Our network: is dynamic both structurally and operationally

Every day we are adding to it; replacing components approaching the end of their lives, increasing capacity to meet customer demand and reconfiguring the network to improve reliability and reduce inherent losses.

We constantly work to keep the network free from potential risk of damage from external sources such as motor vehicles and machinery and interference by possums, birds and trees.

We also continually consider opportunities for improvement – for example; can we reduce losses and improve reliability of supply through altering the configuration, changing voltage, installing additional circuit breakers or re-routing the supply. We explore whether new improvements in technology have the ability to enhance our network’s operation and our overall performance.

Continual improvement is an integral part of our management of the network. Were we not to pursue it, the network would languish and ultimately fail to meet customer expectations.

Overall we have an underlying resolve not to postpone prudent timely investment for the future. In recent years the primary focus of our capital expenditure has been to meet increased customer demand.

Our interest in delivery of electricity starts with Transpower

Transpower owns and operates the national grid and conveys electricity from the major generators – in Marlborough’s case, typically from Otago.

Supply to Kikiwa at the top of the South Island is delivered by three 220kV lines. Supply to Blenheim is provided via a single 110kV circuit from Kikiwa and a dual 110kV circuit from Stoke.

In recognition of the increased load during the year Transpower increased the capacity of its Blenheim substation by installing a third transformer (110/33kv 60MvA), to supplement the two existing 50MVA transformers and to bring the firm ‘N-1’ capacity of the substation to 100MVA, and installing additional circuit breakers. The cost of this project was in the order of $7.5m and will be met by Marlborough Lines through increased annual charges.

Transpower deserves full credit for the timely installation of this transformer and switchgear together with the manner in which the work was effected.

The increased capacity of its Blenheim substation will meet Marlborough’s projected demand for a period of between ten and 30 years with growth rates of 11.5% and 3.5% respectively.

After years of Transpower postponing investment it is pleasing to record it has now installed a static voltage compensator at Kikiwa and is in the process of increasing the capacity of its grid south of Islington to enhance supply to the top of the South Island. The current management of Transpower recognised that this investment was long overdue and is also currently upgrading the DC link and reinforcing their grid throughout New Zealand.

For too long grid investment was suppressed within Transpower. It needs to be recognised that cost benefits of delaying investment within an electricity system can be asymmetric. Any savings in the time value of money through deferred investment can be offset many times by the subsequent costs which are sustained by the economy when customer demand is not able to be met.

Our load management is harmonised

For the second year we have participated in a combined load management initiative with Transpower and other network companies in the top half of the South Island. Again, this proved to be beneficial to all parties. In addition to reducing our demand through controlled load we also utilised our 1MVA mobile generator to reduce peak charges.

The combined initiative resulted in a reduction of some 15MW for the top of the South Island. Marlborough Lines’ own peak chargeable demand was 64.4MW, although our system maximum demand was 70.2MW which occurred at a different time to the maximum top of the South Island peak and illustrates the benefits of the combined initiative.

Our record capital expenditure confirms our customer commitmen

Our capital expenditure for the year was at a record level of $14.547m, brought about by the completion of some $1.608m of work carried over from the previous year.

	2011 actual $m	2010 actual $m	2012 target $m
Capital Expenditure	14.457	12.570	12.778

Customer consultation plays an important part in determining our capital expenditure together with safety considerations and our knowledge gained from monitoring of the network. Overall we have an underlying resolve not to postpone prudent timely investment. In recent years the primary focus of our capital expenditure has been to meet increased customer demand. The slow-down in Marlborough’s economy has given us the opportunity to further improve reliability and replace older system assets that have attained the end of their lives.

Regardless of the area of capital expenditure we have not sacrificed the longer-term interests of our shareholders for short-term expediency.

Substation investments continued

We invested a total of $4.1m in our substations during the year. This work included:

• Completion of the new Waters 33/11kv zone substation in Redwood Street, Blenheim.
• Installation of new 33kv indoor switchgear at the new Springlands substation.
• Installation of new 33kv switchgear at the Springlands load control centre.
• Expansion of the Havelock 33/11kv zone substation to provide for the addition of a second 5MVA transformer to provide N-1 reliability.
• 33kv feeders at Transpower substation were increased in capacity and increased in number from seven to ten.

Sub-transmission and reticulation capital expenditure enhanced supply

Over the year a number of new lines were constructed and existing lines had conductors replaced or completely rebuilt at a cost of $5.6m. Where appropriate 11kV lines have been constructed at 22kV and 33kV lines have been constructed at 66kv, to provide for future growth.

A total of approximately 8.37kms of 33kv line to rai valley had the old hardwood poles replaced with 16.3m steel poles and this section of line will be re-conductored in the current year.

The 11kV lines constructed to provide increased capacity or the replacement of old lines included:

• Old Coach road, Havelock to Canvastown.
• Hardings road, second stage.
• Double circuit lines extended along State Highway 63 up the Wairau Valley.
• various lines in the environs of renwick and Blenheim.
• The line in Benmorven road was upgraded and this will also be utilised as part of a new tie line to a cable in Taylor Pass Road. Lines which were constructed to provide increased reliability included:
• A new tie cable between the feeders in the Awatere valley to provide the wineries with alternate power supplies.
• Lines through a major forestry block relocated and increased in capacity beyond Okiwi Bay (trees had fallen over this area of line on six occasions causing outages of over ten hours each).
• A new tie line was constructed between Benmorven and the Taylor Pass Road area to provide alternative supplies. To further enhance safety our work included:
• Lines in rapaura road shifted back to property boundaries to allow widening by NZTA.
• On State Highway 1 south of Seddon, lines relocated to allow improved road alignment by NZTA.
• Lines on State Highway 1 south of Ward relocated from the roadside to enable the road to be widened by NZTA.
• State Highway 1 from the entrance to Picton to Kent Street converted from overhead to underground.
• Lines in rapaura road converted to underground to facilitate The construction of a new bridge and improve road safety. Our SCADA systems were expanded to provide:
• New radio sites at Jamies Knob and Weld Cone to enable increased surveillance of our network and remote operation of circuit breakers.
• The Seddon, riverlands and Waters zone substations were connected to the expanded SCADA network.

Prudent maintenance maximises reliability, safety and maintains value

We have never regarded maintenance as a cost, rather it is an investment which, when undertaken in a timely manner typically results in future savings.

Our ongoing maintenance programme is detailed in the comprehensive Asset Management Plan on our website www.marlboroughlines.co.nz.

Included in our maintenance programme are a number of preventative techniques including infrared detection and partial discharge testing to eliminate potential faults which may result in loss of supply. We inspect all parts of our network on a continuous basis with staff and contractors. Analysis of our network’s performance assists in targeting our maintenance.

We are also assisted by direct communication with our customers.

Over the year we spent some $6.516m on maintenance which compares with $5.906m for the previous year.

	2011 actual $m	2010 actual $m	2012 target $m
Network Maintenance	6.516	5.906	5.960

Our staff do their utmost to minimise disruption to supply

We have in excess of 3,300km of lines with thousands of components all of which must perform reliably and without being subject to external interference if we are to deliver electricity to every customer 24 hours a day.

Properly – within practical limits and cost considerations – we have a large measure of control over our network and its components.

What we do not have control over is unforeseen component failure and unpredictable external factors such as vehicle accidents and extreme weather events. This is particularly relevant for our network given we have a number of radial lines over remote and difficult terrain, much of which is not readily accessible by vehicle and therefore we have to rely upon boat and helicopter access.

Unfortunately in these areas it is totally impractical and cost prohibitive to provide an alternative supply. Loss of supply can be prolonged and beyond what can reasonably be expected in urban situations where lines are readily accessible and the network is typically meshed with alternative means of supply.

Interestingly we only need 20% of our lines to supply 80% of our customers yet it is the remaining 80% of our lines, often in remote areas, that distort our outage statistics.

As an example, one of our feeders in the Marlborough Sounds is some 327km in length and has more than 3,000 poles which may require individual inspection before restoration of supply can occur and this is only one of our feeders in the Marlborough Sounds.

Despite our best endeavours our total customer minutes lost through faults for the year was the worst for a number of years. Up until December the cumulative minutes of lost supply to customers was looking better than in previous years notwithstanding significant storms in June, August, September and October. Then we experienced extreme weather events within the month of December when our cumulative total minutes of lost supply jumped from 108 to 319 minutes.

Were it not for the dedication of our staff the effects of the storms would have been much greater. By way of example, in December heavy rain caused some hillsides to subside and trees to fall and engulf sections of the lines. Flooding and slips closed roads and prevented access to isolating switches and damaged lines.

On occasions as the first vehicles on the road after or during the storm our staff have had their access blocked by fallen trees and had to cut them to gain access. Although we regularly utilise helicopters there are limits to the work that can be effected by these means, especially when heavy equipment is required.

Unavoidably with some events considerable time elapses despite the very best efforts of our staff before the fault can be accessed with the appropriate equipment. In December flooding prevented direct access to faults on the Okiwi Bay/French Pass line, because the usual route via State Highway 6 was blocked between Havelock and Canvastown. Our intrepid staff had to make a substantial detour of some 170km via State Highway 63 and Nelson and then back to Okiwi Bay. After having located and determined the severity of the line damage after clearing trees and negotiating flooded roads it was clearly apparent repairs could not be quickly effected. To minimise customer impact the Company’s mobile generator was taken to site by retracing the same long circuitous route.

In these extreme situations our dedicated staff deserve credit for their efforts and it is unjust to criticise the Company’s reliability statistics under such circumstances.

The extreme weather events encountered during the year alone caused some 146 minutes of lost supply. When remote lines and extreme events are excluded from our reliability statistics the total number of customer minutes lost from faults for urban and rural customers plummets from 343 to 78 for the year. Alternatively, if the Commerce Commission’s regulatory reporting criteria is followed, the duration for minutes of lost supply (taking into account events deemed extreme by the Commission) equates to 197 minutes (SAIDI) for the entire network. But as demonstrated by the graphs and table depicted in this section, 197 minutes of lost supply is at variance with what actually occurred.

Aside from supply lost through unplanned outages some customers also experienced loss of supply through scheduled shutdowns to undertake planned work which could not be done live. Under such circumstances the customers are individually advised about two weeks in advance of the scheduled outage.

Regardless of the challenges inherent in providing electricity supply in remote locations over difficult terrain we are intent on maximising our reliability

Invariably the scheduled outages were necessary to connect new assets, replace old ones, and undertake scheduled maintenance. All of this is required to enable us to provide a reliable electricity supply of adequate capacity.

	SAIDI
Total Minutes Lost	429
Less Planned Outages	86
Total Minutes Lost by Faults	343
Less Minutes Lost by Extreme Events	146
Less Minutes Lost by Remote Lines	119
Total Lost by Urban and Rural Faults	78

Ignoring extreme events, we are targeting a reduction of 50% in our outage statistics

Regardless of the challenges inherent in providing electricity supply in remote locations over difficult terrain we are intent on maximising our reliability.

During the year we retrofitted another 1,000 long-length possum guards to poles and staywires taking the total to some 16,000. We have previously installed thousands of bird spikes, fitted numerous lightning arrestors, and also installed additional fuses, sectionalisers and circuit breakers. This work is ongoing, but we are not able to incur unlimited expenditure on improving the reliability of our lines.

Given that the revenue from those in remote areas frequently is insufficient to meet the actual costs already incurred, replicating existing lines to provide an alternative supply is totally unrealistic.

Over the year we continued to target our ten worst feeders and we have:

• Reduced the line length between circuit breakers and sectionalisers.
• Installed additional air break switches.
• Installed remotely operated circuit breakers.
• Increased the capabilities and utilisation of our SCADA system.
• Increased the number of remotely controlled devices.
• Where practical and cost effective we are relocating lines away from problem areas, particularly where there are repeated tree problems.
• Increased the utilisation of our 900kvA mobile generator, and we purchased a further 550kVA unit during the year and a third unit has been ordered for delivery early this year.
• Reconfigured lines and where appropriate installed longer length salt resistant insulators and hardware. These measures will all play their part in improving the reliability of our network.

Aside from ongoing vegetation control we expect the installation of further remotely operated circuit breakers to have the greatest impact in reducing customer minutes.

It cannot be overstated that while we can and will continue to make improvements to improve customer reliability, we can never compensate for outages that are caused by the inadequacies of the current tree regulations or the actions of others.

Considerable work is undertaken to minimise disruption caused by trees Preventing trees and vegetation from interfering with our lines is an ongoing issue.

For the year a total of $1.8m was expended in keeping trees free of the lines and clearing vegetation from our access tracks. But there is more to this work than the actual cutting and spraying.

Our 3,300km of lines have to be inspected at least annually, consultation has to be undertaken with landowners and in a number of locations in the Marlborough Sounds where there are small holdings with absent landowners, some areas have to be visited several times prior to cutting the trees.

The situation is complicated when landowners are living overseas or are only able to meet on site with our representatives at certain times of the year.

In the absence of gaining approval to cut or trim, trees can continue to pose risks to the reliability of supply for significant numbers of electricity customers.

From our perspective this is most frustrating when we have identified a potential risk yet cannot get approval from the landowner or in some cases even make contact, and know the reliability of supply to customers is prejudiced.

It is no comfort in such instances to have our prediction of an event confirmed when a tree ultimately causes loss of customer supply.

Simply if trees can be properly dealt with when potential problems are identified the costs can be minimised, the inevitable loss of supply avoided, and the reliability of our network improved.

The inadequacy of the Hazards from Trees Regulations 2003 is not always conducive to assisting Marlborough Lines to keep its lines free of interference from trees. yet the Government’s regulator, the Commerce Commission, monitors our reliability statistics and undertakes investigation should we be in breach of its reliability criteria.

Against this background, Marlborough Lines has filed proceedings seeking a Declaratory Judgment in relation to aspects of the Company’s rights and obligations regarding preventing the interference of trees with electricity lines.

In the Marlborough Sounds where much of the area can only be reached by boat or helicopter it is unnecessarily expensive when all trees on an individual property or an area cannot be trimmed at the same time.

 

Following the Canterbury earthquakes, prudence dictated that we again undertake a complete reassessment of the potential risks faced by the Company in relation to a major earthquake in our own region

How earthquake proof are we?

We are not immune from earthquake risk. We have always been aware the Wairau fault and other significant fault lines run through our province, and that parts of Marlborough have the potential to be subject to liquefaction.

Equally we have always designed our structures to meet all relevant earthquake standards and we undertake regular reviews.

In addition to the work of our own engineering staff this year we also engaged independent professional civil/structural engineers to reassess the resistance of all assets to a major earthquake. The studies by our own staff and our independent advisors determined that, with the exception of underground cables, generally our assets would withstand significant earthquakes.

As has been demonstrated in Canterbury, when underground cables traverse fault lines or are subject to liquefaction, damage typically results. Aside from residential subdivisions, the majority of our underground cabling is installed within Blenheim’s business area. To an extent we have sought to alleviate this risk through the provision of alternative supplies but the reality is that a severe earthquake could inflict serious cable damage.

Elsewhere within the network it is our expectation that our substations and overhead lines should survive a major earthquake event. As is typical within the network industry in New Zealand – aside from substations – Marlborough Lines does not have its network insured because of the prohibitive costs.

Do we have a ‘smart network’?

Can we make our network smarter? yes. And are we doing it? yes. But in the context of considering the intelligence within our network, there are several relevant factors that need to be taken into account.

First up, our network is not dumb (meaning parts of it are able to speak to other parts). For some 50 years we have had the ability to remotely control off-peak load to minimise Transpower’s chargeable demand by controlling water heaters, space heating, and irrigation at customer premises with our very effective ripple control system.

Our key circuit breakers are remotely operated. Our SCADA system enables real-time measurement of the network status and typically reports or acts when exceptions to pre-determined management criteria show up – not only in terms of isolating and restoring supply for single circuit lines, but in automatically selecting and switching to an unimpaired 33kV supply for the five zone substations external to Blenheim.

In the 2011 year we intend to further extend our SCADA to the more remote parts of the network following additions to our very extensive network of radio sites. We will enhance the reliability of our network and increase our points of control with the installation of another 20 remotely operated circuit breakers.

But while we can increase the intelligence of the componentry within our network we are mindful that it needs to be cost-effective – with the benefits and costs properly identified prior to commencement.

Equally it has to be recognised that particularly with remote lines, derived revenues do not support significant additional investment in SCADA systems. Our investment in control systems has to be largely driven by cost savings.

Overall it can be said that we are increasing the intelligence of our network. But we also see this as part of the whole electricity system which will only deliver the full benefits available from technology to customers when there is smart thinking at all levels.

The policies of Government and controls of the regulators should encourage innovation that provides customer benefit. More work is required in this area.

Regrettably, a sectionalised electricity system and a backward looking regulatory regime will not permit the development of an optimal electricity system encompassing generators, the national grid, network companies and retailers.

Simply too often smart meters are seen as a single panacea for the perceived ills of the electricity industry.

There is little point in politicians or others advocating smart meters and real-time pricing unless they are prepared to accept the disadvantages as well as the advantages that will result. The current anomalies imposed by the Government policy requirements of the low fixed charge option for domestic customers necessitates cross subsidy from others. The current constraints on increasing fixed line charges relative to the cost of supply are incongruous with a user pays pricing system.

The situation in relation to establishing clear price signals relative to actual cost to end-use customers is also exacerbated when retailers mask the price signals provided by network companies. Marlborough Lines is fully conversant with the issues around introducing smart meters and has observed with interest what has occurred in other parts of New Zealand, in Victoria in Australia, and other parts of the world.

It is salient that typically where smart meters have been employed the primary benefit has been the remote reading and disconnection of meters. Interaction with the customer and load management has only prevailed in a limited number of circumstances.

Technically there is no reason why smart meters should not be able to control household appliances to minimise peak loads and ideally reduce charges to end users. But in locations where this is possible, only the most enthusiastic customers choose to do so. For the remainder of electricity users there would have to be significant changes in pricing regimes to the extent that non-participation in time of use pricing was punitive and forced active participation in load management.

A further point for the advocates of smart meters to consider is the source of electricity generation and whether the electricity system constraints are related to capacity (instantaneous demand (kW)) or energy for a period of time (kWh).

It is interesting that in victoria, Australia – following significant public criticism of the mandatory introduction of smart meters – the government introduced a moratorium to prevent the introduction of real-time pricing (where customers pay relative to the cost of electricity prevailing at the time), because although this system can provide benefits it also has the potential to impose high costs on the uninformed.

In Marlborough it is the energy retailers who own the meters at the customer premises.

Marlborough Lines realises that if we progress the installation of smart meters it would have to be in conjunction with retailers who would typically have to write off the value of their existing meters.

It is also worth noting that in today’s environment the life of a smart meter can be expected to be considerably less than other assets utilised within the network.

Invariably and ironically, where smart meters have been introduced, the net effect is there is an increase in cost to the electricity user.

Knowing this, Marlborough Lines will continue to closely monitor smart meters.

Our focus is on improving the performance of our network to benefit our customers and where appropriate we will seek to change the political and regulatory environment to achieve overall efficiency within the electricity sector.

We uphold ISO standards

As part of our commitment to excellence and continuous improvement it is necessary to seek and achieve compliance with recognised standards. Within Marlborough Lines we have achieved the internationally recognised ISO accreditation for:

• Management ISO 9001,
• Environment ISO 14001, and
• Health and Safety OHSAS 18001.

These standards are integral to all aspects of our operations and to ensure that our systems remain worthy of international accreditation we are independently audited every six months.