Risk Considerations in Asset Management Decisions

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Sabrina Pierce
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1 Risk Considerations in Asset Management Decisions APIC Forum November 8, 2012 Presented by: C. Hughes R. Geddes P. Murthy 1

2 2

3 Overview 1. Risk Assessment and Asset Management 2. Overview of AE Risk Management Model 3. Application to 25kV System Enhancements 4. Application to Transformer Emergency Sparing 5. Questions 3

4 Risk Assessment and Asset Management (AM) Risk Assessment needs to be aligned throughout the organization AE has good experience utilizing a Risk Assessment model at the corporate level The trick is to ensure this model is aligned throughout the organization and supports AM decisions True life cycle analysis must include an element of cost associated with probability and consequence of asset failure Effective AM requires active and quantified risk management Understanding the potential for misfortune or loss 4

5 Identify the risk considers systems and critical asset elements Risk Process Assess the consequence and probability of failure considers a wide range of financial, social, community and environmental factors Prioritize the asset risk and develop risk management strategies cost-effective and efficient mix of operating, maintenance and capital (renewals, replacements) programs to mitigate failure risk 5

6 Probability Probability Risk Matrix I - extreme risk, II - high risk, III - moderate risk, IV - low risk I - extreme risk, II - high risk, III - moderate risk, IV - low risk Likely III II I I Likely III II I I Somewhat Likely IV III II I Somewhat Likely IV III II I Somewhat Unlikely IV IV III II Somewhat Unlikely IV IV III II Not Likely IV IV IV III Not Likely IV IV IV III Materiality / Impact Negligible Materiality / Impact Marginal Critical Extreme Negligible Marginal Critical Extreme 6

7 Materiality / Impact Measures Negligible Marginal Critical Extreme Financial (% of earnings) < 1% 1-5% 5-10% > 10% Health, Safety and Environment Employee and/or customer health or safety not at risk; Environment not at risk Employee and/or customer health or safety at risk; Environment at risk Employee and/or customer injury possible; Localized major environmental consequence Employee and/or customer injury possible; Extended significant environmental consequence Service Quality Commitments Client/customer relationship questioned as a result of impact Negatively impacted client/customer relationship but able to resolve within 2 days Negatively impacted client/customer relationship but able to resolve within 10 days Negatively impacted client/customer relationship not able to resolve within 10 days 7

8 Materiality / Impact Measures Negligible Marginal Critical Extreme Public Image or Reputation Corporate reputation not at risk Corporate reputation at risk Damage to corporate reputation Significant damage to corporate reputation Regulatory Commitment Investigation by regulatory agencies, public officials; no threat of regulatory action, limited or no impact to regulatory credibility Investigation by regulatory agencies, public officials; possible threat of regulatory action, moderate impact to regulatory credibility Active investigation by regulatory agencies, public officials; pending regulatory action, damage to regulatory credibility Active investigation by regulatory agencies, public officials; significant regulatory action, significant damage to regulatory credibility IT Negligible impact to confidentiality, integrity and/or availability of data Low impact to confidentiality, integrity and/or availability of data Moderate impact to confidentiality, integrity and/or availability of data High or severe impact to confidentiality, integrity and/or availability of data 8

9 Asset Management Risks Loss of system availability - interruption of service Security of supply of critical inputs Disasters and emergencies Product reliability Asset failure collateral damage Loss of critical asset Hazardous materials e.g. H2S Control failure Changes in regulation Double circuit conflicts Danger to employees or public External threats 9

10 Risk Matrix Application in Distribution 10

11 Step 1 - Severity Estimate Corporate Project 4 -Negligible 3- Marginal 2- Critical 1- Extreme Financial Assets ( % of the Project Budget) <5% 5%- 9% 10%- 20% >20% Public Image or Reputation Reliability Outage over 4-8 hour Outage to over 250 customers Outage over 8 hour Outage to over 750 customers Outage over 12 hour Outage to over 1500 customers Outage over 24 hour Outage to over 2000 customers Human (Health and Safety) Minor injury Medical Injury Lost time injury Fatality Health and Safety Minor illness Restricted work Multiple injuries Long term health impact First Aid Short term health impact Environmental Impact Environmental Impact Minor and confined to lease Moderate Medium term impact OR Long term impact OR No impact Short term impact OR Environmental protection order Regulatory charges Administrative penalty 11

12 Step 2 Probability Estimate Level Actual # of outages / year greater than 4 hrs >1 >2 >3 >4 Probable # of outages / year on line 0.5 to 1.0 >1.0 >1.5 >2 Additional Considerations 0 or 1 12

13 Risk Assessment Matrix Step 3 Determine Risk Potential P R O B A B I L I T Y 4-Likely to occur 3-Somewhat likely to 2-Somewhat unlikely to 1-Not likely to occur 1- Negligible 2- Marginal 3-Critical 4-Extreme SEVERITY Step 4 Risk Level and Action 4 - Extreme - Work must be done immediately to mitigate the risk 3 - High Extensive risk controls mitigation measures must be implemented 2 - Medium Risk controls/mitigation measures must be implemented 1 - Low Some risk controls/mitigation measures may be justified. 13

14 Two Distribution Projects and Matrix Application 14

15 Assumption 25kV Load Very remote area Helicopter access only 884 km from Edm ~ 12 hour drive ATCO Service Point Rainbow Lake w/ crew from High Level ~105km to Assumption ~2.5 hour drive Long Outage duration 15

16 What is the Risk 16

Assessment Probability Grid for Assumption Level 1 2 3 4 Actual # of outages / year greater than 4 hrs >1 >2 >3 >4 Probable # of outages / year on line 0.5 to 1.0 >1.

17 Assessment Probability Grid for Assumption Level Actual # of outages / year greater than 4 hrs >1 >2 >3 >4 Probable # of outages / year on line 0.5 to 1.0 >1.0 >1.5 >2 Additional Considerations 0 Materiality Grid for Assumption Level # of Customers Over 250 Over 750 Over 1500 Over 2000 Contingency Restoration Time 4-8 hrs Over 8 hrs Over 12 hrs Over 24 hrs Additional Considerations 1 17

18 Risk Assessment for Assumption P R O B A B I L I T Y 4-Likely to occur 3-Somewhat likely to occur 2-Somewhat unlikely to occur 1-Not likely to occur 1.5 X3 1- Negligible 2- Marginal 3-Critical 4-Extreme SEVERITY 18

19 Solution 9 km of 3 x 1/0 ACSR overhead line 19

20 Saddle Lake Reserve 25kV load ~170 km from Edmonton Service point St. Paul ~27km to Saddle Lake 30km line 20

21 What is the Risk? S Vilna 5L11 1x6 ACSR S x200A Spedden OCR S A S10300 N/O 600 A S x200A 5 L 1 1 Three Phase A-Phase B-Phase C-Phase 3x6 ACSR S x800A OVR Saddle Lake IR S A S x200A 5L251 S A OVR S x70A 5L13 5L11 To S11446 N/O S St. Paul 2x4 ACSR 5 L x6 ACSR To S705 N/O 21

22 Assessment Probability Grid for Saddle Lake Level Actual # of outages / year greater than 4 hrs >1 >2 >3 >4 Probable # of outages / year on line 0.5 to 1.0 >1.0 >1.5 >2 Additional Considerations 1 Materiality Grid for Saddle Lake Level # of Customers Over 250 Over 750 Over 1500 Over 2000 Contingency Restoration Time 4-8 hrs Over 8 hrs Over 12 hrs Over 24 hrs Additional Considerations 2 22

23 Assessed Risk for Saddle Lake P R O B A B I L I T Y 4-Likely to occur 3-Somewhat likely to occur 2-Somewhat unlikely to occur 1-Not likely to occur 1.5X Negligible 2- Marginal 3-Critical 4-Extreme SEVERITY 23

24 Solution S Vilna 5L11 S x200A Spedden OVR S x70A S10300 N/O 600 A S x200A Construct 14.4 kilometres 3x1/0 and salvage 12.8 kilometres 1x6 All branches A-Phase New Switch N/O 600A All branches A-Phase 5 L 11 Three Phase New Three Phase A-Phase B-Phase C-Phase Saddle Lake IR All branches A-Phase All branches B-Phase S A S x200A 5L251 S A S x800A OVR S x70A OVR 5L13 5L11 To S11446 N/O S St. Paul All branches A-Phase 5 L 39 8 To S705 N/O 24

25 Risk Matrix Use in Transmission Maintenance 25

26 Probability How does sparing tie in with our risk matrix? Consider impact of outage to residential, industry, etc. Short term contingency plans Contingency plans play a crucial role in risk mitigation I - extreme risk, II - high risk, III - moderate risk, IV - low risk t Long term: proper sparing to restore system back to normal Likely III II I I Somewhat Likely IV III II I Somewhat Unlikely IV IV III II Not Likely IV IV IV III Materiality / Impact Negligible Marginal Critical Extreme 26

27 Transformer Sparing Strategy Substation class transformers how many spares are enough? Optimal level for us to maintain system reliability while considering cost Every critical transformer asset is looked at individually 27

28 What s our transformer sparing philosophy? Equipment factors considered: Transformer specifications (V, MVA, OLTC etc.) Age / condition monitoring Cost Also consider future developments or requirements in system 28

29 Reliability How do we determine how many spares we need? Look to maintain 95% confidence in sparing levels (P(n)) 144/72kV LTC Transformer Sparing Level eg. 120% 100% 80% 60% 40% 20% 0% Spares Poisson distribution x n=0 P( n) ( KFT ) e n! n KFT P(n) = probability of having a spare available (we aim for 95%) n = number of spares required T = avg time required to procure a replacement (provisioning period) K= number of units in service F= average failure rate (based on past ~ 5 years data) 29

30 Typical Action Plan Transformer fails Arrange for shipping of spare Install spare Mobile sub brought in and/or load transferred through distribution lines or to other transformer in sub System restored to normal Send damaged transformer for refurbishment Refurbished transformer now spare 30

31 Questions? 31

Contents Introduction Chapter 1 - Security Policy... 6

Contents Introduction Chapter 1 - Security Policy... 6 Policy statement Contents Introduction... 5 PURPOSE... 5 SYSTEM OPERATOR POLICIES TO ACHIEVE THE PPOS and dispatch objective... 5 Avoid Cascade Failure... 5 Frequency... 6 Other Standards... 6 Restoration...