Business Overview Safety, Security Revenues Investment Information Summary
and Update and Reliability and Regulation and Innovation and Claims 47
Surveys and Valuations Update
ENGINEERING SURVEYS
Our partnership with Aon Global Risk Consultants (AGRC) to provide independent engineering surveys across our
assets globally has continued in 2015. A further 12 locations were surveyed this year. These sites were selected
from either the rolling survey programme or were identified due to their high site values and/or criticality to the
network. The sites surveyed were:
UK USA
Diss Gas Compressor Haverhill HV Substation
Hinckley Office Reservoir Woods Office
Iver HV Substation Sandy Pond HVDC Converter Station
Pelham HV Substation Tewkesbury HV Substation
Peterborough Gas Compressor
Sellindge HVDC Converter Station
St John’s Wood HV Substation
West Ham HV Substation
Copies of all recent surveys are available on our renewal website.
ASSET VALUATIONS
We work alongside our businesses to determine modern day replacement values for our assets and major items
of plant and equipment. The values are based on a blend of incurred and forecast unit costs from our extensive
capital investment and mains replacement programmes. To support our regulatory (RIIO) submissions in the UK we
have done an extensive amount of work to rebase the unit costs for all major plant items. Annually, the valuations
are revisited and adjusted to reflect retail price index (RPI) and real price effects (RPE) specific to the
industry sector.
In our US businesses we use the industry wide Handy-Whitman Index of Public Utility Construction Costs to
refresh the valuations of our US asset base year on year.
48 National Grid plc 2016/17 Annual Insurance Update
Site Asset type Geography 2010 2011 2012 2013 2014 2015 2016
Aberdeen Gas compressor UK
Alrewas Gas compressor UK
Avonbridge Gas compressor UK
Bacton Gas terminal UK
Barking Substation UK
Commercial Point LNG storage US
Bridgewater Substation US
Britned – Isle of Grain HVDC Interconnector UK
Britned – Maasvlakte HVDC Interconnector Netherlands
Cambridge Gas compressor UK
Carnforth Gas compressor UK
Cellerhead Substation UK
Churchover Gas compressor UK
City Road Substation UK
Clay Substation US
Didcot Depot/Office/W’house UK
Diss Gas compressor UK
Drakelow Substation UK
E F Barrett Generation US
East Clayden Substation UK
Elstree Substation UK
Feckinham Substation UK
Felindre Gas compressor UK
Greenpoint LNG storage US
Hackney Cable Tunnel UK
Harker Substation UK
Hatton Gas compressor UK
Haverhill Substation US
Hicksville Depot/Offices/ Workshop US
Hinckley Office UK
Holtsville Generation US
Holtsville LNG storage US
Business Overview Safety, Security Revenues Investment Information Summary
and Update and Reliability and Regulation and Innovation and Claims 49
Site Asset type Geography 2010 2011 2012 2013 2014 2015 2016
Huntington Gas compressor UK
Isle of Grain LNG import terminal UK
Iver Substation UK
Kings Lynn Gas compressor UK
Kirriemuir Gas compressor UK
Mannington Substation UK
MetroTech Centre Office US
New Scotland Substation US
Northborough Office US
Northport Generation US
Pelham Substation UK
Peterborough Gas compressor UK
Port Jefferson Generation US
Providence LNG storage US
Ratcliffe-on-Soar Substation UK
Reservoir Woods Office US
Sandy Pond HVDC Interconnector US
Sellindge HVDC Interconnector UK
Solihull Office UK
Syracuse Office US
St Fergus Gas terminal UK
St. John’s Wood Substation UK
Tewksbury Substation US
Tilbury Substation UK
Wading River Generation US
Wakefield Substation US
Warwick Office UK
West Ham Substation UK
West Weybridge Substation UK
Willesden Substation UK
Wokingham Office UK
Wormington Gas compressor UK
50 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 51
Reliability
We need to keep the lights on and the gas flowing and we are
finding better value ways to do this without affecting reliability.
NETWORK RELIABILITY
Maintaining a safe and reliable supply is a critical part of our job. Our licences and regulatory agreements set our
reliability targets and these are linked to our revenue streams.
In the UK we met all our standards of service. We continue to maintain a world class standard of transmission
network reliability in the UK on both our gas and electricity systems. In the US, our overall safety and reliability
performance continue to improve for our electric and gas businesses.
Our overall reliability and availability performance during the year is summarised as follows:
NETWORK
RELIABILITY TARGETS MEASURE TARGET
10/11 11/12 12/13 13/14 14/15 14/15
Electricity transmission – UK 99.9999 99.9999 99.9999 99.9999 99.9999 % 99.9999
Gas transmission – UK 100 100 100 100 100 % 100
Gas distribution – UK 99.999 99.999 99.999 99.999 99.999 % 99.999
Electricity transmission – US 99.969 99.960 99.958 99.957 99.942 % –
Electricity distribution – US 99.997 99.977 99.980 99.980 99.969 % *
*Targets are set jurisdictionally by operating company.
(i) 2011/12 result restated to reflect final data.
(ii) 2012/13 result excludes New Hampshire which was sold during the year.
DELIVERING RELIABILITY
We deliver reliability by:
• Planning our capital investments to meet changing demand and supply patterns.
• Designing and building robust networks.
• Risk based maintenance and replacement programmes.
• Detailed and tested incident response plans.
National Grid plc 2014/15 Annual Insurance Update
52
52 National Grid plc 2016/17 Annual Insurance Update
RELIABILITY: ASSET HEALTH
SWITCHGEAR REFURBISHMENT
Switchgear describes the equipment at our
substations that is used to ensure the safe
running of our network as circuit breakers can
be used to turn circuits on and off to deal with
faults, current overload and to safely maintain
our network.
We are trialling innovative methods of
switchgear refurbishment, with a view to
managing the asset life of circuit breakers
and maximising the useful life of the
other equipment that is part of the overall
switchgear asset. This includes providing the
option of carrying out targeted (instead of full)
refurbishment, which extends the asset life
initially by ten years.
This could be supplemented by an option to
refurbish the asset again in a further ten years
(in other words, we’d be deferring asset
replacement for twenty years). Our cost-benefit
analysis of this strategy found that the ten year
refurbishment option provides better value for
consumers in the long run.
Under this refurbishment approach, the asset
health of circuit breakers remains a priority,
but the scope of refurbishment is tailored
to the asset life of associated bay assets.
The first targeted refurbishment trials have
achieved positive outcomes so we’re planning
to do more of them.
Business Overview Safety, Security Revenues Investment Information Summary
53
and Update and Reliability and Regulation and Innovation and Claims 53
2015 UK Future Energy Scenarios
With energy security and affordability continuing to be
high on the news agenda, National Grid launched the
2015 UK Future Energy Scenarios (FES), which set out
a range of credible futures for how Great Britain’s energy
landscape might evolve through to 2035 and 2050.
KEY MESSAGES FROM FUTURE ENERGY SCENARIOS (FES) 2015
Great Britain remains a net importer of
electricity in three out of four scenarios.
The scenarios highlight the increasing
operability challenges the electricity
industry faces.
Sufficient gas supplies are available in
all scenarios with significant uncertainty
on the source.
Gone Green is the only scenario to
achieve all renewable and carbon
targets on time.
WEB
Margins, whilst narrow, continue to be
manageable until 2018/19 when the Please scan here
to view further
capacity market delivers new sources information:
Future Energy
of capacity and margin pressures ease. Scenarios.
54 National Grid plc 2016/17 Annual Insurance Update
2015 UK Future Energy Scenarios
The 2015 scenarios bring together viewpoints and insights from stakeholders across the energy industry,
gained from an extensive engagement programme over 12 months, distilled into different pathways for Britain’s
energy future.
Consumer Power is a world of Gone Green is a world where green
relative wealth, fast paced research ambition is not restrained by financial
and development and spending. limitations. New technologies are
Innovation is focused on meeting introduced and embraced by society,
the needs of consumers, who focus enabling all carbon and renewable targets
on improving their quality of life. to be met on time.
500 MWe 458 M LEDs 300,000
Additional installations of gas CFL bulbs will peak in 2022 LEDs will be the only viable Annual sales of air source
CHP in commercial properties with 458 million units. option for light bulbs by 2030. heat pumps exceed 300,000
reaches 500 MWe in 2018. by 2020.
Solar Shale gas 400 10%
By 2020/21, solar PV installed Commercial production Over 400 new biomethane Electricity interconnection
capacity nearly quadruples of shale gas starts in 2020. connections will be required reaches the EU supply
to 18GW. by the end of 2025. capacity target of 10% by 2020.
40% 2025/26
By 2035/36 small scale By 2025/26, output from
generation will account renewable sources of
for 40% of the power electricity generation will
supply capacity. be comparable to that of
conventional power stations.
No Progression is a world focused on Slow Progression is a world where
achieving security of supply at the lowest slower economic growth restricts market
possible cost. With low economic growth, conditions. Money that is available is spent
traditional sources of gas and electricity focusing on low cost long-term solutions
dominate and little innovation affecting to achieve decarbonisation, albeit later
how we use energy. than the target dates.
130,000 50% 50,000 Offshore
Cavity wall installations DSR contribution will only Annual sales of hybrid Offshore wind capacity
don’t exceed 130,000 be up 50%, from today’s electric vehicles exceed doubles every five years
per annum. value, by 2030. 50,000 by 2019. until 2025/26.
Solar 89% 8.4 GW
Electricity interconnection
By 2035/36 the output By 2035/36, for electricity increases to 8.4 GW by 2020.
from solar will match generation, gas output will
that of coal. increase by 15% whilst coal
output drops by 89%.
Smart
13.6 million smart meters will
be rolled out by 2025.
Business Overview Safety, Security Revenues Investment Information Summary
and Update and Reliability and Regulation and Innovation and Claims 55
56 National Grid plc 2016/17 Annual Insurance Update
3
Revenues and
Regulation
Business Overview Safety, Security Revenues Investment Information Summary
and Update and Reliability and Regulation and Innovation and Claims 59
03 Revenues and Regulation
We are a long-term, asset-based business. Our operations are
regulated, which means we create value for our stakeholders
through predictable revenue streams.
Our regulatory framework and our performance against it define our allowances and the revenues that we are
allowed to recover from our customers. This ‘allowed revenue’ is calculated based on a number of factors.
These include:
INVESTMENT IN PERFORMANCE AGAINST
NETWORK ASSETS INCENTIVES
RETURN ON EQUITY CUSTOMER SATISFACTION
AND COST OF DEBT SCORES
In addition to the investment required for new connections we also need to replace ageing infrastructure in both
the UK and US. We are seeking to achieve this in a safe, reliable and efficient way utilising innovative ways of
working, wherever possible, to deliver savings to our customers without compromise to performance.
60 National Grid plc 2016/17 Annual Insurance Update
UK Operating Environment
CHANGING ENERGY MIX REGULATION
Changing fuel costs and environmental programmes Infrastructure investment needs must be balanced with
are affecting traditional electricity generation. affordability. We must accommodate customers’ cost
concerns and also provide safe, up-to-date systems.
In February 2015 DECC announced the results of the
first Contracts for Difference (CfD) auction allocation Regulators acknowledge that there is a significant
rounds, with wind technology making up the bulk of need for investment in aging infrastructure which
contracted generation. can contribute to greenhouse gas emissions through
leaks. However, affordability continues to be a
Continued support for solar through Feed in Tariffs primary concern.
(FiTs) and the Renewables Obligation contributed to
growth in installed solar. UK regulators want greater efficiency and
innovation and this is driving them to favour
Older fossil fuel plants continue to face the challenge more market competition.
of environmental regulations while the new nuclear
plant at Hinkley received State Aid approval from
the European Commission in October 2014. INNOVATION AND TECHNOLOGY
Performance improvements and cost declines
This could lead to significant network investment have led to continued growth in new technologies.
opportunities, with interconnection between the UK Distributed generation of solar power has grown
and adjacent European markets delivering net benefits significantly. Further investment in electricity distribution
to the UK. networks may be necessary to integrate these
new technologies.
ENERGY POLICY
Sustainability, security of supply and affordability
underpin EU policy. Negotiations for a new
international agreement on climate change
continued at the twenty-first session of the
Conference of Parties (COP21) in Paris in
December 2015. Policy decisions can affect
our investment needs and compliance obligations.
AVI
Please scan here
to view video:
What Outage?
Business Overview Safety, Security Revenues Investment Information Summary
and Update and Reliability and Regulation and Innovation and Claims 61
US Operating Environment
CHANGING ENERGY MIX ENERGY POLICY
In the US, shale gas development has continued US policy is evolving to meet environmental and
to keep national wholesale prices low which has energy diversity goals. Options for increased
increased the amount of gas used for electricity renewable and distributed generation are
generation, causing constraints into the northeast US. being explored. We continue to support movement
Oil to gas conversions will continue as gas maintains its towards a clean energy economy and support
price advantage. New interstate gas pipeline capacity additional measures to increase the US’s
is needed to overcome this growing gas demand. energy productivity.
Environmental Protection Agency regulations have
led to generator retirements or increased costs REGULATION
for compliance. US regulators are focused on system modernisation
and integration of new distributed energy resources.
Renewables are growing their share of electricity Investments to modernise networks and integrate
generation and account for a significant amount of distributed resources will offer new options and value
newly installed capacity. The electricity transmission to customers. State officials in Massachusetts and
system will need upgrades and rebalancing due New York have approved gas system investment
to generation retirements and to connect new programmes to accelerate replacement of
renewable sources. ageing infrastructure.
FERC is reforming transmission planning and
promoting competition in the transmission industry.
Competitive transmission planning provides
opportunities for us. FERC issued Order 1000 in
2011 which has opened our service territory to
competition from non-incumbent transmission
developers and also created opportunities for us
to compete for transmission projects outside of
our current geographic footprint.
INNOVATION AND TECHNOLOGY
Energy storage is growing in the US as certain states
set goals and other utilities announce investment plans
for storage capacity.
Plug-in electric vehicle sales in the US and worldwide
grew, even as gasoline prices dropped throughout the
past year. Investment in renewable energy continues
to grow. Regulatory proceedings are underway to
enhance the value of distributed resources to the grid
and give customers more control over their energy use.
62 National Grid plc 2016/17 Annual Insurance Update
Revenue
We own a portfolio of businesses that range from cash-generative developed assets with minimal investment
requirements (such as National Grid Metering, included within Other activities) to businesses with high levels of
investment and growth (such as US Gas Distribution).
We operate both regulated and non-regulated businesses. The regulated businesses revenue is governed by the
various regulators in the UK and US whereas the non-regulated businesses operate in a competitive market place.
We generate 95% of our revenue from our main regulated businesses in the UK and US. We work with our
regulators to obtain agreements that balance the risk we face with the opportunity to deliver reasonable returns for
our investors. In the event of a significant outage we would not envisage a major impact to our revenue as there
are provisions under our regulatory regimes to recover the majority of such losses. We would however expect to
incur additional costs associated with the repair, replacement and restoration of the network infrastructure as well
as possibly affecting some of our regulatory incentives in the event of a non-emergency scenario.
When investing in non-regulated businesses we aim to leverage our core capabilities to deliver higher returns
for investors.
The following charts show the split of our revenues and adjusted operating profit by business and by geography.
5%
5%
31% 70%
30% Adjusted 52% Adjusted
Revenue operating 43% 48% Revenue operating
profit profit
52%
12% 30%
22%
UK Transmission UK Gas Distribution UK/Rest of World US Regulated
US Regulated Other activities
Please note that the forecast and actual revenues are included under the revenue section of our renewal website
(www.nationalgridinsurance.com). How we make money from our regulated assets is also more fully described
in our Annual Report and Accounts. Typically, our accounting figures include a number of items which from an
insurance perspective would not normally be considered as revenue for rating purposes:
• Net Fuel Costs: US revenue includes a commodity price element which does not contribute to profit known
as “Net Fuel Costs”. This includes gas and electricity purchases, for supply to our customers and transmission
charges which are pass-through costs.
• Deferrals: Particularly in the US, the efficient costs we incur may not be included in the calculation of allowed
revenue in the same year. Instead, these are deferred for regulatory purposes and we can recover them in
future years. For example, we incur costs restoring power to customers immediately after a major storm.
However, these costs will generally be included in allowed revenue over a number of years and may not start
until the relevant regulator has approved a request. This can be some time after the storm and may not cover
all the costs.
• Corporate Centre, Business Services and Shared Services: Revenues are based on the internal costs of
running the business which are then allocated and recharged to the operational businesses for which the
services are provided.
Business Overview Safety, Security Revenues Investment Information Summary
and Update and Reliability and Regulation and Innovation and Claims 63
Regulation
Due to our position in, and importance to, the economies we serve, our electricity and gas transmission and
distribution businesses are subject to UK, European Union and US federal and state laws and regulations.
Therefore, we have a number of regulators, exercising power over how we operate within their respective
jurisdictions. Changes in law and regulation, including decisions of government bodies or regulators,
in the countries and states in which we operate can materially affect our operations.
UK US
100% 100% 6% 6%
21%
21% 14% 14%
% of Rate Base % of Rate Base % of Rate Base % of Rate Base
21
21
79 79
59% 59%
Ofgem Ofgem Rhode Island Public Utility Commission (RIPUC)Rhode Island Public Utility Commission (RIPUC)
Massachusetts DPU (MADPU)Massachusetts DPU (MADPU)
FERC New York PSC FERC New York PSC
Our regulators, both in the UK and the US, are concerned with ensuring we provide a safe, reliable and efficient
service to our customers. Our ability to deliver that service and to deliver returns to our investors depends on our
relationships with those regulators.
Recognising the value of the relationship with our regulators and other stakeholders we have restructured our
business to respond better to their respective needs, for example, moving to a jurisdictional model in the US.
In total our UK regulated asset value (RAV) and US rate base increased by £2.3 billion (7%) to £37.0 billion
in 2014/15. This reflects the continued high levels of investment in our networks in both the UK and US,
together with the impact of the stronger US dollar.
64 National Grid plc 2016/17 Annual Insurance Update
RIIO
On 1 April 2013, our UK regulator introduced
a new regulatory framework called RIIO
(revenue = incentives + innovation + outputs),
which lasts for eight years.
Our UK regulated businesses delivered a strong
financial performance in the second year of RIIO.
We aim to create value for our stakeholders
by focusing on performance and making sure
our processes are as efficient as they can be.
Savings generated in the first two years of RIIO
will reduce future customer bills by around
£200 million.
Business Overview Safety, Security Revenues Investment Information Summary
and Update and Reliability and Regulation and Innovation and Claims 65
US
The objectives of our rate case filings are to make sure we have the right cost of service with the ability to earn a
fair and reasonable rate of return, while providing safe, reliable and economical service to our customers. In order
to achieve these objectives and to reduce regulatory lag, we have been requesting structural changes, such as
revenue decoupling mechanisms, capital trackers, commodity-related bad debt true-ups and pension and other
post-employment benefit true-ups, separately from base rates. We completed the final stabilisation upgrade to
our new financial systems in July 2014. The new systems will facilitate future regulatory filings and capture the
benefit of the increased investments in asset replacement, network reliability and customer growth. We expect
to make a number of such filings over the next two to three years to update the capital investment allowances
and rate base across many of our businesses. Specifically, KEDLI, KEDNY and Massachusetts Electric will file
applications for new rate plans with their regulators during the 12 months ending 31 March 2016. Moreover, as
part of current regulatory initiatives, we will file proposals for investments in grid modernisation in Massachusetts
and for innovative technology deployments and service offerings as part of the Reforming the Energy Vision effort
in New York.
SUMMARY OF US PRICE CONTROLS AND RATE PLANS
Rate base (31 Mar 2015) Equity to debt ratio Allowed return on equity Achieved return on equity (31 Dec 2013) Revenue decoupling † Capital tracker ‡ Commodity-related bad debt true-up § Pension/ OPEB true-up ◊
2012 2013 2014 2015 2016 2017
Rate plan
1
New York Niagara Mohawk $4,453m 48:52 9.3% 9.0% ✓ ✗ P ✓
Public Service (upstate, electricity)
Commission Niagara Mohawk $1,060m 48:52 9.3% 8.3% ✓ ✗ P ✓
(NYPSC) (upstate, gas)
KEDNY (downstate) 2 $2,387m 48:52 9.4% 8.5% P P P ✓
KEDLI (downstate) 3 $2,146m 45:55 9.8% 6.5% P P P ✓
Massachusetts Massachusetts Electric/ $1,905m 50:50 10.35% 4.6% ✓ P ✓ ✓
Department of Nantucket Electric
Public Utilities Boston Gas $1,427m 50:50 9.75% 7.8% ✓ P ✓ ✓
(MADPU)
Colonial Gas $320m 50:50 9.75% 7.9% ✓ P ✓ ✓
Rhode Island Narragansett $570m 49:51 9.5% 9.5% ✓ ✓ P ✓
Public Utilities Electric
Commission Narragansett $496m 49:51 9.5% 11.6% ✓ ✓ P ✓
(RIPUC) Gas
Federal Energy Narragansett $607m 50:50 11.57% 12.1% n/a ✓ n/a ✓
Regulatory
Commission Canadian $16m 51:49 13.0% 13.0% n/a ✓ n/a ✓
(FERC) Interconnector
New England $1,380m 68:32 10.57% 11.6% n/a n/a
Power ✓ ✓
Long Island $446m 46:54 10.0% 10.5% n/a ✓ n/a ✓
Generation
1. Both transmission and distribution, excluding stranded costs. Rate filing made Rate plan ends
2. KeySpan Energy Delivery New York (The Brooklyn Union Gas Company). New rates effective Rates continue indefinitely
3. KeySpan Energy Delivery Long Island (KeySpan Gas East Corporation). ✓ Feature in place | ✗ Feature not in current rate plan | P Feature partially in place
†Revenue decoupling §Commodity-related bad debt true-up
A mechanism that removes the link between a utility’s revenue and sales volume A mechanism that allows a utility to reconcile commodity-related bad debt to
so that the utility is indifferent to changes in usage. Revenues are reconciled to a either actual commodity-related bad debt or to a specified commodity-related
revenue target, with differences billed or credited to customers. Allows the utility bad debt write-off percentage. For electricity utilities, this mechanism also
to support energy efficiency. includes working capital.
‡Capital tracker ◊Pension/OPEB true-up
A mechanism that allows for the recovery of the revenue requirement of A mechanism that reconciles the actual non-capitalised costs of pension and
incremental capital investment above that embedded in base rates, including OPEB and the actual amount recovered in base rates. The difference may be
depreciation, property taxes and a return on the incremental investment. amortised and recovered over a period or deferred for a future rate case.
66 National Grid plc 2016/17 Annual Insurance Update
Regulatory Filings
MASSACHUSETTS solar facilities. We have entered into contracts with
developers to deliver constructed solar generation
facilities by 2015 and will petition MADPU for
cost recovery in 2016 once the solar facilities
become operational.
GRID MODERNISATION
MADPU is increasingly focused on improving
service and reliability to customers, with a focus
on greater choice for customers and integrating
distributed energy resources. MADPU directed us
CAPITAL INVESTMENT PROGRAMMES to file a grid modernisation plan in August 2015
that demonstrates how we will make measurable
Most recently, on the electricity side, MADPU allowed
approximately $12 million into rates effective from progress towards reducing the effect of outages,
1 March 2015, related to $170 million of plant optimising demand, integrating distributed resources
investments made in 2013. On the gas side, MADPU and improving workforce and asset management.
allowed approximately $15 million into rates effective The grid modernisation plan represents a new capital
from 1 November 2014, related to $134 million of investment opportunity for us. MADPU established
plant investment made in 2013. criteria that, if met, would allow the capital costs from
the plan to be recovered through a separate capital
Additionally, recent legislation in Massachusetts recovery mechanism.
grants us greater ability to cost effectively accelerate
the replacement of our ageing gas infrastructure Additionally, our Worcester, Massachusetts Smart
by receiving concurrent cost recovery for eligible Energy Solutions pilot began on 1 January 2015.
capital investments. We submitted a plan to MADPU The pilot is testing grid modernisation technologies
on 31 October 2014 to replace all eligible ageing for approximately 15,000 customers, with a goal of
gas infrastructure on our system within 20 years reducing peak and average loads by 5%. We filed on
by increasing the annual replacement rate by 15 September 2014 to recover $11 million of costs
approximately 50% within the next 10 years and then incurred in 2012 and 2013 to implement this pilot.
maintaining this replacement rate for the remainder of MADPU is currently reviewing the Company’s
the programme. On 30 April 2015, MADPU approved request and a decision is expected in early 2016.
our proposal to place an additional $9.7 million
into rates effective from 1 May 2015, related to SERVICE QUALITY
$175 million of anticipated investments in 2015 MADPU issued its final order and service quality
under this accelerated pipe replacement plan. guidelines for all gas and electricity companies
on 22 December 2014. MADPU made changes
SOLAR INVESTMENT LEGISLATION to the current service quality structure, including
removing financial offsets to penalties, setting state-
Recent legislation extended our ability to construct,
own and operate a total of up to 25 MW of solar wide benchmarks and changing the calculation of
facilities within our electricity service territory if benchmarks and penalties. The new guidelines are
the facilities are constructed by 30 June 2016. effective from 1 January 2015. However, there is a
MADPU also pre-approved an amount not to exceed motion for clarification and reconsideration currently
$97.6 million for ownership costs, lease expenses pending before MADPU on this matter.
and property tax expenses associated with the
Business Overview Safety, Security Revenues Investment Information Summary
and Update and Reliability and Regulation and Innovation and Claims 67
NEW YORK The audit found that our operations performed
well in providing reliable gas service and noted
strength in operations, network planning, project
management, work management, load forecasting,
supply procurement and customer systems support.
The audit report offered 31 recommendations aimed
at promoting improvement in the performance of our
New York gas businesses, including recommendations
around strengthening of the National Grid US
jurisdictional operating model, enhancing the service
level agreements between the operating companies
and supporting functions and corporate governance.
We generally accept the recommendations presented in
UPSTATE NEW YORK 2012 RATE PLAN FILING the report and are currently working on implementation.
Effective from 1 April 2014, the upstate New York KEDLI GAS INVESTMENT PLAN
electricity and gas businesses entered the second
year of their three year rate plan. In June 2014, KEDLI petitioned the NYPSC for
approval of a deferral mechanism related to a
proposed gas infrastructure investment programme.
REFORMING THE ENERGY VISION (REV)
In December 2014, the NYPSC approved two
In April 2014, the NYPSC instituted the REV gas investment plans for calendar years 2015 and
proceeding, which considers options for a new 2016, one for leak-prone pipe capital expenditures
regulatory and operational model for electricity (capped at $211.7 million in total) and one for
utilities that includes a greater emphasis on gas service expansion expenditures (capped at
incorporating distributed energy resources (DER) $202.9 million in total). The NYPSC approved a
via market mechanisms. The NYPSC envisions a surcharge to begin recovery of the deferred leak-prone
new role for utilities as distributed system platform pipeline investment costs, allowing for the recovery
(DSP) providers who create markets for DER and up to a total of $23.4 million through a surcharge
more fully integrate DER in distribution system effective from 1 April 2015 until the end of 2016.
operations and planning.
KEDLI received approval to establish a new deferral
accounting mechanism for the balance of the approved
The REV proceeding’s objectives include: enhanced
customer energy choices and control; improved costs not covered by the surcharge.
electricity system efficiency, reliability and resiliency;
and cleaner more diverse electricity generation. NEW YORK TRANSCO
In February 2015, the NYPSC issued an order addressing On 14 November 2014, the four New York investor-
various technical, policy and market design issues. owned utilities (IOUs), including Niagara Mohawk
Power Corporation, formed NY Transco LLC,
2013 NEW YORK GAS MANAGEMENT AUDIT a New York company whose sole business will
be to plan, develop, construct and own major new
In October 2014, the NYPSC issued a report on
the results of the comprehensive management high voltage electricity transmission projects across
and operations audit of our three New York gas New York State. In early December 2014, the four
distribution utilities. New York law requires periodic IOUs and NY Transco filed on behalf of NY Transco
management audits of all utilities at least once every an application with FERC to establish a formula rate,
five years. We last underwent a management audit in rate incentives and cost allocation for a portfolio of five
2009 when the NYPSC audited Niagara Mohawk’s new transmission projects with a combined estimated
electricity business. total cost of over $1.7 billion.
68 National Grid plc 2016/17 Annual Insurance Update
RHODE ISLAND RHODE ISLAND 2014/15 ELECTRICITY
AND GAS INFRASTRUCTURE, SAFETY
AND RELIABILITY (ISR) PLANS
In December 2014, we filed with the RIPUC for review
and approval of our annual ISR plans for the electricity
and gas systems. RIPUC approved the 2016 ISR
plans on 31 March 2015. The electricity ISR plan
encompasses a $73.3 million spending programme for
capital investment and $12.1 million for operating and
maintenance expenses for vegetation management
and inspection and maintenance. The gas ISR plan
encompasses $76.8 million for capital investment
and incremental operation and maintenance expense
for the hiring and training of additional personnel to
support increases in leak-prone pipe replacement.
RHODE ISLAND RENEWABLE ENERGY
GROWTH PROGRAM
In June 2014, the Rhode Island legislature enacted
legislation to facilitate and promote installation of
distributed renewable energy generation. As a result,
in November 2014, we filed with RIPUC a proposal
to implement the Rhode Island Renewable Energy
Growth Program, which replaces our current
programme and will create a feed-in-tariff (FIT)
programme to support a total of 160 MW of
renewable distributed generation projects over a five
year period. RIPUC approved the new programme
on 31 March 2015. Under Rhode Island law,
we can recover the incremental costs associated
with the programme and are entitled to earn
incentives equal to 1.75% of the gross payments
made under the FIT.
Business Overview Safety, Security Revenues Investment Information Summary
and Update and Reliability and Regulation and Innovation and Claims 69
FERC
NEW ENGLAND GAS AND ELECTRICITY In these orders, FERC also found that the total or
INTERDEPENDENCY maximum RoE for our New England transmission
To address the challenge of restricted gas availability business, including various RoE incentive adders
for generation and decreased electricity reliability, authorised by FERC, cannot exceed 11.74% during
New England’s governors have established an initiative these periods.
envisaging coordinated strategic infrastructure
investments focused on expanding the region’s energy FERC ORDER 1000
portfolio. We are working with representatives from Issued in 2011, Order 1000 was FERC’s major policy
several states, other regional electricity and gas utilities, order intended to foster regional and inter-regional
interstate gas pipelines, state regulators and FERC transmission planning, address transmission needs
in realising the governors’ goals. We have put driven by public policy requirements and increase
forward structural proposals which would support the competition in the electric transmission industry.
development of additional gas pipeline infrastructure In 2014 and 2015, FERC issued orders on filings made
to serve the region’s needs and are also developing by the New York and New England system operators
electricity transmission proposals to increase the to comply with Order 1000 and continue to implement
ability to deliver clean low carbon energy to enable a package of reforms addressing transmission
a balanced solution to the region’s energy needs. planning and cost allocation. A federal court upheld
key provisions of Order 1000 against legal challenges
COMPLAINTS ON NEW ENGLAND in an August 2014 decision. Policies to comply with
TRANSMISSION ALLOWED ROE
Order 1000 have been in effect in New York since
In September 2011, December 2012 and July 2014, January 2014 and became effective in New England
complaints were filed with FERC against certain in May 2015. The competitive transmission planning
transmission owners, including our New England processes instituted under Order 1000 have opened
electricity transmission business, to lower the base our service territory to competition from non-incumbent
RoE from the FERC approved rate of 11.14%. transmission developers and also created opportunities
In orders addressing the September 2011 complaint for National Grid to compete for transmission projects
issued in June 2014, October 2014 and March outside of the Company’s current geographic footprint.
2015, FERC set the base RoE for the first complaints
15 month historical refund period and for a prospective
period beginning in October 2014 at 10.57%.
70 National Grid plc 2016/17 Annual Insurance Update
Regulatory Environment
These next paragraphs aim to provide a high level overview of our liability for supply obligations across our
regulated business activities in both the UK and US. More detailed information about this area of interest has
been included this year on our renewal website, in the ‘supporting information’ section.
ELECTRICITY TRANSMISSION – UK GAS TRANSMISSION &
Supply obligations are in the main governed by GAS DISTRIBUTION – UK
the Connection and Use of System Code (CUSC) We are obliged (under our operating licence) to purge
agreement which requires all holders of a generation, and relight all properties which have been disconnected.
distribution or supply licence to be a party to the CUSC
framework agreement and to comply with CUSC. In the event of a major loss of supply National Grid
Gas would call on the huge number of engineers that
The agreement limits liability (Cl. 6.12) to physical loss it has available to it. The resources would be drawn
or damage to the property of any of the other parties from approximately 4,500 gas engineers and directly
subject to CUSC or physical loss or damage to any managed contractors as well as 3,500 Gas Distribution
third party, plus common law liability for death or Strategic Partnership contractors.
personal injury resulting from negligence; loss of profits,
revenue, use and consequential losses are all excluded. An Order could be sought from the Secretary of State
However, some parties are not subject to CUSC and for self-reconnection if more than 50,000 consumers
our liability to these parties is governed by contracts lose supply. The reconnection costs are specifically
with each party and the contractual liability is no covered under our property damage/business
broader than that of Common law. interruption policy.
For further detail see: US
www.nationalgridinfo.co.uk/uk/Electricity/codes
In the event of a ‘failure to supply’ gas incident or
Whilst currently untested, legal opinion supports the interruption to power, the claimant can sue based
stance that the CUSC framework agreement is robust. on the following:
• Common law breach of contract.
The European Third Energy Package came into law on
• Breach of the Uniform Commercial Code (UCC).
3 March 2011. It is a key step towards harmonising
• Implied warranties of merchantability & fitness for
the European energy market. The European Network particular use.
Codes (ENCs) will take precedence over the existing • Negligence in the supply of electric power.
GB codes where differences arise and covers • Gross negligence.
connections, markets and system operations.
Like other utilities we file for immunity for the failure to
supply under our tariffs. The tariffs hold us liable where
gross negligence is proven (there are slight variations
in language and definitions of gross negligence from
state to state). These tariffs are filed with and apporved
by the various Public Service Commissions and FERC,
if you would like to explore this aspect further. As with
the UK, similar exposures for reconnection exist in
the US. The New York Public Service Commission has
directed us to relight any pilots that go out as a result
of a storm, our negligence, or that of our contractors.
The reconnection costs are specifically covered under
our property damage/business interruption policy.
Business Overview Safety, Security Revenues Investment Information Summary
and Update and Reliability and Regulation and Innovation and Claims 71
72 National Grid plc 2016/17 Annual Insurance Update
4
Investment and
Innovation
Business Overview Safety, Security Revenues Investment Information Summary
and Update and Reliability and Regulation and Innovation and Claims 75
04 Investment and Innovation
The energy landscape within which we operate is changing.
We continue to invest efficiently to deliver world-class reliability
for our stakeholders and enable our customers to connect to
our networks.
Delivering benefits for our stakeholders
has been at the forefront of each of our
Innovation projects. This has driven
collaboration across the industry in search
of new techniques to revolutionise the
way we work. Expenditure on research
and development during the year was
£23 million versus £12 million in 2013/14 and
£15 million in 2012/13. Innovation funding
throughout 2014/15 has stimulated
greater investment across all three of
our UK Regulated business areas.
Growing our core businesses and developing
future new business options depend on delivery
of our investment plans. Combining this with
operational and procurement efficiencies
contributes to our ability to achieve strong
returns and meet our commitment to investors.
Much of our capital expenditure work involves
asset replacement but there are also a number
of new initiatives.
In this section of the brochure we highlight
some of our current investments, in people
and assets, as well as new technologies
and initiatives.
AVI
Scan here to
view The Future
of Energy video.
76 National Grid plc 2016/17 Annual Insurance Update
UK Investment in Assets
National Grid is continually investing in infrastructure to ensure that gas and electricity are delivered as efficiently and
safely as possible. We are spending around £26 billion, over an eight year period commenced April 2013, on replacing
and upgrading our networks to ensure we continue to deliver world-class levels of reliability every single day.
Icelink NSN
Link GB to Iceland Link GB to Norway
Build / operate 1.4GW, 720km interconnector
1GW interconnector Construction 2015
Timing – post 2022 Timing – 2020
Estimated capital ~€3.5bn Estimated capital ~€2bn
Subject to investment decision
Viking
IFA Link GB to Denmark
2GW, 70km interconnector York & Humber CCS Pipeline
1GW, 600km interconnector
Operational 1985 We are working on plans to construct a
Construction 2017
pipeline for transporting carbon dioxide,
St. Fergus
which would support the development of
Timing – 2020/21
carbon capture, transportation and storage
Estimated capital ~€2bn
Western Link
Grain Phase 4 (CCS) technology in the Yorkshire and
A £1bn joint venture
The ideal location and Humber region. Subject to investment decision
project with Scottish
favourable site provide
Power. The project will
bring renewable energy
significant opportunities BritNed
from Scotland to
for further expansion of 1GW, 260km interconnector
England and Wales,
Grain LNG (Phase 4). Operational 2011
via a pair of sub-sea
A final investment decision is Bramford – Twinstead
high-voltage cables.
This project supports the connection of a
subject to market requirements range of generators to the national grid
but could be in excess via a new 400kV electricity transmission
NEMO
of £300m and provide connection in East Anglia.
Link GB to Belgium
an additional 6m tonnes to Ballylumford Teesside 1GW, 130km interconnector
per annum of capacity. to Dublin
Construction 2015
Mid Wales Barrow Timing – 2019
This project connects a
BioSNG Plant Easington Estimated capital ~€700m
number of new windfarms to
Turning household waste from the
the national grid via a new
400kV electricity transmission
into fuel IFA2 Burton Point Theddlethorpe Netherlands
connection in Mid Wales.
Partners: Advance Plasma Link GB to France Bacton
Power. Progressive Energy 1GW, 240km interconnector to/from
and Carbotech. Belgium
Construction 2016/17
Timing – 2020
Estimated capital ~€850m Subject to investment decision
Hinkley Point BritNed to/from
We are proposing a South Hook Subject to investment decision Operational
the Netherlands
new 400kV electricity Dragon Construction
connection between Grain LNG
Bridgwater in Somerset
and Seabank, in order
Depending on our partner, we may create each project either as an incorporated or unincorporated joint venture.
to connect the new
nuclear power station to/from
at Hinkley Point and France
proposed other
generators, including London Power Tunnels
A £1bn, seven-year project to rewire the Capital via deep
a new gas-fired power underground tunnels in order to meet increasing electricity demand
station at Seabank. and to help London access the future renewable energy generation.
Over an eight year period Providing safe and reliable
we will replace 15,000 kms gas networks to 1,680,000
of gas mains – enough households, equivalent to
pipe to stretch from improving the gas mains to
London to Perth, Australia. more than the population of
Wales (1.3M).
Business Overview Safety, Security Revenues Investment Information Summary
and Update and Reliability and Regulation and Innovation and Claims 77
US Investment in Assets
We are investing $10 billion over the next five years in our infrastructure throughout New York, Massachusetts
and Rhode Island to enhance the resilience, efficiency and safety of our networks.
Potsdam Microgrid 16 MW of Solar in
Our partnership with Clarkson University on Massachusetts
a microgrid project in Potsdam, NY will keep We’ve gone from 5 solar sites
electricity flowing in Potsdam communities on company-owned property
even in the most extreme weather events. to 19 sites across the state.
New York Transco New England East-West
$1.7 billion transmission projects to improve Solution (NEEWS) Project
reliability and reduce congestion in New York. This a set of four related
transmission projects
developed by a working group
from National Grid, Northeast
Utilities and ISO New England.
The main components of these
projects are 345-kilovolt (kV)
lines, but they also include
upgrades to substations and
improvements to the region’s
115-kV electric system.
Access Northeast pipeline Fields Point LNG, RI Aquidneck Island
$3 billion project that aims to $100 million LNG system at The $93 million Aquidneck
significantly increase natural Fields Point in Providence, RI. Island Reliability Project will
gas capacity to generators in bring more reliable power to
New England. the nearly 32,000 homes and
businesses in Portsmouth,
Middletown and Newport.
The project includes two
state-of-the-art substations,
AVI reconfiguration of two
transmission lines, local
Please scan here distribution work and
to view video: retirement of five substations
Beam me up, Solar – on the island.
a Connect21 video.
78 National Grid plc 2016/17 Annual Insurance Update
Demand Side Balancing Reserve (DSBR)
LIMEJUMP Limejump’s software and technology connects
Limejump’s mission is to transform energy with data. to customers’ smart meters and control devices.
From its offices in central London, this pioneering The intuitive platform is powered by ‘big data’ –
start-up uses cutting edge software and technology from live and forecast weather data, to relevant
to help businesses across the country take part in market prices, to customer tariff information –
balancing the National Grid. helping businesses proactively manage their power
demand or switch to their own on-site generators at
Limejump’s partnership with National Grid is a perfect peak times.
match for this cloud-based platform, which was
created to help businesses drive electricity savings This is an easy way for companies to generate new
and generate new revenue streams by taking part revenue which will have a positive impact on the
in demand response programmes through ‘a virtual companies taking part. It is a great illustration of
power plant’. what we are doing as a modern, progressive and
greener business.
Piloted last winter, DSBR is National Grid’s innovative
new emergency back-up scheme. It will be active FLEXITRICITY
between 4pm and 8pm on weekday evenings Flexitricity can be described as a ‘virtual power station’
between November and February.
as it provides reserve energy to the National Grid by
harnessing the flexibility available from industrial and
A data-driven revolution is taking place in the energy
commercial partners.
market. Companies across the UK are switching to the
innovative Demand Side Balancing Reserve (DSBR)
The company has provided reserve energy to National
service, where National Grid pays businesses to use
Grid since 2008, extending this service provision to
less energy at peak times. Limejump are pioneers in
National Grid’s innovative emergency back-up scheme
this dynamic new marketplace.
known as the Demand Side Balancing Reserve (DSBR),
piloted over the winter months of 2014 and 2015.
Business Overview Safety, Security Revenues Investment Information Summary
and Update and Reliability and Regulation and Innovation and Claims 79
Investment in our People
PERFORMANCE EXCELLENCE VOLUNTEERING
During 2014/15, we have worked on boosting Our employees continue to support our local
the capabilities of our employees in the areas of communities, sharing their time and expertise on
Performance Excellence, stakeholder engagement, a range of skills-based volunteering and fundraising
customer focus and contract management. activities. In the UK we raised over £500,000 for good
We see these capabilities as being crucial in causes and provided over 9,000 hours of support
helping us improve our performance and meet to community projects. Our support of City Year now
regulatory and customer expectations. includes a new mentoring programme in Birmingham
and we launched ‘Good Leaders’, a programme
More than 900 employees have attended our
Performance Excellence programmes; more than that shares our leadership expertise with the charity
650 employees have attended our stakeholder sector. In the US, our Power to Serve employee
engagement and customer focus programmes; volunteering programme supports our stewardship
and around 250 employees have attended our and safety principles. It seeks to acknowledge existing
contract management programmes. community service, as well as to create new volunteer
opportunities for employees.
Our executive team and senior leaders in the UK
and US are participating in a programme to develop
performance leadership skills.
We remain committed to investing in our people,
providing the training and other support necessary
for them to build, maintain and operate our networks
safely and reliably and this year we provided more
than one million learner hours of training across our
UK and US businesses.
80 National Grid plc 2016/17 Annual Insurance Update
SAFEGUARDING THE FUTURE
There is a significant skills challenge facing the During 2014/15, we have expanded our residential
engineering profession in the UK. Research by work experience programme (balanced 50/50 between
EngineeringUK has highlighted a need for 1.8 million girls and boys) to include a non-residential programme
engineers, technicians and crafts people over the for students aged 16–19 who are in sixth form or
period 2012–2022. Around 60% of all new jobs in this college and do not have an existing relationship with
period will need science, technology, engineering and an employer.
maths (STEM) qualifications, yet not enough school This year, we invested nearly £900,000 in our
children succeed in these areas. There is a similar education outreach, bringing benefits to 70 schools
challenge in the US where the number of scientists and and more than 9,000 students who receive at least
engineers needed to meet growth and net replacement one hour of STEM/careers experience with our
needs between 2012 and 2022 is 2.3 million, education ambassadors. We expect this to grow
including 1.2 million in the computer occupations considerably in the UK through Careers Lab.
and more than 540,000 engineers.
In the US, we continue to partner with seven local
We are helping schools, parents and children see community colleges to deliver energy utility technology
engineering as a modern, dynamic, desirable career training programmes, designed to equip people
with a great future. Our employees act as education for jobs in the energy industry. These programmes
ambassadors who volunteer their time for a range currently focus on future line workers. We plan
of activities in the classroom and at science and to expand them to include technical skills for the
engineering fairs, most notably on STEM enrichment, gas industry.
careers education and work experience programmes.
We are continuing our partnership with the Center for
Our careers education programmes in the UK include Energy Workforce Development on its ‘energy industry
Careers Lab, an initiative we developed that was fundamentals’ and we work with veterans through
taken up by the charity Business in the Community in the US Troops to Energy Jobs programme.
November 2014. It links working professionals from
a range of sectors with schools to bring the world of This is designed to help veterans make the transition
work to life for secondary school children. A further from military service to the energy/utility industry.
initiative is the ‘Engineer Your Future’ exhibition
at London’s Science Museum, which opened in
December 2014 and explores engineering challenges
through interactive games and digital experiences.
Business Overview Safety, Security Revenues Investment Information Summary
and Update and Reliability and Regulation and Innovation and Claims 81
Innovation
In projects across our regulated businesses.
£22m
invested to deliver network reliability.
We also received Network Innovation
Competition awards totalling over
£12.5m
for our UK Gas Transmission and UK
Electricity Transmission businesses.
82 National Grid plc 2016/17 Annual Insurance Update
Innovation projects
BALANCE OF PLANT PROJECT
Our compressor stations play the vital role of keeping gas flowing through the national transmission system.
In line with new legislation on industrial emissions, we are currently following a programme of designing and
building new or upgraded sites. So it’s an opportunity to take greener decisions about the equipment we use.
Our Balance of Plant project set out to develop a tool that enabled people designing our sites to choose more
environmentally friendly solutions when they are selecting compressor ancillary equipment.
PIPELINE DAMAGE MEASUREMENT USING HANDHELD LASER SCANNERS
Laser technology offers accurate results and safer solution for technicians.
Laser scanning offers improvements in accuracy, speed, simplicity of use and
recording of damage. Risks faced by our network technicians will also be reduced,
thanks to a successful project that proved laser scanners are effective in measuring
pipeline damage.The project demonstrated that using handheld laser scanners
to assess issues – such as corrosion, gouges or dents in pipes – can improve
accuracy of results, while significantly reducing the time technicians need to spend
in potentially dangerous excavations.
TRANSFORMER HEAT RECOVERY
Transformer heat recovery trial improves thermal efficiency and environmental performance. National Grid has
trialled innovative heat recovery systems in three substations, utilising waste heat, a by-product from electricity
transformers, to provide heat and hot water to adjacent buildings. This non-invasive, sustainable method of
harnessing energy reduces substation demand for low voltage electricity supplies, reduces National Grid’s impact
on the environment and supports local communities.
Trial installations at Melksham, Bishops Wood and Cardiff East substations are helping National Grid to understand
the performance and potential efficiency gains from three different variations of heat recovery system in different
substation environments. In each case, heat recovery systems have been retro-fitted to super-grid transformers
without the need for outages.
Business Overview Safety, Security Revenues Investment Information Summary
and Update and Reliability and Regulation and Innovation and Claims 83
400KV SYNTHETIC ESTER FILLED
TRANSFORMER PILOT PROJECT
In 2013/14, National Grid worked with two partners to
complete a project to build and test a synthetic ester
(MIDEL 7131) filled transformer test rig. MIDEL 7131 is a
reduced fire hazard liquid alternative to mineral oil which
has the potential to assist compact transformer design.
Successful lightning impulse testing at 400kV was carried
out in line with National Grid and IEC specifications.
This provided the confidence to commission the design and
build of a 240MVA 400/132kV synthetic ester filled transformer.
In February 2014 a competitively-tendered contract was
awarded to Siemens to supply three such transformers filled
with MIDEL 7131, for a new-build substation at Highbury in
London. In March 2015, National Grid engineers, working
closely with Siemens, witnessed the successful test of a
commercially-offered 400kV, MIDEL 7131 filled, heat recovered
transformer. The transformers feature a heat recovery
system and in Highbury, more than 1MW of waste heat
will be recovered and used to heat a neighbouring school.
SMART METERING
Our networks deliver low-cost energy for heating and cooking
and we believe they will continue to be an important part
of the energy mix towards 2030 and beyond. To ensure we
can utilise the gas networks into the future in a low-carbon
economy, we need to help our customers reduce their demand
for energy. This can be done by making their homes energy
efficient and therefore, reduce the impact on the environment.
Once installed by suppliers, gas smart meters will provide
information on how much energy our customers are using
and see the effects of their actions on how they use energy,
such as turning down the thermostat on their boiler by
one degree. We support real-time energy consumption via
smart meters and believe that the supplier lead roll-out is
a really positive step in helping customers to manage their
everyday use.
84 National Grid plc 2016/17 Annual Insurance Update
REDUCING OUR IMPACT ON THE
ENVIRONMENT IS IMPORTANT TO US.
As a group we’ve set a voluntary target to reduce
greenhouse gas (GHG) emissions across our UK and
US businesses by 45% by 2020 (baseline: 1990).
We can break down emissions into areas like energy
generation in the US, methane losses across the
group, sulphur hexafluoride (SF6) leakage losses,
our own gas usage and buildings and transport.
Our UK business baseline emissions level (excluding
line losses) was set at 19.6m tonnes of carbon
dioxide equivalent after tracing previously published
and verifiable data going back to 1990. We expect to
exceed the 2020 target.
In 2014/15, 2.75m litres of insulating oil was processed
and recycled by our mobile Oil Management Unit.
This is equates to 110 road tankers of oil saved.
All three of the states National Grid serves,
Massachusetts, New York and Rhode Island,
have established goals of 80 percent reductions
in emissions economy-wide versus 1990 levels.
These states have already made progress toward
their targets.
AVI
Please scan here
to view video:
Reducing our
Carbon Footprint.
Business Overview Safety, Security Revenues Investment Information Summary
and Update and Reliability and Regulation and Innovation and Claims 85
We have the potential to save
300,000 tonnes
of greenhouse gas emissions each year by using
waste heat to reduce demand for gas at our
liquefied natural gas (LNG) terminal.
We have reduced fuel gas use by up to
169M m /year
3
That’s the equivalent of taking 100,000 cars off the road.
We are HELPING OUR SUPPLY CHAIN
TO REDUCE EMISSIONS
Climate OUR CARBON CALCULATOR
We have developed the carbon interface tool
that accurately calculates the carbon intensity
of an infrastructure project.
Positive 92 schemes
have been evaluated with the tool so far.
SUSTAINABLE BUSINESS HELPING TO REDUCE CARBON
IS GOOD BUSINESS IMPACTS FOR THE FUTURE –
WE’RE SECURING LOW CARBON
That’s why we’re capitalising on innovative ideas and
investing billions to create power networks for smart, ENERGY FOR CURRENT
sustainable low carbon energy. AND FUTURE DEMAND
WHAT WE HAVE ACHIEVED SO FAR
%
OUR TARGETS 62 less
• Reducing greenhouse gas emissions that are
a direct result of our operational activities: Greenhouse Gas emissions from the entire National Grid.
80% by 2050 with an interim target of 45% by 2020. That saves as much carbon as flying a 747 non-stop
for 44 years.
• 80 % We cut our energy consumption by
of our top 250 suppliers to report 23 %
greenhouse gas emissions by 2020.
between 11/12 and 13/14.
We connect and deliver
18TWh
of energy from renewable sources like solar and wind.
86 National Grid plc 2016/17 Annual Insurance Update
Information
Summary
and Claims 5
Business Overview Safety, Security Revenues Investment Information Summary
and Update and Reliability and Regulation and Innovation and Claims 89
05 Information Summary and Claims
This section provides a snapshot summary of our key underwriting data
and claims performance based on information as at December, 2015.
For a full list of all detailed information together with any material changes in value post December 2015,
underwriters should refer to the renewal website (www.nationalgridinsurance.com).
90 National Grid plc 2016/17 Annual Insurance Update
Key Statistics
Property Values
All information shown is in GBP million.
Conversion rates* of 1.63 US$ = 1 GBP and 1 GBP = 1.2 Euro.
* Conversion rates used for underwriting comparison purposes and may not reflect the current market rate.
24,121 24,595
Single Site Locations
Country 2015/16 2016/17
UK 24,121 24,595 7,637 7,836
US 7,637 7,836
TOTAL 31,758 32,431
* The above figures are exclusive of power generation assets (separate direct US placement), 2015/16 2016/17
tunnels, jetties, wharfs, cables, towers, pipelines, dams and railroads.
Towers / Overhead Lines / Cables
Electricity Underground Underwater
Comm, Towers Towers Overhead Electricity Electricity
Country & Masts / Pylons Lines Cables Cables
2015/16 2016/17 2015/16 2016/17 2015/16 2016/17 2015/16 2016/17 2015/16 2016/17
UK 0 0 7,176 7,207 4,001 4,005 2,960 2,960 408 408
US 2 2 0 0 0 0 4,268 4,347 57 58
TOTAL 2 2 7,176 7,207 4,001 4,005 7,228 7,307 465 466
* Note – US electricity towers, pylons and overhead lines are excluded from above as they are not included within the insurance programme.
7,307
7,176 7,207 7,228
4,001 4,005
465 466
2 2
2015/16 2016/17 2015/16 2016/17 2015/16 2016/17 2015/16 2016/17 2015/16 2016/17
Communication Electricity Overhead Underground Underground
Tower & Masts Towers / Pylons Lines Electricity Cables Electricity Cables
Business Overview Safety, Security Revenues Investment Information Summary
and Update and Reliability and Regulation and Innovation and Claims 91
Employee Information
15,621
14,662
Forecast Headcount – Permanent
9,459 9,702
Country 2015/16 2016/17
UK 9,459 9,702
US 14,662 15,621
TOTAL 24,121 25,323
2015/16 2016/17
2,439
2,240
Forecast Headcount – Agency
Country 2015/16 2016/17
UK 2,240 2,439
420
US 420 280 280
TOTAL 2,660 2,719
2015/16 2016/17
Revenue
All information shown is in GBP million. Conversion rates of 1.63 US$ = 1 GBP and 1 GBP = 1.2 Euro.
Total Revenue
Forecast @ Actual @ Forecast @ Forecast @ Forecast @
Country
last year this year last year this year this year
2014/15 2014/15 2015/16 2015/16 2016/17
UK 7,427 7,489 7,663 7,752 7,798
US 7,165 7,742 7,165 7,427 7,427
TOTAL 14,592 15,231 14,828 15,179 15,225
15,231 15,179 15,225
14,592 14,828
Forecast @ Actual @ Forecast @ Actual @ Forecast @
last year last year last year last year this year
2014/15 2014/15 2015/16 2015/16 2016/17
92 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 93
Pipelines
All information shown is in GBP million.
Conversion rates of 1.63 US$ = 1 GBP and 1 GBP = 1.2 Euro.
Underground Gas Pipelines Underwater Gas Pipelines
Country
2015/16 2016/17 2015/16 2016/17
UK 40,813 45,731 538 554
US 27,171 29,811 18 21
TOTAL 67,984 75,542 556 575
* Note – US Underwater Gas Pipelines were historically included within ‘Underground Gas Pipelines’ but have been identified seperately from 2015/16 renewal onwards.
75,542
67,984
556 575
2015/16 2016/17 2015/16 2016/17
Underground Underwater
Gas Pipelines Gas Pipelines
94 National Grid plc 2016/17 Annual Insurance Update
Global gas pipeline statistics
Network mileage by geography
Country 2015/16 renewal 2016/17 renewal
UK – Transmission *7,857 *7,833
UK – Distribution 78,198 78,143
US – Transmission 494 485
US – Distribution 34,821 34,960
GLOBAL TOTAL 121,370 121,421
* UK transmission data includes both National Transmission System (“NTS”) and the Local Transmission System (“LTS”) pipelines, albeit that the LTS assets form part of
the UK Gas Distribution business unit.
UK – Transmission 7,833
UK – Distribution 78,143
US – Transmission 485
US – Distribution 34,960
Business Overview Safety, Security Revenues Investment Information Summary
and Update and Reliability and Regulation and Innovation and Claims 95
Global transmission – Network mileage by pipeline diameter
Country 4" or less 4" to 10" 10" to 20" 20" to 28" over 28" TOTAL
UK – 250 1,815 1,361 4,407 7,833
US – 16 287 138 44 485
UK 7,833
US 485
4" or less 4" to 10" 10" to 20" 20" to 28" Over 28"
Global distribution – Network mileage by pipeline diameter
Country 4" or less 4" to 8" 8" to 12" over 12" TOTAL
UK 33,364 30,961 10,403 3,415 *78,143
US 21,076 10,921 2,345 618 34,960
*UK Distribution excludes LTS pipeline as already included in UK Transmission data.
UK 78,143
US 34,960
4" or less 4" to 8" 8" to 12" Over 12"
96 National Grid plc 2016/17 Annual Insurance Update
US gas transmission
Network mileage by age of pipeline
Unknown Pre–1940s 1940–1959 1960–1979 1980–1999 2000–2019 TOTAL
0 0 206 124 136 19 485
US gas
transmission 485
Unknown Pre-1940s 1940–1959 1960–1979 1980–1999 2000–2019
Mileage of gas transmission pipeline, split by type of coating
All 485 miles of gas transmission pipeline is cathodically protected coated steel.
Mileage of transmission pipeline through high consequence areas (“HCA”)
Regulated entity HCA Non HCA TOTAL
NIMO 76 192 268
KED-NY 69 0 69
KED-LI 135 0 135
Boston 6 0 6
Colonial Cape 1 0 1
Colonial Lowell 6 0 6
Essex 0 0 0
Rhode Island 0 0 0
TOTAL 293 192 485
NIMO 268
KED-NY 69
KED-LI 135
Boston 6
Colonial Cape 1
Colonial Lowell 6
Essex
Rhode Island
HCA Non HCA
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