APPENDIX 7
Memorandum by the Electricity Association
BACKGROUND
1. The Electricity Association (EA) is the
national trade association for the UK's major electricity generation,
transmission, distribution and supply companies. EA represents
the UK industry at both a national and international level. EA
will be restructuring on 30 September 2003 resulting in trade
association activities for electricity networks being passed to
the new Energy Networks Association (ENA). The UK's 14 distribution
network operators (DNOs) are members of EA and the founding members
of ENA.
SUMMARY
2. BPI's report confirmed that "the
UK's electricity supply networks are being managed by operators
who are deploying appropriate risk management processes and implementing
adequate design standards and maintenance policies within the
constraints of their regulatory price allowances." The varying
performance of DNOs on this occasion was attributable to a combination
of individual company specific issues and national industry wide
issues. However, there was "no inherent or generic problem
in the network."
3. Distribution Network Operators have made
significant progress in addressing the specific and generic recommendations
in the British Power International (BPI) report. All the companies
are committed to working with the Government, the Regulator and
their colleagues in the industry to minimise the impact of storm
damage. Due to the diverse nature of severe weather events, however,
it must be recognised that industry best practice will not in
itself prevent or avoid significant and extended supply disruption
in the future.
4. The BPI report raised generic network
resilience issues which cannot be solved by the electricity industry
alone. For this reason the industry has joined with the Department
for Trade & Industry (DTI) and Ofgem to establish a joint
Network Resilience Working Group. The group is currently developing
actions that can be taken in the short, medium and long term to
minimise the risks of supply interruptions arising from severe
weather events. Energywatch has also been invited to participate.
The group will report its initial findings in October 2003.
5. Key short term issues are vegetation
management and customer expectations. Long term issues centre
around the level of resilience required for networks in the future.
Moving from baseline operations resilience to a storms resistance
approach, or from fault mitigation to fault prevention, will require
detailed work streams supported by substantial funding and investment
within a framework of clearly identified efficient levels of expenditure.
BPI recognises that "investment, possibly beyond that which
can be reasonably economically justified under the current regime,
will be required—with costs being passed on to customers.
Significant environmental impact may be a consequence." Management
of these issues necessitates wider involvement than just industry,
government and the regulator.
6. DNOs accept the principle of compensation
where justified. However, there is a need for a wider debate of
the issue as the process and speed of dealing with payments to
customers requires reform. This debate should take place in the
wider context of price control arrangements, as any increase in
compensation payments would reduce capital available for investment
in networks. DNOs are keen to work with the regulator and others
to develop a better framework.
PROGRESS MADE
BY ELECTRICITY
SUPPLY COMPANIES
(DNOS) IN
ADDRESSING THE
ISSUES IDENTIFIED
BY BPI
The recommendations
7. The key recommendations of the BPI report,
based on national best practice, were:
— Ensure that emergency plans are adequately
and routinely tested.
— Develop predictive tools which relate
weather forecasted weather conditions to likely damage to the
network and demand on resources.
— Ensure rigorous testing of telephone
response and answering services with contingency plans in place
in the event of system failure.
— Provide realistic estimates of length
of repair and inform customers.
— Provide feedback to customers with
regular updates.
— Ensure maintenance programmes are
up-to-date with trees and vegetation kept under control.
Primarily these recommendations address short
term issues. However the investigation of the event also identified
longer term matters which will need to be addressed if the short
term recommendations are to have the anticipated effects.
Individual commitments
8. Individual companies responded to the
company specific recommendations in the BPI report in January
and February 2003 outlining the actions they would be taking to
address the key areas of concern. The Minister published these
responses on the DTI website in April 2003, see http://www.dti.gov.uk/energy/domestic_markets/security_of_supply/stormdresp.shtml
These responses confirmed the good progress
made in addressing the BPI recommendations and that there was,
and remains, genuine commitment on the part of DNOs to improve
performance. Examples of actions introduced or completed by companies
include:
— The annual review of major incident
management plans covering both its testing and implementation
was revised to include both IT and telecommunications systems
and consideration of lessons learned from recent exercises.
— Development of and implementation
of a branch-wide emergency plan covering three licensed networks.
— Establishment of a 132kv live insulator
washing group to help protect against flashovers caused by salt
deposits and misty conditions.
— Doubling the number of call takers
available during a system emergency through better utilisation
and training of employees from elsewhere within the organisation.
Collective action
9. Through EA, the industry has collectively
been considering the issues of NEWSAC development, customer communication
and telephony issues.
NEWSAC
10. NEWSAC has proved extremely effective
and an important means of providing mutual aid across the country
when required. It enables the industry to provide mutual support
to respond speedily and efficiently to major system emergencies
by sharing resources. A review of the NEWSAC arrangements has
identified a number of areas for amendment. For example,
— The productivity of staff imported
from another company or area during an emergency it is recognised,
will typically be lower than that of indigenous staff due to differences
in network, local knowledge and safety. The development of generic
staff authorisation safety codes, across agreed areas will significantly
reduce the staff induction times required for transferred or on-loan
staff.
11. The IIP Project penalises and rewards
companies based on their Quality of Supply performance. It is
important that Ofgem recognises that companies who donate staff
under NEWSAC are not penalised by putting their IIP targets at
risk whilst serving the common good.
Customer communication
12. EA held its annual emergency response
seminar following the industry's own storm review. The seminar
was open to a wider audience than previously, and agreed four
priorities, three of which related to customer communication:
Sharing of best practice and information exchange
between companies under emergency and normal operating conditions.
Following the separation of the electricity businesses, customers
now have a much closer relationship with their supplier rather
than their distribution company. Customers are often unclear about
this delineation. This raises questions about the involvement
of suppliers in managing such incidents, and how DNOs can best
manage information sharing with customers. The volume of calls
handled during the incident necessitated the use of traditionally
non-call centre staff by vertically integrated companies. This
was viewed by BPI as a positive and efficient use of resources.
Keeping customers informed of DNO activity
and their commitment to restoring supplies. During the incident
in addition to the DNOs, a number of energy suppliers, energywatch
and other stakeholders received calls from customers, reporting
or requesting information regarding their quality of supply status.
In such emergency situations everyone has a responsibility to
ensure that the focus of attention is on the most urgent issue—that
of getting people back on supply. Where these are not already
in place, systems need to be established to enable parties to
share information and ensure that all interested groups are up
to date on the action being taken. EA members believe central
data collation and dissemination is a useful activity in such
incidents and can play a supportive role to individual company
activities. EA has therefore formalised its emergency response
system which will enable the collation and distribution of information
regarding these incidents between members and interested parties
such as DTI, Ofgem, energywatch, and the media. This has been
welcomed by DTI.
Awareness of MACC (Military Aid to the Civil
Community) and the various triggers that would allow DNOs to receive
assistance under MACC. EA is seeking to ensure that all DNOs
have details of contacts within the MACC community. Particular
issues will need to to be addressed, as electricity distribution
work requires specific competences and authorisations that military
engineers may not have.
Telephony services
13. All companies have systems in place
for call handling, customer feedback, incident management and
network management. BPI recognised that most components generally
proved effective. In terms of internal communications BPI concurred
with EA's view that consideration should be given to giving priority
to such communications. This could be achieved through the inclusion
of HV and LV sub-stations in the Government Telecommunications
Preference Scheme, access to the Emergency Services Airwave platform
and/or access to ACCOLC, a Government approved scheme that enables
mobile call prioritisation when there is a system overload. EA
is pursuing discussions with DTI on these matters.
14. In terms of customer communications,
the incident highlighted inadequacies in the BT system which raises
issues at an industry as well as an individual company level.
Given the national importance of these systems, there is a need
of greater cooperation between Ofgem, Oftel, and the DTI. Through
EA, the industry has therefore been working with BT to identify
what actions can be taken to prevent this from occurring in the
future. A new system is currently being tested with one EA member.
Results will be shared across the industry and implemented as
required.
GENERIC NATIONAL
NETWORK RESILIENCE
ISSUES
15. The implementation of industry best
practice will not in itself prevent similar disruption in the
future. Due to the diverse nature of severe weather events eg
wind, snow, rain, serious disruption is always a possibility during
such incidents. This raises generic issues of both short term
and long term significance. For this reason the industry has joined
together with Ofgem and the Government in the Network Resilience
Working Group (see appendix 1) to identify what actions can be
taken to address the key issues of concern. Management of the
short term and long term issues requires both industry and stakeholder
commitment. The group will report its initial findings in October
2003.
Short term
16. For wind related events, a key issue
is the proximity of trees to overhead lines, which can cause brushing
contact, produce wind borne debris or actually fall onto lines.
To resolve totally this problem will require cutting trees back
to falling distance. This is one of the BPI recommendations; effectively
the removal of trees or the removal of the network. All companies
have tree trimming and cutting programmes, but all have problems
in enforcing their statutory powers (relative to safety clearances,
not falling distances) in the face of terminable wayleaves, and
even these powers allow no margin for re-growth. In some isolated
instances landowners are unwilling to allow access for tree trimming
or removal. There are also obviously environmental issues to be
taken into consideration regarding tree clearance. This issue
would benefit from a wider national debate and may require legislation.
17. Equally, customer expectations have
risen and supply interruptions have become less tolerable than
in the past. Supply interruptions generally are viewed as unsatisfactory,
and large numbers of interruptions extending beyond 24 hours are
bound to produce significant public and media reaction. Even following
extreme weather, any volume of interruptions beyond 48 hours appears
unacceptable to the public. Whilst efforts can be made to mitigate
the customer impact when incidents do occur, (eg tree operations),
minimising the potential for incidents will require longer term
action. In the short term, efforts need to be made to keep customers
better informed.
Long term
18. Overhead networks may face increased
vulnerability to severe weather events in future years. Experts
suggest that the growing season is extending, the leaf cover duration
is longer, and the window in which storms are most likely is extending.
Such events are expected to become more extreme and occur more
frequently over the next 30 years. During these events, overhead
networks will continue to suffer significant disruption (often
60 times the normal levels of fault activity) and resources will
be overstretched which will result in extended restoration times.
In contrast, underground networks generally experience faults
on a random basis, which enable resources to be matched to incidents.
This raises questions of whether selective undergrounding, the
acceleration of upgrading of overhead lines and the redesign of
the network with interconnection and duplication would be to the
long term benefit of the UK economy. All of these issues were
identified in the BPI recommendations resolution will require
detailed work streams supported by adequate funding and investment
within a framework of clearly identified efficient levels of expenditure.
19. In essence the issue that needs to be
tackled is what level of resilience is required for networks in
the future. Should this be determined by baseline operation or
storm resilience considerations? Taking into account weather patterns,
customer expectations and the skills base available should a policy
of fault mitigation, or fault prevention, or a mixture of both
be followed? The Network Resilience Working Group is considering
these issues.
GUARANTEED SERVICE
STANDARDS
20. There is a need for a wider debate on
the issue of compensation, and the processes and methodology used
to determine fair outcomes for both customers and companies. This
is particularly true in relation to events like the October 2002
storms, where the possibility of claiming financial compensation
from DNOs under the provisions of the guaranteed service scheme
has been well publicised and a large number of claims have resulted.
Nevertheless, companies' obligations under this scheme do not
apply in restoring supplies in exceptional circumstances in the
aftermath of storms.
21. Around 3,500 claimants exercised their
ultimate right to have their entitlement to compensation formally
determined by the regulator. This was an unprecedented number,
and the resource impact on Ofgem in terms of the need to process
and determine these claims speedily and efficiently was therefore
very substantial.
22. Ofgem's solution to this problem in
the October 2002 storm was to group the claimants according to
the engineering characteristics of the supply to their premises,
and then to assess the performance of the DNOs in restoring supply
to each such group by comparison with the performance of a benchmark
comparator chosen by Ofgem. Ofgem took as the benchmark comparator
the "best performing" of all the DNOs, and on this basis
was able to "determine" the compensation liabilities
of each DNO for each of the specified groups of customers. This
methodology, which treats customer determinations rather like
a series of small class actions, has the apparent merits of speed
and simplicity, and the DNOs have accepted it in the interests
of their customers.
23. However, DNOs are concerned that their
acceptance of Ofgem's approach to the post-October determinations
should not be taken as a precedent for the treatment of future
determinations arising in relation to supply restoration performance.
They are keen to work with the regulator to produce more robust
arrangements for the next price control period and a better framework
during the interim, so that customers and companies benefit from
a fair, practical and equitable system for determining entitlement
to compensation.
Electricity Association
29 August 2003
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