ASSET CONDITION ASSESSMENT

Transcription

1 Filed: August 17, 2005 RP /EB Exhibit D1 Tab 2 Schedule 1 Page 1 of ASSET CONDITION ASSESSMENT 1.0 INTRODUCTION This Asset Condition Assessment (ACA) submission highlights key findings of the comprehensive ACA studies carried out by Hydro One Distribution and its consultants, Acres International, on the assessment and management of Hydro One Distribution s assets as related to condition. The ACA assessments are based on 2004 asset information. The purpose of ACA is to detect and quantify long-term degradation and to provide a means of quantifying remaining asset life. This entails identifying assets that are of high risk or near end-of-life that will require major capital expenditures to refurbish or replace, or eliminate the asset altogether. Asset condition assessments are a significant factor in defining the asset risks for the development of Sustaining Capital and OM&A programs, and if determined necessary these programs are then implemented to mitigate the risks. 2.0 OVERVIEW The effective and efficient operation of centralized asset management requires consistent and accurate asset information to support Ontario wide investment decision processes. The health or condition of an asset is one factor in the assessment of risk for consideration and input to the investment decision process. Other factors that are considered are the business value impacts and risks on safety and environment, customer, reliability, finance, reputation, regulatory relationship, and efficiency and effectiveness. 27

2 Filed: August 17, 2005 RP /EB Exhibit D1 Tab 2 Schedule 1 Page 2 of The management of the distribution assets requires optimizing these business value impacts that are traditionally focused on balancing lifecycle costs, risk of failure, and performance of the distribution system. If the asset management focus were strictly on improving or maintaining asset condition, sub-optimal decisions would be made that would increase costs. Also, the specific asset health or condition does not necessarily imply a set course of action or timing, without consideration of the operating context, risk, financial implications, and overall strategy for managing a particular asset. In most cases, physical asset condition and asset performance can be determined only by actual inspection and testing, either by manual or automated means. Asset condition assessment information is routinely and consistently collected and updated to properly support decision processes. Recognizing that gathering detailed condition information on every individual asset and every nut and bolt is both practically and economically infeasible, distribution assets were grouped into 20 logical asset classes. These classes were prioritized and further grouped into three categories, Priority 1 (P1); Priority 2 (P2); and Priority 3 (P3), and based on the value to the business determines the importance of acquiring the condition information. The asset priority results are shown below Priority 1 (P1) Priority 2 (P2) Priority 3 (P3) Asset Class Transformers/ULTC's Land Assessment & Remediation Woodpoles Overhead Line Sections Vegetation Management (ROW) Total: 5 Asset Class Station Reclosers Station HV Switches and Fuses Station Sites and Structures Mobile Substations Submarine Cables Underground Cables Total: 6 P1 - High Value - High Risk P2 - Moderate Value - High Risk Asset Class Oil Circuit Breakers Spares AC/DC Service Equipment Switch and Fuse Feeder Protection Oil Containment PCB's - Stations Switches - Lines Reclosers - Lines Transformers - Lines Total: 9 P3 - Low Value - Lower Risk

3 Filed: August 17, 2005 RP /EB Exhibit D1 Tab 2 Schedule 1 Page 3 of P1 assets represent the highest priority assets and are of high value (in terms of total sustainment program expenditures) and high risk to the business. P2 assets are second in priority with moderate program expenditures and high risk; and P3 assets are lowest in priority with low program expenditures and lower risk to the business. For the high value P1 and P2 assets, detailed asset condition assessments are carried out that involve documenting asset description, demographics, condition criteria, comparisons with industry practice and condition assessment results. Limited information is provided on the P3 assets, because acquiring asset condition information on these assets is of low value for either of the following reasons: The assets are of low dollar value in terms of ongoing investments and it is not cost effective or practical to collect ACA information on these assets e.g. Distribution Line Fuses When these assets fail, risks are considered relatively low and managed process exists to quickly identify and repair or replace assets that have failed, or are about to fail, e.g. pole-top transformers. Hydro One Distribution retained Acres International through a competitive RFP process to perform the asset condition assessment as a qualified, unbiased, third party because asset health or condition in the utility industry is not well defined. There is not an industry standard or methodology to assess asset health and it is not an exact science. As with the human body, wide-scale exploratory internal inspections are not practical and not always possible. Professional judgement is still required, and therefore differences of professional opinion will exist. To provide a second opinion as well as additional insight, Acres was retained to review the ACA process and practices, develop condition based health indices, analyze and

4 Filed: August 17, 2005 RP /EB Exhibit D1 Tab 2 Schedule 1 Page 4 of assess Hydro One Distribution s asset condition information and audit the results. The results of their assessments are provided in the attached Acres International report entitled Asset Condition Assessment Study Summary Report of Distribution Assets dated July ASSET DEFECTS VS. ASSET CONDITION When considering ACA, it is important to understand the differences between defect management and regular maintenance versus long term asset degradation and asset condition assessment. Defects are usually well defined and associated with failed or defective components in the ancillary systems that affect operation and reliability of the asset well before end of life. These do not normally affect the life of the asset itself, if detected early and corrected. Defects are routinely identified during inspection and dealt with by maintenance activities to repair or replace failed components to ensure continued operation of the asset. Long term degradation is generally less well defined and is not easily determined by routine inspection. The purpose of asset condition assessment is to detect and quantify long-term degradation and provide some means of quantifying remaining asset life. This includes identifying assets that are of high risk or at end of life that will require major capital expenditure to refurbish or replace, or eliminate altogether. Condition assessment procedures are intended to measure asset degradation, the criticality of the degradation, and the remaining asset life. A reasonable understanding of the degradation and failure processes is required to establish sensible assessment criteria or to define appropriate end of life criteria. 27

5 Filed: August 17, 2005 RP /EB Exhibit D1 Tab 2 Schedule 1 Page 5 of Hydro One s ACA PROCESS Hydro One Distribution carries out its asset condition assessment using an overall ACA approach that describes the ACA objectives, prioritization and process to be used for assessing the condition of its distribution assets. A more detailed process that outlines the steps for assessing the asset condition for a specific asset class is then used. These processes are described below Overall ACA Process Hydro One Distribution s application of condition assessment techniques can be viewed as part of an overall ACA process, as shown in Figure Figure 1: Overall ACA Process Networks' Core Delivery Assets Networks' BusinessValues Identify Asset Classes Prioritize Asset Classes Define Evaluation Methodology & Identify ACA Criteria Provide Industry Practices for Asset Condition Assessment Detailed ACA Process Specific to Each Asset Class Carry Out ACA Field Audits Assess Asset Condition Collect Necessary ACA Information (e.g. via ACA Surveys or Maintenance & inspection) Revise ACA Criteria, As Appropriate 15

6 Filed: August 17, 2005 RP /EB Exhibit D1 Tab 2 Schedule 1 Page 6 of The ACA process defines objectives; prioritizes assets for which ACA is to be carried out; identifies the asset degradation and failure modes to determine condition and end-oflife criteria; provides industry/ utility practices; analyzes and assesses asset condition; and verifies/audits that the asset condition assessment results reflect actual field condition. The ACA process follows the eight major steps described below. 1. Identify asset classes and demographics. 2. Prioritize the asset classes (P1, P2, P3) based on the value the assets represent to the business, which in turn determines the importance of acquiring condition information. 3. Define the asset information needed to determine and evaluate asset condition against predefined condition indicators, expected results or specifications for all P1 and P2 asset classes. 4. Provide documentation and information on industry practices and understanding of the asset deterioration process and the failure modes and consequences (including any mean time to failure trends); and define the asset condition and asset end-of-life criteria for all P1 and P2 asset classes. 5. Review the adequacy of existing asset condition documentation (both condition information and decision criteria) on all P1 and P2 asset classes and determine the additional condition information required to adequately assess asset condition. 6. Collect the necessary asset condition information. This information may be obtained from existing databases or through regular testing, surveys or inspections. Define the measurements, and coordinate and schedule the necessary work with Hydro One Distribution staff to collect statistically relevant population samples of asset condition

7 Filed: August 17, 2005 RP /EB Exhibit D1 Tab 2 Schedule 1 Page 7 of information, that will enable a condition assessment of the asset population in question. 7. Analyze the asset condition and performance information to identify population condition, performance trends and high risks and impacts of asset condition on meeting business objectives, including service quality standards. 8. Verify and confirm that the asset condition assessment results reflect actual field condition ("spot audits"). 5.0 ASSET CONDITION SUMMARY OF RESULTS 5.1 ACA Results A summary of the asset condition assessment results for the Priority 1 and Priority 2 distribution assets is shown in Table 5.1 and detailed in the attached Acres International report. 18

8 Filed: August 17, 2005 RP /EB Exhibit D1 Tab 2 Schedule 1 Page 8 of 70 1 Table 5.1: Summary of Priority 1 (P1) and Priority 2 (P2) ACA Results 2 ACA Results Very Poor Poor Fair Good Very Good P1 Assets Dx Stations Transformers 1.7% 1.3% 3.6% 17.0% 75.8% Land Assessment & Remediation 44.6% % Dx - Lines Wood Poles 1.9% 2.2% 0.5% 0.9% 94.5% OH Line Sections Rights of Way 2.8% 24.4% 36.0% 23.6% 13.1% P2 Assets Dx Stations Reclosers Circuit Switchers 0.0% 0.0% 0.0% 8.3% 91.7% HV Fuses % 34.8% 38.7% -- Sites & Structures 0.1% 1.8% 22.4% 40.2% 35.5% Mobile Substations 0.0% 7.1% 0.0% 71.4% 21.4% Dx - Lines Submarine Cables Underground Cables ACA Results Shading For "Very Poor to Poor" Categories: <1% 1 to 5% >5 % A consistent approach has been used in developing the Health Index formulations, so that the meaning of the categories is broadly understood across most asset classes with exceptions as highlighted in the discussions below Very Poor and Poor Condition assets are high risk and will require replacement, refurbishment or other remedial action within the next 5 years to correct significant deterioration. Fair Condition assets have experienced noticeable deterioration, but should survive another 5 to 10 years with regular maintenance or component replacement.

9 Filed: August 17, 2005 RP /EB Exhibit D1 Tab 2 Schedule 1 Page 9 of Good to Very Good Condition assets are low risk and it is expected that ongoing maintenance activities will be adequate to maintain these assets for the next 10 to 20 year period. As identified in Table 5.1, the Acres asset condition assessment review has identified a concern where greater than 1% of any asset group is in the poor to very poor category. Details concerning these assets are provided as follows: Distribution Station Transformers About 3.0% (45) distribution station transformers are at high risk of failure and will need to be replaced within the next five years. Transformer failures occur for a number of reasons such as animal contact, lightning, or poor condition. During 2004 Hydro One Distribution experienced 37 transformer failures of which the majority of transformers could be repaired and returned to service. In total, Hydro One Distribution purchases about six to ten transformers annually to replace high risk end-of-life units, to replace failed units that cannot be repaired, and to maintain adequate spare coverage. As well, Hydro One Distribution makes use of proactive measures and diagnostic tools to facilitate early detection of deteriorating transformer condition and incipient failure to extend the life of these costly assets. The proposed Sustaining OM&A (Exhibit C1, Tab 2, Schedule 2) and Capital (Exhibit D1, Tab 3, Schedule 2) programs provide appropriate funds to manage the lifecycle of these costly assets and to address those transformers identified to be at high risk Site Contamination Land Assessment & Remediation About 45% of Hydro One Distribution s properties, with the majority being station sites, have been identified as exceeding Ministry of Environment (MOE) guidelines for

10 Filed: August 17, 2005 RP /EB Exhibit D1 Tab 2 Schedule 1 Page 10 of agricultural or residential land-use, as a result of certain long-lasting chemicals such as wood preservatives and arsenic based herbicides, storage and use of mineral insulating oil, fuel, and PCB s. Any site, where it was discovered that one or more test samples exceeded MOE guidelines, was categorized as very poor based solely on condition. Acres did not assess the risk at each site, as such categorized all as very poor with follow-up risk assessment required. The risk assessment process is part of the Land Assessment and Remediation (LAR) program presented in Sustaining OM&A, Exhibit C1, Tab 2, Schedule 2. This program s primary focus is to reduce the risk of off-property impacts to human and ecological exposure through the implementation of remedial measures. The proposed plan will address all high to medium risk sites within the next 7 years. This plan is highlighted in Sustaining OM&A under Stations (Exhibit C1, Tab 2, Schedule 2) and Shared Services and Other OM&A under Real Estate (Exhibit C1, Tab 2, Schedule 6) Wood Poles Acres estimates that about 4.1% or 66,000 wood poles in Hydro One Distribution s system are in poor to very poor condition. The locations of these poles still need to be identified and this is expected to occur over the duration of the next inspection cycle. Hydro One Distribution is proposing to assess all poles within a six-year period. The Acres finding of 66,000 poles at risk is consistent with Hydro One Distribution s findings and support the need to maintain pole the assessment plans proposed in Sustaining OM&A (Exhibit C1, Tab 2, Schedule 2) and to maintain pole replacements at levels proposed in Sustaining Capital (Exhibit D1, Tab 3, Schedule 2). Statistical analysis using pole survival data and Hydro One Distribution s wood pole demographics would indicate that over the next few years there will be a need to increase the program level of wood pole replacements to 6,000 during 2006, replacing 7,000 by 2007, and 10,000 poles by 2010.

11 Filed: August 17, 2005 RP /EB Exhibit D1 Tab 2 Schedule 1 Page 11 of Rights of Way About 27% (27,000 km) of Distribution rights of way are at risk and require clearance work within the next two years. The balance of the rights of way (73%) is not expected to require line-clearing work before the third planning year. The scheduling of work will be based on ACA information, growth projections and associated feeder tree caused outage data. To optimize long term costs, mitigating right of way risks and maintaining reliability performance, the distribution rights of way vegetation management program will move from a 9.4 year clearing cycle proposed for 2006 to an optimal eight-year cycle with approximately 12,500 km being done by Over time, moving to an eight-year cycle will eliminate the backlog that is needed to reach optimum reliability levels and reduce future costs. For further details refer to Sustaining OM&A, Exhibit C1, Tab 2, Schedule High Voltage Fuses About 995 sets of HV fuses are installed on the Hydro One distribution system. Approximately 26.5% of these fuses have been identified as being in poor condition. Procedures are in place to inspect these devices during regular station maintenance and devices that are found to be in substandard condition are replaced immediately Station Sites and Structures About 1.9% (20) station sites and structures are at high risk and will need to be upgraded or refurbished within the next five years. Based on ongoing station condition assessments carried out during regular maintenance and asset condition assessment findings, ten to fifteen stations are refurbished each year. This work covers, as

12 Filed: August 17, 2005 RP /EB Exhibit D1 Tab 2 Schedule 1 Page 12 of appropriate, the refurbishment of fences, high voltage and low voltage structures, insulators, buildings, yards and roads, as well as electrical equipment such as transformers, AC/DC service equipment, circuit switchers, etc. In some cases it is the condition of transformers and electrical equipment that determines station refurbishment work at which time corrective work is also completed on site facilities. The proposed refurbishment plans proposed in Capital Sustaining (Exhibit D1, Tab 3, Schedule 2) will address those sites that have been identified to be in poor condition over the next 5 years Mobile Substation About 7% (2) of the Mobile substations have been identified to be in poor condition requiring refurbishment over the next 5 years. One of these mobile substations is scheduled for refurbishment during Additional details are provided in Sustaining Capital, Exhibit D1, Tab 3, Schedule ACA Process & Practices Acres International also carried out a comparison of utility maintenance and condition assessment practices to Hydro One Distribution s processes and practices. This exercise focused on the types of testing and inspection undertaken for each asset in question, the frequency of testing and inspection, and the application of maintenance and condition assessment data. The results indicate that Hydro One Distribution follows a process that is very similar to other major utilities around the world with respect to inspection and diagnostic testing as part of a preventive maintenance program. Hydro One Distribution s processes contain all the necessary elements for managing a large number of assets that are similar to other leading electricity utilities: existing practices and programs include the same range of

13 Filed: August 17, 2005 RP /EB Exhibit D1 Tab 2 Schedule 1 Page 13 of tests applied at approximately the same frequency. Overall, Hydro One Distribution s asset condition assessment programs are judged to be effective and consistent with good practice, and in most cases, the analysis and testing are more rigorous than many other leading utilities. For example, the development and use of the Health Index is a significant development that enables condition information to be used in a consistent manner in the end-of-life decision-making process. Acres did however find some process and data availability gaps for distribution overhead line sections, station reclosers and submarine/underground cables that prevent full application of Health Index principles. As such, ACA results were not presented in Table 5.1 for these asset groups. It is recognized that in some cases it may not be cost effective or practical to acquire the necessary information to support the application of a Health Index, in which case maintenance processes and reliability indicators are used to manage the assets. This is further discussed below for each of the asset groups in question Distribution Overhead Line Sections The gap in information results from the uniqueness of this asset compared to other asset classes, in that this asset consists of a grouping of overhead line component assets (e.g. conductor, insulators and wood poles) that extend anywhere from 1 km to 100 km. Grouping of the line components is deemed to be the most practical and cost-effective approach for assessing the condition of distribution line sections because end-of-life replacement or refurbishment often occurs on entire sections rather than on individual components. This approach recognizes that replacement or refurbishment may include some individual components that may not yet have reached their end-of-life. 28

14 Filed: August 17, 2005 RP /EB Exhibit D1 Tab 2 Schedule 1 Page 14 of 70 1 Data on Distribution Overhead Line Sections is obtained by: field crews during routine inspections or during other work activities identify situations that may need further inspection and asset condition assessment; pole testing and regular line patrols capture defects and degradation characteristics on line components, and sections of line that exhibit significant deterioration are noted; performance information indicating poor performance of a feeder or section is noted. Rather than collecting asset condition information on all distribution line sections, the process noted above is considered to be the most practical and cost effective approach to identify specific distribution overhead line sections that need further assessment and evaluation, and possible refurbishment or replacement. Over time, as more information is acquired, it may be possible to assess the overall health of this asset group Station Reclosers Hydro One Distribution currently manages approximately 6,000 distribution station reclosers consisting of single-phase (97%) and three-phase (3%) units. Station reclosers are currently on a six-year maintenance cycle for refurbishment or replacement and amount to 1,000 units/year. During maintenance, insufficient information is collected to assess the health of this equipment class. Hydro One Distribution has adjusted the recloser maintenance cycle by linking it to asset condition and duty, i.e.; number of operations determines maintenance requirements. Ongoing ACA post-mortem studies of the refurbished or replaced reclosers will be used to adjust these maintenance cycles for optimum program effectiveness. 27

15 Filed: August 17, 2005 RP /EB Exhibit D1 Tab 2 Schedule 1 Page 15 of Underground / Submarine Cables The maintenance activities for distribution underground / submarine cables involve a three-year inspection for urban circuits and a 6-year inspection for rural circuits in accordance with OEB regulations. For underground cables, the inspections involve visual examination of the components associated with the cable termination, pothead, elbows, and cable riser poles. For the large majority of cables, which are buried directly underground, no examination of cable or splices is undertaken. For a few cables that are in ducts some examination of the external condition may be carried out for troublesome or critical circuits. For submarine cables, the inspections involve visual examination of corrosion of the neutral at the entry into the water. Neutral corrosion has been identified as a potential safety issue. Hydro One Distribution s management practices for underground and submarine cables are based on performance: two failures within a section of cable would normally lead to the decision to replace the cable. The decision whether to repair or replace is made on the condition from visual assessment and performance of the cable, and if deemed necessary laboratory testing is carried before decisions are made concerning replacement. Hydro One Distribution s program for managing distribution underground and submarine cables is generally consistent with the approach adopted by many other utilities for such cables. There is potential to improve the management of these assets as proposed under the Asset Management and Data Collection project. Refer to the Business Case Summary IT10 in Exhibit D2, Tab 2, Schedule

16 Filed: August 17, 2005 RP /EB Exhibit D1 Tab 2 Schedule 1 Page 16 of ASSET CONDITION ASSESSMENT STUDY SUMMARY REPORT OF DISTRIBUTION ASSETS ACRES INTERNATIONAL Attachment A 6

17 Asset Condition Assessment Study Summary Report of Distribution Assets By Acres International Limited July 2005 Hydro One Distribution ACA Summary Report Page 1 of 51

18 This report is an update to a March 2003 report prepared by Acres International Limited, Canada in association with EA Technology Limited, UK, (Consultants) for Hydro One Distribution. Neither Hydro One Distribution nor the Consultants, nor any other person acting on their behalf makes any warranty, express or implied, or assumes any legal responsibility for the accuracy of any information or for the completeness or usefulness of any process disclosed or results presented, or accepts liability for the use, or damages resulting from the use, thereof. Any reference in this report to any specific process or service by trade name, trademark, manufacturer or otherwise does not necessarily constitute or imply its endorsement or recommendation by Hydro One Distribution or its Consultants. Hydro One Distribution ACA Summary Report Page 2 of 51

19 Table of Contents Executive Summary 1.0 Introduction 2.0 Methodology 2.1 Asset Descriptions 2.2 Asset Demographics 2.3 Review of Asset Condition Assessment (ACA) Process 2.4 Analysis of Asset Condition 2.5 Audit of ACA Data Collection Process 3.0 Analysis of Distribution Assets 3.1 P1 Assets Distribution Transformers and Under Load Tap Changers Distribution Land Assessment and Remediation Distribution Wood Poles Distribution Overhead Line Sections Distribution Rights-of-Way 3.2 P2 Assets Distribution Station Reclosers Distribution Station Circuit Switchers and HV Fuses Distribution Station Sites and Structures Distribution Mobile Unit Substations Distribution Submarine Cables Distribution Underground Cables 3.3 P3 Assets Distribution Oil Circuit Breakers Distribution Spares Distribution AC/DC Service Equipment Distribution Switch and Fuse Feeder Protection Distribution Oil Containment Distribution PCB and Hazardous Waste Distribution Line Switches Distribution Line Reclosers Distribution Line Transformers (Pole and Pad) Hydro One Distribution ACA Summary Report Page 3 of 51

20 4.0 Audit of ACA Data Collection Process 4.1 Audit of Lines and Rights-of-Way 4.2 Audit of Station Assets Appendix 1 Development of Asset Condition Composite Health Indices Hydro One Distribution ACA Summary Report Page 4 of 51

21 Executive Summary E.1 Introduction In preparation for effectively rationalizing Hydro One Distribution s sustainment based work programs the company has undertaken a major condition assessment program for its Distribution (Dx) Assets. Since the inception of the asset management organization, Hydro One Distribution has reviewed the data available within its maintenance databases, identified additional data required to facilitate an objective appraisal of asset condition, and undertaken additional condition assessment surveys as necessary to collect the critical mass of asset condition data needed to plan its sustainment work programs. This report contains a review of the overall asset condition assessment (ACA) process adopted by Hydro One Distribution, and documents the evaluated condition of the total population of Distribution assets, based on condition criteria and end-of-life criteria that are indicative of asset condition and consistent with industry practices. The Distribution assets were grouped into 20 asset classes and prioritized into three categories, Priority 1 (P1), Priority 2 (P2), and Priority 3 (P3), based on their value to the business (in terms of reliability, customer, finance, health & safety, regulatory/legal/environment) and importance of acquiring the condition information. P1 assets (5 asset classes) represent the highest priority assets and are of high value (in terms total sustainment program expenditures) and high risk to the business. P2 assets (6 asset classes) are second in priority with moderate value and high risk; and finally P3 assets (9 asset classes) are lowest in priority with lower value and risk to the business. This report presents the condition assessment results of the P1 and P2 assets. For the low priority P3 assets only a review of industry practices is presented any available condition assessment was not assessed because of the lower priority of these assets. This report has been prepared by Acres International Limited (Acres) of Oakville Ontario. The analysis and report has been prepared in consultation with Hydro One Distribution s staff specialists, but the report and its conclusions are based on the findings of the consultant. For one asset group, Distribution Station Land Assessment Remediation (Dx LAR), Hydro One Distribution prepared the report section, including the underlying analysis. This approach was adopted since the relevant analysis and reporting was well advanced at the time of project commencement and it was felt that inhouse Hydro One Distribution specialists were best qualified to undertake the required analysis. The consultants in this case limited their involvement to auditing the process and analytical methods and the assessed condition results. E.2 Process Review In general, it has been found that Hydro One Distribution has undertaken a very careful and thoughtful evaluation of condition assessment needs, and has followed a steady and measured program of data collection to secure the information needed to assess the condition of its Distribution assets. The data collection methods, tools and technologies are generally appropriate to the task of measuring asset condition, providing the right data at an appropriate cost. The methods used by Hydro One Distribution have been found to be consistent with industry practices. The methods and procedures for data collection are Hydro One Distribution ACA Summary Report Page 5 of 51

22 well documented in head office procedure documents and specifications for data collection services. Except for a few exceptions that did not result in any significant impact to the ACA results, the identified data collection procedures have been executed according to specifications, and useable data has been collected and stored in centralized or distributed databases. Hydro One Distribution is using this data appropriately, having adopted condition criteria that form a rational basis for asset decision-making. Hydro One Distribution has adopted methods of analysis that are consistent with industry practices in most cases, and are at the cutting edge of industry practices in several cases. With composite Health Indices for critical class of assets, as recommended by the consultant, Hydro One Distribution has established a coherent and rational basis for evaluating the overall condition of each Distribution asset owned by the company. Tables E1 and E2 show an overall evaluation of the quality of the processes adopted by Hydro One Distribution, and the quality of the data found in the various databases. Utility Comparisons Benchmarking & Process Review Process Viability Data Availability Health Index Developed Distribution Stations Transformers Yes Land Assessment & Remediation Yes Distribution Lines Wood Poles Yes Overhead Line Sections Yes Rights-of- Way Yes Assessment Shading: - Score of 1-2 Very Good - No significant issues - Score of 3 Fair - Some gaps or issues - Score of 4-5 Poor - Significant gaps or issues Table E1 Evaluation of Hydro One Distribution ACA Processes for P1 Assets Hydro One Distribution ACA Summary Report Page 6 of 51

23 Utility Comparisons Benchmarking & Process Review Process Viability Data Availability Health Index Developed Distribution Stations Reclosers Yes Circuit Switchers and High Voltage Fuses Yes Sites and Structures Yes Mobile Unit Substations Yes Distribution Lines Submarine Cables Yes Underground Cables Yes Assessment Shading: - Score of 1-2 Very Good - No significant issues - Score of 3 Fair - Some gaps or issues - Score of 4-5 Poor - Significant gaps or issues Table E2 Evaluation of Hydro One Distribution ACA Processes for P2 Assets The results of the industry comparisons require little discussion. In all cases, Hydro One Distribution is pursuing a program of asset condition assessment that is equal to or better than programs executed in forward-thinking utilities around the world. The ACA processes of Hydro One Distribution have largely been demonstrated to be viable, in the sense that the data collected and the uses made of it are entirely appropriate to support the spending decisions that Hydro One Distribution must make. Composite Health Indices have been recommended for Hydro One Distribution use by the consultant for most of the asset groups. Health Indices provide a basis for assessing the overall health of an asset. Health Indices are based on identification of the modes of failure for the asset and its sub-systems, and then developing measures of generalized degradation or degradation of key sub-systems that can lead to end-of-life for the entire asset. The data availability rankings require some clarification. The only assets ranked poor on this aspect were for Distribution Station Reclosers, Distribution Submarine Cables and Distribution Underground Cables. These information gaps are not inconsistent with other utilities. The most common way of managing Distribution Submarine and Underground Cables is on a run-to-failure basis. However, it is valuable to identify demographic characteristics and historical performance for evaluating risk and it is recommended that Hydro One Distribution redefine their process for acquiring and managing data for these asset classes. In the case of station reclosers Hydro One Distribution uses a time based maintenance program (i.e., a 6-year cycle) to maintain and refurbish them. After an assessment the recloser is either rebuilt to Very Good condition or replaced. However, detail information on the assessment is not collected. It is recommended that Hydro One Distribution start collecting more detailed condition information as it could then provide an ideal opportunity to implement a condition assessment process using a Health Index to identify end-of-life, estimate remaining life and establish optimal maintenance cycles. Hydro One Distribution ACA Summary Report Page 7 of 51

24 E.3 Asset Condition Results The condition of the Hydro One Distribution assets has been evaluated in all circumstances where viable condition criteria are in place and sufficient condition data exists. Health Indices have been calculated for every asset with a recommended Health Index formulation and sufficient condition data to satisfy the minimum requirements for application of that formulation. The results of the asset condition assessments for the P1 and P2 assets are presented in Tables E3 and E4, based on the Health Index formulations and the extrapolated test results. ACA Results Very Poor Poor Fair Good Very Good Distribution Stations Transformers 1.7% 1.3% 3.6% 17.6% 75.8% Land Assessment & Remediation 44.6% % Distribution Lines Wood Poles 1.3% 2.8% 0.5% 0.9% 94.4% Overhead Line Sections Rights-of- Way(Line Clearing) 2.8% 24.4% 36.0% 23.6% 13.1% Assessment Shading for "Very Poor" and "Poor" Categories: <1% Limited deterioration 1 to 5% Increasing deterioration, attention required >5 % Significant deterioration, requires diligent and timely attention Table E3 ACA Condition Results for P1 Assets ACA Results Very Poor Poor Fair Good Very Good Distribution Stations Reclosers Circuit Switchers 0.0% 0.0% 0.0% 8.3% 91.7% High Voltage Fuses % 34.8% 38.7% -- Sites and Structures 0.1% 1.8% 22.4% 40.2% 35.5% Mobile Unit Substations 0.0% 7.1% 0.0% 71.4% 21.4% Distribution Lines Submarine Cables Underground Cables Assessment Shading for "Very Poor" and "Poor" Categories: <1% Limited deterioration 1 to 5% Increasing deterioration, attention required >5 % Significant deterioration, requires diligent and timely attention Table E4 ACA Condition Results for P2 Assets For some asset groups, maintenance and condition data has been collected for virtually every individual asset owned by Hydro One Distribution. In other asset classes, a smaller proportion of the total asset base has been tested and/or inspected, and the size and nature Hydro One Distribution ACA Summary Report Page 8 of 51

25 of the samples taken is sufficient to extend the results to the balance of the assets in that class through statistically relevant sampling. A consistent approach has been used in developing the Health Index formulations, so that the meaning of the categories is broadly consistent across most assets except for Rightsof-Way, Land Assessment and Remediation (LAR), and Spares, for which a conventional end-of-life definition is not applicable. In general terms, a Very Poor asset can be interpreted to be at or very close to end-oflife, requiring urgent attention in the form of a risk assessment potentially leading to asset replacement or a major overhaul. Assets in the Poor category can be interpreted as being close to end-of-life, requiring risk assessment potentially leading to replacement or significant maintenance expenditures in a 1 to 5-year time frame. Assets in Fair condition have experienced noticeable deterioration, but should survive at least another 5-10 years with regular maintenance and/or component replacements. Assets in the Good category can be considered to have at least 10 to 20 years of service left, given normal maintenance expenditures. Assets in the Very Good category should survive for more than 20 years, given normal maintenance expenditures. As might be expected, the vast majority of the assets owned by Hydro One Distribution are ranked in Good or Very Good condition, meaning that these assets are generally being managed effectively and are being maintained in a condition suitable for many more years of service. The same conclusion may be drawn from the relatively small proportion of assets found in Very Poor or Poor condition. In general, concerns exists for those assets that are exhibiting greater then 1% in the poor to very poor category, with more specific concerns highlighted below. Distribution wood poles, with about 4.1% (66,000 poles) being at or near end-oflife. These poles should be replaced over the next inspection cycle as they are identified taking into consideration criticality and consequence of failure. This level of deterioration is consistent with a mature wood pole plant that has a substantial number of poles entering the end of life category each year. Distribution Rights-of-Way (ROW), with about 27.2% of the ROW requiring tree clearing in about the next two years. Distribution Station Land Assessment & Remediation (DS LAR), has 44.6% of stations showing some level of contamination and based strictly on condition, is rated as very poor even through the risk may be low in some cases. As the consultant was not directly involved in evaluating the condition assessment details, the rating was based purely on contamination or no contamination. As such, further analysis is recommended to assess the severity and impacts of the contamination. Hydro One Distribution has carried out additional risk assessment and this is discussed in greater detail in Section Distribution Mobile Unit Substations (MUS), with 2 (7%) of the stations in poor condition. These stations are at risk of failing road certification within the next 5 years and will need refurbishment if they are to be kept in operation. Hydro One Distribution ACA Summary Report Page 9 of 51

26 E.4 Field Audits Field audits were undertaken in 2003 for most of the P1 and P2 assets, to ascertain the degree of conformance of data collection activities to defined procedures and practices, and the degree of conformance of observed conditions to recorded field data and stored data. In general, the auditors found that data was being collected by field groups in accordance with specifications, and that there was good correlation between field observations and recorded data. Such minor discrepancies as were observed followed no discernible pattern, and it has been concluded that no bias has been introduced in the overall condition results as a result of these minor discrepancies. Given the relatively short time period (i.e. less than 2 years) since the completion of this 2003 audit study, it was determined that a new field audit for the 2005 update was not necessary. Hydro One Distribution ACA Summary Report Page 10 of 51

27 SUMMARY REPORT Hydro One Distribution ACA Summary Report Page 11 of 51

28 1. Introduction Hydro One Distribution retained Acres to update the March 2003 comprehensive assessment of the condition of the Distribution assets owned by Hydro One Distribution. The investigation commenced in January of 2005 and was concluded in July The scope of the project, as set out in Terms of Reference issued by Hydro One Distribution in January of 2005, is as follows: 1. Investigate the modes of degradation and failure for each of the asset classes in the Distribution systems owned by Hydro One Distribution. 2. Review the asset condition assessment processes employed by Hydro One Distribution to measure the condition of the assets, and benchmark these processes against those employed by other utilities around the world. 3. Recommend asset condition criteria, end-of-life criteria and Health Indices for use by Hydro One Distribution in their asset management activities. 4. Assess the adequacy of the available condition data in preparing an objectively verifiable assessment of asset condition, and recommend measures to close any identified gaps in the existing condition data. 5. Evaluate the condition of Hydro One Distribution s Distribution asset base, using the recommended criteria and the available condition data. This Summary Report documents the methodology employed in the investigation and the philosophical approach used, along with summary results for all 20 Distribution asset classes. Recognizing that to gather detailed condition information on every individual asset and every nut and bolt is both practically and economically infeasible, all Distribution assets were grouped into 20 asset classes and prioritized into three categories, Priority 1 (P1), Priority 2 (P2), and Priority 3 (P3), based on their value to the business (in terms of reliability, customer, finance, health & safety, regulatory/legal/environment) which determines the importance of acquiring the condition information. P1 assets (5 asset classes) represent the highest priority assets and are of high value (in terms total sustainment program expenditures) and high risk to the business. P2 assets (6 asset classes) are second in priority with moderate value and high risk; and finally P3 assets (9 asset classes) are lowest in priority with lower value and risk to the business. This report presents the condition assessment results of the P1 and P2 assets. Limited information is to be provided on the P3 assets because acquiring asset condition information on these assets is of low value for any of the following reasons: The assets are of low dollar value in terms of ongoing investments and it is not cost effective or practical to collect ACA information on these assets e.g. Distribution Line Fuses. Hydro One Distribution ACA Summary Report Page 12 of 51

29 When these assets fail, risks are considered relatively low and managed process exists to quickly identify and repair or replace assets that have failed, or are about to fail, e.g. pole-top transformers. The assets included in each asset group (P1, P2 and P3) and the corresponding section numbers of the report dealing with these assets are listed in the following tables. It is noted that Acres completed the comprehensive asset condition assessment for all P1 and P2 assets in accordance with the scope of work, except for Dx Land Assessment and Remediation. In this case Hydro One Distribution wanted to understand the results internally prior to consultant involvement, however, Acres reviewed the findings of the internal study. P1 Assets Dx Stations Dx Lines DESCRIPTION Dx Transformers and ULTCs Dx Land Assessment & Remediation (LAR) Dx Wood poles Dx Overhead Line Sections Dx Rights-of-Way (ROW) SECTION NO. P2 Assets Dx Stations Dx Lines DESCRIPTION Dx Station Reclosers Dx Station Circuit Switchers & HV Fuses Dx Station Sites and Structures Dx Mobile Unit Substations Dx Submarine Cables Dx Underground Cables SECTION NO. P3 Assets Dx Stations Dx Lines DESCRIPTION Dx Oil Circuit Breakers Dx Spares (Transformers and Switchgear) Dx AC/DC Service Equipment (Batteries and Chargers) Dx Switch and Fuse Feeder Protection Dx Oil Containment Dx PCB and Hazardous Waste Dx Line Switches Dx Line Reclosers Dx Line Transformers SECTION NO. Hydro One Distribution ACA Summary Report Page 13 of 51

30 2. Methodology 2.1 Asset Descriptions A detailed description has been prepared for each of the 11 assets in the P1 and P2 and for some in the P3 asset classes investigated as part of this study. The descriptions focus on the nature of the assets, their function within the power system, and key characteristics of the assets including the critical subsystems that make up the assets. 2.2 Asset Demographics Detailed demographics were prepared for all 11 assets in the P1 and P2 asset classes, focusing on the total population size of each asset, and the distribution of this population by various salient asset characteristics, such as asset types, operating characteristics (voltage ratings, current or power ratings), ages, and geographic locations. The objective of the demographic breakdown was to quantify population sizes within definable groupings, which then form the basis for extrapolation of sampled condition results to the respective target populations. The source data for the Distribution demographic analyses was from a variety of data sources, including the Distribution Work Management system, Line Asset Surveys and the Distribution Station (DS) ACA Survey (for station assets). The consultant did not directly access the raw data, but instead relied on Hydro One Distribution staff to extract needed data. 2.3 Review of Asset Condition Assessment Process Acres carried out a review of asset condition assessment processes for each of the P1 and P2 asset classes. This review was carried out in comparison with an idealized framework for a hierarchical and prioritized asset condition assessment process, as described in Section The specific elements of the review include: Analysis of asset deterioration and failure modes, Description of the Hydro One Distribution condition assessment process, Review of industry practices, Benchmarking of Hydro One Distribution practices against industry practices, Recommendation of practices for use by Hydro One Distribution, Analysis and recommendation of composite Health Indices. For P3 asset classes only a review of industry practices is carried out Overview of Asset Condition Assessment Processes Throughout the world, electricity companies are undergoing major change due to privatization or deregulation. While the detail of these processes varies from country to country, some of the effects are almost universal. Essentially, the engineering activities of utility companies have been subject to much closer scrutiny and there is great pressure to reduce cost while maintaining or improving system performance. As a consequence of Hydro One Distribution ACA Summary Report Page 14 of 51