Gas Transmission Approach to SC 13 Development of Network Output Measures:

1. Gas Transmission Approach to SC 13Development of Network Output Measures: Tony Stonehewer 3rd April 2008

2. Network Output Measures Special Condition 13 Development of appropriate methodology to evaluate network output measures for the pipeline system including;- • Network Asset Condition • Network Risk • Network Performance • Network Capability & Utilisation We are seeking your view on our proposed measures

3. Introduction – Network Output Measures Principles used to develop the measures • Consider existing measures reported both internally and externally and where possible avoid duplicating existing reports • Measures should ;- • meet the requirements of Special Condition 13 • collated in an efficient manner • provide stakeholders with useful information

4. Introduction – Network Output Measures Timetable for Network Output Measures • Develop and Consult with industry parties • Submit Methodology to OFGEM 31/5/08 • Record data for report 1/4/09 • First report of Network Output Measures 31/7/10 • Measures may be modified at a later date

5. Network Output Measures - Development • In developing the measures we have considered and addressed the following requirements • Performance in relation to the development, maintenance and operation of an efficient economical pipeline system • Assessment of historical and forecast network expenditure on the pipeline system • Comparison of network performance analysis over time • Provide information in a transparent manner to interested parties • Assessment of the customer satisfaction derived from the services provided

6. Network Asset Condition • C13 Part B 3.(a) Licence Condition • the current condition of the assets which collectively form the pipe-line system to which this licence relates (including condition of the principle components of those assets) (collectively “network assets”), the reliability of the network assets and the predicted rate of deterioration in the condition of the network assets which is relevant to making assessment of the present and future ability of network assets to perform their function (network asset condition)

7. Network Asset Condition • C13 Part B 3.(a) Licence Condition • Defining Assets within scope • Current condition of network assets • Reliability of network assets • Predicted rate of deterioration in condition • Present/future ability to perform their function

8. Principal Assets Network Entry Points • Pipelines • Compressors • Multi-junctions • Network Exit Points

9. Loss of supply from the NTS into the Distribution networks would have a considerable affect on gas consumers and industry It would take several weeks or months to restore gas supplies to a Town or City Failure of a principal asset can have considerable impact on the local community and the environment Gas NTS must be very reliable otherwise there would be considerable effect on consumers and on the safety of the general public Network Asset Condition – Reliability of the NTS

10. Protection and management of the principal assets is crucial to the reliability of the NTS and the efficient management of the network Secondary Assets are used to support, control and manage the principal assets to ensure the overall reliability of the principal assets and network remains high By focusing on the condition and performance of the secondary assets we can maintain the reliability of the network and increase the life of the principal assets Network Asset Condition – Reliability of the NTS

11. Secondary Asset are installed to protect / minimise the risk of principle components failing e.g. Principal Asset - Pipeline Secondary Asset - Cathodic Protection (CP) System CP System protect pipeline from external corrosion therefore reducing the risk of failure and maintaining the integrity of the pipeline Network Asset Condition – Secondary Assets Block Valve Cathodic Protection Pig Trap Pig Trap Block Valve

12. Network Asset Condition – Secondary Assets • Secondary Asset Groups 47 Groups identified • Some assets categories support more than one Principle Asset e.g. • Cathodic Protection System • Locally Operated Valves • Civil Buildings

13. Network Asset Condition • C13 Part B 3.(a) Licence Condition • the current condition of the assets which collectively form the pipe-line system to which this licence relates (including condition of the principle components of those assets) (collectively “network assets”), the reliability of the network assets and the predicted rate of deterioration in the condition of the network assets which is relevant to making assessment of the present and future ability of network assets to perform their function (network asset condition) Remnant Life = Expected Life – Current Age

14. Network Asset ConditionExpected and Remnant Life Process • Using following data sources where applicable • Fault data • Visual inspection • Operational data • Design life • Benchmark data • Replacement History Assess Expected life of Secondary Asset Group based on existing data Consider additional replacement drivers Calculate Expected Life • Obsolescence of Equipment • Legislation / Standard change Calculate Current Life Change in current life based on increase running hours or number of operations /cycles Calculate Remnant Life = Expected Life – Current Life

15. Network Asset Condition Report • Each Secondary Asset Group Report Total Number of Asset Groups No of Assets where work may be required;- • Within 2 years of current year • Within 5 years but not within 2 years of current year • Within 10 years but not within 5 years of current year • Not be required within the next 10 years of current year

16. Network Asset Condition Report • Report gives an indication of asset condition risk to Network however there are other factors which need to be considered • Report provides information on work which may be required it does not provide details on type or extent of remedial activity, options include:- • Re-life or Partial Re-life • Replacement or Partial Replacement • Re- assessment of life • Decision on type of remedial work can only be made following further detailed engineering assessment

17. Example - Network Asset Condition Report

18. Network Asset Condition ReportHow will we use it ? Outages Outages Age Expected life: replacement history, OEM data, condition monitoring External drivers Resources Resources Alignment with Alignment with Criticality Criticality System drivers System drivers Consequences Consequences Scheme bundling Scheme bundling of failure of failure Replacement / Re-life Options Priorities Network Asset Scheme Priority Scheme Priority Condition Report Condition Capital Plan Capital Plan

19. Network Asset Condition Report • Why is proposal a good measure ? • Data meets the Licence Condition requirements and is relatively easily collected : • Current condition of network assets • Reliability of network assets • Predicted rate of deterioration in condition • Present/future ability to perform their function

20. Network Risk • C13 Part B 3(b) Licence Condition • “the overall level of risk to the reliability of pipeline system to which this the licence relates as a result of network asset condition and the interdependence between network assets” (network risk)

21. Network Risk Network Risk needs to address the following; • Security of Supply • Meet License obligation for 1 in 20 winter demand • Safety • Public safety as a result of asset failure (societal risk) • Environment • Protect environment from releases and emission from assets • Fiscal • assets available to record energy transported

22. Network Risk • Regulators already require risk assessment these are delivered in both quantitative and qualitative forms dependant upon available data * Supported by Generic Industry / International Data

23. Network Risk • Why quantitative Risk Assessment for the entire network is not practical • Safety criteria are stringent and the individual and societal risk targets are very low (Predicting likelihood of very low frequency events with high consequence) • Interaction of factors outside National Grid total control (3rd Party interference) • Where Quantitative Analysis has been carried out, it is not possible to sum the output to produce a Network value • Asset interaction, dynamic operation and gas flows variables makes a network calculation of little or no value

24. Network Risk • A Quantitative and Qualitative analysis of Network Risk has been developed to meet Network Output requirements • Analysis is based on compliance with existing International and Industry Codes of Practice and Standards • e.g. IGE TD/1 - Recommendations for Steel Pipelines and High Pressure Gas Transmission • By complying with these standards the risk from the Network is minimised to reasonably acceptable levels • Compliance with these standards is reviewed by enforcement agencies HSE, EA and SEPA

25. Network Risk • International and Industry Standards and Operating Codes have been developed over a number of years to ensure assets are safe and reliable to meet security of supply standards • Industry Code of Practice TD/1, TD/13, IEC 61508 etc are regarded by Regulators to be Best Practice • Deviation from these must be accompanied with a detailed justification of alternative method to demonstrate safety, security of supply or environmental standards are maintained or improved

26. Network Risk • Defining acceptance criteria will draw upon existing performance standards e.g. IEC 61508 requires Safety Integrity Levels (SIL) to be set and maintained for protective systems • Remote Operable Valves SIL 1 = 0.1 reliability • i.e. failure rate not greater than 1 in 10 • Compressor Control System SIL 2 = 0.01- 0.001 reliability • i.e. failure rate not greater than 1 in 100

27. Describe Function Safety – major accident, Security of Supply, Finance, Environment – reportable incidents Primary factor consider however many assets contribute the management of more than one risk, worst case is used Acceptable – Meets required standard for availability, reliability or capability Cautionary- Only partially meets standard for availability, reliability and capability Unacceptable – Fails to meet the required standard for availability, reliability and capability Identify Primary Risk Factor • Code / Standard Acceptance Levels • Acceptable • Cautionary • Unacceptable Collate Risk Profile for Primary Assets Year on Year Comparison Network Risk Process Secondary Asset Group

28. Network Risk • Defining acceptance criteria • Green Acceptable – Meets required standard for availability, reliability or capability • Amber Cautionary- Only partially meets standard for availability, reliability and capability (nominally with 20% of gap from acceptable target) • Red Unacceptable – Fails to meet the required standard for availability, reliability and capability (nominally greater than 20% gap from acceptable Target)

29. Network Risk Report Example Projected Risk Profile for a Principal Asset Typical Acceptable Performance level Projected risk if secondary asset group condition not addressed Secondary Asset Group Risk Profile

30. Network Risk Report • Why is proposal a good measure? • Report is a useful assessment of Risk based on current condition and performance of Secondary Assets and meets the requirements to provide information on: • Overall Level of Risk • Considers all risks including asset condition and reliability • Interaction of the different secondary assets is represented on the principal asset risk report

31. Network Performance: Definition • C13 Part 3(c) Licence Condition • “those aspects of the technical performance of the pipe-line system which have a direct impact on the reliability and cost of services provided by the licensee as part of its transmission business” (network performance)

32. Network Performance: Definition • Licence Condition requires • Performance of the licensee’s transmission system • Direct impact on the reliability and cost of services

33. Network Performance: Definition • Existing Performance Reports • HSE – “Major Hazards Safety Performance Indicators in the UK Onshore Gas and Pipeline Industry” report includes • Maximum Operating Pressure Excursions • DN Inlet Pressure Excursions below 38 Barg • Gas Quality TFA Advice Instructions • EA / SEPA Network Review includes • Running Hours per Site/ Unit and Emissions to Atmosphere • Prediction of Future running Hours • OFGEM – Annual Price Control Review Report includes • Compressor Running Hours • No of Incidents

34. Network Performance Report • The following Output measures will provide detail on the overall network performance ;- • Number of unplanned events where the operating pressure of a pipeline has been reduced to carry out a repair or investigate the condition of the pipeline. • Number of unplanned events where the flow into the network from an Entry Point has been restricted because of an asset fault or failure. • Number of unplanned events where the flow from the network at an Exit Point has been restricted because of an asset fault or failure.

35. Network Performance: Definition • This additional information which would be useful would provide details on when unplanned actions have been taken to restrict flows or pressure in the Network; - • Why Unplanned events only ? • Planned events should have no impact on the overall network, outages are planned in summer when flows are reduced • Pressure and flow reductions are required to maintain and operate the plant safely, restricting these activities can have a detrimental affect on the Operator’s ability to manage the assets safely and efficiently

36. Network Performance • Why is proposal a good measure? • The proposed Performance measures are an efficient way of providing information on the performance of the network without duplicating existing reports and meet the requirements • Technical performance of the pipe-line system • Direct impact on the reliability and cost of services provided • Measures have a impact on Operator’s ability to transport gas and accept gas into the network

37. Network Capability and Utilisation - Definition • C13 Part B 3(d) Licence Condition • “the level of capability and the utilisation of the pipe-line system to which the licence relates at entry and exit points and other network capability and utilisation factors” (network capability & utilisation)

38. Network Capability and Utilisation OFGEM –Annual Price Control Review Reporting Pack Includes eight report sheets which include information on Capability and Utilisation of the network :- 5.1 System characteristics 5.2 Activity indicators 5.3 Transmission system utilisation and performance 5.4 System demand and capability 5.5 Utilisation of compressor capacity 5.6 Environmental Monitoring 5.9 Asset data 5.11 Forecast scenarios

39. Network Capability and Utilisation 5.1 System characteristics

40. Network Capability and Utilisation 5.2 Activity indicators

41. Network Capability and Utilisation 5.3 Transmission system utilisation and performance

42. Network Capability and Utilisation 5.4 System demand and capability

43. Network Capability and Utilisation 5.5 Utilisation of compressor capacity

44. Network Capability and Utilisation 5.6 Environmental Monitoring

45. Network Capability and Utilisation 5.9 Asset data

46. Network Capability and Utilisation 5.11 Forecast scenarios

47. Network Capability and Utilisation • Proposal is to use the existing OFGEM report which provides a significant amount of information on the Capability and Utilisation of the Network • There may be some opportunity to reformat and rationalise the information presented so it is easier to use • Why is proposal a good measure? • Efficient use of data that is already reported and it Addresses Licence Condition requirements: • Utilisation entry and exit points • And other network capability and utilisation factors

48. Next Steps • Stakeholder Comments / Update Draft • Network Output Measures Methodology Submitted to OFGEM by 31/5/08 • OFGEM consult on Output Measure Proposals to be confirmed at a later date