Aging Utility Infrastructure - Myths and Realities

Aging Utility Infrastructure -Myths and Realities Presented by Dan O’Neill At the Chartwell Distribution Reliability Summit On March 9, 2007 In Atlanta, Georgia

Agenda • The ‘problem’ as typically stated • The myth of the ‘tsunami’ dispelled • Age-based replacement is imprudent • The real problems of aging infrastructure • How to address the problem • Observations and key questions 1

Most US utilities had a growth spurt in the 1960s-70s… … And as a result, many utilities have a ‘bubble’ of equipment of that vintage, like the post-war baby boomer bubble in population 2

…that caused a ‘bubble’ in some distribution installation, e.g., URD… • Most companies started ramping up their URD in the 1960’s • Some were responding to local ordinances requiring URD for residential developments of any significant size • E.g., NY in 1967: URD for developments with 5 or more • Housing growth is the key driver • Often a good correlation between feet installed and customer growth • Recessions in 1975 and in early 1980’s are evident • In 1990’s some were affected by local or regional limits to growth 3

Scenario 1: “The egg thru the snake” When the Weibull distribution has a shape value of 30 and a scale value of 25 years, the assumed rate of cable failures are tightly bunched around the 25-year point, and the profile of predicted cable failures follows the distribution of installations, with the peak failures shifted about 25 years in the future (the dispersion adds about three years: the 1973 peak in installations corresponds to a 2001 peak in failures) Predicted Cable Failures 120 100 80 Failures (000s) 60 40 20 0 1975 1979 1983 1987 1991 1995 1999 2003 2007 2011 2015 2019 2023 2027 2031 Cable Sections Left By Year Installed 5,000 4,500 4,000 3,500 3,000 Sections 2,500 2,000 1,500 1,000 500 0 1982 1986 1990 1994 1998 2002 1950 1954 1958 1962 1966 1970 1974 1978 …which could cause a ‘bubble’ of failures in the current era Typical data Assumed Rate of Cable Failures 50% Shape = 30 Scale = 25 yrs 40% 30% Failures 20% 10% 0% 1 5 9 37 41 45 49 13 17 21 25 29 33 Years Since Installation 4

Predicted Cable Failures -Illustrative- 60 50 40 Failures (000s) 30 20 10 0 1975 1979 1983 1987 1991 1995 1999 2003 2007 2011 2015 2019 2023 2027 2031 Cable Sections Left By Year Installed -Illustrative- 5,000 4,500 4,000 3,500 3,000 2,500 Sections 2,000 1,500 1,000 500 0 1982 1986 1990 1994 1998 2002 1950 1954 1958 1962 1966 1970 1974 1978 Wider failure distribution smoothes the installation profile… Typical data Scenario 2: “Smoothing the profile” When the Weibull shape value is reduced to 10, • the assumed rate of failures are more dispersed around the 25-year point and • the profile of the predicted failures is a smoothed version of the distribution of installations, • with its peak failures shifted about 34 years into the future (from 1973 to 2007) Assumed Rate of Cable Failures -Illustrative- 16% 14% Shape = 10 Scale = 25 yrs 12% 10% Failures 8% 6% 4% 2% 0% 1 5 9 37 41 45 49 13 17 21 25 29 33 Years Since Installation 6

Scenario 3: “The egg disappears” When the Weibull shape value is reduced to 2.5, the assumed rate of failures are widely dispersed around the 25-year point and the profile of predicted failures is virtually a straight line after the first 25 years, with its peak failures shifted almost 100 years into the future Predicted Cable Failures 14 12 10 8 Failures (000s) 6 4 Peak in 2072 >> 2 0 1975 1979 1983 1987 1991 1995 1999 2003 2007 2011 2015 2019 2023 2027 2031 Assumed Rate of Cable Failures 5% 4% 4% 3% 3% Failures 2% 2% 1% 1% 0% 1 5 9 37 41 45 49 13 17 21 25 29 33 Years Since Installation …With a wide distribution erasing the installation profile Typical data Cable Sections Left By Year Installed 5,000 4,500 Shape = 2.5 Scale = 25 yrs 4,000 3,500 3,000 2,500 Sections 2,000 1,500 1,000 500 0 1982 1986 1990 1994 1998 2002 1950 1954 1958 1962 1966 1970 1974 1978 7

The third scenario is born out by existing evidence • For companies that have done little URD cable replacement, the trend is much like what is pictured in the third scenario: • Failures increasing at a steady annual rate of about 5 percent, which, with compounding, means a doubling in about 14 years • With an active replacement program, no such increase will occur, but: • The replacement itself might need to grow at about 5 percent per year to keep up, until the failure-prone cable is substantially replaced • The replacement program’s impact can beincreased or diminished by how the cable to be replaced is selected: • It needs to be, as much as possible, worst first URD Cable Failures 6,000 Company A 5,000 Company B 4,000 Failures Per Year 3,000 2,000 1,000 0 1982 1985 1988 1991 1994 1997 2000 2003 The myth that cable installed in the 1960-70’s had a ‘thirty-year’ life and so will come ‘crashing down on us’ in the next ten years is just not true. There is no ‘crashing wave’, only a ‘long swell’ until the worst is replaced 8

July 15, 1999, Thursday Metropolitan Desk And yesterday, Mr. Giuliani continued his attacks on Con Edison's response as too passive. ''What Con Edison should be saying is here are the things that have to be done to make it virtually impossible for blackouts to take place,'' he said. ''We need more power. We need to purchase more power. We need more alternatives. We need a more modern infrastructure, meaning we have to improve the feeder cables so we have better material. We need to insulate them better.'' (emphasis added) Public cries to replace aging infrastructure are increasing 10

But if the public knew the facts about age & reliability… Relying on age-based replacement for reliability is: Replacing infrastructure components based on age is one of the least cost-effective ways of improving service Not cost-effective There are better indicators of deterioration than age, e.g., specific failure history, test results, defective types Not method-efficient Other industries have learned not to rely on age for reliability management, e.g., aerospace, automotive, even natural gas pipelines and LDC’s Not best practice …they would say that age-based replacement is ‘imprudent’ because it is usually a poor use of ratepayer funds 11

Age-based replacement is almost always an inferior strategy The failure rate of 40-year old cable is about .45 per mile, which is higher than average, but the failure rate of cable sections that have failed, say three times in five years is 9.0 per mile*, or 20 times higher! * E.g., 350 feet per section, or 15 sections per mile Because even though failure does increase with age, it does so very gradually, and other methods provide a sharper pencil to select assets for replacement closer to ‘just in time’ 12

Replacement is only one of the asset management strategies… Asset Management Strategies • Improved standards for new construction • Preventive maintenance • Remediation of failure-prone conditions • Replacement of failure-prone components • Re-design for redundancy • Reinforce for capacity • Inspection and condition monitoring • Mitigation of effects on customer satisfaction • Rapid repair and restoration …and it is usually not the most cost-effective, unless combined with inspection and monitoring to replace the worst first 13

There are better replacement criteria than age alone • Better method of selection • Number of previous troubles – e.g., URD cable • Inspection of condition – e.g., Poles. Crossarms • Due to defective design or ‘vintage’ • (not necessarily the oldest) • Better reason for selection to replace • With a capacity upgrade – conductor, transformers • To fix specific power quality problems or complaints • With customer contribution for enhanced reliability • Better timing of replacement • With road moves or customer work • To take advantage of a planned outage • Upon failure or at condition of imminent failure Most poles have a pole mark, with the date of installation stamped on it. Right? Why don’t we replace poles by just reading the age on the pole? Because we have a better method – pole inspection – just another example of why age-based replacement is imprudent. 14

Utilities should know the ‘trouble-prone’ groups of aging assets • URD cable – especially HMW or unjacketed 170-mil XLPE concentric neutral from the 1960s’-70’s • Circuit Breakers • Medium voltage – Air-magnetic metal clad (especially outdoor) • High voltage – Certain air blast models • Oil breakers of inferior design • Poles – as indicated by inspection • Power transformers – certain designs, locations • Transformers – CSPs, overloaded, submersed • Crossarms – ‘chicken wing’ armless construction • Transmission H-frames – wooden side braces • Cutouts – Potted porcelain cutouts of the early 1990’s vintage by a certain manaufacturer • Substation buss – cap-and-pin insulators, i.e. ‘brown glass’ • Pole-top – plastic ties, guards, etc. not protected from UV deterioration • Arresters – silicon carbide gap-ype arresters 16

For some equipment, there are problems with early ‘vintages’ • Typical progression of URD types: • HMW unjacketed (1960’s) • XLPE unjacketed (1970’s or later) • XLPE jacketed (1970’s or later) • TRXLPE jacketed (1980’s to now) • EPR jacketed (1980’s to now) • Virtually all is concentric neutral • Original HMW was un-stranded • Some went from DB to in-conduit • Especially in rocky soil • And some had a period of C-in-C • Typical insulation by voltage: • 12kV – 170 mil • 34kV – 240 mil Unjacketed 3-phase cable with worn concentric neutral around insulated conductors * Glossary: HMW – High Molecular Weight Polyethylene XLPE – Cross-Link Polyethylene TRXLPE – Tree-retardant XLPE EPR – Ethylene Propylene Rubber DB – Direct Buried C-in-C – Cable in Conduit (cable pre-inserted) For most companies, their URD problem is their 34 kV-class or, for their 15kV-class, the 170-mil HMW unjacketed cable installed in the 1960’s and 1970’s, if they have not already replaced it 17

Left alone, aging asset failures can be an accelerating problem For example, in Company A’s URD cable: • Outages were increasing at 5-6% per year, which means doubling every 12-14 years • Repair costs were averaging tens of million$ per year, and growing at the same rate • Customers were experiencing multiple interruptions, with some averaging 3-4 per year on their half-loop, not counting upstream outages from feeder lockouts, trees, etc. • Replacement spending had been very little, and needed to ramp up to sufficient levels to arrest the growth in outages, and would have to grow to keep up with deterioration URD Cable Failures 6,000 Company A 5,000 Company B 4,000 Failures Per Year 3,000 2,000 1,000 0 1982 1985 1988 1991 1994 1997 2000 2003 Company A needed to fund a URD cable replacement program that would arrest the growth of outages and maintain the level like Company B did * URD – Underground residential distribution – typical way of serving a post-1960’s residential subdivision, i.e., 300-5000 feet of usually single-phase, 12-34kV primary voltage cable, direct-buried (not in conduit), connecting 1-30 padmount transformers per half-loop, with 2-10 customers per transformer, so about 50 customers per half-loop (from riser to ‘normally open’ point) 19

HL&P addressed its URD problem effectively HL&P (CenterPoint Energy) had the same type of problem as many and addressed it with a combination of Lightning Arrestor (L/A) upgrade and a cable replacement program: • Key program items • L/A change out program to limit “let-through current” starting in the mid 1980’s • From 1981 to 2001 all replacement cable was jacketed cable in conduit, but due to cost and no observed increase in reliability, the installation practice was shifted back to direct buried after 2001 • 35kV Cable • Adopted an aggressive 5 year replacement program (1987 to 1992), funded at $10 million per year, that replaced 95% of the original installed cable • 15kV Cable • Active policy for the past 10 years of replacing half loops with 2 or greater failures in a rolling 12 month period. 2005 funding level was $2.4million or a 19 mile replacement program (at $24/ft) HL&P 35kV Failures HL&P 15kV Failures HL&P has leveled the exponential growth of failures, and stabilized failures at an acceptable level, where it has stayed for over a decade. Others can do the same 20

The solution involves four key questions about the replacement program • Does the utility know: • What causes failures? • How to avoid them? • How much it costs? Measuring the right data? Predicting the right future? • Does the utility know: • What will happen if programs stay as they are today? • Whether there will be a ‘crashing wave’ or a ‘long swell’? • How the future could be changed? Funded at the right level? • Does the utility know: • What level of funding would at least stabilize aging asset outages? • What funding would be needed to achieve customer satisfaction? • What funding is needed to at least break-even on repair costs? Replacing the right assets? • Does the utility know: • Which cable segments or half-loops are most cost-effective to address? • Whether and when to inject, outsource, directionally bore, etc.? • How to ensure the field replaces what the model assumed they would? Answering these four key questions will allow the utility to optimally manage its aging infrastructure replacement programs 21

It is important to investigate causes of failure… New Construction Manufacturer Defect Thumping Insulation Thickness/Type Maintain Cath Prot Rock Bruising Cable Injection Cable Replacement Jacket/casing missing/broke Cathodic Protection Corrosion Strength Insulation Breakdown Treeing Street Crossing Moisture in cable/joint Thermal Instability Cable Failure Maintain Manholes Wet Manhole Arresters around open Lightning Temperature of cable Steam (Ducted) Upgrade to MOV Enforce Penalties Dig In Mechanical Damage Ventilation (Ducted) Loading Mark-outs Add Capacity Enforce Trench Standards One Call Improper Training Improper Installation Capacity Planning Rocky Soil …in order to know how to fix the problem 22

The key to optimal replacement is high failure rate… Bang per buck Cost per mile Past outages per mile Growth rate of outages Minutes per outage Miles of line to be replaced Dollars spent Past outages per year Miles of line to be replaced Future outages avoided per year Past outages per year Future minutes avoided per year Future outages avoided per year Future minutes per year avoided Dollars spent 1 min. $2.00 1 $90,000 x 8 x 1.25 x 4500 = The higher the failure rate... …the higher the bang per buck Where: • $90,000 per mile = 5280 feet/mile x $17 per foot to replace • 8 outages/mile/year = 13 spans/mile x (3 outages per 400ft span in past 5 years) • 25% growth rate = 3 outages in past 5 years becomes 3 outages in next 4 years • 4500 minutes per outage = 50 customers per outage x 90 minutes per outage 23

…As well as ways to reduce the unit cost • Injection is sometimes a cost-effective option • Guaranteed by some vendors for many years • Typically half the cost per mile when used on the right cable • Not effective with blocking splices • Does not solve problem of corroded neutral • Not really an option for replacing individual segments, but good for half-loops • Volume can reduce unit cost • Half-loops get better cost than individual segments • But not worth it if failure rate of replaced cable drops faster than unit cost when volume increases • Use trenchless technology where possible • Tunneling under driveways, through tree root systems, etc. • Take credit for saving O&M, if appropriate • Repairing future failures can be made easier, e.g., conduit 24

URDFailures Distribution of Failure by Half-Loop (2001-2005) 60% 49% Possible target of replacement program 50% 37% 40% 30% Devices 20% 7% 3%* 3% 10% 0% 0 1 2 3 4 or greater Failures It is crucial to identify and replace the ‘worst first’ • E.g., most of utilities’ URD cable sections and half-loops has not failed in the last five years. Replacement of that cable would be unnecessary at this time • A customer satisfaction-driven program would target those half-loops that experienced a high rate of failure, because every segment that fails in the half-loop causes outages to all customers behind that device (the fuse on the riser) • The replacement program should then be further refined by replacing only those half-loops or sections in the half-loop that have not already been replaced, or that fit certain criteria, e.g., corroded neutral, voltage, etc. The goal is not to replace all of the assets, but to replace enough of the right assets at the right time to affect the trend of failures 25

With the right approach, an optimal program can solve the problem Based on the number of miles of cable that fit the criteria of the half-loop program: • A program of 2x miles of URD cable replacement, beginning in 2007 and rising by y% per year, would stabilize failures at a normal 2007 level • 2005 was a hot year, like 1999, so a normal 2006 would be less • An x-mile program would leave failures rising, although at half the rate Company A URD Cable Failures 9,000 Actual '82-'05 8,000 Projected '82-'16 7,000 Repl x mi +y% per yr 6,000 Repl 2x mi +y% per yr 5,000 Failures Per Year 4,000 3,000 2,000 1,000 0 1982 1984 1986 1988 1990 1992 1994 1996 1998 2000 2002 2004 2006 2008 2010 2012 2014 2016 Without a replacement (or injection) program, or with a minimal program, Company A’s URD failures would continue to double every 12-25 years 26

Elsewhere*, we have shown how to choose the right level of replacement From the viewpoint of a prudent company (and its regulator), there are three tests of a replacement program of this type: • Trending – What are the trends in spending and outages of this type? • If spending is down while outages are up, more spending is needed • If spending is level and outages are level, spending may be adequate (but see below) • Obviously, there are issues in adjustment for weather, costs, productivity, etc. • Benchmarking – What are other companies doing in spending and performance? • If other comparable companies are spending more or getting better results, shouldn’t you? • Obviously, there are reasons why some companies may differ for good reason • Modeling – When the process is modeled, what does it indicate the required level of spending should be to maintain performance or improve it to what customers expect? • This is the kind of modeling we have demonstrated above • There is customer satisfaction data to suggest that the threshold may be around three outages per year – including outages caused by devices upstream of the URD half-loop • Compared to the other two tests, this one is the most useful if the modeling is done right A ‘prudent’ replacement program should be designed with these tests in mind, especially the third * See “The Reliability Conundrum – What Is the Right and Prudent Level of Spending on Service?”, Public Utilities Fortnightly, March 2004, by Daniel E. O’Neill 27

Agenda • The typical problem • A comparison of URD programs • The myth of the ‘tsunami’ dispelled • How to address the problem • Observations and key questions 28

What we have learned • Capturing the right information during installation and failures, e.g., date installed, insulation type, location and protection device operated, etc. that will enhance the data mining and prioritization process going forward Measuring the right data Predicting the right future • Modeled correctly in terms of installation history, failure rate, and replacement/retirement • No ‘tsunami’, just growth at a compounded rate Funded at the right level • Based on trending, benchmarking, and modeling • As a ‘stake in the ground’, at least determine the amount of funding needed to stabilize failures at current levels, then determine what it would take to achieve customer satisfaction Replacing the right assets • Replacing based upon centralized selection criteria that include failure history, design/model, projected number of customers affected and restoration time, etc. Answering these four key questions will allow the utility to optimally manage its aging infrastructure programs 29

Observations and Key Questions Observations • Replacement program – Utilities need to implement an enhanced replacement program for aging infrastructure assets, keyed to replacing the ‘worst first’ • Asset selection – Utilities need to select assets with a high rate and impact of failure • Without such a replacement program, asset failures will continue to double, often in a decade or so, with consequences for repair cost, increased multiple interruptions to the same customers, possible lengthy outages during major events, and accumulation of the inevitable replacement cost • There is no ‘tsunami’, only a long, high swell, in the sense that failures and costs will continue to rise at about 3-10% per year, doubling in a decade or so. But a replacement program can stabilize the failures, or even reduce them Key Questions • Is the current level of failures acceptable, or should the utility aspire to reduce them further? • Can the utility execute an enhanced replacement program effectively with its current processes? • Are their other opportunities to reduce and refine the selection process e.g.: life extension, better inspection and maintenance, etc.? 30

Questions? 31

Aging Utility Infrastructure - Myths and Realities