Collaboration To Compliance And Beyond…

1. Collaboration To Compliance And Beyond… AGA Best Practices January 14, 2014 Kevin J Mahoney

2. Recalibration of Compliance Resources With Proper Focus…. • Need to adapt to change in regulatory/business environment • Need to re-think / recalibrate the need for “focused” resources within Operations to ensure a “cradle to grave” approach to compliance driven activities • Behavior Shift in Learning vs Reaction

3. The Bar Has Been Raised • NTSB criticized the Regulator / Operator relationship • Policymakers demand greater accountability • PHMSA is implementing the Pipeline Safety & Job Creation Act • State Regulators are increasing their expectations WE NEED TO SHIFT FROM REACTINGTOLEARNING

4. Understanding....“It Can Happen Here!” • Lexington, MA • Amityville, NY • Other non-compliance lessons learned San Bruno was a wake-up call… What about right here at home?

5. Building On Awareness Changing laws, and regulations require changes in policies, procedures, training, tools, materials and culture

6. VISION…….. Connecting you to your energy needs today, trusted to help you meet your energy needs tomorrow……. “Drive our focus and behaviors to prevent injuries and safeguard the public” “Embed into our business practices and systems a regulatory focus and rate case readiness” Compliance Improvement Is “Connected” to Elevate Principles & LOS Priorities….

7. Strategic FrameworkEnhancing Compliance Behavior Pyramid of Compliance Compliance Improvement Process Changed Behavior Pipeline Safety, Beyond Compliance Creates Enables Behavior Change Accountability Enables Focus, Ownership & Accountability Awareness & Layers of Protection Focus Compliance Resources Enhanced Operational Focus & Accountability Yields Compliance Success 7

8. Having The Courage To Take This Journey …….. • Success WILL be defined by our actions as a Company and as an Industry • Behavior Shifts DO NOT HAPPEN OVER NIGHT • However, we must start somewhere ? • National Grid’s E-Learning program will be shared and can be adapted to other Companies – Core Principles Belong To ALL Of Us !!

9. Renewed Focus on Doing Things Right • A National Grid compliance campaign • Heightened expectations • Raising awareness – layers of protection • Focus and ownership • Thinking beyond the word, “compliance” • “Zero Violations” behavior • Dedicated compliance analysts, toolbox equipped • New metrics • Procedural Changes for the “RIGHT” reasons

10. Encourages a STOP /Question/Say Something Culture • Living the values - holding ourselves accountable • Trusted to work responsibly • If something does not “Feel Right” , “Look Right”

11. Thinking “Beyond Compliance” Plan • Education: E-learning module – building towards improved pipeline safety • Self Assessment Tool Kit:Getting back to “Operational Basics” • Compliance Metrics: Focus on critical code sections right down to the yard level, ensure effectiveness of corrective action to avoid repeat violations MAKE THE TIME TO MAKE PIPELINE SAFETY COMPLIANCE A PRIORITY Personal Safety – Process Safety – Pipeline Safety

12. For Today…… • Reminder of industry drivers for behavior change • National Grid’s Plan – getting ahead of the curve • E -Learning • Compliance Analyst’s role • Work Methods & Procedures – access & communication • Redefining the term “Qualified” • Enhanced role of QA/QC • Turning vision to reality challenges & continued focus……..

13. E-Learning Framework Connects the core principles of Pipeline Safety with Those of Personal Safety & Process Safety and introduces “Layers Of Protection” concept

14. E-Learning Framework • Sets the stage for an evolving regulatory environment • Connects core principles of pipeline safety, personal safety & process safety – introduces “layers of protection” concept • Designed to allow the student to place themselves into real life situations – “what would you do” knowledge checks • Engaging, provocative & challenge current thinking about pipeline safety compliance behaviors & accountability

15. Re-education / Re-calibration to “Think Beyond” • Pipeline Safety E-Learning experience – all Management / Contractor Management • Pipeline Safety video learning experience – all Bargaining Unit & Contractors • Integrated Messaging – Pipeline Safety/Personal Safety/Process Safety • Doing the Right Thing – our ethics responsibility

16. Next Steps: E-Learning & Beyond • Completed first production “Thinking Beyond Compliance” E-Learning module • Develop complementary video version for Bargaining Unit employees • Roll-out plan to all Gas Business Unit Employees by pending • Pipeline Safety campaign / integrated messaging with broader ethics compliance message • Analysts engaged in operations • Begin “Living The Experience”

17. The Compliance Puzzle Repeat Issues • Recordkeeping • Failure to follow procedures • Inadequate procedure • Training / OQ issues All Within Our Control?

18. Recent Audit Experiences & Compliance Imperativeness = ‘The Compliance Analyst’ • We will make some mistakes • We will have some audit findings The Reality Is That We Are All Human… It’s how we handle them that defines our character as a company and our regulatory relationships.

19. Compliance Analyst Role ……..Compliance Advocate & Catalyst • Provide a focused point of contact locally within each Jurisdiction for: - procedure changes - compliance notices - regulatory audits - commitment follow-up

20. Compliance Analyst Role… • Continued focus on day-to-day compliance activities via a series of pre-defined inspections • Keen focus on mandated programs & historical repeat violations • Continuous view of compliance documentation • Working within the Operating Family to assess problem areas locally and prescribe fixes – “coaching assessments” • Report back to Process Teams on potential systematic issues that may cross jurisdictional boundaries

21. Compliance AnalystsEmbedded in Operations Compliance monitoring and improvement as a focused, dedicated, “day job” Armed with assessment toolkit Coordinated with QA/QC, auditing, regulatory, training, standards, etc. Monitoring metrics 21

22. Thinking Beyond the Word, “Compliance”Intent vs. the Letter of the Codes • Procedures need to address the intent • Procedures cannot try to exploit “Loopholes” When In Doubt, Common Sense Must Prevail… Do The Right Thing

23. Procedure Consolidation – It’s All About Teamwork • Nothing New Today • No Rabbits Pulled From a Hat……….. • Redefining a Structured Framework for Success • Its really all about you, your people and your willingness to think and act “One National Grid”

24. Work Team – General • Commit to enterprise wide solutions • Subject matter experts • Union feedback • Commitment to work it through • Coming to the meetings/calls prepared • doing homework • Clean slate approach – no preconceived outcomes. • Copy exactly

25. Procedure Consolidation – Defining the TEAM • Executive Sponsor • Process Owner • Project Manager (GWM’s Rep) • Work Team Members (SME’s) • Extended Work Team Members • Regulatory Representatives

26. Procedure Revision & Consolidation – THE PLAN

27. Bucket #1 – “As Is”Meeting #1 • How did we end up here? • Regulatory drivers • Codes, incidents, audits, NOPV’s • Understand on a region by region basis what the existing process is • Why? - Identify obstacles to change

28. Bucket #2 – “Going Places” Meeting#2 • Examine all options • Copy Exactly – Copy SMARTLY • Not sameness for the sake of sameness. • Consider process safety , efficiency of operations & effectiveness in serving our customers. • Leave regional philosophy at home.

29. Bucket #3 – “To Be” Meeting #3 • Final Summary detailing changes by region. • Business Case (if needed) • Agreed upon action & ownership • Additional Stakeholder outreach. • Process Owner owns final decision

30. Bucket #4 – “How – Making it Stick” – Post Activities • What changes are needed to support the CBP. • Roll-Out & Communication Plan • Who • What • When • The How & Why of making it work. • Good Science / Common Sense Approach to explain the “Why” • Regulatory considerations?

31. Work Methods - Important Terms Category: The new procedures are being grouped into major categories (i.e. Corrosion, Engineering etc.) Sub Category: Most categories have been divided into small sub categories for easy website navigation. Knowledge Base: The boiler plate portion of the procedure, such as, definitions, references, document history, job aid, etc. What's New: This tab will bring you to a web page listing any new procedures and/or procedures that have been changed. Hot Procedures: This tab will bring you to a web page listing the commonly used procedures in each jurisdiction. 31

32. Policy & Work Methods Document Structure Document File Name Category Effective Date Document Title 32

33. Work Methods Website 3: Home Page 33

34. Website 3 - Quick Tips Page 34

35. Website 3 – Knowledge Base This link will bring up a webpage with all knowledge base data. 35

36. Important Considerations……… • Don't ever take a fence down until you know why it was put up. Robert Frost

37. CGI Upgrade & Process Standardization • Instrument assessment complete • Required extensive lab testing at low temperatures to simulate operating environments (not covered in UK assessment) • Negotiated standardized business process for instrument calibration / maintenance support through Meter & Test • Final report and recommendation in progress, sanctioning expected mid-October, • Instrument delivery December for NIMO, January, KEDNY and Feb for RI.

38. Building a Qualified Contractor Work Force Regulatory Focus, Training & Qualifications • Regulators in all Jurisdictions have expressed concerns regarding Contractor workforce “qualifications” • Issue compounded by Inter-Company use of common contractor resources & differences in OQ / Procedures • Current proposal by Grid to partner with NGA to lead an effort to develop consistent fundamental construction practices, adopt common pipeline safety compliance performance specification language & develop “certified gas technician” training program for region • Build on Nationally Recognized NGA OQ program

39. Keeping an Eye on The Ball….. Operational Focus and Discipline • Pipeline Safety Operations Steering Group • Not another Committee !!!!!!!!!!!!!! • Key process team members, enabling process team members (L&D, IS,Network Strategy, Safety) • Keen focus to monitoring status / drive success & accountability for: • Compliance Enhancement Plan • Emerging regulatory environment Impacts on day-to-day operations, regulatory commitments • Development of a “qualified" workforce • Mandated program & audit findings • Consistent reporting to RCC and operational risk ranking

40. Other Compliance Enhancement Plan Components • Procedure Review / Above & Beyond • Corrosion program 3rd Party Assessment • MAOP Operations Strategy & Compliance Agreement • Re-alignment of QA/QC Program With a Pipeline Safety Documentation Focus • Interim improvements to MWORK • Mandated work Roadmap (addresses P1 Audit Finding) • Gas Work Management System ??

41. In Summary • Based on review of several years of violation history in all jurisdictions • Strategic combination of: - Re-education & Communication Plans - Additional Focused Operational Resources - System Improvements - Third Party Assessments - Equipment Upgrades / Process Improvements - Procedure / Work Method Improvements - Training / Qualification Enhancements

42. Thinking Beyond Compliance A Consistently Persistent Approach • Continuing education & reinforcement of lessons learned – replace “reacting” with “learning” • Getting back to Operational Basics – finding the right “balance” • Measurement & Accountability – having the courage to look in the mirror & take action based on “good science & common sense” • Encourage taking the time to make pipeline safety regulatory compliance “the” priority Personal Safety – Process Safety – Pipeline Safety

43. Gut Check… It’s not about financial penalties, its about who we are, with every decision, every action and everything we do… This is one of those defining moments in our industry, and its very rare we have the opportunity we now have before us…….. We can lead the industry beyond the word “compliance” if we stay true to the plan and have the self-discipline to hold ourselves accountable.

44. Questions 44