2016 National Grid Insurance Update Brochure

Insurance



Update






National Grid plc
Annual Insurance Update 2016/17

Renewal Information Website


www.nationalgridinsurance.com




The full suite of National Grid’s underwriting information will be available via our website.
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National Grid UK @nationalgriduk NationalGridUK

Sections








1. Business Overview and Update 1



2. Safety, Security and Reliability 31



3. Revenues and Regulation 57



4. Investment and Innovation 73



5. Information Summary and Claims 87





































Confidentiality
All information provided herein is confidential, unless freely available in the public domain and is provided solely for underwriting purposes. It should not be copied, reproduced, or published,
whether in whole or in part, without the prior consent of the Group Head of Risk and Insurance, National Grid plc.
Good Faith/Disclaimer
The Insured, and their representatives/agents, have used their best endeavours to perform a reasonable search of the business to collect, prepare and summarise this underwriting
information. Given the size and expanse of National Grid plc, the information has been gathered from numerous sources at various times. It is believed that when taken in its entirety the
Information is a fair presentation of the lnsured’s current activities. (Re)insurers undertake to review this information, and raise any observations/questions they may have to the broker(s).
Each (re)insurance underwriter is a professional who himself knows his own information requirements and he alone needs to ensure all such information requirements have been fully
satisfied. The Insured always has and continues to welcome open dialogue with its (re)insurers.
(Re)insurers acknowledge they have the opportunity to solicit additional information from the Insured, attend presentations, workshops and surveys chaired by the Insured.
We welcome any questions you have and we will endeavour to provide answers in an expeditious manner.

National Grid plc 2016/17 Annual Insurance Update

1


Foreword




Our annual update soon comes around! This year we have

decided to build upon the work we have completed previously

on our “brochure” by providing just that. This publication has a
different look and feel and we have tried to focus on updates so
the document is just a little trimmer but continues to provide key

information on our business. Please however, for completeness,

refer back to our annual update prior to our renewal in 2015/16.



At National Grid we are committed to providing the best value
for our customers, investors and stakeholders. The last year saw
continued strong performance and may it long continue. As we
move into the second half of our financial year we are on track to
continue following positive half year results.

It has just recently been announced that our long serving Chief
Executive Officer, Steve Holliday will step down with effect from
July 2016 and he is to be succeeded by John Pettigrew, currently
Executive Director of the UK business. Also we announced the
potential sale of a majority stake in our UK Gas Distribution business.
I was of course keen to ensure we advised you of these changes as
soon as possible with a communication in early November. My team
will very much be involved in preparing for the potential sale and
we will, as far as possible, keep you aware of developments.



SAFETY STRATEGY
We can never be complacent where safety We continue very much to focus on the ownership
performance is concerned and must continually strive and operation of gas and electricity transmission and
to improve performance in all of our businesses. distribution infrastructure in and around the UK and
We have and will continue to be relentless in this the north-eastern United States. Our job is to connect
area and in Section 2 of this document we provide people to the energy they use safely.
an update.
We invest in value adding assets and at the same time
Regrettably, there were two fatalities during the year endeavour to provide and maintain high standards of
– a member of the public in the UK who fell when customer service through the efficient, reliable and safe
climbing on one of our pipelines and a contractor at our operation of our extensive networks. This approach
Rhode Island gas distribution business. We must seek to combined with appropriate regulatory arrangements
do all we can to avoid any repeat of these occurrences. for our larger regulated businesses allows us to deliver
Despite these incidents, we achieved our best-ever returns whilst managing risk on behalf of customers,
Group safety performance during 2014/15. We can investors and stakeholders.
never be complacent about our performance and
must continually strive to improve.

2 National Grid plc 2016/17 Annual Insurance Update









OUR OPERATING ENVIRONMENT In November we announced the potential sale of a
Energy policies in the UK and US have continued to majority stake in the UK Gas Distribution business
evolve against the backdrop of political uncertainty following a strategic review of the global portfolio.
and economic considerations seeking an acceptable This business has performed well over a number of
balance between affordability to consumers, security years and with connections to 10.9 million customers it
of supply and sustainability. is vital that as the process commences for this potential
sale that we continue to run the business with the
In the UK, Electricity Market Reform was implemented rigour that has always existed in what is a vital network.
successfully and we saw significant developments in There is much work to do in any sale process and it
large interconnector projects where National Grid is is anticipated that this will take some time with further
very much involved in near term projects. There has details to follow.
more recently been considerable interest in the likes of
large scale connections at the likes of Hinkley Point C US BUSINESS UPDATE
and announcements from government concerning The winter of 2014/15 saw an extremely harsh and
carbon capture.
prolonged period of plunging temperatures and record
levels of snowfall in parts of New England. Again, our
In the US there were mid-term elections and debate
continued on the likes of essential infrastructure, network resilience held up well. As we have explained
resilience and sustainability. We have filed our in updates previously and in our annual declarations of
application for a new rate plan in Massachusetts and information we have invested millions of dollars in both
are scheduled to complete our filings in relation to our our electricity and gas assets to improve resilience and
downstate gas distribution businesses in early 2016. to help reduce the impact of service interruptions.
In December 2014, we received an award
UK BUSINESS UPDATE for excellence in energy efficiency from Platts
In the UK there has been lots of public focus on Global Energy. We were commended for ongoing
security and reliability of the UK’s energy supply. initiatives to upgrade equipment, reduce emissions and
Despite tighter margins than in previous years we improve safety and efficiency. We were also awarded
were able to operate the system efficiently given with the Edison Electric Institute “Emergency Recovery
plant availability and the mix of generation available Award” for power restoration efforts following the
to include the imports of electricity from France and severe ice storm in New York State in December 2013.
the Netherlands. We also tendered the new balancing
services for additional reserves of supply and whilst We finally completed the stabilisation work to our new
not used during last winter this is a useful tool to financial back office systems which has very much
ensure there is further resilience to energy supply. facilitated the completion of our rate filings in 2015
We recently issued a notice for additional generation and those scheduled for 2016. We have also been
and for demand response and again this is a tool successful in discussions with regulators to ensure we
that can be used. This was effective such that it was speed up the replacement of assets on, for example
withdrawn within period given the response received Long Island where an additional $200 million per
from the market. annum of investment was approved by the New York
Public Service Commission. This will also extend the
Our transmission businesses in the UK continue to use of the gas network for more customers to use.
focus on targeted investment intended to secure
growth and maintain reliability of our infrastructure. As the year continues we recognise that focus
on customer satisfaction and improving this is a
priority as we move forward. We will continue with
our community partnering in various initiatives.

3









INSURANCE STRATEGY CLAIMS
Our insurance programme has to be efficient, reflect Our risk management and approach to process
the risk appetite of the business and be flexible to take and behavioural safety are robust to say the least.
account of business change and the growth agenda Our claims record again has been positive for the year.
of National Grid. We have and will continue to value
relationships with insurers who can partner with us in We continue to update markets following the
our endeavour to deliver effective risk management and notifications post Sandy and that approach will
transfer in areas that truly could affect the achievement be maintained as matters progress albeit slowly.
of our objectives whether they arise from existing or
emerging risks. UNDERWRITING INFORMATION

It never ceases to amaze me as to the time it takes and
We have for many years used group captives which
play an integral role in our strategy. We continue to efforts made to produce information for us to in turn
have our captive deploy significant capital across present this document and the supporting information
a plethora of risk categories in all of our operating to you. I would like to thank my team for the work
territories. We will press our captives to provide added they have again completed unerringly to develop our
value services and will look to you to support our underwriting information. With the requirements of the
approach to risk management as we move forward in Insurance Act 2015 looming I do reflect on the foresight
what are very exciting times with the extent of growth and hard work of my predecessors and colleagues
and investment opportunities the Group are seeking. in putting us in a strong position to be compliant with
the requirements and have information disclosed in
Our US captive that commenced writing business in an orderly and understandable format. So with that
2014 has had an excellent start and our Isle of Man I would once again implore you to read the material
captive once again has maintained the “A” rating from and make full use of our renewal information website
AM Best. The strength of our captive performance has www.nationalgridinsurance.com. As always if you
been another positive in what has been a strong year need further information then please just notify our
for us all in the risk management arena. broking team.


Last year we were comfortable to enter into a long term Finally in what has been a challenging and very sad
agreement on our property programme and as part year for some given global security concerns recently,
of our agreement this document and our underwriting I would like just to wish you a safe, enjoyable and
information should meet the expectations in relation hopefully prosperous 2016.
to disclosure. We are also looking at our options on
the liability portfolio and whether we can adopt an
approach to extend existing arrangements where
considered appropriate. We as a team appreciate the
support you have provided to us and to our broking
team in their approaches and we look forward to
working with you as we move forward.
Neil Hughes
Group Head of Risk and Insurance

4 National Grid plc 2016/17 Annual Insurance Update

1








































































Business



Overview



and Update



Business Overview Safety, Security Revenues Investment Information Summary
and Update and Reliability and Regulation and Innovation and Claims 7


01 Business Overview and Update











































National Grid is one of the world’s largest public owned utilities
focused on transmission and distribution activities in electricity and

gas in both the United Kingdom and the northeast United States.
We play a vital role in connecting millions of people to the energy

they use safely, reliably and efficiently.






















AVI

Please scan here
to view video:
This is National Grid.
PG5 - This is
National Grid

8 National Grid plc 2016/17 Annual Insurance Update


Who we are





Our strategy is to be a recognised leader in the development and operation of safe, reliable and sustainable energy
infrastructure, to meet the needs of our customers and communities and to generate value for our investors.

We own and operate gas and electricity transmission and distribution infrastructure in the UK and northeastern US.
Our principal operations are:

UK Electricity UK Gas UK Gas US Regulated Other activities
Transmission Transmission Distribution (such as Grain,
LNG, Interconnectors
and Metering)


We are a long-term, asset-based business. Our operations are regulated, which means we create value for
our stakeholders through predictable revenue streams and cash-flows.


OUR VISION
Connecting you to your energy today, trusted to help you

meet your energy needs tomorrow.





PERFORMANCE EXCELLENCE


Performance Excellence is an approach that will help us achieve our objectives by looking for improvements
to all of our processes. It aims to save time and make us more efficient so we can deliver value for our
customers and stakeholders – from new ideas that improve processes, to introducing equipment that does
things more effectively.












STIMULATE INNOVATION 
DELIVER OPERATIONAL Promote new ideas to work more
EXCELLENCE ENGAGE OUR PEOPLE efficiently and effectively.
Achieve world-class levels Create an inclusive, high
of safety, reliability, security performance culture by developing
and customer service. all our employees.

Business Overview Safety, Security Revenues Investment Information Summary
and Update and Reliability and Regulation and Innovation and Claims 9










UK ANNUAL PRIORITIES US ANNUAL PRIORITIES


• Deliver sustainable improvements • Performance Excellence
in safety and wellbeing. Integrate performance excellence as a
• Improve the service we driver of superior customer experience
provide customers. by demonstrating outstanding cost
• Deliver sustainable outperformance of management, eliminating rework
our regulatory and commercial contracts. in our end-to-end processes and
developing full-time performance
• Enhance our reputation by building excellence practitioners.
trust with our stakeholders and
influencing externally. • Local Jurisdiction Model
• Build our capacity and capability Use the local jurisdiction model to
to reach our potential. drive regulatory, financial and customer
service accountability.
• Performance excellence is the way
we work. • Future Energy Networks
Drive new revenue opportunities and
the design and creation of 21st Century
gas and electricity networks through
operational and regulatory innovation.
• Talent and Capabilities
Provide the tools, resources and
capabilities that we need to build and
operate future energy networks.











EMBED SUSTAINABILITY
Integrate sustainability into our
decision-making to create value,
preserve natural resources and respect
the interests of our communities.




ENGAGE EXTERNALLY DRIVE GROWTH
Work with external stakeholders to Grow our core businesses
shape UK, EU and US energy policy. and develop future new
business options.





AVI AVI
Please scan here
to view video: Please scan here
National Grid’s to view video:
Line of Sight. Our Contribution.
PG7 - Line of sight PG6 - Our
Contribution

10 National Grid plc 2016/17 Annual Insurance Update













































The Foundations of our



Business Model










OUR Our business is built on our people. We work hard to make sure
PEOPLE we keep them as safe as possible as well as providing an inclusive
culture and encouraging development.



BEING A Doing the right thing is a responsibility we take seriously.
RESPONSIBLE Our environmental, financial and social responsibilities are
BUSINESS fundamental to the way we work and how we manage our
impact on the communities in which we operate.



INNOVATION Thinking differently and challenging the norms allow our people to
develop innovative and more efficient ways of delivering our services
and maintaining our networks.

Business Overview Safety, Security Revenues Investment Information Summary
and Update and Reliability and Regulation and Innovation and Claims 11


Risk Management and Internal Control





The Board oversees risk management and as part The Board evaluated the effectiveness of
of this role, it reviews the main elements of our management’s processes for monitoring and reviewing
processes and sets and monitors risk appetite. internal control and risk management, noting that no
significant failings or weaknesses had been identified
The Board regularly reviews our internal controls by the review and confirmed that it was satisfied the
and risk management processes. This year specific systems and processes were functioning effectively.
consideration was given to the guidance in the UK
Corporate Governance Code 2014 which applies to Our process involves a continuous cycle of bottom-
the Company in this fiscal year and refinements to our up review and reporting and top-down review and
processes will be introduced as appropriate. feedback for all our business functions.


Our Company-wide corporate risk management The Board participates in an annual risk workshop to
process provides a framework through which we make sure that the principal risks remain closely aligned
can consistently identify, assess and prioritise, to our strategic aims and that no important risks are
manage, monitor and report risks. being overlooked. The Board considers emerging risks
(uncertainties that are still developing and sit outside
We have a number of processes to support our internal the principal risks profile) together with our strategy
control environment. These processes are managed by team’s annual long-term update.
dedicated specialist teams, including risk management,
ethics and compliance management, corporate
audit and internal controls and safety, environment
and health. Oversight of these activities are provided
through regular review and reporting to the appropriate
Board committees.

12 National Grid plc 2016/17 Annual Insurance Update


Risk Mitigation Activities





The following provides a brief

insight into some of our risk
mitigation activities.



Deliver operational excellence
• We continue to commit significant resources and
financial investment to maintain the integrity of our
assets and we strive to continuously improve our
key process safety controls.
• We continue to implement our Group-wide process
safety management system to ensure a robust and
consistent framework of risk management exists
across our higher-hazard asset portfolio.
• We are developing a suite of risk models to assess
the risk of specific asset types and support targeted
investment to reduce risk.
• We monitor a mix of leading and lagging process
safety indicators and test the effectiveness of our
controls with periodic audits.
• We have a US strategy focused on safety and
reliability, customer responsiveness, stewardship
and cost competitiveness. Performance measures
are tracked and reported monthly. US jurisdictional
presidents continue to develop strong relationships
with local regulators and communities.
A Performance Excellence framework is
firmly established to deliver sustainable
and innovative performance improvements.
• The UK operating model implemented in 2013
to support our performance under RIIO is now
established and we continue to roll out our
Performance Excellence framework across
the business. We actively engage with local
communities and non-governmental actors.
• We monitor network reliability and customer
satisfaction as KPIs.
• We use industry best practices as part of our
cyber security policies, processes and technologies.
• We continually invest in cyber strategies that are
commensurate with the changing nature of the
security landscape. This includes collaborative
working with DECC and the Centre for Protection of
National Infrastructure (CPNI) on key cyber risks and
development of an enhanced CNI security strategy.
In the US, we have been involved with developing
the National Institute of Standards and Technology
Cyberspace Security Framework.

Business Overview Safety, Security Revenues Investment Information Summary
and Update and Reliability and Regulation and Innovation and Claims 13









Drive growth
• We regularly monitor and analyse market conditions,
competitors and their potential strategies,
the advancement and proliferation of new
energy technologies, as well as the performance
of our Group portfolio. We are also looking to
access new sources of finance and capabilities
through partnering.
• We have internal processes for reviewing and
approving investments in new businesses,
disposals of existing ones and organic growth
investment opportunities. These processes are
reviewed regularly to make sure our approach
supports our short and long-term strategies.
We undertake due diligence exercises on
investment or partnering opportunities and carry
out post-investment reviews to make sure we
learn lessons for the future.
Engage our people
• We have identified the core capabilities that align
with our strategic ambition and defined our set of
leadership standards.
• We are involved in a number of initiatives to help
secure the future engineering talent required.
• We continue to develop our succession plans
for key roles, including leadership.
• In the UK, we are continuing to work closely with
DECC and Ofgem on Electricity Market Reform
(EMR) plans.
• We continue to maintain strong relationships with
government, engage in consultations and develop
comprehensive stakeholder communication plans.
The Board is also continuing to monitor the
increasing public debate around the cost,
availability, security and sustainability of UK
energy supplies.
• In the US, we are engaging our external
stakeholders about the role of the utility company
of the future, under the banner of Connect21.
• Regulatory proceedings related to utility of
the future have been launched in New York
(Reforming the Energy Vision) and Massachusetts
(Grid Modernization) and our Connect21 aligns well
with them. We are continuing to strengthen our
jurisdictional focus and are improving our rate case
filing capabilities so our businesses can continue
to earn a fair and reasonable rate of return.
• We maintain and monitor a reputation ‘watch list’
at both Company and regional levels to support
awareness and proactive management of issues
that could cause us reputational harm.

14 National Grid plc 2016/17 Annual Insurance Update


What we do – Gas



The gas industry connects producers, processors, storage,
transmission and distribution network operators, as well as

suppliers to industrial, commercial and domestic users.


System operator The gas transmission system has to be kept
As system operator we are responsible for the high constantly in balance, which is achieved by buying,
pressure gas National Transmission System (NTS) in selling and using stored gas. This means that,
Great Britain. We have responsibility for the residual under normal circumstances, demand can be met.
balancing activities on the NTS and for keeping the We are the sole owner and operator of gas transmission
physical system within safe operating limits. infrastructure in Great Britain.
Our price control, set by Ofgem, includes incentives In the US, we hold a minority interest in Millennium
that aim to maintain and improve our daily Pipeline Company. Interstate pipelines are regulated
operational efficiency and are subject to by the Federal Energy Regulatory Commission (FERC).
renegotiation at set intervals.
3 Distribution
1 Production and importation In the UK, gas leaves the transmission system and
Gas used in the UK is mainly sourced from gas fields enters the distribution networks at high pressure.
It is then transported through a number of reducing
in the North and Irish seas, piped from Europe and pressure tiers until it is finally delivered to consumers.
imported as LNG.
There are eight regional gas distribution networks in the
There are seven gas reception terminals, three UK, four of which are owned by National Grid. In the US,
LNG importation terminals and three interconnectors gas is delivered by the interstate pipeline companies to
connecting Great Britain via undersea pipes local distribution networks. Each local distribution
with Ireland, Belgium and the Netherlands. company has a geographically defined service territory
Importers bring LNG from the Middle East, and is the only local distribution company within
the Americas and other places.
that territory. Local distribution companies are regulated
Gas used in the US is produced mainly in North by the relevant local state’s utility commission.
America. We import LNG from a number of countries.
Our networks deliver gas to 10.9 million consumers
We do not produce gas in either the UK or US. in the UK and 3.6 million customers in the US.
In the UK, we own and operate Grain LNG,
an importation terminal and storage facility at the 4 Supply
Isle of Grain in Kent, which charges customers Pipeline shippers bring gas from producers to suppliers,
under long-term contracts for various services. who in turn sell it to customers.
These include access to our importation terminal, We do not supply gas in the UK. However, we own
storage facilities and capacity rights.
National Grid Metering, which provides meters and
In the US, we own and operate LNG storage and metering services to supply companies, under contract.
vaporisation facilities, as well as an LNG storage In the UK, customers pay the supplier for the cost of
facility in Providence, Rhode Island, where we store gas and for its transportation. We transport the gas
gas for third parties for a fee. We also buy gas directly through our network on behalf of shippers, who pay
from producers and LNG importers for resale to us transportation charges.
our customers.
In the US, gas distribution companies, including
2 Transmission National Grid, sell gas to consumers connected
The transmission systems generally include pipes, to their distribution systems.
compressor stations and storage facilities, including In most cases in the US, where customers choose
LNG storage. They connect production through National Grid, they pay us for distribution and gas costs.
terminals to the distribution systems. Where they choose to buy gas from third parties,
they pay us for distribution only and pay the
In the UK, gas enters the transmission system through third-party supplier for the gas and upstream
importation and reception terminals and interconnectors transportation capacity.
and may include gas previously held in storage.
Also in the US, except for residential consumers in
Compressor stations located along the network Rhode Island, customers may purchase their supply
play a vital role in keeping large quantities of gas from independent providers with the option of billing
flowing through the system, particularly at times of for those purchases to be provided by us.
high demand.

Business Overview Safety, Security Revenues Investment Information Summary
and Update and Reliability and Regulation and Innovation and Claims 15















4 Supply 3.6 million
US gas customers
















7,660 km
of high pressure
pipeline in the
UK 3 Distribution
D







26,882
New gas heating
2 Transmission customers in
the US
10.9 million
T
Customers
serviced in the UK

















1 Production and importation
14.9%
Approximate
percentage of
UK gas from
LNG imports

16 National Grid plc 2016/17 Annual Insurance Update


What we do – Electricity



The electricity industry connects generation sources to homes
and businesses through transmission and distribution networks.

Companies that pay to use transmission networks buy electricity
from generators and sell it to consumers.


System operator We are also now entering the construction phase for
As system operator (SO) for England and Wales, two new interconnectors, between the UK and Norway
we coordinate and direct electricity flows onto and and the UK and Belgium. We are continuing to work on
over the transmission system, balancing generation developing additional interconnector projects, which
supply and user demand. Where necessary, we pay we believe will deliver significant benefits to consumers.
sources of supply and demand to increase or These include opportunities for interconnection with
decrease their generation or usage. Iceland, Denmark and a further link with France.
We have the same role for the two high voltage We also jointly own and operate a 224 kilometre
electricity transmission networks in Scotland and we interconnector between New England in the US
are SO for the offshore electricity transmission regime. and Canada.
Our charges for SO services in the UK are subject to We sell capacity on our UK interconnectors through
a price control approved by Ofgem. System users auctions and on our US interconnector through
pay us for connection, for using the system and wholesale markets and bilateral contracts.
balancing services.
3 Transmission
As electricity transmission SO, our price control
includes incentives to minimise the costs and Transmission systems generally include overhead lines,
associated risks of balancing the system through underground cables and substations. They connect
buying and selling energy, as well as procuring generation and interconnectors to the distribution system.
balancing services from industry participants. We own and operate the transmission network in
In the US, similar services are provided by England and Wales. We operate but do not own the
independent system operators. Scottish networks. We are also working in a joint venture
with Scottish Power Transmission to construct an
interconnector to reinforce the GB transmission
1 Generation system between Scotland and England and Wales.
Generation is the production of electricity from fossil fuel In the US, we jointly own and operate transmission
and nuclear power stations, as well as renewable sources facilities spanning upstate New York, Massachusetts,
such as wind and solar. In the US, we own and operate New Hampshire, Rhode Island and Vermont.
50 fossil fuel-powered stations on Long Island and
4.6 MW of solar generation in Massachusetts. We do 4 Distribution
not own or operate any electricity generation in the UK.
Distribution systems carry lower voltages than
We sell the electricity generated by our plants on transmission systems over networks of overhead lines,
Long Island to LIPA under a long-term power supply underground cables and substations. They take over
agreement. The contract allows us to recover our the role of transporting electricity from the transmission
efficient operating costs and provides a return on network and deliver it to consumers at a voltage they
equity on our investment in the generation assets. can use. We do not own or operate electricity distribution
networks in the UK.
For solar generation, we recover our costs and a
reasonable return from customers in Massachusetts In the US, our distribution networks serve around
through a solar cost adjustment factor. This is added 3.5 million customers in upstate New York,
to the electricity rate, net of revenues earned from the Massachusetts and Rhode Island.
solar assets.
5 Supply
2 Interconnectors The supply of electricity involves buying electricity and
Transmission grids are often interconnected so that selling it on to customers. It also involves customer
energy can flow from one country or region to another. services, billing and the collection of customer accounts.
This helps provide a safe, secure, reliable and affordable
energy supply for citizens and society across the region. We do not sell electricity to consumers in the UK.
Interconnectors also allow power suppliers to sell their All our customers in the US can select a competitive
energy to customers in other countries. supplier for the supply component of electricity utility
Great Britain is linked via interconnectors with France, services. Where customers choose National Grid, they
Ireland, Northern Ireland and the Netherlands. pay us for distribution and electricity costs. Where they
National Grid owns part of the interconnectors with choose to buy electricity from third parties, they pay us
France and the Netherlands. for distribution only and pay the third-party supplier for
the electricity. Our base charges for electricity supply
are calculated to recover the purchased power costs.

Business Overview Safety, Security Revenues Investment Information Summary
and Update and Reliability and Regulation and Innovation and Claims 17


3.8 GW

Generation
produced
in the US






260 km

Approximate 1 Generation
length of BritNed
interconnector


2 Interconnectors





















99.99999% 3 Transmission
Electricity transmission
reliability in England
and Wales






30 TWh

Approximate amount of 4 Distribution
electricity we forecast,
plan for and procure
annually across three
states in the US 3.5 million

US electricity
customers












5 Supply

18 National Grid plc 2016/17 Annual Insurance Update


Managing the Infrastructure





We run the networks that are the backbone of the energy system.




UK GAS NETWORK: UK ELECTRICITY NETWORK:
141,460 8,700


Kilometres of pipeline Kilometres of overhead lines and underground cable US GAS NETWORK: US ELECTRICITY NETWORK:
57,044 131,160

Kilometres of pipeline Kilometres of overhead lines and underground cable





UK NETWORK
UK Transmission
Scottish electricity transmission system
English and Welsh electricity
transmission system
St. Fergus Gas transmission system
Terminal
LNG terminal owned by National Grid
LNG terminal
Electricity interconnector
Gas interconnector
UK Gas Distribution
Gas distribution operating area

Principal offices
Owned office space:
Hinckley, Warwick and Wokingham
to Ballylumford Teesside Leased office space:
to Dublin Solihull and London
Leased office space totalling 40,100 square
Barrow metres (431,600 square feet) with remaining
terms of one to eight years.
Easington
from the
Burton Point Theddlethorpe Netherlands
UK TRANSMISSION
Bacton Approximately 7,200
to/from
Belgium kilometres (4,470 miles) of
overhead line, 1,500 kilometres
(932 miles) of underground
cable and 336 substations.
BritNed to/from
South Hook the Netherlands
Dragon Approximately 7,660
Grain LNG kilometres (4,760 miles)
of high pressure pipe and
24 compressor stations
connecting to eight distribution
to/from networks and third-party
France independent systems.


UK GAS DISTRIBUTION
Approximately 133,800
kilometres (83,139 miles) of
gas distribution pipeline owned
and operated by National Grid.

Business Overview Safety, Security Revenues Investment Information Summary
and Update and Reliability and Regulation and Innovation and Claims 19









We design, build and maintain the physical infrastructure.

We manage the networks, which are a vital part of the
energy infrastructure.
UK GAS NETWORK: UK ELECTRICITY NETWORK:
141,460 8,700


Kilometres of pipeline Kilometres of overhead lines and underground cable US GAS NETWORK: US ELECTRICITY NETWORK:
57,044 131,160

Kilometres of pipeline Kilometres of overhead lines and underground cable





US NETWORK





Canada
Vermont


Maine




New Hampshire


New York Massachusetts


Connecticut

Rhode Island
Pennsylvania New Jersey







US REGULATED
US Regulated An electricity distribution network of approximately
116,636 circuit kilometres (72,474 miles) in New England
Electricity transmission network
Gas distribution operating area and upstate New York.
Electricity distribution area A network of approximately 56,263 kilometres (34,960 miles)
Gas and electricity distribution area
of gas pipeline serving an area of approximately 25,545 square
Principal offices kilometres (9,863 square miles) and 781 kilometres (485 miles)
of gas transmission pipe.
Owned office space:
Syracuse, New York
Leased office space: An electricity transmission network of approximately
Brooklyn, New York and 14,355 kilometres (8,920 miles) of over headline,
Waltham, Massachusetts 169 kilometres (105 miles) of underground cable and
Leased office space totalling approximately 52,676 square metres 520 transmission substations.
(567,000 square feet) with remaining terms of ten to fourteen years.

20 National Grid plc 2016/17 Annual Insurance Update


UK Electricity Transmission





WHAT WE DO We achieved a significant engineering milestone,
We own the electricity transmission system in England installing the first ever series compensation device on
and Wales. Our networks comprise approximately the UK network. This device, which adds capacity to
7,200 kilometres (4,470 miles) of overhead line, a transmission circuit, can increase power flows from
1,500 kilometres (932 miles) of underground cable Scotland. With both National Grid and Scottish Power
and 336 substations. series compensation in service, the Scotland-England
boundary capacity is expected to increase by 1 GW.
MARKET CONTEXT We have continued to develop the innovative T-pylon

Although demand for electricity is generally increasing and are considering where it could be offered
around the world, in the UK it is expected to remain alongside other connection options when developing
broadly flat over the next five to ten years. new transmission circuits. The first T-pylon has been
installed at our Eakring training facility. CAPITAL UK £1.1BN

Changes in the sources and characteristics of ADJUSTED INVESTMENT 2013/14: £1.4BN
generation connecting to our network, such as wind Our Visual Impact Provision (VIP) project OPERATING UK £1.2BN
and nuclear generation, mean we need to respond gathered pace. Our policy to make use of the PROFIT 2013/14: £1.1BN
by developing the way we balance and operate our £500 million allowance under RIIO to mitigate the
network to accommodate these sources. Over the visual impact of our overhead lines in National Parks
last two years, some generators have delayed their and Areas of Outstanding Natural Beauty was agreed
connection dates to the network and this means our with Ofgem. A stakeholder advisory group, including
future investment profile for electricity transmission is representatives of organisations with a national focus
flatter than in previous years. However, we are ready on our natural heritage, is helping us choose which
to respond to connection dates when we need to. transmission lines should be prioritised and how the
We will continue to renew our network to deliver the fund should be allocated. 99.9999%
UK Electricity RELIABILITY
network reliability our customers require as efficiently
We agreed an RPI-linked bank loan facility of
as possible.
£1.5 billion with the European Investment Bank (EIB). Unless stated, the above values are as reported for the last complete financial year (2014/15).
This is the largest ever single loan by the EIB and is
WHAT WE’VE ACHIEVED now available to fund capital investment in National
DURING 2014/15 Grid Electricity Transmission plc.
The full tunnel network on our London Power Tunnels
project has been completed and the remaining We also deployed new tools and systems to our field
works programme is forecast to complete ahead of workforce, winning the Mobile Innovation category at
schedule and under budget. We have also completed the SAP UK Quality Awards.
the development of a £164 million asset replacement
and customer connection project for Wimbledon.

We made progress on substation and cable
construction work for several new Network Rail
connections, as well as Crossrail connections
in London. These connections are required
to support the national railway electrification
programme from 2015 to 2017.

Business Overview Safety, Security Revenues Investment Information Summary
and Update and Reliability and Regulation and Innovation and Claims 21









PRIORITIES
• Safety: Make sure our suppliers and employees • Visual Impact Provision: Through our VIP project
manage their safety performance when working we will identify the final locations where the visual
near our transmission assets. This includes seeking impact of our networks will be reduced.
evidence that they are using effective safety • Data and technology: Continue to improve how
management systems. we define and capture the network data that
• Maintenance: Establish a programme to change helps us make better decisions on our assets and
the way we plan and deliver all work on our assets respond more quickly to customer demand for
by balancing risk, performance and delivery costs. new connections.
• Hinkley Point C connection: Continue to progress
the regulatory submissions needed for the Hinkley
Point C connection project to secure the funding
for delivery.

CAPITAL UK £1.1BN
INVESTMENT
ADJUSTED 2013/14: £1.4BN
OPERATING UK £1.2BN
PROFIT
2013/14: £1.1BN










99.9999%
UK Electricity RELIABILITY


Unless stated, the above values are as reported for the last complete financial year (2014/15).










FAST
32% FACTS
Adjusted
operating profit of
Group total (%) 7,200

68% approximate kilometres
of overhead line
336

substations

1,500

kilometres of
underground cable
UK Electricity Transmission Rest of Group

22 National Grid plc 2016/17 Annual Insurance Update


UK Gas Transmission





WHAT WE DO WHAT WE’VE ACHIEVED
We own and operate the gas national transmission DURING 2014/15
system in Great Britain, with day-to-day responsibility We delivered a strong safety performance, particularly
for balancing supply and demand. Our network in our operations business where we have achieved
comprises approximately 7,660 kilometres (4,760 miles) 24 months (from April 2013) without a single lost time
of high pressure pipe and 24 compressor stations. injury suffered by our employees or contractors.
In 2014/15 the gas throughput across the system
was over 80 billion cubic metres. We reached record levels of compressor availability
in our network. Operational availability was at 100%
several times during the winter, with an average
MARKET CONTEXT
of 96%. This is a rise of 7% on the average for winter
The UK’s gas market and sources of gas are changing. 2013/14. It follows targeted investment in our fleet
Domestic demand has fallen over the last five years of compressors and improvements to our planning
and a significant increase is not expected in future process, maintenance and repair methods.
years. The UK continental shelf (UKCS) now makes up CAPITAL UK £0.2BN
less than half our total gas supply, with the remainder We received £5.7 million from Ofgem following a INVESTMENT 2013/14: £0.2BN
ADJUSTED
coming from Norway, continental Europe, or further successful bid in the Network Innovation Competition OPERATING UK £0.4BN
afield via shipped imports of LNG. for designing and building a robotic device that can PROFIT
2013/14: £0.4BN
inspect below-ground pipework at high pressure
Overall, supply capacity now exceeds peak demand installations. The device will help us to better assess
by more than 25%, giving our customers significant asset condition, so we can focus expenditure where
flexibility over which sources of gas they choose to it is needed, benefiting gas consumers.
meet demand. Newer sources of supply, such as LNG
importation terminals and storage sites, can respond to To meet the stricter environmental limits imposed
demand more quickly than traditional UKCS supplies. by the Industrial Emissions Directive (IED), our larger
Our network therefore needs to be able to respond to gas turbines will need modifying or replacing. We 100%
changing day-to-day supply and demand patterns. have sought feedback from our stakeholders on the UK Gas RELIABILITY
impact of the IED, adapting our proposed solutions
We also need to prepare for an uncertain energy in response. This has helped us develop investment Unless stated, the above values are as reported for the last complete financial year (2014/15).
landscape in the long term. UK reliance on imported options to make sure the network can meet the future
gas supplies will vary depending on the level of gas needs of our customers and operate as efficiently
supply from the UKCS and the development of as possible.
indigenous gas sources.


We are working closely with our customers and
stakeholders to meet these operational challenges.
We are focused on continuing to develop our network
and services to meet their needs safely, reliably
and efficiently.

Business Overview Safety, Security Revenues Investment Information Summary
and Update and Reliability and Regulation and Innovation and Claims 23









PRIORITIES
• Safety: Sustain and improve our safety • Innovation: Use the innovation opportunities
performance by implementing a new safety available through the Network Innovation
culture improvement programme across UK Competition and Network Innovation Allowance
Gas Transmission. funding. This will help us to create value for
• Reliability: Build on improvements we have made customers and the industry, and to achieve
this year in compressor availability, extending this our RIIO-T1 commitments.
across other critical assets in our network to further • Emissions compliance projects: Continue
improve the service we deliver to our customers. work on existing emissions compliance projects
• Efficiency: Continue improving end-to-end and secure funding for continued works over the
processes and deliver greater value for customers remainder of the RIIO-T1 period and beyond.
by being more efficient. Where we create
additional capacity, we will look to insource some
maintenance work and increase specialist pipeline
services for customers.



CAPITAL UK £0.2BN
INVESTMENT
ADJUSTED 2013/14: £0.2BN
OPERATING UK £0.4BN
PROFIT
2013/14: £0.4BN










100%
UK Gas RELIABILITY


Unless stated, the above values are as reported for the last complete financial year (2014/15).



11%





Adjusted
operating profit of FAST
Group total (%)

89% FACTS
7,660

kilometres of
high pressure pipeline
24

compressors

UK Gas Transmission Rest of Group

24 National Grid plc 2016/17 Annual Insurance Update


UK Gas Distribution





WHAT WE DO WHAT WE’VE ACHIEVED
We own and operate four gas distribution networks DURING 2014/15
comprising approximately 133,800 kilometres We believe we are making progress towards our
(83,139 miles) of pipeline. We transport gas ambition to be the best gas distribution business
from the national transmission system to around in Britain by 2017.
10.9 million consumers on behalf of 37 shippers.
We are investing in our networks to make sure we
meet customer and stakeholder needs. This includes
MARKET CONTEXT replacing approximately 1,450 kilometres of old metal

We are incentivised through RIIO to operate efficiently pipelines with more durable materials as part of our
and deliver services that our customers and mains replacement programme developed with the
stakeholders value. Ofgem establishes outputs we HSE and Ofgem. In London, we have replaced around
are expected to deliver so that we maintain a safe 300 kilometres of iron mains, including projects in
and reliable network; make a positive contribution to Battersea and around the City.
sustainability and protect the environment; provide
connections to supply new consumers and support We have also completed ten commercial bio-methane
new gas entry points into the network; meet their social connections, more than any other UK gas distribution
obligations; and provide an agreed standard of service network, including the first 100% food waste plant
to consumers and other stakeholders. and the first commercial sewerage connection with
Severn Trent Water.
We collaborate with the industry on issues that are
Overall, we have delivered successfully against
common to all networks and customers, such as
our targets to deliver world-class levels of safety
innovation, safety and the future of networks to
performance across our combined field workers and
deliver outcomes that customers value.
contractor workforce. In terms of cable strikes and
injuries to members of the public, we have increased
In our half year results we announced our plans
to commence a process for the potential sale of our efforts to make improvements. We have also used
a majority stake in UK Gas Distribution. This is innovative technology that has helped reduce excavation
a mature and attractive network business and volumes, so we can minimise disruption. We have also
therefore it is considered the right time to look to been helping stakeholders such as landowners and
rebalance National Grid’s portfolio. As part of the the construction industry understand how we protect
process, consents will be required from Ofgem who pipelines and how they can operate safely around them.
have responsibility for the licenses under which During 2014/15, we were recognised by Ofgem
the business operates. The Health and Safety as the best performing gas distribution network in
Executive will need to approve the safety case understanding our customer and stakeholder needs for
and additional approvals may be required from the previous year. Our focus in this area has seen over
competition authorities depending on who the 1,200 fuel poor customers benefiting from an alternative,
purchaser is. This process is anticipated to take up more affordable method of heating their homes since
to 18 months to complete, however throughout this we have connected them to our gas networks.
process we will maintain business as usual staying
focused on security of supply, safe operations and We have invested in new mobile technology for our
performance excellence. field workforce to increase productivity and provide our
supervisors with real-time information. This has also
helped improve employee engagement scores and
the desire to drive better outcomes for our customers;
our field workforce now compares favourably with
industry benchmarks.

Business Overview Safety, Security Revenues Investment Information Summary
and Update and Reliability and Regulation and Innovation and Claims 25









PRIORITIES
• Improve our safety performance by further • Continue to work with government and industry
reducing cable strikes, injuries to members of the on setting out the vision for the future role of gas
public and preventing third-party encroachment. in the UK’s energy mix and policies that support
This will continue to be an important area of focus. this role, while considering how domestic smart
• Continue to use innovative technology to meters can create value for customers.
deliver better services that reduce the impact on • Motivate and equip our workforce with the tools
customers’ bills and minimise disruption caused and knowledge they need to deliver the services
by our work. our customers value, while increasing productivity.
• Improve our customers’ experience of planned
replacement work projects by working with our
partners to improve our processes, data capture
and how we communicate and engage with
our customers.



ADJUSTED
OPERATING UK £0.8BN CAPITAL UK £0.5BN
PROFIT INVESTMENT
2013/14: £0.9BN 2013/14: £0.5BN










99.999%
UK Gas Distribution RELIABILITY

Unless stated, the above values are as reported for the last complete financial year (2014/15).



FAST
FACTS
21%
260TWh

Adjusted of gas delivered
operating profit of
Group total (%) 10.9 million

consumers
0800 111 999
79%
National Gas emergency number

133,800 km
underground gas pipe

UK Gas Distribution Rest of Group

26 National Grid plc 2016/17 Annual Insurance Update


US Regulated





ELECTRICITY In a joint programme with Earth Networks,
We jointly own and operate transmission facilities we purchased 55 Weatherbug stations to donate
across upstate New York, Massachusetts, to our communities in Massachusetts, New York
New Hampshire, Rhode Island and Vermont. and Rhode Island. These stations provide customers
We own and operate electricity distribution networks with more localised weather information and we use
in upstate New York, Massachusetts and Rhode Island. them to better prepare for and respond to storms.
They also contribute to STEM education in giving
free real-time local weather data to schools and
GAS emergency responders.

We own and operate gas distribution networks
across the northeastern US located in upstate We continue to invest more in reinforcing the electricity
New York, New York City, Long Island, distribution system and also in replacing gas mains.
Massachusetts and Rhode Island. The NYPSC approved $414 million gas infrastructure
investment in Long Island to speed up the replacement
of ageing pipe and extend the use of natural gas to
MARKET CONTEXT
more customers.
In the US, regulators are focused on system
modernisation and the integration of new distributed
energy resources. In 2014 we introduced Connect21, WHERE WE ARE HEADING
our thinking on advancing America’s natural gas Building a resilient backbone for our energy system
and electricity infrastructure beyond its 20th Century that can provide reliable, flexible electric and gas
limitations and creating a more customer-centric, service to all customers and integrate clean energy
resilient, agile, efficient and environmentally sound wherever it is located on the grid.
energy network. We are working with policymakers,
customers and stakeholders to transform the energy Informing and educating customers about choices
industry through initiatives such as Grid Mod in available to them to meet and manage their energy
Massachusetts, Reforming the Energy Vision (REV) needs in the most cost-effective ways.
in New York and Gas and Electric Infrastructure We have introduced Connect 21, our strategy for
Safety and Reliability (ISR) plans in Rhode Island.
advancing America’s natural gas and electricity
infrastructure beyond the 20th century. Connect 21
WHAT WE’VE ACHIEVED aims to drive economic growth by investing in our

During 2014/15, we delivered a solid performance networks in ways that enhance the economy as well
and continued with high levels of investment in our as encouraging innovation and reducing the stress on
networks. We achieved our reliability KPI targets our environment and public health.
but we still have work to do if we are to improve
our customer satisfaction target scores. Finding new ways to deliver cleaner energy and
encourage consumers to use energy more efficiently.
We completed the stabilisation work on our new
enterprise resource planning system. The data we AVI
can produce with the new systems is an essential Please scan here
foundation to the future performance improvements to view video:
and regulatory filings that we need for profitable growth Connect21
overview
in the US.

Business Overview Safety, Security Revenues Investment Information Summary
and Update and Reliability and Regulation and Innovation and Claims 27









PRIORITIES
• Performance Excellence: We will improve the • Talent and capabilities: We will provide employees
way we work as teams to become more efficient, with the tools and resources they need to achieve
innovative and responsive to our customers’ needs the performance measures required by our
in end-to-end processes that include meter to cash, customers and shareholders.
emergency response, deliver, maintain and operate • Future energy networks: We will update and
gas and electric. create new electricity and gas networks through
• Local operating model: we will continue to design, operational and regulatory innovations.
drive greater accountability and customer
service delivering the services and obligations
expected by the 14 operating companies and
four jurisdictions that comprise our US business –
at a cost and performance level agreed upon by
each jurisdiction’s management team.


ADJUSTED
OPERATING US £1.2BN CAPITAL US £1.5BN
PROFIT INVESTMENT
2013/14: £1.1BN 2013/14: £1.2BN








Electricity Distribution: Electricity Transmission:
99.969% 99.942% RELIABILITY
2013/14: 99.980% 2013/14: 99.957%

Unless stated, the above values are as reported for the last complete financial year (2014/15) quoted in GBP.

FAST

FACTS


7.1 million
customers
30%
116,636 km

of electricity
Adjusted distribution network
operating profit of
Group total (%) 520

transmission
substations
70%
644
distribution
substations
50
generation units (2MW to 385MW)
at 12 locations across Long Island
US Regulated Rest of Group

28 National Grid plc 2016/17 Annual Insurance Update


Other Activities





GRAIN LNG Throughout 2014/15, both IFA and BritNed
Grain LNG is one of three LNG importation facilities have operated as part of the North West Europe
in the UK. It operates under long-term contracts with market region. The creation of this region is part of
customers and provides importation services of ship the ongoing development of the EU’s Internal Energy
berthing, temporary storage and re-gasification in to Market. IFA and BritNed have entered this region
the national transmission system. This year, we have voluntarily ahead of the introduction of new EU-wide
continued to explore developments to our LNG rules for cross-border electricity trading. IFA and
services to increase revenue, including the potential BritNed are also involved in the next phase of this
to offer ship reloading. We have started a ship cool- regional market that will cover the intraday market
down service. This process helps ships that have been timescale (currently it only covers the day ahead
out of service or having maintenance to reload full timescale). Intraday markets help market participants
LNG cargo. We have also commissioned and launched adjust their positions better over short time periods.
our LNG road tanker loading facility. This will provide
tankered LNG to off-grid customers and operators METERING
of heavy goods vehicles. National Grid Metering (NGM) provides installation
and maintenance services to energy suppliers in the
INTERCONNECTORS regulated market in Great Britain. It maintains an asset
base of around 14.1 million domestic, industrial and
The England-France interconnector (IFA) is a
2,000 MW HVDC link between the French and British commercial meters.
transmission systems with ownership shared between The domestic traditional gas metering business
National Grid and Réseau de Transport d’Electricité. continues to operate in its role as the National Metering
The interconnector’s availability continued to improve Manager, pending the start of the smart metering
this year following a significant valve replacement mass roll-out. This role means customers have a point
programme. Average availability for 2014/15 was of contact if they require a meter up until the start of the
90.62%, up from 83.84% in 2013/14. A substantial smart metering roll-out. Tariff caps agreed with Ofgem
proportion of the flow continues to be in the import as part of this role, which took effect on 1 April 2014,
direction, from France to Great Britain.
will continue to apply until at least the end of the
BritNed is a joint venture between National Grid and transition to smart metering.
TenneT, the Dutch transmission system operator.
Customer satisfaction scores for NGM remain positive
It owns and operates a 1,000 MW HVDC link between
for both its domestic and industrial and commercial
England and the Netherlands. As with IFA, a substantial
businesses, but we continue to work with our
proportion of the flow is in the import direction from
customers on areas for improvement. In our industrial
the Netherlands to Great Britain.
and commercial business we have implemented new
software that allows remote customer self-serve access
for some services and is expected to improve efficiency.
We are also responding to the rapidly changing
non-domestic sector by exploring additional products
and services.

Business Overview Safety, Security Revenues Investment Information Summary
and Update and Reliability and Regulation and Innovation and Claims 29









UK PROPERTY US NON-REGULATED BUSINESSES
National Grid Property is responsible in the UK for the Some of our US businesses are not subject to state
management, clean-up and disposal of surplus sites, or federal rate-making authority. These include interests
most of which are former gas works. During 2014/15, in some of our LNG road transportation, some gas
we entered into a joint venture with the Berkeley transmission pipelines (our minority equity interests
Group, known as ‘St William’, to develop surplus in these are not regulated) and certain commercial
land for residential use in London and the South East. services relating to solar installations, fuel cells and
We have also sold 42 sites and exchanged on several other new technologies.
high-profile land disposal agreements with joint venture
partners. Our holder demolition and contaminated land CORPORATE ACTIVITIES
clean-up programmes are progressing well and we are
in the process of retendering our estate management Corporate activities comprise central overheads,
outsourcing agreement. Group insurance and expenditure incurred on
business development.

XOSERVE
Xoserve delivers transactional services on behalf of
all the major gas network transportation companies
in Great Britain, including National Grid. Xoserve is
jointly owned by National Grid, as majority shareholder
and the other gas distribution network companies.
Xoserve celebrated its 10 year anniversary as a
company on 1 May 2015.














ADJUSTED
OPERATING
UK/US £0.20BN PROFIT
2013/14: £0.13BN








UK/US £0.2BN
CAPITAL
2013/14: £0.2BN
INVESTMENT

30 National Grid plc 2016/17 Annual Insurance Update

2



















































Safety,



Security and



Reliability



Business Overview Safety, Security Revenues Investment Information Summary
and Update and Reliability and Regulation and Innovation and Claims 33


02 Safety, Security and Reliability





We are committed to ensuring our network remains reliable

and safe for our users both today and in the future.








We achieved our best ever Group safety performance during 2014/15.

In the UK we maintained a world-class employee safety performance during 2014/15,
with an employee injury frequency rate (IFR) of 0.09. Our US business continues to
improve its safety performance, with an employee injury frequency rate of 0.15. Our overall
Company-wide IFR rate was 0.13.

We continue to build on our strong performance so we can achieve consistent world-class
safety performance.

In the past year the US business has seen a 7% reduction in the number of injuries requiring
medical attention and a 26% reduction in the number of cases requiring employees to stay
out of work. These reductions result from programmes and initiatives based on risk areas,
improved incident investigations and root cause analysis. There is still much work to do as we
strive for zero injuries. Soft tissue injury prevention, safety observations, road traffic collisions
and slips, trips and falls remain a focus for us in the year ahead.





WE BETTERED OUR COMPANY-
WIDE EMPLOYEE IFR TARGET (0.15)
0.13
FOR 2014/2015



Safety remains an important priority for us. Regrettably there were two fatalities in 2014/15.
The first involved a child who fell when climbing on one of our pipelines. There were inadequate
measures in place to stop him from climbing on the pipe. Thereafter we put guards in place on
this pipeline and other similar crossings throughout our network too as well as advising other
network operators so they could take action as well. This pipe had been in position since 1903.
We have operated our network for well over a century and this is the first time that a fatality of
this kind has happened and we will do all we can to ensure it never happens again. The other,
regrettably involved a contractor working at our Rhode Island gas distribution business.

34 National Grid plc 2016/17 Annual Insurance Update









Safety Programmes and Initiatives

CORPORATE SECURITY US SECURITY TEAM
Protecting our people and property – Electric Substation Intrusion
the Integrated Security Solutions (ISS) Detection Systems
programme Prevention of crimes is a primary goal. But even
The electricity, gas transmission and gas distribution our best prevention systems can be compromised
networks that we operate form a significant element of by determined criminals. If deterrence measures
the UK’s infrastructure that supports every element of are defeated, detection is the next layer to protect
our daily lives from our economic base of commerce, our assets. Fencing, locks and lighting are effective
manufacturing and finance to everything we do in our deterrents, but to stop crimes during their commission,
domestic lives. Security is installing enhanced intrusion detection and
video systems at dozens of electric substations across
The UK government recognises the potential risks that the US, many of which are in New York State. This will
the country could suffer should a number of national reduce the risk of injury to the thieves, danger to our
security threats, including terrorism, be realised with employees and will improve reliability of our system.
a loss or impairment of the service National Grid
provides and is working with the company to reduce There are different types of systems, but they are all
some of the more significant vulnerabilities. based on detecting motion – and the systems are
smart enough to know the difference between a rabbit
Working with the Department for Energy and and a human. Once the motion alarm occurs, video
Climate Change and the government’s security is streamed to staff monitoring the alarms. Through the
advisers, we have identified a number of our assets, video they can determine if there is a National Grid
which if attacked and damaged could have the crew working – or a suspicious person trying to
greatest impact on our system.
steal copper. Police are contacted and the crime
will be stopped and often the criminals are caught.
The ISS Security Programme has been developed
between the government and National Grid to
reduce our vulnerability to these types of threats and CYBER SECURITY
mitigate the impact of any attack through a series of National Grid is subject to a number of new online
security improvements at our most important assets threats to its IT infrastructure every day. You will
which include a number of physical enhancements, constantly hear in the news how costly a cyber breach
controlled access, adoption of thorough personnel can be – in terms of reputation; loss of customer faith;
security practices and personal safety advice. lack of trust and engagement in the company from
This programme is also supported by our Digital staff; not to mention the biggest issue of customers’
Risk and Security team who oversee the protection personal details falling into the wrong hands.
of operational and business critical IT systems.
To prevent these attacks, National Grid is investing in
In the US, we are required to comply with North proactive measures to thwart infiltration and penetration
American Electric Reliability Corporation (NERC) to its IT system – the communication infrastructure
Critical Infrastructure Protection (CIP) standards. that we all so heavily rely on every day to run our
The Standards define the reliability requirements for business and do our job effectively. National Grid
planning and operating the North American bulk power continues to invest in necessary proactive preventative
system and require that we control both physical technology, improving processes and general
and cyber access to critical cyber assets (CCAs) awareness campaigns.
and stringently protect all information about them.

Business Overview Safety, Security Revenues Investment Information Summary
and Update and Reliability and Regulation and Innovation and Claims 35









































It is important that cyber security expenditure vulnerabilities and threats. Since the centre opened,
is directed into all areas that affect our security the CSOC team has monitored billions of events each
i.e. technology, people and processes. A lack of month to make sure we are all protected. A US version
processes can lead to data breaches too e.g. of the CSOC will open in the coming months. Due to
what and how often to install patches and updates the nature of their work, it is not always possible for the
for software should be managed by a process. CSO team to share news and celebrate successes.
The Cyber Security Operations team has been However, the team of cyber security professionals
set up for this reason. provides, among other operational capabilities:

The Cyber Security Operations team is actively working • Real-time intelligence: working closely with
with stakeholders within Digital Risk & Security, IS and UK and US government agencies, commercial
organisations and open source, to provide
of course the wider business to ascertain, develop and actionable, protective, intelligence to National Grid.
implement fit-for-purpose solutions and fixes. • Vulnerability alerting: working across the
business to proactively identify cyber threats
Cyber Security Operations (CSO) is the new name and then mitigate or log the risk. The team regularly
for the Investigation and Threat Management team, reviews over 35,000 devices across our estate.
a change which more accurately reflects the wide • Vulnerability scanning: working both internally
and externally, actively scanning our systems for
remit of the combined and growing team. The CSO vulnerabilities and again mitigating or logging risks.
function interfaces across all areas of the business, We scan 30,000 systems inside National Grid
delivering operational excellence in detective, and 400 on our perimeter, including 7000 links
on www. nationalgrid.com.
protective and responsive security services; we are • Penetration testing: by adopting the role
making sure that we meet our vision of connecting of a ‘hacker’, in excess of 60 systems were
our customers to their energy through a safe, reliable tested last year – that’s over one system a week.
and sustainable energy infrastructure. The UK Cyber • Incident management: working with
Security Operations Centre (CSOC), which opened Major Incident Management and across the
business to respond to cyber security incidents
in 2015, is an important part of the wider CSO team. around the clock.
The centre monitors and supports the analysis of
internal and external National Grid’s systems for

36 National Grid plc 2016/17 Annual Insurance Update









STRATEGIC ASSET MANAGEMENT
PROGRAMME (SAM)
In the UK, the RIIO price control arrangements
introduced measures that assess the health and
criticality of different assets on our network and
determine how we invest to keep our network reliable.
We plan to meet the relevant targets over the
eight year period by delivering a programme
based on the risk and criticality of our assets.
Long-term value to customers lies at the heart of our
asset management approach, so we have to make
difficult choices about how and when to maintain
or replace equipment. We continue to develop our HIGH ALTITUDE AERIAL
Strategic Asset Management (SAM) programme, SURVEILLANCE (HAAS)
which is increasing our knowledge about the Damage due to third parties is the biggest threat to our
condition of our assets, driving innovation projects high-pressure gas pipeline network. A ruptured pipe
and introducing new technology to help us monitor is very dangerous for the public or anyone working
the condition of our assets. The programme informs nearby, so we are continually seeking innovative ways
our decision-making approach, to make sure the right to reduce the risk. Our High Altitude Aerial Surveillance
work is done on the right assets at the right time. project promises many safety benefits.

In the UK, corrosion damage to our pipeline system Project HAAS will help us switch from helicopters,
is a key safety focus and significant investments have which were traditionally the best way to patrol our
been made to ensure our pipes are protected as far pipeline from the air, to fixed-wing aircraft that fly
as possible. This includes helicopter surveys and walks higher and faster. During helicopter patrols a human
along the pipeline route as well as internal pipeline observer manually records potential sightings or
inspection using the In Line Inspection (ILI) tool. threats on the on-board computer. The aircraft will
have a new automated system that identifies threats
During 2014/15 we invested £57 million in maintaining to the pipelines. This automated surveillance will
the health of our UK Gas Transmission assets which reduce the risk of third party damage and make
contributed to maintaining the safety and reliability our pipelines safer.
of our network. Our asset health approach focuses
on resolving issues identified with the condition or
performance of our assets. Investment is prioritised
according to the condition of the assets and their
criticality to the safe operation of our network. We aim
to deliver efficient asset health solutions by considering
appropriate remedial activities, including refurbishment
versus replacement. Additionally, our customers’
requirements for more varied and flexible utilisation
of the system continues to increase. To tackle these
challenges and to deliver benefit to customers, we are
working hard to deliver innovative solutions in a number
of areas.

Business Overview Safety, Security Revenues Investment Information Summary
and Update and Reliability and Regulation and Innovation and Claims 37












































HEALTH AND WELLBEING CAMPAIGN PROCESS SAFETY
Among our programmes for 2014/15 we have worked We have continued to focus on process safety and
to address the stigma and discrimination associated establishing a safety management system across
with mental health. We signed the UK Government-led both our UK and US businesses.
‘Time to Change’ pledge and have trained a further
92 employees in mental health first aid. We have also As part of our focus on process safety and the
helped more than 4,000 of our employees and our management of major hazard assets, we have
service providers’ staff understand their ‘heart age’ re-evaluated the risks surrounding our LNG assets.
and run a weight-loss campaign that raised more Further risk reduction measures were implemented
than £4,000 for Macmillan Cancer Support. for two sites, Commercial Point in Massachusetts
and Providence Rhode Island, where risk levels
In the US we have refreshed our soft tissue injury were established to be highest. These risk reduction
programme, aimed at helping reduce muscular measures included installation of automatic shutdown
skeletal disorders. Our employee opinion survey mechanisms which were completed in June 2014,
results continue to show that employees have a in addition to dyke redesign and construction to
growing awareness of our wellbeing programmes. improve containment of LNG escapes in the event
of an incident.
We have been continually increasing awareness and
developing our safety culture through training initiatives,
including eLearning. We are looking to improve how we
share learning from incidents more effectively, incidents
and lessons learned reports are shared with employees
on a daily basis.

38 National Grid plc 2016/17 Annual Insurance Update


Here are some examples

of our Health & Wellbeing

campaign focusing on

1 in 6 people mental health.
experience mental
health issues in
the workplace






1 in 6 people
experience mental
health issues in
the workplace

















To access any of the support
services, call
0845 094 8107
Or go to the Safety, Sustainability
and Resilience Health & Wellbeing
infonet pages.


Working well at National Grid





To access any of the support
services, call
0845 094 8107
Or go to the Safety, Sustainability
and Resilience Health & Wellbeing
infonet pages.


Working well at National Grid

Business Overview Safety, Security Revenues Investment Information Summary
and Update and Reliability and Regulation and Innovation and Claims 39









In the US, we continued our initiative aimed at revising and

upgrading our Safe Motor Vehicle Operations policy outlined
below, as well as a Soft Tissue Injury Prevention programme

and Slippery Surface Simulator training.




SAFE MOTOR VEHICLE OPERATIONS POLICY


• Cell phone requirements. • Smith System On the Road training 5 year
• Training requirements. refresher requirement.
• Employee, supervisor and the business’ • Advanced 1:1 On the Road training for higher
responsibilities. risk drivers.
• New hire and management transfer Department • Web based annual programme – Alert Driving.
of Motor Vehicles (DMV) requirements. • Post Incident training programme.
• Backing requirements/guidance. • New Hire Policy Module, awareness and
• Pre-trip requirements (i.e. Circle of Safety). understanding of the policy for all new hires.
• Awareness around distractions. • DriveCam System, evaluate risk and trends
for coaching.
• Dedicated Vehicle Safety Team.



ROAD TRAFFIC COLLISION TRENDS & IMPLEMENTION HISTORY
April 2015 include ‘*FY16 estimated’
1000
900 951 886 858
Number of Incidents 800 600 586 472 492
700
600
500
400
300
200 324
100
0
FY ’09 FY ’10 FY ’11 FY ’12 FY ’13 FY ’14 FY ’15 FY ’16

Gas and
DNY DriveCam Gas, GEN, Network PTO Alert Driving Smith Smith
businesses fully LIPA & Strategy starts Policy System System
risky drivers deployed Energy Mgt and Alert Module implemented expanded to
attend Smith in Gas start Alert PM&CC Driving Launch & all for Non-Ops all operations
System Driving start Alert remaining Target 20% Target 20%
Driving Non-Ops per year per year
started
Gas sending
15% / year FCM & Fleet UNY Electric, SHE, Transgas,
through start Alert Inventory Mgt, Inv Planning,
Smith Driving L&D, & Cust Risk Analytics
System start Alert Driving

40 National Grid plc 2016/17 Annual Insurance Update

Business Overview Safety, Security Revenues Investment Information Summary
and Update and Reliability and Regulation and Innovation and Claims 41









In the UK, the Driver Risk Management System has been

implemented for any employee with the potential to drive on
company business. Telematics have also been introduced into

our vehicles in an effort to reduce our Road Traffic Incidents and
provide better training post incident.




PERMIT
DRIVER
ENROLMENT






Staff list
supplied weekly


An employee with the
potential to drive on Driver Risk Assessment
Process repeated business will complete Online Declaration
annually this process Driver Licence Check






DYNAMIC
PERMIT TO DRIVE TRAINING
RISK SCORE










Risk Rating
Once the driver is fully Motoring Offences
compliant, they will be When Risk Score Threshold Young Drivers
issued with a Permit exceeded, further action is Vehicle Incidents
To Drive Card taken to mitigate risk Repeat Offenders




REQUIRED TO


• Obtain Hire Car
• Obtain Company Car
• Claim Mileage Expenses

42 National Grid plc 2016/17 Annual Insurance Update














LONDON GAS MAINS REPLACEMENT


We are investing nearly £1 billion over an eight year
period to 2021 in London’s gas distribution network.
In particular, we’re replacing and upgrading more than
2,500 kilometres of gas mains. The work will provide vital
infrastructure, supporting London’s economic growth
by continuing to provide a safe and reliable gas supply.


Our use of innovative technologies, like Core & Vac
keyhole technology, helps us to keep disruption to
a minimum, allowing the city to go about its daily
business while we improve the network for the future.

Business Overview Safety, Security Revenues Investment Information Summary
and Update and Reliability and Regulation and Innovation and Claims 43


Managing Pipeline Risk





UK AND US PIPELINE REPLACEMENT
Our approach to managing pipeline risks remains robust and as previously disclosed. In both the UK and the
US we have significant on-going programmes to decommission older metallic gas mains and replace them with
polyethylene which is flexible and resistant to corrosion. These replacement programmes are determined on a
prioritised and risk managed basis.

The charts below demonstrate the kilometres of mains replaced each year.
UK

2,500

2,000
1,500
1,000

500
0
2008/09 2009/10 2010/11 2011/12 2012/13 2013/14 2014/15

US
700
600
500
400
300
200
100
0
2009 2010 2011 2012 2013 2014 2015*
*The 2015 US pipeline replacement activity does not complete until 31 December and hence is the best forecast at the time of writing.

US LEAK RECEIPTS
26,000 23,671 23,424
24,000 19,648 19,987 20,135
22,000
Number of leaks 20,000 20,672 20,173 16,904 20,000
18,000
16,000
14,000
12,000 16,740
10,000
2006 2007 2008 2009 2010 2011 2012 2013 2014 2015
Year
“Leak Receipts” includes all self reported leaks and notifications of suspected leaks from the public, even where these are non-hazardous.


Following a significant gas incident, reporting is typically higher due to heightened public awareness.
By way of example, our leak receipts spiked in 2009 as a result of an incident in Gloucester, Massachusetts.

44 National Grid plc 2016/17 Annual Insurance Update


























































GAS ROBOTIC AGILE INSPECTION DEVICE (GRAID)


Project GRAID is a ground-breaking venture that helps
to assess the health of our assets. For the first time, we
have worked with partners to design and build a robotic
inspection device that can determine the true condition
of below-ground pipework at high-pressure gas
installations. By better understanding our assets we can
focus our excavation and pipe replacement work and
extend the life of assets that are in good condition.

Business Overview Safety, Security Revenues Investment Information Summary
and Update and Reliability and Regulation and Innovation and Claims 45









US Pipeline Inspection programmes

In the US service territory, we define transmission pipeline as those pipelines that operate at pressure equal to
or greater than 125 psig. There are almost 1,200 miles of pipeline that fit this criteria, of which 485 miles are
Department of Transportation (DOT) reportable and 293 miles are classified as High Consequence Area (HCA).
The bulk of the HCA pipe (96%) is located in New York State. National Grid’s Integrity Management Plan (IMP)
for our transmission pipelines consists of mandated requirements as well as additional initiatives taken by us as
we continually strive to ensure the safety and reliability of our transmission system.


Key elements of National Grids IMP programme are:
• Multi-layered risk mitigation activities.
• Review and understand our risks, using tools such as Process Hazard Analysis.
• Use of risk ranking models and performance metrics to develop maintenance and pipe
replacement programme.
• Testing of pipe via external direct assessment, inline inspection and use of new technologies such
as inspection robots, magnetic thermography and guided wave technology.
• Excavation and verification.
• Independent review of all records – gap analysis and verification of established maximum allowable
operating procedure.
• Periodic meetings with all stakeholders.
• Long range Operations & Maintenance (O&M) and Replacement programmes with a focus of Inline Inspection
(pigging) capability.
• Installation of remote operating valves at key locations.
We maintain a proactive approach in the operation and management of our pipeline system through anticipation of
future operating code changes, driving regulatory change to provide the biggest risk reduction, use of a multi-layer
approach to easily incorporate new methods as they are developed and including capital and O&M requirements
into our regulatory rate filings.



Total Transmission Transmission DOT Distribution
(> 125 psig)
Miles of Pipe 1,170 485 34,960
Mitigation Activities:
Leak Survey Yearly Yearly Business Districts – Yearly
Cast-/Steel – 3 Years
Plastic – 5 Years
Cathodic Protection System Yearly Yearly Yearly
Valve Inspection Yearly Yearly Yearly (Critical Valves)
Odorant Levels Weekly Weekly Weekly
Monitor Incoming Gas Continuously Continuously Continuously
Quality
Excavation Stand-By   
Physical Patrol   
Direct Assessment/Inline  
Inspection

46 National Grid plc 2016/17 Annual Insurance Update