TRANSPOWER S ASSET MANAGEMENT STRATEGIES AND PLANS

Transcription

1 TRANSPOWER S ASSET MANAGEMENT STRATEGIES AND PLANS AN INDEPENDENT REVIEW BY BW CONSULTING Transpower New Zealand Limited December 2010 Transpower s asset management strategies and plans Transpower New Zealand Limited All rights reserved. i

2 Introduction Bill Wilkinson (BW Consulting) was commissioned by Transpower to carry out an independent review of Transpower s current Asset Management Policies, Strategies, Plans and Practices and to advise on any gaps against good electricity industry practice. The review has made reference to the DuPont review of Maintenance Practices and Expenditures Report dated the 10th September 2008 and the ITOMS benchmarking studies of 2007 and Bill Wilkinson was one of the authors of the 2008 DuPont review. He is a former Engineering Manager for National Grid UK, and has been involved in international benchmarking and reviews of transmission asset management over many years. Bill Wilkinson s report dated 10 December 2010 is attached. Recommendations and Transpower Responses The following table sets out the recommendations from Bill Wilkinson s report, together with Transpower s responses. Recommendation 1 Consider the production of an annual Asset Health Report, the Fleet Asset Strategy document would be a good start. 2 Review the condition assessment criteria particularly in the light of anticipated asset replacement and refurbishment plans, considerable data will be available as a consequence of carrying out the replacement and refurbishment work. 3 Continue the refinement of Transpower s procurement process, approved suppliers, fewer suppliers and use of international standards. Transpower s Response Structured management reviews of asset health will be implemented as part of PAS55 compliant Asset Management systems that are now under development. Transpower agrees and will continue to explore opportunities for improving our understanding of equipment condition and failure modes including through the examination of equipment undergoing replacement or refurbishment. This approach is particularly relevant for substation equipment because of the inherent limitations of non-invasive diagnostic techniques. Transpower agrees, and will continue to focus on reducing the diversity in the fleet by limiting the number of suppliers, makes and models, and aligning procurement with international standards. Category Management Plans are already in place to ensure continuing improvement in procurement of many major asset types. Preferred supplier arrangements are in place that will limit fleet diversity.

3 Recommendations and Transpower Responses Recommendation 4 Review Transpower s strategic spares holdings having investigated the possibility of adopting standard asset replacement specifications. 5 Reduce the amount of duplication across the Asset Strategy and Asset Management Plans. Instead of duplicating content across documents consider making reference to all other applicable documents within the respective document, this will make for easier modification now and into the future. 6 Review asset technical lives and profile asset ages in order to evaluate the size and the occurrence of the replacement workload so as to enable smoothing of the replacement refurbishment work. 7 The Asset Management Plans require a clearer presentation of replacement and refurbishment candidates with anticipated implementation time scales and indicative costs to at least 5 years out. Transpower s Response Strategic spare power transformers have recently been procured to ensure emergency preparedness for major transformer failures. Strategic unit spares are held for emergency replacement of most major asset types, but the appropriate level of these holdings will be regularly assessed. Over time and through improved procurement practices, the diversity in the existing asset fleets will reduce, allowing substantial reductions in the range of spares, particularly spare components. Transpower is committed to achieving accreditation to the PAS55 specification for asset management systems. The target is to achieve accreditation during The current suite of asset management documents represents an interim stage in the journey, and further revisions are anticipated before full compliance with PAS55 is achieved. In future revisions of asset management documents, some of the asset strategies and management plans will be integrated, to reduce the extent of duplication. Smoothing of replacement and refurbishment work is an important aspect of achieving efficiency in delivery, and this is a key focus of Transpower s integrated works planning process. Long range forecasts of replacement workload are developed using a range of inputs. For some categories of substation assets, standard lives are one of the inputs into long range replacement workload forecasts. However, for transmission line assets, the replacement and refurbishment work is essentially driven by condition assessment, rather than by technical or actual lifetimes. Further cycles of review of asset management plans will include improvements in the presentation of proposed project workload (see comment 5 above on the maturity of these documents). 3

4 Recommendation 8 Prioritise Transpower s replacement and refurbishment plans. With the replacement and refurbishment plans at asset group level there is a need to consider optimising the size of the work packages at least to a circuit end level. 9 In the light of poor asset performance carry out a review of Transpower s Maintenance Policy and Maintenance Practices. Transpower s new document, Routine Maintenance Strategy, has addressed this issue and gives a review of actions completed and to be taken. 10 Gain control of the Maintenance Practices. Transpower s new document, Routine Maintenance Strategy, has addressed this issue and identifies that a project has been initiated to capture the knowledge of the workforce and prepare detailed work specification to use across the business. 11 Evaluate the contractors Maintenance Practices to identify the best and most appropriate, disseminate these across the business and ensure compliance by contracting staff. 12 Continue with the initiative to increase the skill level of both Transpower and contracting staff by the continued development of training facilities and plant specific training packages. Transpower s Response The integrated works planning process commences with the identification of replacement and refurbishment needs within asset groups, based on target year bands. Further prioritisation then occurs to achieve efficiencies, e.g. by combining planned work at circuit ends, or in physical regions. Transpower acknowledges that there is scope for improved systems for prioritisation of needs across diverse portfolios. This will be part of the risk management systems development outlined below. A review of maintenance strategy is in progress. This review includes examination of issues arising from the findings of the 2008 DuPont review, and the ITOMS 2009 benchmarking study. Some early initiatives include contractor workshops examining human element incidents associated with protection systems. A project has been established to develop Standardised Maintenance Procedures (SMP s). All service providers will contribute to this initiative, with the intention of capturing and documenting best practices across the sector. The project is forecast to be complete by end The preparation of Standardised Maintenance Procedures (SMPs) will include the evaluation of existing maintenance practices, to ensure that best practices are captured and disseminated. Agreed. The provision of direct training of the field workforce will continue, based around the extensive curriculum material that is already available, and the dedicated training establishments and training packages designed for specific assets.

5 Recommendations and Transpower Responses Recommendation 13 Integrate Transpower s Maintenance Policy and Maintenance Practices into the Training documentation and programmes. 14 Review the appropriateness and application of Transpower s current Maintenance Management System with the aim of scoping either modification to the current system or the procurement of a replacement system that meets the needs of Transpower s business now and into the future. 15 Identify the significant risks to the business, quantify the risks and scope appropriate control measures. 16 Develop a quantified risk assessment procedure to be used when assets condition indicates a defective asset. 17 Investigate the reason for the increase in the number of overhead line primary faults and develop strategies to improve performance. Transpower s Response Agreed. As progress is made on standardising maintenance policies and practices, the relevant training materials and programmes will be updated. This is underway. A Grid Business Capability Plan has been prepared that identifies the requirements for investment in a new core asset management information system. Investment is planned for the period It is acknowledged that Transpower s current risk management systems do not meet the expectations of the PAS55 Asset Management specification. Improvements will be achieved through implementation of a development plan for asset and network risk management. The development plan will outline the staged development and implementation of a formal asset and network risk management system to meet PAS55 requirements. This will form part of the development plan for risk management systems (discussed above). The high number of transmission line faults reported in the ITOMS 2009 benchmark studies has been investigated. The 2008/09 period included an unusual number of incidents. Outage rates for 66 kv and 110 kv lines were significantly higher than historic averages. The unplanned outage rate has reduced significantly in 2009/2010 to a level more consistent with longer term averages. Particular attention will be paid to an apparent long term increasing trend of faults on 110 kv circuits. Possible causes include changes of land use beneath lines, leading to increased insulator pollution, particularly from birds. 5

6 Recommendation 18 With the current world wide focus on the environment and its care carry out a review of the environmental issues and address these as a separate topic within the Asset Strategy and Asset Management Plans, giving clear strategies and plans for managing the environmental risks and concerns. Transpower s Response Environmental risk management issues are already extensively covered in a range of asset management documents, particularly in service specifications. However, Transpower agrees that there is scope to improve the presentation of environmental risk management in some asset management strategies and plans, and this will be included in future revisions where appropriate.

7 Review of Transpower s Asset Management Strategies and Plans. 10 th December 2010 (Bill Wilkinson BSc (Hons) CEng F.I.E.E) BW Consulting Rev 6; 10/12/2010 Page 1 of 47

8 Disclaimer The information used to compile this report has been exclusively supplied to BW Consulting by Transpower New Zealand. Whilst BW Consulting has taken reasonable care and diligence in the review, analysis and assessment of the information supplied, no responsibility, expressed or implied, is accepted by BW Consulting for any direct or indirect consequences of actions taken as a result of, or in light of, information contained within this report. Confidential This Report and the information contained have been provided to and for the benefit of Transpower New Zealand only. BW Consulting assumes no responsibility of liability for damages or claims in connection with the use of the conclusions, recommendations, representations, or practices contained herein. BW Consulting Rev 6; 10/12/2010 Page 2 of 47

9 Contents Section Item Page 1 Executive Summary 4 2 Asset Management, a World View 8 3 Introduction 10 4 Scope of Review 10 5 Out of Scope 11 6 Approach to the Review 11 7 General Comments 12 8 Transpower s Asset Management Policy 13 9 Asset Lives Asset Age Profiles Risk Assessment Quantified Risk Assessment Risk Register Environmental Issues Substation Management Systems Staffing, Expertise and Maintenance Maintenance Management System Maintenance Policy and Practices Strategic Spares Outdoor 33kV Switchyards Indoor Switchgear Circuit Breakers Disconnectors Free Standing Instrument Transformers Capacitor Banks Synchronous Condensers Secondary Assets Power Transformers Transmission Lines Tower Painting Conclusions Recommendations Appendices 43 Appendix 1 Examples of Asset Lives 43 Appendix 2 Transpower Documents Reviewed 45 BW Consulting Rev 6; 10/12/2010 Page 3 of 47

10 1 Executive Summary 1.1 Bill Wilkinson (BW Consulting) was commissioned to carry out an independent review of Transpower s current Asset Management Policies, Strategies, Plans and Practices and to advise on any gaps against good electricity industry practice. The review has made reference to the DuPont review of Maintenance Practices and Expenditures Report dated the 10 th September 2008 and the ITOMS benchmarking studies of 2007 and Transpower s decision to adopt the PAS 55 framework is prudent. The structure seems to be gaining considerable international business interest and shows promise to become a de-facto world-wide specification for any organisation wishing to demonstrate a high level of professionalism in whole life cycle management of their physical assets. 1.3 Transpower has had little investment in asset replacement over the last decade with asset performance declining, see ITOMS Benchmarking Studies 2007 and The DuPont report of 2008 recognised this shortfall and recommended that an asset health review be undertaken and asset replacement and refurbishment plans drawn up. Transpower s Asset Management Policy, Asset Strategies and Replacement Plans go someway towards addressing this recommendation. 1.4 Transpower s plans and strategies are detailed and comprehensive addressing the significant issues faced by Transpower now and into the future. However, a general comment with regards to the structure of the documents is that although being very comprehensive there is a considerable amount of duplication across documents. Subsequent discussion with Transpower identified the intended structure as the figure below:- BW Consulting Rev 6; 10/12/2010 Page 4 of 47

11 Organisational Strategic Plan Business Plan Statement of Corporate Intent T2040 Asset Management System Asset Management Policy Grid Asset Management Policy Asset Management Strategy Grid Asset Management Strategy Management Review Grid Development St r at egies Asset Strategies Asset Management Plan Grid Development Plans (APR) Asset Management Plans 5 Year Integrated Works Plan Routine Maintenance St rat egy Asset Management Objectives Grid Objectives and KPIs Grid Business Capability Plan Performance Monitoring Lifecycle Activities 1.5 The Asset Management Plan (AMP) has been superseded by a new document called Fleet Asset Strategy and is intended for general readership. The Asset Management Policy has yet to be finalised but I am informed it will be a high level document expressing policy. As Transpower s asset management capabilty grows and matures it should produce an annual clear documented assesment of asset health indentifying any significant issues, poorly performing assets, time expired BW Consulting Rev 6; 10/12/2010 Page 5 of 47

12 assets etc, followed by strategies to address these issues supported by action plans showing when the work is to be undertaken and at what cost. 1.6 Transpower s asset base is diverse in asset type, manufacturer and voltage; the proposed strategies and plans go some way to addressing this problem through an action to review the approved manufacture and supplier base and limit it to just a few approved companies in order not to proliferate asset diversity. This action is essential for Transpower to develop manageable maintenance practices, preserve asset related engineering knowledge and expertise and to be able to procure and have available an optimum level of strategic spares. 1.7 Although the plans and strategies contain a considerable amount of condition information and data along with years when replacements are proposed, dates for specific assett replacements along with costs are not detailed. Each asset group has presented a case for a considerable spend on replacement and refurbishment. In total this represents a significant investment and workload, by looking at asset group level it is not immediately obvious how big the overall workload will be or precisely when it will be required. Consequently, some prioritisation through an overall consolidated replacement plan is essential. It is suggested that prioritisation should be informed by safety (of the public and staff), Risk (to third parties and the system), system needs and cost. 1.8 The Asset Management Plans are at an asset group level and as such do not consider bundling and optimising work to take account for the optimum size of the work package, and optimum timing taking into account business factors. This is currently addressed through the integrated works planning process. 1.9 Priorities appear to be:- Strategic Spare Power Transformers; the Replacement of Power Transformers based on criticality, condition, risk and performance; the Replacement of high maintenance and small population Circuit Breakers; the Replacement or Refurbishment of 33kV Outdoor Substations on safety grounds; the Replacement of the old Transmission Line conductors and fittings and the Refurbishment of grillage foundations Many of the asset strategy documents and management plans refer to Transpower s poor asset performance and develop a case for asset replacement; however, there is no mention of reviewing the Maintenance Policy and Practices which could, in themselves, be significant in contributing to the poor performance. The routine maintenance strategy does show that a review of Transpower s maintenance policy and practices has begun as recommended by the DuPont report. BW Consulting Rev 6; 10/12/2010 Page 6 of 47

13 1.11 In general, dynamic systems are required in order to progressively evolve a high level understanding of asset health and performance, supported by detailed plant specific data. Transpower s current Maintenance Management System (MMS) does not satisfy this requirement. This has been identified in many of the strategy papers and was also concluded in the DuPont report. Now is the time to review the appropriateness and application of the management system, the system fails to meet worlds best practice and further system development could require significant expenditure. Transpower has identified this need and is making provision to address this shortcoming, Transpower s document Grid Business Capability Plan addresses this need Many of the strategy documents refer to risk but there is no documented formal risk assessment methodology. There is an established risk register specifying the significant risks to the company with appropriate risk control measures, although there is no risk assessment at an asset level. I believe that it would be advantageous to have a company-wide asset risk register and a documented methodology for quantified risk assessment. As Transpower have adopted a conditioned based approach to maintenance it becomes more crucial that Transpower has a methodology for quantified risk assessment. If condition assessment indicates that an asset is displaying distress, then on safety grounds alone, the risk of failure and the implications of failure need to be quantified and if necessary measures taken to control the risk to within acceptable limits Environmental issues, although mentioned within some of the documentation, are not addressed specifically. The current world wide focus on the environment and its care makes it a significant issue and as such requires to be addressed as a topic in its own right, giving clear strategies and plans for managing the environmental risks and concerns. Discussion with Transpower has revealed that extensive testing for PCB s has been carried out concluding that Transpower has no major assets left that contain PCB s, only a few switchgear grading capacitors and some small capacitors in protection relays. Transpower also has an effective mechanism for the monitoring of SF 6 gas loss to the atmosphere. There is a plan addressing the reduction of SF 6 gas loss. Although the Asset Management Plan for GIS does mention the replacement of gaskets on leaking flanges there are other assets that are exhibiting leaks and need to be addressed, there is merit in including these in the appropriate asset Strategy. Further issues around the environment and its care are covered within the body of this report Transpower s Field Workforce Competence Training Strategy document recognises that Transpower s poor service level performance in the international benchmarking studies could be partly due to a lack of suitably trained maintenance staff and technicians. The Training Strategy is well BW Consulting Rev 6; 10/12/2010 Page 7 of 47

14 developed and shows Transpower s commitment to maintaining and developing suitable skills to undertake the care of its assets, however, there is no reference to Transpower s Maintenance Policy or Maintenance Practices. If the contracting staff are left to produce their own maintenance documentation then it is most likely that there will be an inconsistent approach to the maintenance of similar asset across the asset base. If practices are different across the asset base it becomes extremely difficult, if not impossible, to determine whether or not the policies and practices are effective or not. It is therefore essential that Transpower gains control of the maintenance practices and ensures that they are consistently used across the asset base and that they are integrated into any training programme. 2 Asset Management; a World View 2.1 Few sectors have changed as rapidly in the last 15 years as the electricity utilities. Regulatory pressure, competition, business diversity and shareholder pressure produce a complex array of problems and solutions. Consequently, utilities are faced with the need to balance the conflicting pressures to improve efficiency whilst maintaining reliability, managing risk, complying with regulatory obligations, growing the business and meeting shareholder expectations. 2.2 Good business management of utility s assets, manpower, infrastructure, data, information, plant and property, has become complex in today s global market place. Cost effective and integrated solutions are vital to the success and profitability of a modern utility. Asset Management is about getting the correct processes and practices in place, the right level of understanding in the business, commitment and ownership of management and workforce in order to effectively deliver the utility s goals. Assets are the basis of an organisation s wealth: recognise and optimise their worth and do the same for those who look after them Norman Eason, Founding Chairman, Institute of Asset Management. 2.3 Privatisation has forced many changes on Transmission Utilities and, together with regulatory price controls, has dramatically reduced in-house staffing levels. The effect of offering shareholder value has been to influence the necessity for early improved performance with commercial management for profit. Such action has also had the effect of reduced BW Consulting Rev 6; 10/12/2010 Page 8 of 47

15 staffing and the pushing down of costs. All this goes to create tension between profit, shareholder value and service standards. Such drivers have led utilities to look critically at what their business shape should actually be. Many are now viewing themselves as Asset Management Organisations and not seeing themselves as purely Engineering Companies. Both, however, still share similar issues, such as; operating and maintaining assets, replacing assets, refurbishing assets, collecting asset health information, optimising asset life and expenditure and meeting the necessary performance requirements placed upon them. The challenge generally adopted has been to reduce costs while improving efficiency and maintaining safety, but still having confidence that the assets are healthy and fit for purpose. 2.4 For most transmission system assets, age alone is not a specific end of life criterion. However, as assets age the ability to support the asset in service often diminishes. One of the major factors contributing to an endof-life decision is the availability of spare parts, or specific skill sets. Parts for older equipment typically become highly expensive or unavailable. Many utilities may use skilled labour from manufacturing companies or other organisations to perform major maintenance, and manufacturing companies typically make marketplace based decisions not to support small populations of older equipment The non-availability of critical parts, or skilled labour to perform work on critical older equipment may therefore contribute to a replace decision. In considering a prudent rate for reinvestment the asset owner must weigh the financial benefit of deferment decisions against the increased risk of deteriorating system performance, increased operating costs, and an unplanned failure-driven replacement program that could prove unmanageable. Deferring the replacement of old assets will result in a further decline in system performance, potentially to the point that implementing an effective replacement programme will be severely compromised. See Spiral of Decline diagram below:- BW Consulting Rev 6; 10/12/2010 Page 9 of 47

16 3 Introduction 3.1 Transpower is preparing its submission to its regulator for the determination of its revenue for the three-year period 2012/13 to 2014/15. Transpower must complete its submission of capital and operating expenditures plans for that period by early February To support this submission, Transpower needs to demonstrate that its asset management policies, strategies, plans and practices are good industry practices and the proposed expenditures are prudent. 3.2 The purpose of this review is to provide Transpower s Senior Management and Board with an independent view that recognises progress to date and identifies any significant gaps against good electricity industry practice. 4 Scope of Review 4.1 The review has been carried out as a desktop exercise reviewing Transpower s documented asset management policies, strategies, plans and practices for grid operating expenditures and replacement and renewal capital expenditures, prioritised by areas of major expenditure BW Consulting Rev 6; 10/12/2010 Page 10 of 47

17 forecast over the next 5 years. It has specifically covered the following asset categories:- Transmission Lines, Transformers, Circuit breakers, Disconnectors, Secondary assets and Substation management systems. 4.2 The review includes asset fleet services and procurement specifications, where appropriate. 4.3 This report refers to the findings from the previous DuPont Review of Maintenance Practices and Expenditures Report dated 10 September 2008 (the DuPont Report) and advises on any gaps against good electrical industry practice and provides recommendations on approaches to close these gaps. 4.4 The review is based mostly on a desktop review of asset management documents supplied by Transpower supported by telephone discussions, remote internet meetings and a series of short face-to face meetings to clarify points. 4.5 Appendix 2 lists the Transpower documents, strategies and plans that have been reviewed and informed this report. 5 Out of Scope 5.1 A review of those strategies, plans and design specifications driving grid enhancement and development expenditure. These are excluded because they will be subject to separate project-by-project regulatory approval process (i.e. Transpower will not obtain revenue approval in advance for any such projects as part of the main Revenue Reset process). 6 Approach to the review of Transpower s Asset Management Strategies and Plans. 6.1 The comments and opinions expressed within this report have been formed from the reading of the asset management documents supplied by Transpower, the DuPont report of 2008, of which I was the Engineering Consultant, ITOMS Benchmarking reports for 2007 and 2009 and my extensive personal experience of Transmission Asset Management. BW Consulting Rev 6; 10/12/2010 Page 11 of 47

18 6.2 I have made comment on areas that I believe should be within your Strategies and Plans. However, these areas may be covered by other unseen Transpower documentation to which the documents provided did not refer. 6.3 Subsequent discussion with Transpower, after the first draft of this report, revealed the existence of other relevant documentation, such documents have been considered and are listed in appendix 2. 7 General Comments 7.1 Having read the documents i.e. The Fleet Asset Strategy, supportive Asset Strategies (TP.TS** & TL**) and Asset Management Plans (TP.AM- S**), it is concluded that they do not readily offer a clear and quick view of Transpower s asset strategies and plans. I found that there is a lot of duplication both within documents and across documents, and in some cases inconsistencies, thus making it difficult to find specific information and action. I would have expected a high level document expressing clear strategies across the whole asset base while the Asset Strategy (TP.TS** & TL**) documents were specific to their respective group of assets and the Asset Management Plans (TP.AM-S**) identified replacement and refurbishment candidates, the appropriate action to be taken with an outline plan of when work is to be done and at what cost. The plans would address in detail the next five years and from there on be less specific. The Asset Management Plans (TP.AM-S**) give a list of priorities for replacement but do not include any indicative costs and time scales and are at asset groups level only. It would be useful to see a replacement profile of total anticipated cost, based on the respective strategies and replacement plans, indicating when and at what cost. 7.2 With regards to duplication across the documentation the Grid Asset Management Policy and the Grid Asset Management Strategy are typical examples. Sections 1 to 5.2 are very nearly identical in both documents, whilst the table of stakeholder groups is different in each document. Duplicating content makes it difficult to manage the documents into the future as a change in one requires a change in the other. Simple reference to other applicable documents in the respective document would alleviate this problem. 7.3 The 33kV assets represent a major problem with safety being a particular issue; fatalities and serious injuries having occurred. Generally speaking international practice of transmission companies is that only the supply transformers (i.e. 110kV HV) and their associated switchgear and busbar connections are regarded as Transmission Assets; all the other assets being distribution. Some divestment of Transpower assets has taken BW Consulting Rev 6; 10/12/2010 Page 12 of 47

19 place; the question is whether or not further divestment is desirable and if so could it be achieved. 7.4 I note that International Benchmarking (ITOMS) results have been used in the preparation of the strategies and plans, some asset groups have used the 2007 results and others the 2009 results, however, both study years do show similar trends for Transpower. 8 Transpower s Asset Management Policy 8.1 The Asset Management Policy is supported by Asset Strategy documents and Asset Management Plans specific to asset fleets such as Circuit Breakers, Transformers and Overhead Lines. The structure decided upon by Transpower follows the PAS 55 framework and is as shown in the diagram below:- BW Consulting Rev 6; 10/12/2010 Page 13 of 47

20 Organisational Strategic Plan Business Plan Statement of Corporate Intent T2040 Asset Management System Asset Management Policy Grid Asset Management Policy Asset Management Strategy Grid Asset Management Strategy Management Review Grid Development St r at egies Asset Strategies Asset Management Plan Grid Development Plans (APR) Asset Management Plans 5 Year Integrated Works Plan Routine Maintenance St rat egy Asset Management Objectives Grid Objectives and KPIs Grid Business Capability Plan Performance Monitoring Lifecycle Activities 8.2 The decision to adopt the PAS 55 framework would seem prudent. The structure is gaining considerable international business interest and shows promise to become a de-facto world-wide specification for any organisations wishing to demonstrate a high level of professionalism in whole life cycle management of their physical assets. It is understood that the PAS-55 document is to be turned into an International Standard. BW Consulting Rev 6; 10/12/2010 Page 14 of 47

21 8.3 The Asset Management Plan (AMP) has been superseded by a new document called Fleet Asset Strategy and is intended for general readership. The Asset Management Policy has yet to be finalised but I am informed it will be a high level document expressing policy. As Transpower s asset management capabilty grows and matures it should produce an annual clear documented assesment of asset health indentifying any significant issues, poorly performing assets, time expired assets etc, followed by strategies to address these issues supported by action plans showing when the work is to be undertaken and at what cost. There is no annual Asset Health Report although the Fleet Asset Strategy could become the document from which the Asset Strategies and Asset Management Plans are then developed. 8.4 The DuPont report recognised that Transpower had made very little investment in asset replacement over the years and that many items of plant had poor performance and were approaching end of life. Transpower s asset base is extremely diverse with a wide variety of asset types and manufacturers; this in its self presents considerable problems in the provision of; experienced staff, maintenance and consumable spares and strategic spares. The decision to address these issues through the production of Transpower s Asset Management Strategies and Plans tackles these observations. 8.5 Transmission Plant and Equipment is replaced and refurbished to ensure that: In-service equipment failures are within levels acceptable to the company and its stakeholders. Long term replacement plans can be achieved without having an unacceptable impact on reliability, availability, quality of supply, health & safety, environmental performance and transmission constraints. Long term capital forecasts, smoothed to assist work programming, procurement and borrowing requirements, are within acceptable levels and that robust need cases can be demonstrated for replacement programmes. Equipment should be considered for replacement before performance becomes unacceptable. The management and operation of a transmission system requires that failure of assets in service be minimised. An operate until it fails approach is unacceptable for assets that: are critical to secure bulk power transmission to customers, BW Consulting Rev 6; 10/12/2010 Page 15 of 47

22 have potential safety and environmental consequences on failure, and have long repair or replacement times. In this regard, high voltage transmission systems are significantly different in character to other engineering systems (e.g. distribution systems and, to some extent, generation plant). Given the above criteria it can be clearly seen that to base replacement and refurbishment schemes purely on the rate of return and economic case only is not acceptable for effectively managing the health of assets that make up a transmission system. An Asset Management Plan should be informed by an Asset Status/Health Report identifying assets groups where their condition is such that any one of the following criteria are met:- The asset is unable to achieve an asset life consistent with those specified. The asset is unable to meet the requirements for site safety in accordance with current legislation and utility policy. The asset is unable to meet the requirements for environmental care in accordance with current legislation and utility policy. The asset is likely to adversely affect system reliability or availability measures or may result in circuit de-rating. The asset is unable to achieve its specified level of technical performance. Refurbishing the assets is not cost effective. 9 Asset Lives 9.2 From the documents reviewed it does not seem that there is a specification of expected asset technical lives for all assets, although some have been specified within the text of the Fleet Asset Strategy document. Financial lives are given in the document, Accounting Notes for Revenue and Capital Expenditure and an assumption made that the technical lives will be the same, this may not be a valid assumption. The DuPont report gives examples of Utility Asset Financial and Technical Lives giving a window indicating the earliest and latest onset of significant unreliability. Age is by no means the governing factor when deciding to replace or refurbish an asset, but to have considered what might be typical technical lives based on Transpower s operational needs and environment can be extremely useful in identifying the size of the replacement and refurbishment wall and when it might occur. Such information will help with the task of phasing the replacement and refurbishment projects. BW Consulting Rev 6; 10/12/2010 Page 16 of 47

23 9.3 The replacement of assets in a timely manner, prior to failure in service, is essential for the long term management of transmission systems. Many of the world s transmission systems have had large investments within relatively short periods, which brings their end of design life within similarly short periods. A system is therefore required which will enable useful life to be determined and therefore enable efficient and timely replacement or refurbishment. 9.4 The projected lives of individual assets depend upon a number of technical factors e.g., environmental conditions, operating duty and history. Analyses of these factors should be undertaken to produce a range of projected lives for each family of assets of similar design. 9.5 The technical asset lives are a key input to both the probabilistic and deterministic planning processes, and will have a significant impact on the long term Asset Replacement Capital Plans. Review of these lives must be undertaken in a controlled consistent manner. Periodic review should be undertaken, to take account of better understanding of the condition of ageing assets, statistical assessments of failures and experience from asset replacement schemes. 9.6 Appendix 1 gives typical asset financial and technical lives for European assets, although the operating conditions are not entirely the same as that of New Zealand. It is not suggested that these lives are directly applicable to Transpower. Transpower s asset lives will have to be assessed based on their operational and environmental conditions; however, they will act as comparisons. The following explains some of the principles used in determination of technical lives of assets. 9.7 Definition Threshold for Plant Reliability Earliest onset of significant unreliability: 2.5% of the equipment population has reached a state where it requires replacement. Anticipated life: 50% (median) of the equipment population has reached a state where it requires replacement. Latest onset of significant unreliability: 97.5% of the equipment population reached a state where it requires replacement. For the purpose of long term forecasting, modelling should be based on the probability of equipment reaching a state that it requires replacement. This state is the point at which it is expected that plant and equipment will BW Consulting Rev 6; 10/12/2010 Page 17 of 47

24 have reached an unacceptable level of performance, and repair is either not possible or economic. This state may be different for different equipments, due to the life cycle, system and safety or environmental considerations. The probability distributions used to model long term replacement requirements can be specified through a range of Asset Technical Lives for each equipment type. 9.8 Criteria for the ranking of Equipment replacement and refurbishment The priority ranking for each equipment type can be achieved by applying a combination of generic and equipment specific criteria. Generic criteria: Asset age, relative to its latest onset of significant unreliability Compliance with Legislation Compliance with policy that is more onerous than legislation Deficient in health & safety performance Removal of an environmental threat Does not meet reliability targets Equipment performance identified as inadequate in a system incident. Excessive cost of care in comparison to modern equivalent assets The maintenance interval cannot be extended, and prevents a circuit being aligned with standard outage intervals Reduced equipment capability imposes a limitation on the overall circuit rating Technical limitations Small populations of obsolete equipment, for which manufacturer support is not available and it is uneconomic to establish an adequate spares holding 9.9 Optimising Process A process to determine, on a scheme by scheme basis, the best fit of proposed works within the overall asset replacement plan. The process involves balancing risks within the following constraints and opportunities: Remaining useful life of equipment and risk of failure if not replaced. Availability of access to the system to replace the assets. Resources available to manage replacement. Availability of capital in the budgetary years. BW Consulting Rev 6; 10/12/2010 Page 18 of 47

25 Proposals from Transmission Customers relating to asset renewal, refurbishment or enhancement. Integration with proposed development works The principal features of the process are as follows: Equipment condition and performance data provides the main technical driver for asset replacement and refurbishment. Upon this data an engineering policy for asset technical lives can be formulated and asset replacement candidates selected and prioritised. An Asset Health Review process is the vehicle for prioritising candidates for asset replacement and refurbishment based on equipment condition and performance. (The Fleet Asset Strategy document could be developed to fulfil this requirement) Asset Replacement Schemes can be bundled and optimised to take account for the optimum size of work package, and optimum timing taking into account business factors. (The asset strategies and plans would go part way to providing this, however, they do not address work packaging and timing, which is currently addressed in the integrated works planning process.) 10 Asset Age Profiles 10.1 Asset age profiles have not been given for all assets. There does not seem to have been a consistent approach given to all assets groups. 11 Risk Assessment 11.1 Asset management decisions should be driven by a number of criteria, only one of which is technical need. When establishing maintenance policy and taking refurbishment or replacement decisions, the risk associated with such decisions should be quantified. Risks created by asset condition and performance have a discrete set of consequences, which must be managed methodically. These consequences are invariably a combination of quantitative and qualitative outcomes which in order to manage consistently should be converted to a common denominator, namely cost, see below. Within the Transpower s asset management documentation there is discussion of risk but no quantified assessment of the risk Example:- (cost of planned care + cost of planned outage) < (cost of plant repair or replacement + value of lost load + Q) * Pt BW Consulting Rev 6; 10/12/2010 Page 19 of 47

26 where And Pt = probability of failure Q = sum of the qualitative factors Q1 = safety of staff and public Q2 = damage to the environment Q3 = threat to transmission licence This may be re-ordered to produce a framework for risk assessment. Failure consequences; cost of consequences X probability of occurrence = probabilistic consequential cost The suitability of the aforementioned risk assessment methodology should be considered in order to develop a front end to asset care or replacement decisions, and to integrate this process throughout the organisation. 12 Quantified Risk Assessment (Health & Safety) 12.1 Transpower s Maintenance Policy is time based condition assessment and as such is the way leading utilities have moved in present times. However, condition-based maintenance and the increased use of asset diagnostic and monitoring solutions can bring its own problems. With changers in legislation Companies, particularly around Health & Safety, are being faced with having to apply structured and auditable risk assessments when assets have either failed or have shown signs of distress. As more condition assessment and diagnostics tools become available, providing information as to asset health and condition, the dilemma of how to handle apparently deteriorating assets will grow. In particular the management of access to and around such assets will become more difficult. In addition, the change in emphasis of current legislation points towards a requirement for a more structured and auditable approach to these issues, involving quantified risk assessment techniques. 13 Risk Register 13.1 The Fleet Asset Strategies and the specific Asset Management Strategies make little of risk management, however, the asset specific Asset Management Plans do mention risk. I am of the opinion that an understanding of risk exposure and a methodology for managing risk is essential to good Asset Management thus enabling the following questions to be addressed:- What level of risk is Transpower exposed to? BW Consulting Rev 6; 10/12/2010 Page 20 of 47

27 What level of risk should Transpower be exposed to? What effects Transpower s risk? 13.2 A Risk Register exists that identifies the significant risks to the company, i.e. risk to; Transpower s transmission license, Transpower s ability to operate, risk to asset health (significant asset failure with no strategic spare), risk of major system failure (fire, seismic activity loss of a major asset or substation), risk of injury of personnel or 3 rd parties and environmental risk together with the action required to manage the risk to within acceptable levels. 14 Environmental Issues 14.1 The current worldwide focus on the environment and its care makes it a significant issue that requires to be addressed as a specific topic giving clear strategies and plans for managing risks and concerns. Some examples of areas of general concern are:- Insulating Oil handling, control and spillage. The management of SF 6 Gas, leaks, discharge and monitoring. Control of Noise Location of, control of and removal of PCB s EMF s Water management Energy management Transport Waste management Land management 14.2 Discussion with Transpower has revealed that extensive testing for PCB s has been undertaken concluding that Transpower has very few assets left containing PCB s, a few grading capacitors on circuit breakers and a small number of capacitors in protection relays. However, Sulphur Hexafluoride (SF 6 ) gas leaks are identified as a problem area. SF 6 gas has a high dielectric strength and is chemically and thermally stable, is non-toxic and non-flammable. Such unique properties make it an excellent dielectric for high voltage equipment. However, increased attention to SF 6 gas has occurred over the last few years in the main for two reasons. First, the price has increased significantly and second, it has been identified as having a detrimental effect on the environment. Sulphur Hexafluoride is a potent greenhouse gas with approximately 24,000 times the global warming potential of CO 2. It has an extremely stable chemistry that permits emissions to accumulate in the atmosphere for hundreds of years. Transpower has an effective mechanism for the monitoring of SF 6 gas loss to the atmosphere, but, apart for replacing leaking assets, there appears to have been no strategy for aggressively addressing the reduction of SF6 gas losses, i.e. leak repairs etc. until recently. Transpower now has a BW Consulting Rev 6; 10/12/2010 Page 21 of 47

28 programme of circuit breaker inspection that is informing a prioritised list of replacement candidates. The objective is to reduce gas emissions by 40% over three years Utilities are using innovative techniques for identifying SF 6 leaks, such equipment as the EPRI gas view camera and making leak repair a priority during maintenance. The gas view camera is an infrared camera, which also incorporates an infrared laser, tuned to a strong absorption wavelength of SF 6. The laser is scanned across the field of view, producing a grey-scale picture on a standard TV monitor, in which clouds of SF 6 gas appear as black. Transpower has invested in this technology and the necessary training to inform its leaking circuit breaker replacement programme. 15 Substation Management Systems 15.1 The increasing pressures of working within a regulated business drives todays Transmission utilities to maintain and improve its high level of asset performance and consider ways to improve productivity and all with due regard to protecting the environment. Companies have sought to improve their processes and become more proactive by the use of such techniques as international benchmarking, performance measures, statistical analysis and effective fault and defect reporting The DuPont report included a recommendation to investigate the provision of remote access of fault recording equipment and protection relays to help with the timely assessment of system disturbances and the general management of the Transpower transmission system. Strategy paper TP.TM addresses this issue, however, I believe that there could have been more advantage taken of the ability of modern Substation Management Systems to provide asset condition data that would not only help in evaluating risk but could also be used to minimise hands on maintenance and inspection. Many best performing utilities make use of on line condition assessment; however, such techniques further increase the need for quantified risk assessment. Having condition data indicating a deteriorating asset creates a further problem, how to handle the developing situation safely, hence the need for quantified risk assessment. Transpower is installing on-line monitoring on some existing equipment that is showing some evidence that there may be an incipient fault present. All new interconnecting transformers are now procured with online monitoring equipment as standard. Furthermore, Transpower is undertaking a pilot substation management system project to determine the feasibility of deploying such a capability nation-wide or at least to critical sites BW Consulting Rev 6; 10/12/2010 Page 22 of 47