National Grid 2008 Annual Report Download - page 559

BOWNE INTEGRATED TYPESETTING SYSTEM
CRC: 21567
Name: NATIONAL GRID
Date: 17-JUN-2008 03:10:51.35Operator: BNY99999TPhone: [phone]Site: BOWNE OF NEW YORK
Y59930.SUB, DocName: EX-15.1, Doc: 16, Page: 41
Description: EXHIBIT 15.1
0/6237.00.00.00Y59930BNY
[E/O] EDGAR 2 *Y59930/237/6*
BOWNE INTEGRATED TYPESETTING SYSTEM
CRC: 21567
Name: NATIONAL GRID
Date: 17-JUN-2008 03:10:51.35Operator: BNY99999TPhone: [phone]Site: BOWNE OF NEW YORK
Y59930.SUB, DocName: EX-15.1, Doc: 16, Page: 41 Description: EXHIBIT 15.1
0/6237.00.00.00Y59930BNY
[E/O] EDGAR 2 *Y59930/237/6*
Table of Contents
Annual Report and Accounts 2007/08
49
Our reliability and availability performance during the year
can be summarised as follows:
Our UK electricity transmission network reliability in 2007/08
of 99.9999% excludes interruptions that affect three or fewer
directly connected consumers and, in 2007/08, also
excluded one incident (equivalent to 0.0003%) relating to
supply interruptions that occurred following flooding in
central England that was outside of our control.
In the US our electricity system reliability performance
declined. Improvement is an objective for 2008/09.
In order to improve
g
as compressor resilience and to support
variations in operating conditions such as we experienced
this year, we are progressing investments in electrical drive
compressors at approximately 20% of our sites.
Our transmission customer service activities principally relate
to facilitating new connections and maintaining existing
connections and relationships with the customers who are
already connected. In the US, much of the interconnection
work with our transmission customers is performed in
conjunction with the independent system operators in the
areas that we operate.
UK investment
Investment in electricity and gas transmission systems is, by
its nature, variable and is lar
g
ely driven by chan
g
in
g
sources
of supply and asset replacement requirements. The gas
transporter and electricity transmission licences also oblige
us to provide connections and capacity upon request.
We have increased our level of investment as, over the next
few years, we replace parts of our UK electricity network as
these assets become due for renewal. In addition, parts of
the gas transmission network are reaching the end of their
lives. These are mainly compressor stations, control systems
and valves (ie above ground assets and not the high
pressure pipes). This, together
Years ended 31 March
Measure 2008 2007 2006
UK electricity transmission
network reliability – target
99.9999% 99.9999% 99.9999% 99.9999%
UK gas transmission
network reliability – target
100% 100% 100 100
US electricity transmission
network reliability – target
< 264 MWh 437 MWh 259 MWh 348 MWh
UK average annual
availability for electricity
transmission network 95.09% 95.02% 95.09%
UK electricity system
availability at winter peak
demand 98.0% 98.2% 97.9%
UK gas compressor fleet
performance – mean time
between failures 259 hours 430 hours
n/a
(changed
definition
)
US annual network
availability 98.6% 98.1% 98.5%
Customer
service
Our aim is to support generators and distribution
network customers, including our own networks
operated by Gas Distribution in the UK and
Electricity Distribution & Generation in the US, in
delivering energy efficiently and effectively to
consumers, in particular in connecting new
sources of su
pp
l
y
to our transmission networks.
Capital
investment
Our aim is to deliver our planned capital
investment programme involving approximately
£7 billion of capital expenditure between 1
A
p
ril 2007 and 31 March 2012.
with work required to meet chan
g
in
g
supply sources, means
that the UK electricity and gas transmission business will
continue to see a significant increase in investment and
network renewal.
Capital investment in the replacement, reinforcement and
extension of the UK electricity and
g
as transmission systems
in 2007/08 was £1,600 million, compared with £1,235 million
in 2006/07 and £849 million in 2005/06. 2007/08 has seen a
substantial increase in the level of investment in
g
as pipeline
projects, some £138 million higher than 2006/07 (2006/07:
£244 million higher than 2005/06). Capital investment
included £22 million with respect to intangible assets,
principally software applications (2006/07: £17 million,
2005/06: £9 million).
Capital investment continues to include high levels of
expenditure on the replacement of electricity transmission
network assets, many of which were commissioned in the
1960s, and also increasing expenditure on load related
infrastructure. Total investment in electricity network assets
amounted to £800 million in 2007/08, compared with
£607 million in 2006/07 and £530 million in 2005/06.
US investment
Capital investment in the replacement, reinforcement and
extension of the US electricity transmission networks in
2007/08 was £111 million compared with £108 million in
2006/07 and £91 million in 2005/06. The increase principally
reflects additional asset replacement in New York to
increase system reliability.
We expect increasing investment in New England to deliver
our regional system expansion projects. Investment in New
York will also continue to rapidly deliver on our asset
replacement plans and to improve the reliability of the
system.
Financial performance
Our combined adjusted operating profit, excluding
exceptional items, for Transmission in the UK and the US of
£1,149 million is 10% higher than 2006/07 on a constant
currency basis, which in turn was 9% hi
g
her than in 2005/06,
also on a constant currency basis.
We measure the financial performance of our UK regulated
business using an operational return metric comparable to
the vanilla return defined in the UK price controls from 1
April 2007. In our electricity transmission operations we
achieved a 4.6% operational return in 2007/08, performing
broadly in line with regulatory assumptions. In our gas
transmission operations we achieved a 7.2% return in
2007/08, significantly outperforming regulatory assumptions
mainly as a result of performance under our incentive
schemes.
In the US we measure our financial performance against the
allowed regulatory return on equity under the terms of our
rate plan or rate agreement. For New England Power we
achieved an 11.9% regulatory return on equity for 2007/08,
0.9% lower than
Profit
Our objective is to drive continuous profit growth.
Returns on
investment
Our objective is to deliver strong financial returns
compared to the regulatory allowances within our
UK price controls and US rate plans and
a
g
reements.