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Electricity Distribution & Generation

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  Distribution & Generation
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  performance

Descriptions of our progress against our overall objectives in the areas of delivering our strategy, operating performance, talent, relationships, environment, financial performance and responsibility are set out under Performance against our objectives. We include below further information specific to Electricity Distribution & Generation US with respect to the progress we have made on delivering our strategy, our operating performance and our financial performance.

Delivering our strategy

Key areas of focus

Key areas of focus for Electricity Distribution & Generation are: addressing the challenges of an ageing asset base in our upstate New York and New England operations; increased customer expectations; heightened regulatory pressures; improving reliability and safety performance and getting the best out of our employees.

 

Tom King was appointed as the Executive Director for Electricity Distribution & Generation with effect from 13 August 2007. Following the acquisition of KeySpan, a new management team for the enlarged business has been appointed, activities such as customer billing, human resources, property services, accounting and financial transactions processing have been transferred into our shared services organisation, and we have started the process of implementing common operating procedures across the business.

Our aim is to transform the current traditional utility model into a business that is able to deliver sustained improvements in operating performance, be more efficient and provide a platform for growth in the future.

We have compared our overall performance on operational efficiency, system reliability and customer experience against industry peers. These measures indicate that, overall, our performance is not at the upper quartile position we believe can be achieved. As a consequence, we plan to improve our performance and are in the process of implementing initiatives on regulatory stability, transforming our operations, and enhancing the customer experience.

Regulatory stability

We aim to be a leader in the energy policy agenda by progressing efforts in energy efficiency, decoupling, and climate change. We aim to improve our regulatory relationships through improved reliability and customer service performance.

Transform operations

We have established a multi-year programme aimed at delivering better performance and value through a series of improvement initiatives. Our objective is to enhance our asset management expertise and discipline by leveraging the benefits of a common operating model and greater standardisation across the business. We believe that our work delivery performance can be improved through standardising processes, investing in field force enablement solutions and establishing rigorous performance metrics. This will involve advancing our network operations performance by consolidating control centres and investing in network control systems and supporting technologies.

Customer experience

Our customers’ expectations continue to change. Experiences our customers have with other industries are setting new performance level expectations for National Grid. Customers and regulators are demanding that we elevate our performance to the same increasingly high standards.

We have begun the process of looking at and defining the branded National Grid customer experience. This effort is centred on understanding customer needs and expectations and delivering on them day in and day out.

Our customer experience strategy is defined by assessing our current customer experience from both the customer’s and our perspective. This allows us to compare internal operations with external perception and experience and so to identify areas for improvements as well as those of strength.

For over 20 years National Grid has offered a comprehensive portfolio of energy efficiency programmes to customers. These nationally recognised programmes have a distinguished track record of consistency in delivering energy savings to our customers. Customers participating in the programmes have saved billions of kilowatt hours of electricity, millions of dollars in energy costs and have eliminated millions of tonnes of greenhouse gas emissions associated with electricity production.

National Grid has received national recognition from the US Environmental Protection Agency (EPA) and the US Department of Energy (DOE) for our leadership and outstanding contribution to energy savings and mitigating the effects of climate change.

Using our proven performance in the area of energy efficiency, we look forward to the potential doubling of programme funding through initiatives underway in Rhode Island, New York, and Massachusetts, while we continue to develop new and creative ways to provide our customers with end-to-end energy solutions.

Operating performance

Safety

Our objective is to reduce employee lost time injuries to zero.

 

The number of employee lost time injuries in Electricity Distribution & Generation (excluding KeySpan) increased to 30 compared with 25 in 2006/07 based on our new definition (see here) which aligns the way we measure lost time injuries between the UK and the US. Our lost time injury frequency rate for 2007/08 was 0.32 (2006/07: no direct comparison available due to changes in reporting lines). Even though we experienced a decline in performance with respect to lost time injuries, we have implemented a number of improvements in safety management:

• supervisor ‘safety days’ were introduced to promote the importance of safety leadership and personal responsibility for safety;
• training programmes including one on human error elimination and one on safe and unsafe acts were implemented to
• training programmes including one on human error elimination and one on safe and unsafe acts were implemented to promote safe behaviours and improve communication skills;
• a soft tissue injury prevention programme was developed to improve our approach to preventing soft tissue or muscular skeletal injuries, which comprise 60% of our injuries. Implementation of the programme will continue in 2008/09;
• as part of our trusted to work responsibly strategy, we implemented ‘golden rules’ of safety that address the most critical areas of safety and set clear expectations of the workforce;
• a new safety recognition programme was developed to ensure we emphasise and reward good safety performance; and
• National Grid and KeySpan policies and practices are being integrated to promote one, positive safety culture.

In 2008/09 our aims include enabling management to spend more time in the field, improving the quality of safety observation tours, developing long-term staffing plans to ensure adequate resources, implementing programmes to help develop safety leaders and ensuring that managers and supervisors are made accountable for meeting safety objectives.

Efficiency

Our objective is to be more efficient in the delivery of services, in the context of higher expectations from our customers and cost pressures.

 

Over the past year we have made progress, gathering data using various methods such as focus groups, surveys, feedback from our frontline team members, customer data analyses and comparative landscape analyses. We have also defined better processes that will help improve our customer experience, and so help to meet their expectations, by leveraging our strengths and improving areas where gaps were found.

Our goal is to make it easier for our customers to do business with us and to enhance the customer experience. We plan to increase online transactions through convenient payment systems and provide access to all our products and services, such as energy efficiency programmes, online.

We recently completed a customer service system conversion that consolidated the upstate New York and New England customer systems into a single information and billing system. This was a multi-year effort with representation from cross functional groups. The consolidation allows us to serve National Grid electricity customers from a single system providing the ability to more easily handle calls to our call centres, provide realtime updates for processing customers’ transactions, and provide for better consistency in procedures and processes as well as voice recognition and web applications.

We have initiated an automatic proactive outbound calling programme that will enable us to reach thousands of customers within a matter of minutes to inform them of relevant information or news, such as progress on power restoration, streetlight repair, tree order acknowledgements, emergency and planned outages, energy seminar promotions and billing notices.

We also continue to make progress on location efficiency. As part of the integration of KeySpan operations, we have begun the consolidation and standardisation of facilities across our US operations. While this involves some temporary moves to facilitate building work and renovations to be completed, our aim is to provide high quality and vibrant work areas that are conducive to working together effectively as one team.

Reliability

In addition to meeting reliability performance targets agreed with our regulators, our objective is to improve reliability.

 

The system average interruption duration (SAIDI) for 2007/08, being the time the average customer is without power during the year, was 110 minutes, compared with a target of 110 to 120 minutes and 121 minutes in 2006/07.

We achieved all of our reliability regulatory targets in Massachusetts and Rhode Island. In upstate New York, we significantly reduced the number of times the average customer was without power during the 2007 calendar year, but still incurred an aggregate net penalty of $13.2 million (£6.6 million).

We are seeing improved performance as a result of our comprehensive reliability improvement programme, which will involve investment of over $930 million (£470 million) over the next five years.

We continue to be committed to reducing the frequency and duration of service interruptions. We are therefore increasing our investment in the coming financial year for asset enhancement, replacement and maintenance. Continuation of this programme into the future should improve reliability, reduce inefficient use of resources in responding to outages and create a safer working environment.

In order to improve performance, we have developed and begun execution of a five year reliability enhancement programme. This includes:

• vegetation management – incremental tree trimming to address an increase in customer outages related to contacts with tree branches;
• feeder hardening – upgrading our worst performing overhead electricity circuits by replacing aged and deteriorated components and protecting against lightning strikes and animal contacts;
• asset replacement – replacing ageing distribution equipment before its expected end of life, including poles, underground cable, and substation equipment; and
• inspection and maintenance – increasing our preventative maintenance and repair activities to find potential faults before they occur to improve reliability and public safety.

Our Long Island electricity generation units earned the maximum possible performance incentives of $4 million (£2 million) during the calendar year 2007. These incentives are based on capacity, summer availability and efficiency. These units maintained their efficiency despite reduced output caused by the introduction of a new interconnector cable between Long Island and the mainland.

Customer service

In addition to meeting customer service objectives agreed with our regulators, our objective is to be within the upper quartile of customer satisfaction in the territories we operate in.

 

Under our service quality plans, we met or exceeded our customer service targets in Massachusetts. We met or exceeded most of the customer service targets in New York, but incurred a penalty of $1 million (£0.5 million) for missing our customer satisfaction targets.

We believe that lower customer satisfaction in New York is mainly a consequence of a negative reaction to sustained higher commodity prices. However, reliability and service issues are also a factor and we are taking steps to improve customer outreach on managing cost and use, billing quality, responsiveness to customer queries, regulatory complaints and call handling. We also believe that our investment in enhancing reliability will improve the way our customers perceive us.

Capital investment

Our objective is to deliver our capital investment plans over the next five years, including our $930 million (£470 million) reliability enhancement programme.

 

Capital investment in the replacement, reinforcement and extension of our US electricity distribution networks was £257 million in 2007/08, £218 million in 2006/07 and £219 million in 2005/06. After excluding the effect of exchange movements of £11 million in 2007/08 compared with 2006/07, capital investment increased by £50 million. This reflected an increase of £17 million in spend related to our reliability enhancement programme, recognition of finance leases related to vehicles of £18 million, other increases in capital investment of £11 million and £13 million of capital investment in the operations acquired with KeySpan, partially offset by a non-recurring benefit capitalisation adjustment made in 2006/07 of £9 million.

After excluding the effect of exchange movements of £14 million in 2006/07 compared with 2005/06, capital investment increased by £13 million. This reflected an increase of £19 million in spend related to our reliability enhancement programme and other increases in capital investment, including a non-recurring benefit capitalisation adjustment, partially offset by a £17 million reduction relating to the Nantucket cable project.