the opex portfolios, as well as any factors likely to affect this, including:

3.5

6.8.1 a description of plans for resourcing and delivering proposed levels of opex for each of the opex portfolios;

2.3.5, 2.3.9, 3.5 and

Appendix C

6.8.2

identification of the key risks associated with resourcing and delivering proposed levels of opex for each of the opex portfolios, including explanation of each risk’s potential to affect; (a) forecast levels of opex; (b) forecast grid outputs; and

2.3.4, 4.3 and

Appendix D

6.8.3 a description of the processes that will be implemented to manage or mitigate these key risks; and

Procurement

8

Transpower may outsource, or plan to outsource, matters relevant to the opex proposal, eg, contracting for the provision of maintenance services. Please provide details of arrangements with service providers for this outsourcing. These details must enable an assessment of how Transpower’s opex and proposed quality standards and grid outputs will be met by the service provider, and must include but not be limited to:

8.1 the size, experience, and capability of the service provider; Appendix C

8.2 the value proposition for outsourcing; Appendix C

8.3 the process used to select, evaluate and award outsourced work; Appendix C

8.4 any performance targets and monitoring arrangements established; and Appendix C

8.5

any other relevant matters relating to the service provider and arrangements considered when outsourcing.

Appendix C

Table 2: Commerce Commission Requirements



B MAINTENANCE ACTIVITY AND COST MODEL (MACM)

Appendix B describes the approach we used to develop the MACM. It outlines:

the aims of MACM;

methodology used;

enhancements included; and

management of uncertainty.

B1 Aims of MACM

We developed MACM to improve our routine maintenance forecasts. It enables us to deliver a number of our routine maintenance objectives for RCP2, including:

ensuring good practice forecasting, including reflecting the trade-offs being made between Capex and Opex and accurately accounting for asset base changes

improved transparency and analysis flexibility

quantifying the cost benefit of efficiencies identified through work order analysis and similar improvement initiatives

reflecting long-term maintenance cost trends in the ongoing maintenance improvement programme

effectively addressing feedback from the RCP1 process.

B2 MACM methodology

We actively sought good industry practice and the support of external specialists to develop a robust approach to maintenance forecasting, and in particular an approach that supports maintenance improvement.

MACM will be a valuable input into the annual budgeting round and will facilitate setting the direction of further improvements and efficiencies in maintenance. The model includes two elements.

An SQL database: this collates transactional work data, enquiry and analysis support, and export to Excel workbooks that provide the user interface. The SQL database efficiently supports analysis and investigation of data from granular and verifiable data sources.

An Excel workbook: this transforms the historical preventive average spends and volumes from the SQL database into forward-looking spend profiles, as well as forecasting the corrective spend profiles (for example, fault response, repairs and rates) based upon average spends and incidences computed in the SQL database.



Figure 9 shows the overall forecasting approach. The individual steps are explained below.

Figure 9: Forecasting Approach Summary

Work order history and asset base

Our Maintenance Management System (MMS) 18 is the source of all routine maintenance cost activity exported to the model. This includes such information as:

the individual transaction activity (work history) for all assets as recorded against them during the last 10 years

the device position, asset type, install date and decommission date of all unique assets that have a maintenance activity recorded against them for the last 12 years.

Approximately one million data records from MMS were loaded into the SQL Server to enable data matching, analysis and aggregation. The utility of the SQL Server made it possible to develop the following profiles at individual asset level.

Corrective maintenance: cost profiles were built for each corrective maintenance type activity over a 5-year period.

Preventive maintenance: cost profiles were built for each preventive maintenance type activity over a 12-year period. This included a specified frequency attached to a unique asset for that particular activity. A 12-year history was chosen, given that some preventive maintenance intervals are 8 years or more.

Asset base: as noted above, an asset base at individual asset level was developed. Changes to the asset base were forecast to 2020.

18

Maximo our new maintenance management system, went live in July 2013 and MMS is no longer used. Data from Maximo can be loaded into MACM.

Savings Targets Model

Asset Base Model

Base Case Model

Work Order History and Asset Base

Excel Based Aggregated

SQL Server Based Non-Aggregated



Base case

The aggregated data in Excel was adjusted to reflect 2012/2013 dollar values. Forecasts for corrective and preventive maintenance were extrapolated using the 2012/2013 asset base to provide a baseline cost forecast for RCP2.

The base case forecast (which assumes no change in the asset base or maintenance approach) provides the reference case for applying change scenarios such as asset base changes, and assesses the contributions of such changes during RCP2.

The calculation for extrapolating corrective and preventive spend is summarised below.

Figure 10: Base Case Escalation Calculation

Asset base adjustment

The asset base model applies forecast asset numbers, by type, to the end of RCP2, to adjust corrective and preventive work volumes and hence scale the corrective and preventive maintenance spend profiles.

Where the future cost profile cannot be derived from historical data (for example, due to a material change in maintenance approach), cost lines are individually adjusted.

This adjustment accounts for any maintenance volume changes associated with planned asset additions, divestments, decommissioning, and replacements (where material).

Savings targets

The final step is applying savings targets to the corrective and preventive spend profiles.

Preventive maintenance efficiency

Projected preventive savings were applied to cost profiles for all fleets except for HVDC and cables. The targets reflected efficiency saving in the delivery of preventive maintenance work, rather than any direct reduction in the preventive maintenance programme. It is too early in our reliability programme to quantify overall expenditure changes resulting from refining the preventive maintenance baseline. Some areas of the preventive maintenance may increase in cost within overall cost-risk optimisation of maintenance.

Corrective maintenance efficiency (maintenance efficiency study)

We engaged a reliability consultancy to mentor the development of our reliability management capability. The consultancy’s work included analysing corrective maintenance transactions over a three-year period, to identify potential cost savings. The potential cost savings from this extensive analysis were reported by facility (substation or line) and asset type (for example, transformers).

The analysis compared current maintenance activity and cost for a particular facility or asset with the overall known average practice (and cost) across the asset base. This identified possible efficiency improvements for a particular facility or asset type such that the activity was improved to the current overall average (normalised for facility size).

Maintenance Activity Type

Asset BaseType

Total Spend Average spend per

activity type Escalation factor ×= ××∑



The analysis excluded outliers and applied a moderated approach. For example, small facilities were excluded,19 and the maximum amount of expected savings that could be accredited for particular facilities or assets was capped.

The aggregated improvement across the low-performing facilities was expressed as a savings target for corrective spend across each asset class to be achieved by the end of RCP2. This percentage savings target was applied within the model as an incremental percentage improvement per year in performance.

B3 MACM Enhancements

We materially improved the approach used in RCP1 to develop our RCP2 forecast in the following ways.

External advice: we used external advice to ensure that good practice modelling techniques were used.

Transactional data: we used detailed historical transactional and asset base data to:

o create cost profiles at the individual asset level to allow for quantifiable estimates during RCP2

o forecast planned network additions, divestments, decommissioning, or adjustments for replacements (like-for-like or like-for-new), and the impact these changes have on routine maintenance throughout RCP2.

Reconciliation: we reconciled historical data used in the model to the General Ledger.

Quality assurance: we used a formal quality assurance process to minimise the risk of error within the model.

Corrective maintenance efficiency improvements: we used detailed data analytics to estimate efficiency improvements at the site and asset level for corrective maintenance.

Preventive maintenance efficiency adjustment: we used a preventive maintenance efficiency improvement target.

B4 Model Uncertainty

MACM aims to deal with uncertainties by the using at least five years of historical routine maintenance expenditure as a baseline, and systematically applying this going forward at a partially aggregated level. This approach assumes that the past is a reliable predictor of the future.

This approach is appropriate as in those historical budgets we included a contingency for corrective maintenance. If this contingency was used in any given historical year, to manage corrective maintenance cost uncertainty, the amounts were captured in the historical routine maintenance actuals.

MACM has been supplemented to reflect: estimates of changes to the underlying maintainable asset base: enhanced maintenance procedures (for example, cables); known strategic initiatives (for example, outdoor-to-indoor conversions); as well as achievable efficiency savings.

MACM has made no explicit assumption or estimate for contingencies or uncertainties.

19

The relationship between the mean time between work and the cost of work breaks down for small facilities.



C SERVICE PROVIDER INFORMATION

C1 Value proposition

The outsourcing model that we have adopted ensures:

we define the ‘right price’ for services provided and capture of efficiency gains

an increased contractor resource pool so that our workload requirements can be met in the medium to long term

a financial gain from working closer with suppliers to develop the optimum business and operations models

enhanced value for our end users and stakeholders from improved services, processes, and organisational effectiveness

improved risk management across the whole value-chain

a continuous improvement business environment.

C2 Service provider procurement process

On 1 July 2012 a new set of contracts for providing Grid Maintenance and Project Services came into effect with five service provider companies: ABB, Electrix, ElectroNet Transmission, Northpower, and Transfield Services. The contracts, with a 6 + 3-year term, provide considerable business certainty for all parties and underpin our strategic framework and business goals by:

promoting maximum value from service provider relationships, including value from innovation and value-add initiatives

focusing on service to our customers and stakeholders

formalising the link between service provider performance to work allocation

ensuring sufficient service provider resources are available to deliver our work programme.

Our service provider contracts by service area are set out in Table 3 and Table 4.

Station Service Area Service Provider

Northland Electrix

Auckland Transfield Services

Waikato ABB

Bay of Plenty Northpower

Central North Island Electrix

Taranaki ABB

Hawkes Bay ABB

Wellington Transfield Services

Canterbury Transfield Services

Nelson/West Coast ElectroNet Transmission

Otago/Southland Electrix

Table 3: AC Stations Service Provider Contracts by Area



Lines Service Area Service Provider

Northland Northpower

Auckland/Waikato Electrix

Bay of Plenty Transfield Services

Central North Island Electrix

Wellington/East Coast Transfield Services

Canterbury Transfield Services

Nelson/West Coast ElectroNet Transmission

Otago/Southland Electrix

Table 4: Lines Service Provider Contracts by Area

To establish the new service provider contracts we initiated a two-stage procurement process, consisting of an open request for information (RFI) and a closed request for proposal (RFP), to appoint grid maintenance and project service providers for up to nine years.

The RFI stage sought to broaden the resource pool, lower barriers to entry and enhance competition.

The RFP was designed to set a service provision platform to assist in the attainment of our strategic objectives and priority deliverables. We evaluated the RFP submissions against a series of criteria:

pricing

value add and innovation

organisational compatibility

transition plans

fault response times

governance and management structures

service area structure, capability and key personnel.

In addition, a Management System Evaluation (MSE) assessed the effectiveness and functionality of the respondent’s business management systems. This involved site evaluations of all RFP respondents and assessed:

safety systems

leadership

workforce focus

client and customer focus

maintenance and capital works processes

integrated works planning.



We commissioned an independent Probity Report to assess our process against accepted good practice expectations for procurement by New Zealand Government entities. This report identified no exceptions in terms of the New Zealand Government or Transpower’s procurement guidelines.

C3 Performance targets and monitoring arrangements

The revised contracts specify KPIs in supporting service specifications. They cover the following performance areas:

safety

service delivery

network performance

finance

environment.

We continue to review the relevance of the KPIs specified in the service specifications with our service providers. This includes establishing a working group consisting of representatives from each of the service providers, our maintenance managers and key lines people.

We have formalised an engagement model with our service providers. This model outlines roles and responsibilities of the parties, together with agreed processes, meetings and communications. Regular meetings include:

Governance Leadership Team (2 per annum)

Delivery Management Team (4 per annum)

Regional Operations Forum (2 per annum)

Quarterly Reviews (4 per annum)

Regional Operational Meetings (12 per annum).

C4 Service provider capability

Table 5 provides an overview of the size, experience and capabilities of the service providers.

Service Provider

Employees Experience and Capability

Northpower 1,000 (NZ) Transmission, Design and Engineering, Industrial and Commercial, Telecommunications, Distribution, Safety

Electrix 1,700 (NZ) Commercial, Distribution, Gas, Generation, Industrial, Telecommunications, Transmission, Transport, Water

Transfield Services

11,500 (Aus and NZ)

Asset Management, Consulting, Engineering, Construction, Operations, Maintenance, Upgrades

ElectroNet Transmission

115 (NZ)

Asset Management, Business and Consumer Electrical, Distribution, and Transmission construction and maintenance

ABB 700 (NZ) Asset Management, Consulting, Engineering, Construction, Operations, Maintenance, Upgrades

Table 5: Service Provider Contracts by Area



D ROUTINE MAINTENANCE RISKS

As discussed in section 2.3.4, the recently established Reliability and Performance group is implementing a revised asset risk register, which will be fully aligned to our Corporate Risk Register. Ongoing workshops ensure that we regularly monitor routine maintenance risks.

Table 6 summarises current high or extreme risks in our corporate risk register that could impact our ability to deliver routine maintenance for the Grid.

Risk summary Current and proposed mitigation processes

Financial failure of a key service provider, or their sudden withdrawal from NZ/ Transpower contracts or poor supplier engagement and governance results in an inability to operate, maintain and build the Grid in certain regions/areas. This could lead to significant loss of supply and reputational damage.

Credit checks of suppliers during procurement and as required throughout the contract period.

Multiple suppliers (for example, Alliance Contracts), where appropriate.

Ongoing engagement governance reviews with suppliers.

Ongoing operational reviews with suppliers.

Supplier relationship managers ensure good ongoing engagement and resolution of issues.

Escalation processes in place.

Inability to get land access for equipment maintenance or vegetation management results in equipment failure or tripping. This could lead to significant loss of supply until equipment can be repaired or vegetation cleared and capacity restored.

Regular line patrols to prevent encroachment (minimise risk).

Ensure that any work on existing lines does not destroy existing rights use under the Electricity Act 1992.

Provide field staff with adequate information on Electricity Act 1992 rights and any specific agreements with landowners.

Follow existing Memorandums of Understanding (MoUs) with landowners and landowner groups.

Ineffective safety assessment and management while undertaking routine maintenance could result in significant injury or death to employees or contractors.

Ensure correct reporting and analysis of safety-related incidents and near misses and safety systems by all staff and contractors who enter work sites.

Regular external reviews with resulting action plans for improvements.

Conduct regular safety meetings with CEOs of Alliance Contractors (Central Safety Leadership Team).

Ensure that safety matters are adequately addressed in regular operational meetings with Alliance Contractor staff and through the Alliance Safety Practitioners forum.

Maintain compliance to NZS 7901 Electricity and Gas Industries – Safety Management Systems.

Maintain current safety programme to continuously address existing practices, process, culture and behaviour.

Establish culture of continuous improvement and sharing of lessons learned.

Failure to maintain service provider staff competency and delivery capacity could result in loss of supply or injury to a field worker or a member of the public.

Long-term work plan (including prioritisation elements) to more accurately predict resource requirements.

Work plan is shared with service providers and other stakeholders.

Continuation and enhancement of ‘Grid Skills’.

Continuation and enhancement of the ‘One Team’ engagement model.



Risk summary Current and proposed mitigation processes

Inability to schedule outages could result in

inadequate maintenance, leading to

significant loss of supply due to network

failure.

Advance planning of outage requirements, and scheduling of work.

Ensure all participants (Transpower, customers, contractors) are aware of and understand the outage planning processes.

Ensure the processes are monitored to produce timely outage planning.

Procedures in place to manage ‘difficult’ outages via the escalation process, providing senior management increased awareness of any issues arising from outage planning.

Insufficient critical spares or expertise to

effect a repair, especially where there is a

long procurement period, could lead to


failure.

Existing spares located closer to known higher-risk assets.

Condition assessments to detect imminent failure.

High Impact Low Probability (HILP) reviews contribute information on strategic spares requirements.

Contingency plans for strategic spare transformers.

Like-for-like replacement of control relays.

Procurement of spares where there are known issues.

Human error or poor quality during

maintenance could lead to asset failure or

unexpected operation. This could result in

loss of supply, or injury to a field worker or

a member of the public.

Up-to-date drawings held on-site, available on the contractor internet site and on the intranet.

Maintenance requirements in service specifications.

Minimum competencies for each role defined.

Requirement to use risk slider before commencing work to ensure Human Element Incident risk factors are considered.

Forward work review by Regional Service Managers to ensure we know if project and maintenance people are on-site together.

Lack of situational awareness for

maintenance work results in damage/

tripping of equipment. This could lead to


failure.

Maintenance planning is more detailed for critical lines or substations.

Jobs are grouped to reduce the number of outages.

Weekly reporting on outages from service operations manager three weeks ahead coded for importance and load at risk.

Service Operations advising job managers when significant load is planned to be on N-security.

National Grid Operations Centres proactively monitoring pre-condition (environmental).

KPIs showing improvement in planning time by service providers.

Asset planners reviewing schedules to align equipment to reduce outages.

Daily operational meetings to review recent events, the forward outage plans and other factors (for example, weather forecasts, public events), ensuring increased situational awareness.

Table 6: Aggregated Maintenance Delivery Risks