Examination of Witnesses (Questions 1-19)
EDF ENERGY NETWORKS
16 SEPTEMBER 2003
Q1 Chairman: Good morning, Mr Cuttill
and Mr Carey. Thank you for coming in. It might seem in some ways
that we are bringing back to you memories which you prefer to
forget—although I would imagine that the lessons you have
learned you would want to keep in mind; but, as we would have
thought we were beginning to get near the time when people would
be more dependent upon electricity for heating—although
it might be the case that in an area like we are talking about,
which is not predominantly but relatively prosperous, they might
be concerned with air-conditioning as well—we thought it
would be better to get a view of what has happened and how you
see the forthcoming winter/autumn storms. There is always an element
of luck in this. We understand that. It is certainly the situation
that you were better able to handle the problems that you had
in January than you were in October. Maybe you could explain to
us how, in the period between October and January, you set about
trying to get your house in order—if that is the right question:
Why is it that it was not in order before? Certainly you had difficulties.
Perhaps we could start there.
Mr Cuttill: Thank you very much,
indeed. It is a good opportunity for us to share with you our
experiences of last October and, as you rightly say, the lessons
we have learned. January this year, in terms of the weather at
the end of the month, presented us with some further challenges
in terms of electricity restoration, but we were able to use the
lessons of October 2002 to perform better. I think I would like
to say right up front that in terms of October, whilst huge efforts
were made during the event, most notably by all of the staff working
for us, it is clear that a sizeable number of our customers did
not receive the service which they are reasonably entitled to
expect from us. We have said consistently that that is a matter
of considerable regret for us and we have apologised unreservedly
for that. But the weather of the last week of January was, I would
say, just as severe as the weather we saw at the end of October,
and we did have to learn the lessons very quickly. The three main
areas on which we concentrated were our ability to anticipate
the resources required to cope with the large number of faults,
particularly on the low voltage system; an understanding of the
scale of interruptions from a perspective of communicating with
our external stakeholders; and also the ability of our customers
to contact us. The initial outcome from the October event was
for a number of reports to be prepared. One was our own internal
review in which we identified 57 points of action and by the turn
of the year 2002, and into 2003 we had implemented a number of
those and made significant progress on just about them all. That
meant that when the January incident came along we did have a
better contingency plan. There is no doubt about it. The important
aspect also was that we had a greater focus of management attention
on the issues. We were able to muster our resources quicker and
earlier, we were better at anticipating what was going to be required—and
those are resources both in terms of people, technical support
and transportation support. We implemented aspects of our revised
communication strategy, which was to use the large call centres
that our supply business use on a normal basis, so we were able
to move calls straight to them in accordance with the arrangements
we had made. Crucially, we had been able, in the intervening months,
to establish much better contacts with the emergency planning
authorities of county councils. We had met most of them and therefore
we were able to use those in a much better way to help us. We
had used the principle of all our staff having what we call a
"storm role", so they understand what it is that we
would like them to do during this period. That was something we
did not have in October. I think we made a better attempt at explaining
early on in the incident what the likely restoration period would
be, such that on the morning of the Friday of the particular
incident we had a very clear understanding of the numbers of customers
affected and an indication of duration. They were all the lessons
that we had identified and we had put plans in place to perform
better. Again, there are always lessons to learn from each incident
that you experience, but I believe that as an organisation we
did respond significantly better in January and that was as a
result of the very severe lessons of October 2002.
Q2 Chairman: The extremity of the
weather, the change in the conditions, had this ever been encountered
before either by the British part of EDF or the French part? If
it happened in France, what would have been the response? Would
it have been as muddled and confused as it was in England?
Mr Cuttill: France had a very
bad weather incident, as you may recall, 1999 into 2000. The response
by EDF was obviously considerable. The UK did provide significant
resource and logistical support in their restoration process.
They saw outages, if I recall, of up to about three or four weeks
in some areas because of the severity of the destruction to their
overhead network. So I do not know whether in terms of restoration
it was better than in the UK. In terms of early communication,
certainly from the experience that we have had in our network
I think the communication was potentially clearer and the scale
of the event was clearly something that had visibility on a national
scale.
Q3 Chairman: Really what I was asking,
and maybe I did not make it very clear, was that within EDF the
lessons of France were not learned and applied in England.
Mr Cuttill: I think that is right
in terms of EDF France. In terms of our own activity in the UK,
the network in the south-east of England that we acquired during
the summer of 2002 had some very good lessons for us that we also
put into place after the October event. So there has been some
learning within our own organisation and we do have very good
exchanges with our French colleagues, but I think it would be
wrong to say that those exchanges had occurred before October
2002.
Q4 Chairman: When EDF emerged in
the UK, there was a bit of understandable chauvinistic resentment
of a French company coming in here. The fact that Americans and
others come in was of no consequence. It was the Francophobia
of parts of the south-eastern press that perhaps led the charge.
But the point I am really getting at is that one of the arguments
in favour of a major European player coming in is that the best
practice of Europe would be translated into the UK, and in fact,
in this instance, the lessons which were learned in France in 2000
were not translated either literally or technically into the UK
experience in a way that might have avoided some of the difficulties
that you encountered.
Mr Cuttill: It is certainly the
case that we had not, as I have said, had the exchanges with them
that we have now seen post event.
Q5 Chairman: Or which you should
have had really, because experiences of that character would have
been useful to have had to hand and to have applied to your setup
earlier rather than later.
Mr Cuttill: I think that is right.
But I would also say that clearly as a UK industry there is plenty
of sharing of experiences going on at all times, so I think it
would be incorrect to say that there was no attempt on the part
of either us or the UK industry as a whole—
Q6 Chairman: Yes, I am not talking
about the UK industry, because bad weather occurs across the UK,
but one of the advantages of getting foreign ownership of UK utilities
is that of foreign experience, which by definition is probably
likely to be different and in no area is more guaranteed to be
different than in that of the weather and the impact of sudden
changes in weather. It does seem a rather gaping hole in your
experience and your communications within the organisation, with
such a traumatic experience as that of the millennium winter in
France, for that not to have been incorporated within your emergency
planning schedules within the UK.
Mr Cuttill: I would say that in
terms of our planning and our contingency arrangements pre-October
they were clearly under management attention and had been assessed
earlier in the year and been found to be robust. The point where
I would agree with you: the scale of the events of October 2002
clearly applied significant pressure on what was believed to be
a robust plan and the plan did not stand up to that pressure.
Q7 Mr Djanogly: Good morning. With
thousands of my own constituents having lost their power, I am
pleased to see the commitment you are making to putting things
right. However, looking at the memorandum you sent to the Committee,
you have suggested in various places that the DTI report underestimated
some of the factors that were beyond your control. The things
which come to mind are that the wind speeds were particularly
high, particularly in certain towns in East Anglia; that power
lines are more likely to be routed along hedgerows than across
open fields there; and that, because the region had not suffered
strong winds in the recent past, the trees were not up to the
job, so to speak, and therefore had a higher felling rate than
in other parts of the country. Whilst you obviously cannot control
any of those aspects, should your contingency planning for high
winds have taken account of the established practice of routing
power lines beside hedges and the likely presence of more weak
trees?
Mr Cuttill: In terms of our planning,
we clearly have to take in all the local environmental conditions.
These are networks that are built up over many, many years. Assets
are on the networks for 40, 50, 60 years. We had been the owner
of this particular network for round about nine months by the
time the storm of October 2002 came, therefore our ability to
influence significantly the basic design of the network, taking
into account the local environmental factors, was shaped by the
fact that we had only owned it for those nine months. One thing
that we did undertake within that nine-month period was to understand
that there were significant increases in investment required,
we felt in terms of capital expenditure on the network, and we
increased the spend by around 20% in the year that we acquired
the network. I think the factors that you are describing are factors
that play into the long-term design, make-up and adjustment of
the networks. Also, I think, in terms of the way that the vegetation
is actually managed, the whole tree-cutting programme is obviously
something that has to be kept under very close review. In the
three years 2003 to 2005 there will be a very significant increase
in the amount of money that we spend on controlling the vegetation;
that is, through our tree-cutting programme. So I think we understand
the environmental conditions to which you refer and the impact
that they can have on our network and we are doing something about
it.
Q8 Mr Djanogly: East Anglia is flat
and winds do sweep across it.
Mr Cuttill: Yes.
Q9 Mr Djanogly: And they always have
done and they always will do! This problem is likely to happen
again. In which case, are you not going to start looking at putting
more cables underground?
Mr Cuttill: We do make strategic
decisions around undergrounding cables. We have, for instance,
made some investment this year in some kilometres whereby we actually
take the cables underground. However, clearly, undergrounding
all of the network in this particular region would be not only
a very costly process but obviously a very, very lengthy process
as well and may not be the most sensible solution. One of the
reasons for that is that, in an underground situation, in the
event of a cable fault it is more time-consuming to excavate and
then repair the fault and then reinstate. We obviously see that
in our urban networks. So a careful balance does have to be struck
between the weather-related incidents, which can affect overhead
infrastructure, compared with the urban issue of undergrounding.
But we certainly do underground where there is clear vulnerability,
particularly on escarpments and things like that. We will
always consider undergrounding as an alternative and, in some
instances, where we wish to re-configure the network, quite often
the planning permissions to do that from the local county councils
require us to underground rather than string overhead. So it is
a combination of both the environmental factors and changes in
planning permissions.
Q10 Mr Djanogly: You mentioned councils.
One of the things that I have found, speaking to local councils,
is that they did not really seem to have much of an ongoing relationship
with you.
Mr Cuttill: Yes.
Q11 Mr Djanogly: And they did not
really seem to know what was going on at all. I did note that
in your opening remarks you said that had changed.
Mr Cuttill: Yes.
Q12 Mr Djanogly: I hope that is the
case because I think that is going to be very important. Chairman,
if I may just go back to the underground cabling. I would say
that in East Anglia this is going to be one of the most significant
things, particularly if we are not going to be chopping down trees
wholesale. Have you produced a paper on this? You mentioned cost
benefits. Is there some information you could provide to the Committee
that would give us an idea of what the implications are for putting
cables underground?
Mr Cuttill: We can certainly provide
a briefing note on that point. I am very happy to do so. Clearly,
the whole discussion around how we design our networks, going
forward, will have to feature as a very significant part of the
forthcoming distribution price-control review. In our consultations
with Ofgem, a discussion around network design, balancing the
risks against those design practices is clearly a very key part
of that discussion and we look forward to the conversations with
Ofgem around that.
Q13 Mr Hoyle: That is a very good
point my colleague has made. I think the big talk is on the environmental
impact of ugly pylons, electricity cables going across beautiful
countryside, but, I think we have to be honest, it is so rare
that you actually put cables underground. It is only when you
are being forced by some lobby group or some planning condition.
That is the only time. I would be interested to know what percentage
of cables you have actually put underground voluntarily outside
an urban area.
Mr Cuttill: I do not have that
right to hand.
Q14 Mr Hoyle: No, I understand that,
but if you could let this Committee have that. You dress up a
very nice argument, but I think statistics will show that you
go for the cheap option, the quick option, and then unfortunately
it takes a disaster like this to happen before realities come
into play. I would like to think that the electricity companies
will reconsider the short-term gain for the long-term gain, that
(1) the customers ought to be the priority but never seem to be,
but (2) that the shareholders ought not to be put first in cases
like this. Undergrounding is a major solution, not only environmentally
but, obviously, as more storms may appear and we see climate change
out there coming in the future. Therefore, companies ought to
take the long-term gain rather than the short-term. If you could
let us have those figures, that would be interesting.
Mr Cuttill: Your analysis that
the amount we have voluntarily put underground is small, I suspect
that would be the outcome of the note that we give you. I think
the debate about the holistic approach in terms of overhead, taking
into account all the factors, as opposed to undergrounding, is
a very real debate that must, as I have said, feature as part
of the distribution price-control review, the very way these distribution
monopolies are financed and their business economics. We are happy
to do that.
Mr Hoyle: Thank you.
Q15 Chairman: Would it be the case,
Mr Cuttill, before we leave this point, that you, of all the utilities,
are best placed to conduct such a study as this because you have
so much of London cabling underground in the first place, so you
can compare and contrast?
Mr Cuttill: Exactly, Chairman.
Our London network, as you have rightly identified, the vast majority
is underground. We have a few pylons to the east of London, but
. . . So we know exactly the economics of undergrounding, including
cost of repairs, as compared with overhead lines. We do have the
two very contrasting networks under our control.
Q16 Chairman: You said you had only
been in ownership of the assets for some nine months.
Mr Cuttill: Yes.
Q17 Chairman: Had you in that period
begun to realise that re-cabling may have to be done ? Had you
made any decisions that certain areas of the cabling perhaps would
be better underground than as they were presently constituted,
in the light of your experience as a bigger operator than the
previous one?
Mr Cuttill: I think in that initial
nine-month period we had concentrated on further, let me call
it, due diligence in terms of the actual condition of the network,
and, as I have said, we did increase the capital expenditure by
some 20% in the year of acquisition to address issues. I would
not wish, however, to overemphasise the point that the majority
of that money would have been spent on straightforward asset replacement
as opposed to the alternative of undergrounding. I know one case
where we have done some undergrounding of a two kilometre line
in the Aylesbury area, which is part of this particular network,
and that is in response to local consultation with customers,
where there have been significant repetitive faults on a line
and we have undergrounded that one. That is the one that is immediately
in my mind.
Chairman: Thank you.
Q18 Mr Berry: Good morning. You have
described the changes you have made to your emergency planning
system since October. Could you tell the Committee what your emergency
planning system was in October?
Mr Cuttill: As I have mentioned
already, we had a plan. It had been assessed in April 2002, along
with all contingency plans. It was found to be robust, but, as
I have said, it did not perform under the pressure that October
2002 put upon it. There was a line of management control. There
were elements in place by which we would commence communications
with external stakeholders. It was clear, though, that the scale
of the event was such that the elements of the plan, when put
under the strain of October 2002, did not stand up to that extreme
pressure. That is why we have done what we have done and why our
performance subsequently has been better.
Q19 Mr Berry: You say you have introduced
the role of an emergency planning and business continuity manager.
Presumably that person now has overall responsibility for emergency
planning.
Mr Cuttill: This is an individual
who reports to Mr Carey, so we have taken it outside of the normal
management lines.
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