Accelerating Pipeline Replacements Issues and Challenges. Susan Fleck National Grid November 20, 2014

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1 Accelerating Pipeline Replacements Issues and Challenges Susan Fleck National Grid November 20, 2014

2 Our US Network 2

3 Our Natural Gas Customers Customers: We serve 3.5 million natural gas customers across three States (MA, NY & RI), in both urban and suburban areas. We have added approximately 130,000 customers since 2010 and forecast to add an additional 260,000 customers in the next ten years. Infrastructure: Over the last five years, we invested a total of $1.5 billion dollars replacing mains and services that are made up of older, leak prone materials. Our spend in this area will increase by at least 60% to $2.4 billion dollars over the next five years. 3

4 The Landscape Nationally: Increasing public safety concerns Increasing public climate change interest and passion Increasing desire for energy efficiency Abundance of domestic natural gas supplies In the Northeast: National Grid is the largest natural gas infrastructure company We have one of the oldest networks in the nation We have an opportunity to convert customers from oil to gas And at National Grid: Public safety is our first priority We are committed to accelerating methane reduction 4

5 Main Inventory US Comparative Summary National Grid - US 34,697 Miles PHMSA Average LDC 888 Miles PLASTIC % CAST IRON % OTHER 16 0% PROT'D STEEL % UNPROT'D STEEL % PLASTIC % CAST IRON 24 3% OTHER 1 0% UNPROT'D STEEL 46 5% PROT'D STEEL % 5

6 Main Leak Repairs - MA Total Main Inventory By Material 11,000 Miles Total Main Leak Repairs By Material Leaks (including damages) PLASTIC 41% PROT'D STEEL 24% CAST IRON * 64% PLASTIC 2% CAST IRON 21% UNPROT'D STEEL 14% ALL STEEL 34% 6

7 Historical & Future Capital Spend Note: Includes proactive and reactive main/service replacements 7

8 Infrastructure Replacement In order to manage both public safety and emissions, a comprehensive program of timely repair and proactive replacements is employed. These efforts are coordinated by our TIMP and DIMP programs and merged with jurisdictional priorities to develop the five year capital plans for our mains and services assets. Additionally, we spend approximately $65 million annually on leak repairs, and expect this number to increase based on our projections of leak rates new regulatory requirements. 8

9 Challenges Expansive infrastructure replacement programs like National Grid s come with challenges for all of our stakeholder groups. Customer Community Regulatory Company 9

10 Customer Challenges Our customers face increasing rates resulting from our investments in pipeline and service replacement programs. They face disruption in service during change over to newer systems. They face inconveniences due to the physical construction work ongoing in the communities where they live and work. They struggle to get current and accurate information about what the utilities are doing, and why they are doing it. 10

11 Community Challenges The communities where we operate distribution systems face challenges due to the large volume of work. They must coordinate permitting, police protection, and paving replacement projects with our replacement and/or repair work. They must respond to public complaints about noise, debris, detours, parking restrictions, and other inconveniences due to the heavy work. 11

12 Example of Community Impact City of Waltham MA Leak Prone Pipe Red is Cast iron, Brown is Wrought Iron and Light Blue is Bare Steel. Newer Pipe Dark Blue Coated Steel and Yellow is Plastic. 12

13 Example of Community Impact 13

14 Example of Community Impact 14

15 Regulatory Challenges Rate regulators face the burden of additional rate cases for utilities to report and get recovery for the replacement programs. They need to balance and manage customer bill impacts. Safety regulators face increased activity in the work areas that needs to be monitored and reviewed for safety and compliance. They must respond to complaints about increasing field activity 15

16 Company Challenges Companies have to manage the risk of aging infrastructure during replacement programs; fixing or monitoring leaks as appropriate. They must develop more frequent rate filings to work with regulators on appropriate recovery programs. They must raise capital to fund the programs. They must recruit, hire, train, qualify, and retain additional workers; field workers, administrative support, engineers and management. They must acquire additional materials, equipment and vehicles. They must coordinate work permitting with cities and towns. They must manage increased complexity in distribution networks. They must communicate effectively to all stakeholders. 16

17 Next Steps Work with our suppliers and contractor communities: Develop new and expand existing sources. Work with our cities and towns: Develop coordinated work plans and communications programs. Work within our states: Develop shared understanding of state and National Grid strategic priorities, how they connect and diverge. Develop infrastructure investment strategies and share best practices. Work with other leading utilities and industry associations to: Develop / identify / share methodologies and technologies to repair and replace infrastructure. Develop and deploy new ways to detect and reduce emissions. 17