Transcript Benefits of Tx focus

Benefits of Transmission
focused development
Tim Martin
Vice President
Business Development
National Grid USA
Energy Roundtable 2005
May 31, 2005
National Grid UK
Electricity transmission system
Within the UK:
 Owns and operates the
HV electricity
transmission system
 Owns and operates the
gas transmission system
 Manages, and balances
the wholesale electric
and gas markets
 Owns and operates
the UK gas distribution
system serving 21m
consumers.
 ~15,000 employees.
Gas transmission system
St Fergus
Teeside
To Ballylumford
400 kV lines
270 kV lines
Substation
400 kV substation
275 kV substation
To Dublin
Barrow
Theddlethorpe
Easington
Bacton
To / from
Zeebrugge
Reception terminals
Interconnector
NTS compressor stations
High pressure transmission system
National Grid US
In Northeastern US:
 Owns and operates electricity
transmission and distribution
systems.

Owns and operates gas
distribution.

Member of New England RTO.

Long term incentive based rate
plans in operating footprints.

3.2 million electric and 500,000
gas customers.
 Reduced controllable costs by 20%
between March 2002 and March
2005.
MAINE
VERMONT
NEW
HAMPSHIRE
Buffalo
Syracuse
Albany
MASSACHUSETTS
NEW YORK STATE
Operating areas
CONNECTICUT
New York
Boston
RHODE
ISLAND
National Grid
Current shape of the
Group
Strategy

Asset based network provider
- Driving world class performance
- Managing regulatory relations

Exploiting our skills and assets by
- Investing in organic growth
- New build of energy delivery networks
- Disciplined M&A and portfolio
management

Low risk, stable, cash generative
earnings.
40%
Electricity
& gas
transmission
33% UK
gas
distribution
22%
US electricity
& gas distribution
5%
Other
activities
Market Capitalisation: ~C$37bn
Transmission in the UK

UK Electricity Industry Reform, 1990.

Former state ownership of generation and transmission operator.

Distribution companies also state owned.

New Generation and Distribution companies.

Stand-alone transmission company created – National Grid.

National regulator OFFER (now OFGEM).
Benefits of stand-alone transmission






Revealed importance of the transmission system.
An essential part of the value chain delivering economic and
reliable electricity to customers.
Facilitated a liquid electricity market and does not compete with
generation or demand.
Delivers management focus on transmission:
 Operational performance
 Cost reductions
 Innovation
Responds to changing environment making investments as
necessary.
Attracts investment, facilitates investment and thus enhances the
value of assets.
UK transmission performance
Since the early 1990’s:

Controllable costs cut by ~57%.

System performance improvements in availability, reliability and
safety.

System capacity increased by 23% and facilitated 25GW of new
generation.

Congestion costs down from a peak of ~C$600m in 1994 to
~C$25m at end of 2000/01.

Investments in both organic growth of the system and standalone
transmission.
Controllable costs
600
• ~40% real reduction in transmission cost
(per unit of electricity delivered)
• Controllable costs reduced by more than half
500
400
£m
300
57%
reduction
200
100
0
91-92 92-93 93-94 94-95 95-96 96-97 97-98 98-99 99-00 00-01
System performance
Average system availability
Winter peak system availability
100
98
96
94
92
90
88
86
90-91 91-92 92-93 93-94 94-95 95-96 96-97 97-98 98-99 99-00 00-01 01-02 02-03
Congestion management



Taking transmission lines out of service can create significant
congestion costs.
National Grid entered into an Incentive Rate System to manage
these costs.
Encouraged innovation and risk management across planning
and operational activities.
Issues

Maximize existing lines and rights of way.

Significant process and practice changes.

Network investment

Outage co-ordination
Congestion cost reduction
400
Incentive Rate System
Introduced
From April 1994 to March 2001,
mainly from congestion management,
350
• Customers saved
US$ million
300
at least US$750 million
250
• Shareholders gained
200
at least US$160 million
150
100
50
0
90/91 91/92 92/93 93/94 94/95 95/96 96/97 97/98 98/99 99/00 00/01
Note:. Exchange rate of $1.42 = £1 used
New investment
Standalone transmission

BassLink interconnection, in Australia, between Tasmania and
Victoria.

Discussed for over 20 years. Bids sought by Government of
Tasmania in June 1999. National Grid appointed developer in
January 2000.

A C$760m new build 600MW HVDC link.

295km sub-sea and 55km overhead.

Issues to manage with state and federal governments.

Also the concerns of landowners, local communities and other
interested parties to address.

Final approvals secured in September 2002, Financial Close
November 2002.
Benefits in the UK
For Government:
- Positive source of revenue (via
taxation)
- Removed need to fund
investments
For customers:
For NG:
• Price reductions
• Improved customer service
• Fewer disconnections
• Increased reliability
• Better investment decisions
• Better line performance
• Lower costs
• Better safety performance
Is UK experience relevant?
“Every country and environment
is different – but much of the
learning is likely to be
applicable”
Questions?
[email protected]
Tel: 508-389-2758