Modernising and extending our distribution networks
Reliability
Our objective is to meet regulatory targets and to have zero loss of supply incidents.
To monitor our reliability performance we use network reliability percentages as our key performance indicator.
In the UK, we again achieved a very high network reliability percentage of 99.9999% which reflects a low volume of unplanned customer interruptions during the year.
In the UK, actual gas consumption was 317 TWh compared with 315 in 2007/08. In the US, gas consumption was 205 TWh for 2008/09 compared with 212 in 2007/08. This was below the previous year due to the decreased gas usage among customers having dual fuel capability.
In both the UK and US, we continue to focus on improving reliability, in particular in the area of gas escapes, and targets in both regions have been met. Specifically in the US, workable gas escape backlog has been reduced by 30% over the previous year.
We continue to focus on process safety, which is the collective name for the measures, systems, procedures or policies which prevent incidents and/or protect people and the environment from the effects of major accidents. We are aligning our approach for controlling asset risks between the UK and the US.
Our asset management policies promote continual improvement in how our physical assets (plant, pipes, meters and regulators) are managed throughout their lifecycle from conception through construction, operation, maintenance and decommissioning.
Capital investment
Our aim is to deliver capital investment by 2012 in line with our UK price control allowance and supported by our US rate plans.
During 2008/09, we successfully delivered £1,019 million of capital investment and plan to invest a further £3.3 billion by 2012.
UK capital investment
Gross investment including reinforcement, extension and replacement of the UK gas distribution network was £598 million in 2008/09 compared with £514 million in 2007/08 and £490 million in 2006/07. Of these amounts, £425 million in 2008/09 related to replacement expenditure that is capitalised (2007/08: £353 million, 2006/07: £333 million) and £173 million to other capital investment including new connections, new pipelines and minor capital expenditure (2007/08: £161 million, 2006/07: £157 million). Expenditure on software applications included within the above amounts was £22 million (2007/08: £18 million, 2006/07: £12 million).
Replacement expenditure increased by £72 million (20%) compared with 2007/08 reflecting an increase in workload and a higher proportion of complex large diameter mains. Performance under the mains replacement incentive scheme is expected to be broadly neutral in 2008/09.
In collaboration with our alliance partnerships, we have replaced more than 1,900 kilometres of metallic gas main this year and approximately 8,800 kilometres since 2004/05, the vast majority of which relates to the long-term mains replacement programme agreed with the HSE.
The increase in other capital expenditure in 2008/09 compared with 2007/08 is driven by the commencement of the construction of a major new pipeline in west London, which is due for completion in 2009/10 together with information technology expenditure to replace obsolete equipment in system control and operational activities.
US capital investment
Capital expenditure in the replacement, reinforcement and extension of our US gas distribution networks was £421 million in 2008/09, £188 million in 2007/08, and £36 million in 2006/07.
After excluding the effect of exchange movements of £58 million in 2008/09 compared with 2007/08, capital expenditure increased by £175 million. The primary reason for the increase arose from five months of additional activities from the gas distribution network of KeySpan acquired in August 2007.
After excluding the effect of exchange movements of £2 million in 2007/08 compared with 2006/07, capital expenditure increased by £154 million. The primary reason for the increase was the inclusion of £144 million representing seven months of capital expenditure on the operations acquired with KeySpan.