OUTPUTS KEY MESSAGE. We intend to deliver these across-the-board output enhancements whilst reducing like-for-like costs by 3.1%.

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1 2 OUTPUTS KEY MESSAGE Our plan reflects what stakeholders have told us and will deliver outputs that meet and in many cases exceed those proposed by our regulator. Customers will see 20% shorter power cuts and 30% faster end-to-end connections times, better support for vulnerable customers, and much more use of digital communications channels. Safety and environmental performance will also improve, and we will create a smarter Powergrid that allows more users to connect domestic-scale lowcarbon technologies. We intend to deliver these across-the-board output enhancements whilst reducing like-for-like costs by 3.1%. March 2014

2 Outputs DOCUMENT MAP WHAT YOU WILL FIND HERE This section, which explains our proposed outputs, is arguably the most important aspect of our Map of our business plan plan. For some stakeholders, it may be second only to the explanation of prices we will charge. We therefore intend to make sure we explain our proposals in some detail, since we expect to be judged on how well we fulfil our promises over the period. We set out the outputs we promise to deliver to our customers. To make sure we have chosen a package of outputs that customers actually value, our regulator, Ofgem, challenged us to engage with stakeholders to develop and refine our service offering, taking into account the costs and benefits of alternative output propositions. This section includes the evidence that shows we have done this to optimise our plan. Ofgem also challenged us to provide a credible explanation of how we intend to improve our service provision to customers we also think it s important that stakeholders can be satisfied that they aren t just hearing warm words and vague aspirations, but there is actually a plan to deliver the service improvements, and in this section we describe in some detail how we propose to deliver the outputs we have set out in the plan. Since our plan was first submitted to Ofgem, the regulator has been able to compare all network companies plans. Ofgem has asked us to provide additional support for the costs of the outputs we propose here but has endorsed the package of outputs we have prepared. Northern Powergrid: Our business plan for March 2014

3 Outputs This section at a glance KEY STATISTICS RELIABILITY: reduction in number of power cuts 8% RELIABILITY: reduce duration of power cuts 20% SAFETY: accident rates reduction 50% CUSTOMER SATISFACTION: improved ratings to >85% CUSTOMER SATISFACTION: complaints resolved within one day 80% CONNECTIONS: end-to-end connection time improvement >30% SOCIAL OBLIGATIONS: customers supported by priority services 350,000 ENVIRONMENT: reduce oil leakage 15% ENVIRONMENT: reduce business carbon footprint 10% ENVIRONMENT: streetworks reinstatement quality standard >90% KEY POINTS Our plan will deliver outputs that reflect the preferences of our stakeholders, and meet or exceed those proposed by Ofgem while bringing down like-for-like costs by 3.1%. We aim to halve our accident rate from a performance that is already among the best in the industry. We will improve our reliability performance. New technologies will enable us to match the best customer service experience established outside the electricity sector. We are reorganising to meet the new 12-hour guaranteed standard on power cut response. We will pay more compensation than required under the power cut guaranteed standards and double the payment for vulnerable customers. We are accelerating our flood defence programme to complete in Keeping trees away from our lines will remain a priority and our safety education programme will reach more children. We will address the new challenges of the smart meter roll-out. For new connections, we will provide self-service internet-based solutions for simple jobs and a more focussed account management approach for larger or more complex projects. We will improve the services provided to our generation customers through better information and innovative contractual provisions. We will continue to enhance our facilitation of competition in connections. We will improve services for vulnerable customers, including those experiencing fuel poverty, by providing more support during power cuts and collaborating with other organisations. We will reduce: electrical losses; our carbon footprint; electricity theft; SF 6 losses; oil leakage; and noise. Our plan takes into account the health of our assets and the input of our stakeholders to arrive at a balanced view that the forecast level of network risk is acceptable. Northern Powergrid: Our business plan for March 2014

4 Outputs CONTENTS 2.1 Introduction and overview Reliability and availability: keeping the lights on Power cuts Targeting the least reliable parts of the network Improving intermittent fault performance Improving the resilience of our network and adaptation for climate change Safety: running a safe operation Customer satisfaction: delivering service improvements Improving customer satisfaction Complaints handling Customer service guaranteed standards Connections: tailoring our service to customers needs Customer service guaranteed standards and performance incentives for new connections Improving our service for distributed generation customers Competition in connections and future uncertainties Social obligations: supporting the wider social agenda Improving the quality of information about vulnerable customers Meeting the needs of our vulnerable customers Protecting the environment Minimising our narrow environmental impact Minimising our broad environmental impact Measuring our delivery of outputs - secondary deliverables Asset health, criticality and risk Network loading Resilience Conclusions We have included at annex GL.1 a glossary that explains the key technical terms and abbreviations used in our business plan. For more detail on how this plan differs from our June 2013 plan, please refer to annex G.12. Northern Powergrid: Our business plan for March 2014

5 Outputs June Introduction and overview Our plan will deliver outputs that meet - and in some cases exceed - those proposed by our regulator Ofgem, our regulator, has set out a clear list of the types of outputs that we, as a distribution network operator (DNO), are required to deliver. This output framework has been developed to ensure that we are making the right investments to provide customers with both the service that they require and the best value for their money. We will meet all the specific targets that Ofgem has set across the following six output categories and will deliver improvements across all the categories. In several cases we are proposing to go beyond what is expected of us, where we believe we can deliver an even better performance in areas that our stakeholders value: reliability and availability; safety; customer satisfaction; connections; social obligations; and environment. At the end of this section of the plan we include a summary of both our key propositions (figure 6) and the targets and measures (figure 7) that we are committing to deliver in the period. whilst bringing down like-for-like costs by 3.1%. Our customers have told us time and again that keeping costs down is their numberone priority. All our stakeholders support this. On a like-for-like basis we are planning to bring down our costs from 2015 relative to today, but we will still deliver across-the-board improvements within these cost levels. Keeping costs down is our customers top priority. We will therefore continue to work hard to remain one of the most efficient companies in our industry, so that we can deliver on our output commitments while keeping costs low. Ofgem s further review of this plan when it was submitted in June 2013 identified areas where our costs may need justification, but Ofgem s comparison found that the overall costs we proposed were among the most efficient in the industry. The cost figures in this document are all shown in prices, the baseline used by Ofgem. This means that the effects of future inflation have been removed from future figures and all figures can be compared on a like-for-like basis. There will be a step change in the customer-facing aspects of our service. We are particularly targeting the customer-facing aspects of our business for step change improvements in The way we interact with our customers will change substantially, improving the service that we provide. Stakeholders have told us that as well as keeping our costs down two other important themes were fuel poverty, championed by our social partners, and predictability of charges, which is important for energy suppliers because price is the priority for Northern Powergrid: Our business plan for Page 1 of 59

6 their customers. Our plan is to use a combination of new digital communication channels and targeted reorganisation of our workforce to create new or improved customer experiences. We also propose to revamp the way we act in respect of our social obligations. Vulnerable and worst-served customers will receive more attention from us and benefit from support that we will help to provide in cooperation with other agencies. To make sure that we get the balance right between the level of service that we provide and the costs that we will incur, we considered a number of different options for the overall package of outputs. For some of the output categories, such as safety and our narrow environmental impact, we can only choose between meeting the standard set by legislation and performing at an even higher standard we certainly have no intention of allowing our standards to fall in any of these areas. Our stakeholders generally agree with this approach. We have high standards and we know that they expect us to keep finding ways to improve. We have much more choice in the other output categories. With customer satisfaction, for example, we had the option to continue with our current approach to customer service, or perhaps even scale up our current approach by devoting more resources to it. But we could also invest time and effort in innovative, potentially risky new business approaches that make more use of digital channels, web services and hand-held technology. Similarly, when considering how we target the reliability of our network, one option was to invest heavily in automated technology at every substation on the highvoltage network that might have delivered improvements in performance. Alternatively we could adopt an incremental approach that makes smarter use of our network and maximises the option value of waiting for new technologies to mature. The outputs we are proposing reflect the preferences of our stakeholders To help us choose between these different options in each of the output areas, we used a set of criteria to ensure we matched the preferences of our stakeholders, by seeking to understand: the feedback that came from our extensive stakeholder engagement exercise, which includes understanding our customers priorities. Detailed information on the stakeholder feedback we have obtained can be in found in annex G.5; the cost associated with delivering various output packages, and our customers willingness to pay for this; what benefits the projects could deliver and whether these would straddle more than one output category (i.e. it might be more efficient to run one project that delivered benefits across more than one output category, rather than multiple projects to deliver these benefits); the compatibility of any given option for output delivery with the rest of our plan; the need to comply with legal requirements; and the technical feasibility of the solutions and investments required to deliver different levels of output. We also used these criteria to assess our options for different ways to deliver the outputs package at a high level (see section 1.2.1). Northern Powergrid: Our business plan for Page 2 of 61

7 with improved reliability, better safety and environmental performance, more connections of low-carbon technologies, greater use of digital communication channels, shorter connection delivery times and more help for vulnerable customers. We have worked hard to optimise the overall package of costs and outputs in our plan by understanding our options and assessing our choices against these criteria. The key outcomes of that process follow: We will invest in our network and our operational capability to provide customers with an even more reliable service in which power cuts are 20% shorter and 8% fewer than at present. We will continue to be proactive and risk-averse when managing the safety risk on our network, which will enable us to target a reduction in accident rates of 50%, maintaining our position as one of the safest network operators. We will reduce our carbon emissions by 10% and minimise pollution from our network by replacing over 134km of fluid-filled cables. We will actively move towards making our powergrid smarter, allowing more users to connect domestic-scale low-carbon technologies (LCTs). We will improve customer choice by increasing our use of digital channels, providing personalised services where customers want them, and redirecting resources towards more proactive contact and engagement with customers. We will shorten routine connection delivery times, make it easier for competitors to offer services in our region and tailor our connections service to better meet the needs of different types of customer. We will become much more active in our contribution to the social agenda, delivering new services to those who need the most help in our communities, particularly when power cuts occur. We do not expect stakeholders, or Ofgem, to accept these commitments without evidence that we have based them on what stakeholders have told us, and that we have thought through the propositions in detail to work out how to make them a reality. The rest of this section contains that detail. Northern Powergrid: Our business plan for Page 3 of 61

8 2.2 Reliability and availability: keeping the lights on OUR RELIABILITY PROPOSITION FOR % reduction in the average length of unplanned power cuts by % fewer unplanned power cuts by 2023 Restoration of supply within 12 hours, or compensation when we fail Continue to pay customers automatically whenever we know we failed a guaranteed standard Planned work that leaves customers without power for less time, particularly during winter Smart meter alarm information to be used to improve network performance as soon as it becomes available Targeted improvements in areas of localised underperformance to improve reliability for worst-served customers Our current reliability and availability performance is good. We have delivered improvements in reliability over the past few years and our electricity supply is available to our customers 99.98% of the time. For the past 10 years we have consistently held a mid-level ranking compared against our peers, while UK-wide reliability and availability performance compares well with that of European countries. 1 Our performance on reliability and availability during the current price control period is solid. Our reliability proposition looks forward to and follows the current period from where: We are beating our regulator s targets for customer interruptions due to power cuts and for the how long they last. Our power restoration times for major power cuts have already reduced by more than 15%. We have responded effectively to a higher number of storms in the period We have reduced the number of long-running power cuts, but recognise that we still have some improving to do in that area. 1 More information on our current and past performance, and how this benchmarks against other DNOs and other countries, is included in annex 2.1. Northern Powergrid: Our business plan for Page 4 of 61

9 2.2.1 Power cuts We will improve our reliability performance to meet or beat the targets set by our regulator. The standard industry measures of reliability are the number of power cuts (the Ofgem metric is customer interruptions (CI), which measures the number of supply interruptions per 100 connected customers) and the average power cut duration (the Ofgem metric is customer minutes lost (CML), which measures the number of minutes lost per connected customer). For each of these metrics, our regulator distinguishes between planned power cuts (i.e. cases where we have to turn the power off while we work on our network) and unplanned power cuts (i.e. faults that occur on our network and result in a power cut). We will report on planned and unplanned power cuts separately in Ofgem has stated that it will set annual CI and CML targets for planned interruptions at the annual average level of the previous three years. 3 The setting of targets for unplanned interruptions is based on Ofgem s established benchmarking technique. We believe that our regulator s targets for these two measures are challenging but fair. The number of unplanned power cuts will fall by 8%... MEASURING SUCCESS Unplanned customer interruptions Yorkshire 60 CI by 2023 Northeast 58 CI by 2023 Unplanned customer minutes lost Yorkshire 51 mins by 2023 Northeast 47 mins by 2023 In we will steadily improve on our current reliability performance in order to meet, and potentially beat, these targets. Relative to today, we will reduce the number of unplanned power cuts by 8% - the 2023 CI target is 58 in the Northeast and 60 in Yorkshire. Customer interuptions Northeast Customer minutes lost Northeast Customer interuptions Yorkshire Customer minutes lost Yorkshire Figure 1: Customer interruption and customer minutes lost targets 2 Ofgem call this mechanism the Interruptions Incentive Scheme (IIS). 3 i.e. the target would be the average annual performance over the to period. Northern Powergrid: Our business plan for Page 5 of 61

10 and their average duration by 20%. We aim to reduce the average duration of these power cuts by 20% - the 2023 CML target is 47 minutes in the Northeast and 51 minutes in Yorkshire. 4 We will continue to improve the performance of our network by installing new components and repairing existing ones to maintain the underlying health of the network. 5 This investment and maintenance programme means we will need to switch off the power from time to time. 6 These interruptions are planned and customers who will be affected are notified in advance, so that they have some time to make alternative arrangements if necessary, but customers will still have to cope without electricity while we carry out the work. Our stakeholders made it clear that reliability improvement is a high priority for them, but not so high that they would be willing to pay significantly more for the major increases in investment that would be required to deliver a step change in performance. Our independently-conducted research showed that domestic customers in particular attached a higher priority to reliability WHAT IT WILL COST spend p.a. Share of our costs 55.2% Domestic charge p.a. Business charge p.a. improvements. 7 Shortening power cuts overall, installing flood defences at substations at risk of flash flooding, and addressing weak spots in the network, particularly where vulnerable customers live, each gained strong support from our stakeholders, who told us that they were prepared to invest 2.60 of a notional 10 bill increase to improve service in this output area. The 10m per annum that this equates to is far higher than the cost of making the specific changes that we propose to make to enhance our trouble call response service. Since our total costs in relation to reliability are falling by 18m per annum, we are confident that our proposal represents good value for our customers. The improvements in our reliability outputs do mean that we need to make some targeted changes in some activities. Our biggest additional cost item is the 1.8m per annum that we plan to spend on additional generators to restore power faster when a difficult repair is required. The other requirement is for our repair teams to work through the night on more occasions to ensure restoration within the target times. The additional labour costs amount to a further 0.9m. As mentioned above, the cost increases that these drive are more than offset by cost reductions elsewhere in this category. Our regulator has framed its own reliability target proposals having considered customers willingness to pay for improvements. These targets will be challenging for us to meet but we have costed what we must do to make the necessary targeted investments in our network and to bring about an improvement in our operational response. Our conclusion is that this output proposition represents good value for money because we can meet the targets for an improved level of service without imposing unacceptable costs on our customers. Indeed, our own stakeholder research (see annex G.5) confirmed a 79% approval rating for the package we are proposing on reliability improvements. We think that these targets represent 4 We expect Ofgem to update the analysis leading to these targets, and subsequently refresh them by the end of We do not expect the targets to be significantly different. It is the revised targets that will apply in Underlying health is measured by our range of secondary deliverables that are described in section 2.8. More information on our investment programme and our maintenance programme is included in section and section of the core narrative to our business plan. 6 Annex 2.1 discusses in more detail for the number and average duration of planned power cuts in the period. 7 Further details on our stakeholder engagement activity can be found in annex G.5 of our business plan, and on customer prioritisation research in annex G.9. Northern Powergrid: Our business plan for Page 6 of 61

11 the outer limit of what can be justified within the envelope that keeps our prices down to acceptable levels. We will achieve this improvement in performance in part by increasing automation facilities to control our network, which will provide our engineers with more options to re-configure the network rapidly in the event of a fault. In addition, we will invest substantially in new IT systems and reorganise our operational delivery teams to place more emphasis on the larger conurbations in our area. 8 This way, we will be able to dispatch our staff to faults more quickly. 9 Our power cut restoration times will be faster, and the investments will also mean fewer interruptions in supply that last longer than three minutes. 10 We will use digital technology to provide better information when there is a power cut. In we will make much more use of digital channels to provide customers with up-to-date information on when our planned power cuts will take place and how long they will last (more detail on this in section 2.4.1). We will use the same technology within our company to make sure that all our work is properly planned and that our own engineers have full visibility of our customers recent experience when they are planning work. We will work with Local Authorities to notify them more regularly of power cuts affecting the communities we both work in. We will continue to do our best to minimise the inconvenience of these power cuts, for example by providing information on our website on how to prepare for power cuts. We will reorganise to meet the new 12-hour guaranteed standard on restoration after a power cut Our regulator has announced that the maximum amount of time that we have to fix a fault on the network before we have to pay compensation will be KEY MONEY-BACK GUARANTEES Power cuts reduced from 18 to 12 hours for the next price control period. To meet this service level, we plan to increase the number of times that we work through the night to restore power. We will also need to equip more of Power restored Check service fuse Maximum over 3-hour power 12hours 3 hours 3 p.a. our work teams with technology to locate faults and with mobile generators to provide power temporarily whilst we repair the network. The increased concentration of our delivery teams in our major urban centres will also help with this challenge. 11 Consequently, we intend to gear up to meet this new level of performance and to keep improving our success rate in relation to this guaranteed standard of service. with no need for customers to claim the payments where we are aware that we have failed and we will make payments automatically in all cases once a smart meter is installed. The 12-hour guaranteed standard is just one of a suite of compensation payments 12 that we will automatically pay to customers in all cases when we know we ve failed. Once a smart meter is 8 Our service territory includes three of the ten largest urban conurbations in the UK. 9 For more information on this, see section of the core narrative to our business plan. 10 Only faults that last longer than three minutes are included in the calculation of CI. 11 This will lead to small increases in costs in some areas. For more information on our delivery strategy and property portfolio, see and Annex 2.7 lists all the guaranteed standards of performance applicable in the period. Northern Powergrid: Our business plan for Page 7 of 61

12 installed, rather than customers having to claim them from us which they sometimes have to do at present, the payments will be automatic in all cases. We also plan to do more for customers than the law requires of us in terms of the level of compensation payments. More details of this are provided in section Targeting the least reliable parts of the network Investment will be targeted at those parts of our network that have the most power cuts. Our stakeholders, particularly domestic customers, have told us that they would like us to improve the service that our worst-served customers receive. We will therefore prioritise improvements to those parts of the network that supply electricity to these customers. This will involve targeting 42.4m of our asset renewal expenditure on ensuring that the service these customers receive becomes more reliable in the period Improving intermittent fault performance An intermittent fault is a fault that exists temporarily, causing a power cut but then disappearing. For example moisture might seep into a cable through a tiny point of damage in the protective sheath; this causes a short-circuit which interrupts supply but the moisture is quickly burnt off as a side effect of the fault and the cable functions normally again. This cycle can be repeated several times. Some parts of our network suffer from repeated power cuts. The majority of these interruptions are caused by intermittent faults. By definition it is difficult to identify intermittent faults and it is therefore challenging for our engineers to fix them and resolve the issue. We know that this issue frustrates our customers as much as it frustrates us, because more than 10% of the complaints we receive are about these intermittent interruptions that repeatedly occur on the same network component. We are investing 1m in Bidoyng devices that restore power automatically where there is an intermittent power cut. INNOVATION: Bidoyng devices applied to intermittent faults to turn the power back on automatically They should prioritise if people are already suffering extensive power cuts, they need to make sure they are given preferential treatment. Customer from Sheffield, (High reliability area) We are installing a large number of a new type of device, known as a Bidoyng, that tells us the power has gone off and automatically turns it back on without the need for a visit by an engineer. The Bidoyng programme has already been very successful over the past two years, and in we will invest a further 1m in these devices. Having more devices means we can deploy them before the problem becomes too severe. In the future, we intend to deploy one of these devices once any customer has experienced two unplanned power cuts on the same part of the network within three months. This innovation will reduce the impact of repeated power cuts that customers experience before an intermittent defect on our network is permanently fixed. Northern Powergrid: Our business plan for Page 8 of 61

13 2.2.4 Improving the resilience of our network and adaptation for climate change In response to stakeholder preferences, our flood defence programme will be accelerated and will complete in Customers said improving resilience to flooding is important. Our plan includes protecting substations at risk of surface-water flooding. Extreme weather conditions, such as flooding, have become more frequent and we have already invested over 7m to defend our network from these events. 13 Climate change is likely to affect us increasingly in the future and it is the risk of flooding to our substation assets that we expect to be one of the most direct impacts. We will continue with our well-advanced programme to protect all major substation sites from the risk of flooding. In response to stakeholder feedback we have accelerated the programme so that it will be completed in Having learnt from the experience of 2012, when intense localised rainfall across our service area inundated assets that were not previously thought to be at risk from flooding, we will further protect relevant assets against surface-water (or flash) flooding. Keeping trees away from our lines will remain a priority Overhead lines are also vulnerable to adverse weather conditions. For example, in high winds there is a risk that trees will fall on our overhead lines and cause power cuts. In recent years we have mobilised a programme of tree cutting and will continue to manage this programme at rates that maintain the security of our network. It means that we will identify encroaching trees and work to a repeat cycle so that there is always an appropriate gap between our overhead power lines and the ever-growing vegetation. and standby batteries will be installed at critical substations to enable us to respond to a shutdown of the National Grid Transmission System. National guidelines, published in 2012, require that standby batteries at critical substations should hold their charge for 72 hours in the event of the mains power being lost. This is so that, under what is called a black start scenario, 14 protection and control functions can be used for up 72 hours without a mains charging supply. To make sure we can always meet this safeguard, we will invest 11m in battery replacement, demand-disconnection control schemes and a small amount of local generation at some key sites. Severe weather is a common feature of the regions we serve and we collaborate with other distributors to offer mutual aid in storm conditions. Our regions experience some of the UK s worst weather conditions and we apply well-tested majorincident response protocols in these circumstances. For example, in 2012 we mobilised this 13 Predicting severe weather events is difficult. We have modelled the likelihood of these events taking place and have factored the threat that they impose on our network into our plans. More information on how we have dealt with this uncertainty is included in Managing uncertainty and risk section 4 of the core narrative to our business plan and in annex A Black Start is the procedure to recover from a total or partial shutdown of the National Grid Transmission System. This entails isolated power stations being started individually and gradually being reconnected to each other in order to form an interconnected system again. Northern Powergrid: Our business plan for Page 9 of 61

14 management process 10 times and in 2013 we mobilised it 9 times. The procedures that co-ordinate our efforts align with the civil authorities gold, silver and bronze civil defence command structures. The investments that we propose will not change this already-robust procedure, but will strengthen our teams ability to act swiftly and effectively if an incident occurs. Given our situation in the north of England, we are well placed to collaborate with our colleagues in the Scottish network companies, who often experience some of the most severe weather in the UK. In the last few years we have benefited from the support of neighbouring network companies in our worst situations, and in return we have sent resources to Scotland, North Wales and the far South East to help them on over ten occasions, including during the major storm that affected Southern England over Christmas The agreement, by which all of the companies in Great Britain provide storm support to each other at cost, rather than at a profit, is an important part of our on-going resilience planning. We remain committed to playing our part in that arrangement as a donor of resources and we remain a grateful recipient of other network companies equivalent support during our own storms (see section 1.3.5). Our commitment to this partnership is underpinned by our commitment to the National Skills Academy for Power, which coordinates common standards of technical training across participating network companies. Most network companies in Great Britain support this body, and as its work endures it will put our workforce in a better position to apply consistent skills to other network companies equipment in times of difficulty. Our performance is incentivised by financial rewards and penalties and by our regulator s publication of our performance alongside the performance of the other electricity distributors. Keeping the lights on is at the core of what we do every day. Our performance is driven by a number of powerful measures. We will be penalised financially through Ofgem s Interruptions Incentive Scheme (IIS) if we do not meet our power cut targets, and rewarded if we beat them the penalties or rewards can be as high as 25m p.a. Our performance is reported annually to our regulator under strict reporting rules. This includes both the measures of asset health (secondary deliverables) as well as the headline measures of performance that include CI and CML. We expect our regulator to continue to publish a performance report each year that identifies our performance on reliability and the other output areas described here in section 2. Our performance guarantees include power cut response we will pay more than the law requires if we fail and will report quarterly on our performance. We will lose our financial allowances to improve the worst performing parts of our network if we don t deliver what we say we will by way of improvement actions. We will publish a detailed report on our performance for stakeholders. STAKEHOLDER APPROVAL Our reliability plan Yes 79% Don t know 18% No 3% Northern Powergrid: Our business plan for Page 10 of 61

15 2.3 Safety: running a safe operation OUR SAFETY PROPOSITION FOR Remain a leading safety performer in our industry, reducing accident rates by 50% Meet or beat all legislative requirements Take prompt action on any network safety issues that the smart meter roll-out reveals Continue to work to reduce the impact of metal theft, including making improvements in substation security Keep safety as a central driver of investment decisions and appraisals Extend and improve our safety awareness campaigns, particularly in schools Equip all of our employees with innovative protective work wear The safety of our employees, contractors, customers and the general public will always be our top priority. The safety of our customers, our employees, our contractors and the general public will always be our main concern. We have a risk-averse approach to managing safety and will continue to invest proactively to reduce the safety risks on our network over the next ten years. Where it is possible to do so without incurring excessive cost, we go beyond the standards required of us by law to reduce safety risk. We will continue to do that in We do recognise that this precautionary approach has a small impact on our customers bills, but we believe that doing only the bare minimum in terms of safety-related expenditure is not an acceptable alternative. We believe that we should implement any realistic, practical measure that we can identify to make people safer. Our customers, our employees and contractors share this attitude towards maintaining leading standards for health and safety. We already have an extremely good track record when it comes to safety. This has been and will remain our number one priority Our safety proposition looks forward to and follows the current period from where: Metal theft has become a major issue. In the first two years of the current price control period we saw more than 2,500 incidents of metal theft from our network, a 300% rise in just five years. The average financial impact of this crime runs to just over 9m per annum. Our accident rates are now 80% lower than they were at the privatisation of the electricity industry in Our major injury rate has reduced by 50% over the last five years. We intend to build upon this strong performance as we look forward to The Health and Safety Executive (HSE) are responsible for enforcing legislation with which we must comply. As such, we have shared our business plan and overarching strategy for minimising safety risk with them to gain their feedback and direction on our proposals. The HSE have acknowledged the progress we have made towards creating an even safer operating environment. We are Northern Powergrid: Our business plan for Page 11 of 61

16 encouraged by their constructive engagement in our plan for the future and we intend to maintain our strong working relationship with the HSE throughout the next 10 years. Although very few of our stakeholders are well placed to comment on how we should optimise our safety performance, there was a consensus that we should continue to look to make our operations safer. Stakeholders feel that our safety record is already very strong with proactive measures in place to keep people safe. As such, initiatives such as educating the public on the dangers of metal theft and extra substation security received only 50 pence of a notional 10 bill increase in an independent willingness-to-pay survey 15. Consequently, we have determined our target improvement level for safety primarily by looking at what it is reasonably practicable for us achieve rather than by asking stakeholders to guide us by expressing views on their willingness to pay for incremental improvements. We are confident that we already have adequate The HSE welcomed our approach and corporate culture in relation to health and safety. They thanked us for taking the time to invite them to discuss these matters and were satisfied that we appear to have plans and procedures in place for managing public safety. The Health and Safety Executive MEASURING SUCCESS Recordable incident rates OSHA 0.22 by 2023 RIDDOR < 0.1 from 2015 resources in our safety programme to keep driving steady improvement in performance. 85% of a representative sample of over 1000 stakeholders told us that they agreed with our safety proposals, hence we are confident that our improvement targets are entirely consistent not only with our legal duties but also with our stakeholders expectations. and by the end of the plan period we aim to have reduced our already low accident rate by 50%. In the period to 2023 we will build on our already-strong performance, 16 as shown in table 1 below. Our ambition is to remain one of the safest operators in the WHAT IT WILL COST industry. We will achieve this by continuing with our current spend 9.9m p.a. approach to managing the safety risks associated with our Share of our costs 2.4% network. Every three years we develop a new safety Domestic charge 0.80 p.a. improvement plan. More details on the current version can be Business charge p.a. found in annex Further details on customer prioritisation research can be found in annex G.9 of our business plan. 16 Our safety major accident rate has fallen by 50% since Northern Powergrid won two gold medals in the Occupational Health and Safety 2013 Awards in the scheme operated by safety charity the Royal Society for the Prevention of Accidents (RoSPA). It was the twelfth year in a row that Northern Powergrid won the award for its operation in the Northeast and the ninth year in a row in Yorkshire. Northern Powergrid: Our business plan for Page 12 of 61

17 Number of Major and over 3/7 day lost time accidents Number of Major and over 3/7 day lost time accidents/100 staff 17 OSHA Rate Table 1: Our track-record on safety By comparison with other network operators, our 2012 reportable major accident rate per 100 employees of 0.12 was 25% better than the industry average. Innovation in safety has yielded benefits in 2013 with state-of-the-art protective clothing. We will continue to look for innovations to reduce safety risk. For example, we recently undertook detailed research to improve the protective clothing worn by our operational staff and make it safer. We looked outside our industry to see what we could learn from leading protective clothing developers and considered the merits of clothing provided to pit-lane workers in Formula 1 motor racing. This research evolved into a project that developed new protective clothing to protect operational staff from the dangers of an unintended electrical flashover or explosion. We selected a supplier by competitive tender and the new clothing was issued to all staff in early We believe this innovation is unique within our industry 19 and the safety-industry trade body the British Safety Industry Federation (BSIF) agrees. INNOVATION: Award-winning clothing that protects workers from the risk of arc flash In May 2013, with our clothing supplier, we were jointly awarded the prestigious BSIF Excellence Award for the work done to produce and supply our new arc-flash work-wear range. Our business plan also includes the completion of a programme to ensure that our overhead power lines are raised sufficiently high in the air to protect the public. 20 Over the past few years we have invested significant resources in this work and we do not expect that we will need to carry any major overhead mains ground clearance work into the period.we expect to complete all extra high voltage, high voltage and low voltage mains ground-clearance work that we know about at this time by the end of This places us in a sound position: the only ground-clearance work planned to complete in the period is the lifting or undergrounding of low-voltage overhead service lines. In the plan period we will address the continuing problems of metal theft and the new challenges of the smart meter roll-out 17 Our accident rate measures our Major and over 3 day lost time accidents (7 days from April 2012) per 100 employees. Our Major and over 3 / 7 day lost time accidents are reportable under the Reporting of Injuries, Diseases and Dangerous Occurrences Regulations 1995 (RIDDOR). These accidents are reportable to HSE. To learn more go to 18 In the USA the Occupational Safety and Health Administration (OSHA) records reportable work related accidents including major injuries leading to absence from work and also less severe injuries where employees may experience restricted work duties or have prescription drugs issued as treatment or therapy. The OSHA rate is presented as recordable cases per 200,000 man-hours. To learn more go to 19 For more information on our state-of-the-art protective clothing or other initiatives that we introduced to improve our safety performance, see annex As specified in the Electricity Safety, Quality and Continuity Regulations Northern Powergrid: Our business plan for Page 13 of 61

18 Our staff and customers have told us that our work to raise awareness of the dangers of metal theft is lower on their list of priorities than some other issues. We have considered these views but, due to the severity of the potential dangers and the additional cost impact of metal theft, we have decided that it will remain a priority in our plan. Metal thieves expose themselves and innocent members of the public to a high risk of serious injury or death. We have worked hard to combat this issue, and have made some progress. But we expect the level of metal theft from our network to remain high in the next 10 years. In order to reduce metal theft and the associated safety risks, we will continue to work closely with law enforcement agencies on crime prevention and detection; press ahead with our programme to upgrade security measures at our substations; and allocate more security investment to protect particularly vulnerable assets. 21 The roll-out of smart meters will provide us with new information about the existing safety risks on our network. For example, meter operatives may identify meter boards that contain asbestos, in which case we will bear the costs of removing these meter boards. We will conduct a robust competency assessment of those meter operatives to make sure that they can identify risks correctly. 22 The level of safety risk associated with metal theft and the smart meter roll-out in the next regulatory period is uncertain. Both of these risks and, therefore, the level of investment we may have to make to address them could be more or less significant than our current assumptions. But we are confident that we will be able to manage these risks so that we can deliver on our promise to meet or beat the HSE safety standards and legislative requirements, and make gradual improvements in our safety performance. 23 and our safety education programme in schools will be augmented and reach even more children in the period. Another important component of our safety proposals is our programme of public education on electrical safety. We have been running this for many years and will continue to do so. The largest part of the programme involves visiting schools to help explain the dangers of electricity to children. We also provide information to schools to help them reinforce the message. We are already using the internet to help augment this programme and we plan to build on that work. We estimate that we currently reach around 30,000 children per year with our message and will continue to see that number grow throughout the period. As each new generation comes along, our safety message must be refreshed and redelivered. We therefore anticipate keeping up the pace of our schools liaison through to For more information on metal theft see annex For more information on the safety risks associated with the smart meter roll-out and how we plan to address them, see annex Further details on how we plan to deal with these uncertainties are contained in annex 1.5. Northern Powergrid: Our business plan for Page 14 of 61

19 Safety performance is a key component within our detail asset risk indicators. We are required by Ofgem to report information on secondary deliverables, which give an indication of how the long-term delivery plan for network improvements will affect the quality of the equipment on our network. Some secondary deliverables, on asset health, criticality and composite risk, include elements of safety performance. We have not dealt with these in this section and more information on secondary deliverables is included in section 2.8 below. In safety, performance is not driven by financial incentives but by the fact that it is a moral imperative that is underpinned by the criminal law. In addition: Our safety performance is the subject of on-going scrutiny from the HSE. We will continue to publish our performance in our annual regulatory accounts and will also publish it in a more accessible form on our website. STAKEHOLDER APPROVAL Our safety plan Yes 85% Don t know 13% No 2% In those reports, we will include more than just the official accident rates. This will provide you with a better insight into our performance and outlook. 2.4 Customer satisfaction: delivering service improvements OUR CUSTOMER SERVICE PROPOSITION FOR All aspects of customer service will become more reliable, better communicated and backed by slicker processes, so we get things done faster, but at no extra cost Customers experiencing power cuts will receive better information through voice or digital communication channels We will use web-based technology to upgrade our process for general enquiries and minor engineering works We will continue to improve the manner in which and the speed with which we resolve complaints We will use our experience of putting together this business plan to sustain stronger, more open relationships with all our stakeholders Customers will be given more options so they can choose how they want to stay in touch and transact with us: internet, mobile technology, on-site meetings, telephone, , social media or text Our use of technology will enable our contact centre to move from being largely reactive to making around 10 million proactive customer contacts a year by 2023 a tenfold increase on today Northern Powergrid: Our business plan for Page 15 of 61