a National - New York State

Loading...

Niagara Mohawk Power Corporation d/b/a National Grid PROCEEDING ON MOTION OF THE COMMISSION AS TO THE RATES, CHARGES, RULES AND REGULATIONS OF NIAGARA MOHAWK POWER CORPORATION FOR ELECTRIC AND GAS SERVICE Testimony and Exhibits of: Kenneth D. Daly Keri Sweet Zavaglia Information Services Panel Book 1 April 28, 2017

Submitted to: New York State Public Service Commission Case 17-E-____ Case 17-G-____

Submitted by: Niagara Mohawk Power Corporation

Testimony of Kenneth D. Daly

          Before the Public Service Commission

NIAGARA MOHAWK POWER CORPORATION d/b/a NATIONAL GRID

Direct Testimony of Kenneth D. Daly, CFA

Dated: April 28, 2017

1

Testimony of Kenneth D. Daly 1

I.

Introduction and Overview

2

Q.

Please state your name and business address.

3

A.

My name is Kenneth D. Daly, and my business address is One MetroTech Center,

4

Brooklyn, New York 11201.

5 6

Q.

Please explain your role and principal responsibilities at National Grid.

7

A.

I am the Jurisdictional President and Chief Operating Officer for National Grid’s New

8

York business.

I am responsible for the performance of The Brooklyn Union Gas

9

Company d/b/a National Grid NY (“KEDNY”), KeySpan Gas East Corporation d/b/a

10

National Grid (“KEDLI”), and Niagara Mohawk Power Corporation d/b/a National Grid

11

(“Niagara Mohawk” or the “Company”). I oversee all aspects of KEDNY, KEDLI, and

12

Niagara Mohawk’s business, including electric and gas distribution operations, financial

13

performance, customer interactions, regulatory affairs, and community involvement. I

14

also serve on the Boards of Directors for KEDNY, KEDLI, and Niagara Mohawk.

15 16

Q.

Please describe your educational background and business experience.

17

A.

I received a Bachelor of Arts in English from St. Francis College in 1988. I received a

18

Master of Business Administration degree from St. John’s University in 1992 and a

19

Master of Science degree in Human Resource Management from NYU-Polytechnic

20

University in 1999. I achieved the Chartered Financial Analyst designation in 2002. In

21

2014, I completed the Advanced Management Program at Harvard Business School. I

22

am an Adjunct Professor of Business and Finance at St. Francis College and I serve on

Page 1 of 56 2

Testimony of Kenneth D. Daly 1

the Boards of Directors for a number of New York energy, business, academic, and non-

2

profit organizations.

3 4

I joined KEDNY in 1988 as a Management Trainee in the Meter Reading area in

5

Brooklyn, and spent my early career in various roles in Customer Relations and Human

6

Resources. From 1997 to 1998, I served on the integration team supporting the merger of

7

KeySpan Corporation and the Long Island Lighting Company. In 2005, I was named

8

Vice President, Financial and Employee Related Services, responsible for human

9

resources, customer relations, collections, and accounting.

I served as a Merger

10

Coordination Officer in the National Grid-KeySpan merger and was named the Chief

11

Financial Officer for Global Gas Distribution in 2007. In 2009, I was named the Global

12

Financial Controller of National Grid plc. I was named President of the New York

13

Jurisdiction in 2011, a role I have held for six years.

14 15

Q.

What is the purpose of your testimony?

16

A.

The purpose of my testimony is to present an overview of the Company’s electric and

17

gas rate filings and introduce the witnesses supporting those filings. I will provide

18

background concerning Niagara Mohawk’s business, including a discussion of the

19

circumstances that have affected the Company since its last base rate case in 2012 and a

20

review of its recent ratemaking history. I will then address the factors driving the

21

Company’s need for rate relief and describe the important steps taken to prepare for

22

these filings. I will highlight the important issues in this case and explain how the

Page 2 of 56 3

Testimony of Kenneth D. Daly 1

Public Service Commission’s (“Commission”) granting the relief we seek will further

2

the objectives shared by the Company, our customers, and the State of New York.

3 4

Q.

Please provide an overview of the Company’s rate filings.

5

A.

Niagara Mohawk seeks to adjust its base electric and gas delivery rates to eliminate

6

electric and gas revenue deficiencies of $326 million and $81 million, respectively, in the

7

twelve months ending March 31, 2019 (“Rate Year”). To mitigate bill impacts for

8

electric and gas customers and maintain rate stability, the Company is proposing to

9

amortize a portion of its deferred liabilities to offset the Company’s need for rate relief.

10

While the Company’s filings propose new rates for the Rate Year only, Niagara Mohawk

11

is interested in exploring a multi-year rate plan settlement that would allow for a phase in

12

of these revenue increases and the ability to manage the impact on customers’ bills. To

13

facilitate such discussions, the Company has included cost projections for two years

14

(“Data Years”) beyond the Rate Year.

15 16

The energy services Niagara Mohawk provides are essential to the wellbeing of

17

customers and communities in Upstate New York. Customers rely on the Company 24

18

hours a day, 365 days a year to safely power their homes and businesses.

19

generations, Niagara Mohawk has been a trusted provider of utility services in New

20

York, delivering electricity and natural gas to over two million customers through

21

networks that have provided reliable service for decades.

For

22

Page 3 of 56 4

Testimony of Kenneth D. Daly 1

Today is an exciting time in the utility industry where technology and innovation hold the

2

promise of a more dynamic, efficient, and sustainable energy future. But that future can

3

only be realized through investments, and the need for those investments must be

4

balanced against the financial impacts on customers of increases in the costs of vital

5

services. To that end, the Company’s rate filings present comprehensive, measured

6

proposals for modernizing Niagara Mohawk’s electric and gas infrastructure, enhancing

7

safety, reliability and customer service, assisting our most vulnerable customers,

8

delivering economic and environmental benefits to the region, helping commercial and

9

industrial customers manage their energy consumption to stay competitive, and

10

promoting energy technologies and markets that support New York State’s energy vision.

11

These filings balance the need for investment with the impact on customers’ bills.

12 13

Q.

Please summarize the significant proposals in the rate filings.

14

A.

First and foremost, the proposals reflected in the Company’s rate filings are focused on

15

efficiently delivering the investments and programs needed to achieve our primary

16

objective of providing safe and reliable electric and gas service to customers in New

17

York. While strengthening the core business, the Company is also laying the foundation

18

for a new energy future. The investments and programs described in these rate filings

19

will enable Niagara Mohawk to take significant steps toward modernizing its energy

20

infrastructure and developing networks capable of serving the changing needs of our

21

customers today and in the future.

22

Company to recover its cost of providing safe and reliable service and, as a consequence,

23

a rate increase is needed to facilitate the necessary investments.

However, the current rates will not permit the

Page 4 of 56 5

Testimony of Kenneth D. Daly 1 2

With respect to the electric system, the changing energy landscape requires investment to

3

enhance and upgrade the Company’s infrastructure.

4

expenditures reflected in these filings will ensure the continued provision of safe,

5

reliable, and cost effective service, including approximately $650 million in core electric

6

transmission, sub-transmission, and distribution infrastructure in the Rate Year.

7

Investments are also needed to modernize the system and establish a framework for

8

enabling an animated energy marketplace, facilitating the integration of distributed

9

energy resources (“DER”), empowering customers, and furthering the State’s and

10

Commission’s policy goals. Many of the investments to modernize the electric system

11

will also be used to support the Company’s Distribution System Platform (“DSP”) as part

12

of the Company’s effort to plan, interconnect, control, monitor, and manage DER on the

13

electric distribution system.

The capital and operating

14 15

To encourage development and innovation for the benefit of customers, the Company is

16

proposing a set of outcome-based Earnings Adjustment Mechanisms (“EAMs”) that will

17

measure and reward the Company’s success in delivering outcomes that customers value.

18

In this respect, this is a transformational rate filing that will advance the utility business

19

model by creating a framework to encourage efficiency and market-based solutions to

20

address future energy needs.

21 22

The Company is focused on protecting its networks from the threat of increasingly severe

23

weather events and quickly restoring service to customers impacted by storms. Already

Page 5 of 56 6

Testimony of Kenneth D. Daly 1

in 2017, the Company has responded to three separate storm events that affected the

2

entire Upstate service territory. A January ice and wind event affected more than 85,000

3

customers with the majority of interruptions occurring in Central New York, while in

4

March two separate wind events affected more than 180,000 and 112,000 customers

5

primarily in the Western and Eastern New York regions, respectively. In each case,

6

service was timely restored thanks to the hard work of the Company’s field crews with

7

the support of additional resources from across National Grid. I am very proud of the

8

Company’s storm response efforts and appreciate the positive recognition that the

9

Company received from customers, municipal partners, and industry peers. However, the

10

impacts of climate change and expectations of our customers demand continuous

11

improvement in this critical area.

12

increasing funding for critical maintenance programs, geographic information systems,

13

and communications on the electric system, to improve reliability, resiliency, and our

14

ability to withstand and respond to future weather events. In combination with capital

15

investments to harden the system, these efforts will help maintain service and power

16

quality for our customers in the face of increasingly frequent and intense storms.

To address this challenge, Niagara Mohawk is

17 18

For the gas business, the Company’s gas infrastructure investment plan recognizes the

19

need to enhance and continue pipeline integrity and reliability programs, upgrade the

20

systems supporting the gas operations, support gas growth, and balance customer bill

21

impacts. To improve the safety and reliability of the gas distribution system, and reduce

22

methane emissions on our older gas infrastructure, the Company will maintain its current

23

aggressive pace of leak prone pipe replacement (50 miles per year), which puts us on

Page 6 of 56 7

Testimony of Kenneth D. Daly 1

pace to eliminate these facilities several years ahead of the Commission’s target date.

2

The gas investment plan also includes a project to mitigate a significant supply/capacity

3

constraint in the eastern portion of the Company’s service territory, as well as pipeline

4

and reliability programs that will improve system performance. The Gas Infrastructure

5

and Operations Panel addresses the Company’s efforts to expand the availability of gas

6

service through targeted capital investments and other means.

7 8

The Company is also proposing a holistic program to upgrade and enhance the systems

9

that support our gas business. The Gas Business Enablement (“GBE”) project will

10

transform National Grid’s U.S. gas operations through business process improvements

11

and new technology investments focused on reducing operational risk, enhancing

12

performance, and creating a platform to support future growth and customer demands.

13 14

Importantly, Niagara Mohawk is focused on gas safety and committed to taking the steps

15

necessary to improve its safety performance. National Grid is proud of its long history of

16

safe and reliable operations in New York, but the Company’s recent compliance

17

performance, as reflected in the results of the Department of Public Service Staff’s

18

(“Staff”) gas field and records audits, is not yet where it needs to be. Compliance with

19

safety regulations is a primary focus. The bar has been raised on safety and compliance

20

for all gas utilities, and the Company will do everything it can to meet the heightened

21

expectations of regulators and customers. The Gas Infrastructure and Operations and Gas

22

Safety Panels discuss investments and programs designed to enhance safety and improve

23

compliance performance, including proposals to improve training for Company field

Page 7 of 56 8

Testimony of Kenneth D. Daly 1

personnel and contractors, expand public outreach and education on gas safety, conduct

2

additional quality assurance inspections, and advance an independent assessment of the

3

Company’s safety and compliance performance. The Company is also proposing to

4

modify its gas safety performance metrics to provide more stringent performance targets

5

in areas such as damage prevention and leak management, and to adjust its safety

6

violations metric to focus more attention on addressing compliance deficiencies going

7

forward. To drive further improvement, the Company’s proposals also include positive

8

incentives that will allow Niagara Mohawk to earn modest incentives for achieving

9

superior performance levels in key main replacement and leak reduction metrics.

10 11

Niagara Mohawk’s expanding infrastructure programs, new safety initiatives, and higher

12

volume workload also necessitate an investment in people. Accordingly, the Company is

13

proposing to add more than 280 positions over three years to support electric and gas

14

operations, grid modernizations, customer, and low income programs. As I discuss

15

below, the utility industry faces a demographic challenge with its aging workforce, and

16

staffing these new positions will help Niagara Mohawk maintain the qualified workforce

17

needed to deliver critical energy services.

18 19

The costs to operate Niagara Mohawk’s gas and electric businesses are increasing as a

20

result of various market and external factors, including new safety requirements for

21

distribution companies. At the same time, investments to modernize infrastructure come

22

at a significant cost. Understanding the need to manage the level of investment, Niagara

23

Mohawk has developed a proposal in this case that delivers benefits without overly

Page 8 of 56 9

Testimony of Kenneth D. Daly 1

burdening customers.

Indeed, the Company has attempted to forecast carefully the

2

infrastructure investment needed to fulfill its public service obligations, advance energy

3

policy priorities, and balance customer bill impacts.

4 5

Niagara Mohawk appreciates that energy bills are a hardship for its financially vulnerable

6

customers, and the Company is committed to providing these customers with much

7

needed financial support through expanded low income programs. The Company is

8

significantly increasing funding for its low income programs and expanding its outreach

9

efforts to identify and enroll customers in available assistance programs. As I discuss

10

more fully below, the Company’s new Energy Affordability Program has the potential to

11

provide more than $70 million in low income benefits, an unprecedented level of low

12

income support and a more than threefold increase in the current budget for these

13

programs. In addition to increasing benefit levels, Niagara Mohawk’s efforts to identify

14

additional low income customers is expected to increase by approximately 55,000 the

15

number of program participants receiving benefits. Expanding the impact of our low

16

income programs is especially important at a time when proposed federal budget cuts

17

threaten the Low Income Home Energy Assistance Program (“LIHEAP”) that provides

18

heating assistance to thousands of the Company’s low income customers.

19 20

The Company is managing costs everywhere it can, using deferrals to offset increases and

21

taking steps to protect the most vulnerable customers.

22

deficiencies arise even though National Grid has been focused on managing operating

23

costs.

The Company’s revenue

In recent years, the Company has implemented a number of cost efficiency

Page 9 of 56 10

Testimony of Kenneth D. Daly 1

measures. For example, the Company’s efforts to negotiate new collective bargaining

2

agreements with its unions will permit the Company to continue to deliver high quality

3

services in a cost-effective manner.

4

Requirements Panel, Niagara Mohawk’s revenue requirement initially reflects a one

5

percent productivity adjustment that has been applied to past Company rate filings. In

6

addition, to allow customers to share in the benefits of the Company’s ongoing efforts to

7

drive cost efficiencies, the revenue requirement reflects the impact of various U.S.

8

efficiency programs. Specifically, the filing describes National Grid’s effort to deliver

9

sustainable savings through its Performance Excellence (“PEX”) strategy, which

10

combines end-to-end process work with the development of leadership behaviors and

11

local team capabilities that maximizes employee engagement and improves service to

12

customers. Combined, the level of annual savings in the revenue requirement totals

13

$12.8 million, which is significant.

As discussed more fully by the Revenue

14 15

Q.

16 17

Are the Company’s filings consistent with the goals and objectives outlined in New York State’s Energy Plan?

A.

Yes.

National Grid supports New York State’s energy policies.

As demonstrated

18

throughout these filings, Niagara Mohawk is committed to modernizing its electric and

19

gas infrastructure to promote resiliency, reliability and growth, to deploying new

20

technologies to enhance safety, reliability and customer engagement, to promoting

21

market solutions that drive efficiencies and enhance customer choice, and to assisting

22

customers with managing their energy usage. The Company looks forward to working

Page 10 of 56 11

Testimony of Kenneth D. Daly 1

with all stakeholders to promote these policies in a manner that benefits customers and

2

communities.

3 4

Q.

5 6

Please introduce the other witnesses who provide testimony in support of the Company’s filing.

A.

In addition to my testimony, Niagara Mohawk’s rate case filings are supported by the

7

testimony of twenty-two witnesses or witness panels. These witnesses and the subject

8

they address are as follows:

9



The Electric Infrastructure and Operations Panel consists of Keith P. McAfee, Vice

10

President, New York Electric, Christopher Kelly, Senior Vice President of Electric

11

Process and Engineering, Allen C. Chieco, Ombudsman Distributed Generation, New

12

York Electric, Peter F. Altenburger, Distribution Overhead and Underground Lines,

13

New York East, and Robert D. Sheridan, Director, New Energy Solutions. The panel

14

discusses the Company’s electric transmission and distribution capital additions,

15

transmission and distribution operations and maintenance (“O&M”) costs, as well as

16

several of Niagara Mohawk’s Distributed System Implementation Plan (“DSIP”)

17

investments.

18



The Gas Infrastructure and Operations Panel consists of Ross Turrini, Senior Vice

19

President – Gas Process and Engineering, John S. Stravrakas, Vice President for Gas

20

Asset Management, Keri Sweet Zavaglia, Vice President of New York Performance

21

and Strategy, and Johnny Johnston, Senior Vice President for Gas Enablement. The

22

panel discusses Niagara Mohawk’s plans to deliver necessary investments in gas

23

infrastructure, including the replacement of leak prone pipe, programs to enhance

Page 11 of 56 12

Testimony of Kenneth D. Daly 1

network reliability and support gas expansion, and investments to promote the safe

2

and reliable operation of our gas networks.

3

Mohawk’s O&M costs to provide gas distribution service to customers.

4



The panel also discusses Niagara

The Gas Safety Panel consists of Ross Turrini, Robert De Marinis, Vice President –

5

Maintenance & Construction New York Gas, and Keri Sweet Zavaglia. The panel

6

presents the Company’s gas safety programs, as well as its proposal on gas safety

7

performance metrics.

8



9 10

capital. 

11 12

Ann E. Bulkley of Concentric Advisors addresses the Company’s cost of equity

Stephen Caldwell, Director Regulatory Strategy & Integrated Analytics, addresses the Company’s overall cost of capital and capital structure.



Maureen P. Heaphy, Vice President of U.S. Compensation, Benefits and Pensions,

13

describes National Grid’s compensation and benefits program and our efforts to

14

control the costs of those programs.

15



Keri

Sweet

Zavaglia

addresses

the

Company’s

implementation

of

the

16

recommendations in the recent New York gas management audit, as well as the status

17

of the Commission’s recent data and staffing audits.

18



19 20

Dr. Kimbugewe Kateregga of Foster Associates LLC presents Niagara Mohawk’s electric depreciation study and proposed electric depreciation rates.



Charles F. Willard, Director, Site Investigation and Remediation (“SIR”), discusses

21

Niagara Mohawk’s SIR programs, its efforts to control and mitigate SIR expense and

22

its forecast SIR costs.

Page 12 of 56 13

Testimony of Kenneth D. Daly 1



The Shared Services Panel consists of Jody Allison, Vice President of Revenue Cycle

2

Management, Paula Leaverton, Manager of the Property Tax Department, Kathryn

3

Granger, Manager of Consumer Advocacy and Low Income, and Arlene Gans,

4

Director Customer Contact Centers, New York. The panel’s testimony sets forth

5

proposals relating to property tax, uncollectible expense, customer service quality

6

metrics, and low income programs.

7



The Electric Customer Panel consists of Carlos A. Nouel, Vice President, New

8

Energy Solutions, John F. Isberg, Vice President, Customer Solutions, and James M.

9

Molloy, Director of Revenue Requirements – New York. The panel presents Niagara

10

Mohawk’s proposals on new products and services to enhance customer engagement

11

opportunities and advance the State’s system modernization goals, current and

12

proposed demonstration projects to test new technologies, EAMs and platform

13

services revenues, investments associated with the Company’s growing dynamic load

14

management programs, and modifications to the Company’s electric energy

15

efficiency programs. In addition, the panel addresses the Company’s proposal to

16

continue its successful economic development programs.

17



The Gas Customer Panel consists of John F. Isberg and James M. Molloy. The panel

18

discusses Niagara Mohawk’s proposal to test and deploy two non-pipeline

19

alternatives projects to create a more resilient and environmentally friendly gas

20

system.

21

development, outreach and education, gas conversion rebates, and energy efficiency.

22 23



The panel also presents Niagara Mohawk’s proposals on economic

Joseph F. Gredder, Manager, Electric Forecasting and Analysis, presents the Company’s electric sales forecast.

Page 13 of 56 14

Testimony of Kenneth D. Daly 1



2 3

Theodore E. Poe, Jr., Manager, Gas Load Forecasting and Analysis, presents the Company’s gas sales forecast.



The Electric Supply Panel consists of Margaret M. Janzen, Director, Wholesale

4

Electric Supply, and Christopher L. Meyer, Manager of New York Wholesale Electric

5

Supply. The panel discusses the Company’s efforts to purchase electricity supplies

6

on a reliable, cost-efficient basis.

7



8 9

Elizabeth D. Arangio, Director, Gas Supply Planning, discusses the Company’s efforts to purchase natural gas supplies on a reliable, cost-efficient basis.



The Outdoor Lighting Panel consists of Melanie W. Littlejohn, Vice President of

10

Community and Customer Management, John E. Walter, Manager of Outdoor

11

Lighting – New York, and Pamela I. Echenique, Director of New York Pricing. The

12

panel describes several changes the Company proposes to improve the service it

13

provides to outdoor lighting customers and enable their transition to more advanced

14

outdoor lighting technology and equipment.

15



The Advanced Metering and Infrastructure (“AMI”) Panel consists of John O. Leana,

16

Director, Performance and Strategy New York, James M. Molloy and Pamela I.

17

Echenique, and discusses the Company’s proposal to deploy electric AMI meters and

18

AMI compatible encoder receiver transmitters (“ERTs”) for its gas meters that will

19

deliver customer, safety and operational benefits, and empower customers by

20

providing enhanced energy consumption data and more products and services for

21

managing their energy costs and usage.

22 23



The Information Systems (“IS”) Panel consists of Anuraag Bhargava, Senior Vice President and Chief Information Officer, Daniel J. DeMauro, Director, IS Regulatory,

Page 14 of 56 15

Testimony of Kenneth D. Daly 1

Mukund Ravipaty, Director, IS Risk and Security, and Aman Aneja, Director, IS

2

Business Relations. The panel’s testimony describes major information systems

3

investments and initiatives during the Rate Year and Data Years, including

4

investments in cyber security. 

5

The Revenue Requirements Panel consists of David B. Doxsee, Vice President and

6

Chief Financial Officer – New York, Stephanie Briggs, Lead Specialist, Downstate

7

New York Revenue Requirements, and James M. Molloy. The panel’s testimony sets

8

forth the electric and gas revenue requirements for the Rate Year, and describes

9

Niagara Mohawk’s efforts to review the Historic Test Year costs to ensure they were

10

accurately charged. 

11

The Electric Rate Design Panel consists of Pamela I. Echenique, Howard S. Gorman

12

of HSG Group Inc., and Carol Teixeira, Manager, Electric Pricing New York. The

13

panel’s testimony addresses Niagara Mohawk’s marginal and embedded cost of

14

service studies, the revenue forecast, revenue allocation, rate design, and bill impacts

15

for electric customers. 

16

The Gas Rate Design Panel consists of Kellie I. Smith, Manager, Gas Pricing New

17

York, Pamela I. Echenique, and Howard Gorman. The panel’s testimony addresses

18

the Company’s marginal and embedded cost of service studies, the revenue forecast,

19

revenue allocation, rate design, and bill impacts.

20 21

II.

Background and Rate History

22

Q.

Please describe Niagara Mohawk.

Page 15 of 56 16

Testimony of Kenneth D. Daly 1

A.

Niagara Mohawk’s electric transmission and distribution business serves approximately

2

1.6 million customers in more than 450 cities and towns across 24,000 square miles in

3

Upstate New York. The gas distribution business serves nearly 600,000 customers in the

4

areas of central, northern, and eastern Upstate New York utilizing more than 9,000 miles

5

of gas transmission and distribution main.

6 7

Niagara Mohawk is a provider of essential energy services to customers and a key

8

partner in the economic vitality of Upstate New York. The Company’s distribution

9

networks power key economic segments including agribusiness, brewing, banking,

10

education, health care, high tech, manufacturing, medical research and development,

11

service industries, transportation, entertainment, and tourism.

12

Niagara Mohawk is upgrading, expanding, and investing in energy delivery systems to

13

meet real economic growth.

Across New York,

14 15

While its first priority has always been the safe and reliable delivery of electricity and

16

natural gas, the Company has a long history of community engagement and a

17

demonstrated commitment to improving the quality of life in the communities we serve

18

through support for economic development, educational, and charitable programs. Since

19

2003, these programs have provided more than $80 million that has helped create or

20

retain more than 45,000 jobs in the Company’s service territory and supported more than

21

$8.7 billion in private and public investment. Niagara Mohawk’s economic development

22

grant programs provided $11.3 million in grant assistance during fiscal year (“FY”) 2016,

23

and over $13.5 million in FY 2017 – the highest annual total in program history.

Page 16 of 56 17

Testimony of Kenneth D. Daly 1

Groundbreaking emergency economic programs following Hurricanes Lee and Irene and

2

Superstorm Sandy helped 400 businesses rebuild and retain nearly 10,000 jobs.

3 4

Q.

5 6 7

Can you elaborate on ways in which Niagara Mohawk has helped to promote economic development in the various regions of its service territory?

A.

Yes.

Niagara Mohawk’s economic development efforts have promoted economic

development in all of the geographic regions served by the Company:

8 9

Western New York. In Cattaraugus County, Niagara Mohawk financial incentives are

10

helping to foster growth in the Southern Tier through a new business incubator in Olean.

11

In Orleans County, a grant from the Company helped a large produce company in

12

Lyndonville add new technology to improve capabilities, reduce energy costs, and stay

13

competitive on a global scale. On the manufacturing front, $1.3 million in National

14

Grid incentives helped a major manufacturer in Jamestown in southern Chautauqua

15

County reduce annual electricity use by 8.7 million kilowatt-hours – energy savings

16

equal to 6.6 million tons of carbon or more than 14,400 barrels of oil a year.

17 18

Central New York. In Oneida County, a $250,000 Urban Corridor incentive helped a

19

business association revitalize a cherished Utica neighborhood, promoting growth while

20

preserving history. Across Onondaga, Oswego and Cortland counties, $415,000 in

21

Niagara Mohawk incentives for lighting and boiler upgrades enabled Cortland and West

22

Genesee central school districts, Oswego County BOCES and SUNY Cortland to reduce

23

their energy use by a combined 3.5 million kilowatt-hours annually.

Page 17 of 56 18

Testimony of Kenneth D. Daly 1 2

Eastern New York.

In Schenectady, the Company is partnering on a massive

3

remediation and redevelopment effort at the former American Locomotive site, helping

4

to transform one of America’s oldest brownfields into a waterfront tourism,

5

entertainment, commercial, and residential destination.

6

Mohawk is helping create the energy system of the future with an innovative program

7

that will improve system efficiency and resiliency while enabling customers to better

8

manage their energy consumption. The Company also supported an innovative biogas

9

technology upgrade that made the Gloversville-Johnstown wastewater treatment facility

10

the first in New York State to officially export power back into the electricity grid and

11

provide revenue for the towns.

12

companies stay competitive and add and retain jobs, boosting production while

13

achieving millions of kilowatt-hours in savings.

In Clifton Park, Niagara

Energy efficiency incentives are helping local

14 15

Q.

16 17

Please describe the Company’s efforts to enhance the quality of service provided to customers.

A.

Through our investments in infrastructure and commitment to deliver continuous

18

improvements in operations, the Company has significantly enhanced the quality of

19

service to customers. Over the past five years, Niagara Mohawk has invested more than

20

$3 billion to modernize its Upstate New York electric gas and networks.

21 22 23

Page 18 of 56 19

Testimony T of o Kenneth D. Daly 1

Table 1: 1 Capital Investments FY 2008-20016

2 3

Since FY 20 008, the Com mpany has increased annnual electrric capital innvestment bby 70

4

a gas capital investtment by moore than 1100 percent. T These investm ments percent and annual

5

arre targeted at a replacing aging infrasstructure andd building sm marter netw works that suupport

6

cu ustomer and d communitty priorities, including upgrades too promote ggrowth and new

7

teechnologies and system m automation n to enhancce service qquality. Thhese investm ments,

8

allong with th he efforts of the Compan ny’s talentedd and dedicatted work forrce, have enabled

9

Niagara N Moh hawk to meeet or exceed its electric reliability m metrics sincee 2008, incluuding

10

eiight consecu utive years of achievin ng Customeer Average Interruptionn Duration IIndex

11

(““CAIDI”) an nd System Average A Interrruption Freqquency Indeex (“SAIFI”)) targets.

12 13

n response to o increasinglly severe weeather eventss, the Compaany is priorittizing investtment In

14

in n storm hard dening and resiliency, and incorpoorating lessoons learned from signifficant

15

weather w even nts such as seevere ice sto orms and sum mmer tornaddoes, Hurricaanes Irene (22011)

16

an nd Lee (2011), Supersto orm Sandy (2 2012), and thhe Mohawk Valley floodding (2013).. The

17

Company’s C excellent e peerformance in electric storm restooration is illlustrated byy the

18

fo ollowing exaamples:

Pag ge 19 of 56 20

Testimony of Kenneth D. Daly 1



Severe storms in June 2015 disrupted service to 60,000 customers.

The

2

Company was able to restore 99 percent of the affected customers within 24

3

hours.

4



5 6

In October 2015, severe rains disrupted service to 64,000 customers. Again, the Company restored service to 99 percent of these customers in 24 hours.



In August 2016, severe thunderstorms affected 100,000 customers; 90 percent

7

were restored within 24 hours. This restoration effort involved more than 1,000

8

field workers removing trees, replacing poles, and repairing damage.

9 10

More recently, the Company experienced three severe storms over several weeks in 2017.

11

On January 11, 2017, a winter storm with wet snow and high winds affected 85,000

12

customers, more than 90 percent of whom were restored within 11 hours. Then on March

13

1st, the Company quickly restored service to more than 112,500 electric customers

14

interrupted by severe wind. And again on March 8th, we were recognized by customers

15

and public officials for our response to wind storms that swept through western New

16

York, delivering sustained wind gusts of 70 miles per hour and causing extensive damage

17

to the electric system. The Company deployed a field force of more than 1,700 service,

18

line and tree workers to restore power to the nearly 180,000 customers affected by the

19

storm. Our crews replaced 300 broken poles and 80 damaged transformers, including

20

more than 200 poles in the hardest hit Genesee region alone, and restored more than 96

21

percent of customers within 48 hours of the storm.

22

Page 20 of 56 21

Testimony of Kenneth D. Daly 1

Niagara Mohawk’s storm response efforts have received recognition within the industry.

2

The Company was awarded Edison Electric Institute’s Outstanding Power Restoration

3

Efforts and Mutual Aid Support Awards in November 2012, December 2013, June 2015,

4

January 2016, and February 2016. The Company was also awarded North Atlantic

5

Mutual Assistance Group Key Contributor Awards in the Spring and Fall 2016. In

6

addition to supporting the Company’s customers, Niagara Mohawk’s crews have played a

7

vital role supporting electric and gas restoration activities during major storm events

8

impacting our sister utilities across New York.

9 10

With regard to the gas business, the Company has accelerated gas pipe replacement

11

across Niagara Mohawk’s gas distribution system to remove leak prone facilities and

12

expanded its gas network to enable more customers and communities to benefit from

13

natural gas. Niagara Mohawk has established state of the art control systems, including

14

upgrades to emergency and outage management systems and enhanced system

15

automation. The Company has also reduced its backlog of system leaks, which will

16

enhance system performance and reduce methane emissions.

17 18

Q.

19 20

What has the Company done to help customers manage their energy usage and pay their bills?

A.

Through its extensive energy efficiency programs, Niagara Mohawk helps consumers

21

manage their energy usage and take advantage of new energy technologies. Over the past

22

eight years, Niagara Mohawk’s energy efficiency program processed more than three

Page 21 of 56 22

Testimony of Kenneth D. Daly 1

million energy efficiency applications that have saved our customers approximately 1.7

2

billion kilowatt-hours of electricity and 36 million therms of natural gas.

3 4

Niagara Mohawk is also providing low-income assistance to more than 120,000

5

households annually, with programs and experts dedicated to delivering solutions for

6

those struggling to pay their energy bills. The Company’s Consumer Advocacy team

7

serves more than 21,000 Upstate New York households through a comprehensive

8

approach that is designed to meet customers’ and communities’ individualized needs.

9

Demographic information is used to tailor low-income programs and services for

10

vulnerable customers across 24,000 square miles.

The Company’s low income

11

programs are focused on arrears management, outreach (approximately 300,000

12

outbound calls and 122,000 households assisted annually), energy efficiency programs,

13

discounts and bill credits, reconnect fee waivers, and fuel funds. The Company’s

14

Customer Assistance Expos organize various assistance programs under one roof to help

15

customers secure needed resources in one day, while our grassroots Advocates in Action

16

reach out to the communities to identify vulnerable customers. Niagara Mohawk also

17

partners with low-income senior housing facilities, human service agencies, and

18

veterans organizations to direct customers to available assistance. Finally, National

19

Grid employees, who live and work in the communities served by the Company, spend

20

thousands of hours volunteering on behalf of numerous charitable causes and activities

21

across Upstate New York.

22

Page 22 of 56 23

Testimony of Kenneth D. Daly 1

Q.

Has the Company developed any demonstration projects to enhance the customer

2

experience and advance the Commission’s efforts to implement Reforming the

3

Energy Vision (“REV”)?

4

A.

Niagara Mohawk stands as a partner with the Commission in implementing the REV

5

goals, which align with the Company’s efforts to modernize its electric system and

6

deliver more environmentally sustainable energy solutions and enhance services for

7

customers. A key aspect of that vision is testing new and innovative technologies. To

8

date, the Company has undertaken four demonstration projects consistent with the goals

9

of REV. The Buffalo Niagara Medical Campus demonstration project will test how the

10

Company, as the DSP provider, can integrate customer-owned energy resources to better

11

manage system demands. The Fruit Belt Neighborhood Solar demonstration project will

12

engage low-to-moderate income residential customers in the Fruit Belt neighborhood of

13

Buffalo, New York with solar and energy efficiency products and services. The Potsdam

14

Community Resiliency demonstration project is examining the feasibility of a community

15

microgrid to add resiliency to the electric infrastructure in the area. Finally, the Clifton

16

Park Smart Energy Solutions demonstration project involves the installation of AMI

17

meters for residents of Clifton Park, New York to test whether price signals, tools, and

18

innovative rate design concepts such as time-of-use rates will reduce electric demand.

19 20

Additionally, the Company has filed for approval for two additional demonstration

21

projects. The Smart Home Rate project, which is linked with the Clifton Park project,

22

involves providing residential voluntary time-of-use customers with voice recognition

23

technology that will allow them to control their home appliances through smart phone

Page 23 of 56 24

Testimony of Kenneth D. Daly 1

applications and other technologies, enabling them to reduce their electric consumption

2

when prices are high. The Distributed Generation Interconnection demonstration project

3

seeks to test whether the Company’s upfront investment in system upgrades to make the

4

electric system “DG-ready,” combined with an innovative cost allocation methodology to

5

recover the cost of these upgrades from participating developers, will stimulate

6

interconnections in Upstate New York.

7 8

As described by the Electric Customer Panel, the Company is considering several

9

additional proposals to further animate markets and deliver the policy objectives of the

10

State and the Commission. These proposals include electric transportation, electric heat,

11

and an energy innovation center in Upstate New York. While the costs of these projects

12

are not included in the case in the interest of balancing investment with customer bill

13

impacts, the Company believes they respond to customer needs and support important

14

policy goals.

15

proposals with the parties to the case for inclusion in future proceedings or as part of a

16

multi-year settlement.

Therefore, the Company welcomes the opportunity to discuss these

17 18

These projects will help to create a more efficient electric system and provide important

19

benefits to our customers. The Company looks forward to progressing the Commission’s

20

REV initiative and working with Staff and stakeholders to embed the learning from

21

existing demonstration projects and develop further demonstration projects in the future.

22 23

Q.

Please provide the recent ratemaking history for Niagara Mohawk.

Page 24 of 56 25

Testimony of Kenneth D. Daly 1

A.

The Company last filed for base rate increases in 2012. The joint proposal that was

2

adopted by the Commission in 2013 provided for a three-year rate plan that commenced

3

April 1, 2013. Under that rate plan, electric delivery service revenues were reduced by

4

8.7 percent in FY 2013 and increased by 2.8 percent in FY 2014 and again in FY 2015,

5

while gas delivery service revenues were reduced by 6.7 percent in FY 2013 and

6

increased by 4.9 percent in FY 2014 and again in FY 2015.

7

Commission issued an Order in Case 15-M-0744 that permitted Niagara Mohawk to

8

utilize certain deferred credit balances to offset approved capital expenditures in FY 2017

9

and FY 2018.

10 11

Figure 2: Recent Ratemaking Timeline January 2012



April 2013



12 13 14 15 16 17 18 19

In May 2016, the

May 2016

Double digit delivery rate reductions for electric customers resulting from the expiration of competitive transition charges  Commission authorized recovery of incremental capital investments and deferral balances New three-year rate agreement timed to coincide with the expiration of a $190 million annualized electric surcharge  Rate plan provides the opportunity to invest in infrastructure, continue important customer programs, and maintain rate stability for customers  Funded approximately $1.6 billion in capital investment over the term of the rate plan  Commission approves capital investment and financing petitions  Two year delivery rate freeze  Supported an additional $1.3 billion investment in electricity and gas infrastructure investments through March 2018  Funding to accelerate leak prone pipe replacement to 98 miles over two years

20 21

As a result of the combination of the Company’s efforts to contain cost increases and the

22

support Niagara Mohawk has received from the Commission, customers have

23

experienced an extended period of energy price stability – for both electricity and natural

Page 25 of 56 26

Testimony T of o Kenneth D. Daly 1

gas. Adjusteed for inflattion, the com mbination oof lower dellivery and ssupply prices has

2

reesulted in total t bills trrending dow wn over thhe last 12 yyears.

3

ap pproximately y 20 percentt lower than they were inn 2004, incluuding a ninee percent deccrease

4

in n delivery rates r and naatural gas bills b are 49 percent low wer over thhat same peeriod,

5

in ncluding stab ble delivery y rates. As shown in Fiigure 3, in rreal terms, tthe Companyy has

6

prrovided morre than a deccade of pricee stability forr residential electric and gas customeers.

7 8 9

Electricity bills are

Figure 3:: Average Residential R B Bills 2004 v.. 2016

10

$2,000 $1,800 $1,600 $1,400 $1,200 $1,000 $800 $600 $400 $200 $0

11

Niagara Moh hawk Gas Ann nual Residenttial Bill (Real  2016$) Un nder Normal Weather: No ov  to Oct 04/27//2016 NYMEX X  Commodity

Deliveryy

07 07/08 08/0 09 09/10 10/111 11/12 12/13 13/14 14/15 15/16 04//05 05/06 06/0

12 Pag ge 26 of 56 27

Testimony of Kenneth D. Daly 1

Q.

Please explain the Company’s need for rate relief.

2

A.

Despite Niagara Mohawk’s efforts to operate as efficiently as possible, the Company’s

3

current rate allowances are inadequate to cover its cost of providing safe and reliable

4

service.

5

Company’s electric and gas businesses. As mentioned earlier, the Company’s capital

6

expenditures have increased very significantly as it has maintained and modernized its

7

gas and electric infrastructure even as customers’ base delivery rates remained flat.

8

Increased capital expenditures and O&M are the principal drivers of the Company’s

9

revenue deficiencies.

Cost increases that are not reflected in rates have eroded returns in the

10 11

Table 1 (on page 18 above) illustrates the steep increases in capital investments the

12

Company has made between 2012 and 2016, with electric and gas capital expenditures up

13

more than 70 percent and 110 percent, respectively, over that period. Similarly, O&M

14

has increased significantly since 2012. A much larger capital program, added costs for

15

vegetation management, increased costs associated with customer programs, higher

16

materials and labor costs, increased funding for low income programs, as well as the

17

impact of general price inflation have driven the Company’s O&M costs overall far

18

above the costs underlying its current rate plan. Figure 4 shows Niagara Mohawk’s

19

increased O&M spending from 2011 to the Historic Test Year.

20 21

Page 27 of 56 28

Testimony T of o Kenneth D. Daly 1

Figure F 4: O&M Expen ditures

2 3 4

III.

Objectives O fo or the Rate Filing

5

Q.

What W are thee overall objectives of the t Compan ny’s filings??

6

A.

The T Company y has severaal objectives that are also important to our custoomers. The key

7

ob bjective is to t adjust Niagara N Moh hawk’s electtric and gass base rates to recover the

8

Company’s C costs c of prov viding safe and reliable eelectric and gas service to its custom mers

9

with w a balancced proposaal that mitigaates the imppact on custtomer bills. Achieving this

10

crritical objecttive will allo ow Niagara Mohawk too deliver on service prioorities that aalign

11

with w the priiorities of customers and the C Commission,, including executing the

12

Company’s C electric e and gas g capital investment i pplans to enabble it to conntinue providding

13

saafe and reliaable service to t customerss, meeting aall reliabilityy performancce standards and

14

maintaining m strong storm m restoration n performannce. Establlishing com mpensatory rrates

15

would w also allow Niag gara Mohaw wk to continnue to resppond to othher interestss of Pag ge 28 of 56 29

Testimony of Kenneth D. Daly 1

customers, including helping them manage their energy usage and facilitating the

2

economic vitality of the communities that Niagara Mohawk serves.

3 4

Niagara Mohawk must adjust base rates to compensate the Company for the cost of

5

providing service, to fund necessary investment in infrastructure, to modernize networks

6

and enhance service to customers and to provide the Company’s investors reasonable

7

returns. The opportunity for the Company to earn reasonable returns in both its gas and

8

electric businesses will allow it to attract, on favorable terms, the necessary capital to

9

finance operations, which will lower costs for customers in the long run. As described

10

by Company Witness Stephen Caldwell, the Company has a need to issue new long

11

term debt during the Rate Year and Data Years and plans to do so in a manner that will

12

obtain the best relative value for customers at the time the Company goes to the debt

13

market.

14 15

Niagara Mohawk needs a fair opportunity to earn a reasonable return on the equity it

16

will invest in its utility business. That opportunity, which can only be available from

17

compensatory rates, is a necessary outcome of this case.

18 19

In recognition of the impacts of this case on our customers, Niagara Mohawk undertook

20

significant outreach to customers and communities to educate them about the

21

Company’s need for rate relief and to hear from them as to their priorities and

22

expectations.

The Company found that its overall objectives align with those of

Page 29 of 56 30

Testimony of Kenneth D. Daly 1

customers.

In developing this case, Niagara Mohawk has reflected much of the

2

feedback we received from customers.

3 4

Q.

5 6

Please describe the efforts the Company’s made to hear its customers’ priorities and what it learned.

A.

Niagara Mohawk had more than 250 outreach meetings, with customers, various state

7

agencies, local governments, school districts, hospitals, economic and community

8

partners and elected officials throughout its service territory.

9

welcomed. We heard directly customers’ expectations, what they believe the Company

10

The outreach was

does well and where it needs to improve.

11 12

Overwhelmingly, the top priorities are the reliability, safety and the affordability of

13

service. All constituents are very concerned about bill impacts. The Company heard

14

that it must do what it can to assist customers who struggle to pay their bills. A number

15

of these stakeholders suggested phasing in increases over multiple years to soften rate

16

impacts for customers. The Company heard praise for the hard work of its consumer

17

advocates, and was asked to add resources in this area.

18 19

Our largest commercial and industrial customers rely on our services to power their

20

businesses, so their number one priority is seeing the Company make the necessary

21

investments to deliver the highest standards in power quality and reliability, while at the

22

same time maintaining stable energy costs to help them stay competitive and retain jobs

23

in the region. These customers noted improved system performance as a result of our

Page 30 of 56 31

Testimony of Kenneth D. Daly 1

investments and maintenance efforts.

They are also looking for our assistance in

2

managing their energy usage and promoting sustainability through economic

3

development grants, energy efficiency programs and incentives.

4 5

Customers want to be able to communicate with the Company more easily and

6

effectively. While many praised the contacts they had with the Company, they seek

7

more direct communications on issues impacting their energy usage, including more

8

information on energy efficiency offerings, renewables, net metering, and available

9

energy incentives. The Company’s educational partners indicated their strong support

10

for the Company’s STEM (science, technology, engineering, and mathematics) grants,

11

mentoring, career panels, and training programs that are helping to develop the energy

12

employees of tomorrow and supporting the Company’s workforce development needs.

13 14

The Company also heard from customers on various areas where improvement was

15

needed. The Company heard fair criticism and frustration on billing issues. Some

16

complained that the Company was slow to respond to new service requests, process

17

applications for incentives, and facilitate interconnections. Others complained about

18

interconnection costs and the need for customer contributions. Municipalities in the

19

Company’s service territories have not been satisfied with the quality of outdoor

20

lighting services but are willing to work with Niagara Mohawk in this area.

21 22

This feedback from customers and constituents was very valuable and has guided

23

development of these filings.

Page 31 of 56 32

Testimony of Kenneth D. Daly 1 2

A. Q.

3 4

Investing in Infrastructure and Developing Our Workforce

Please provide an overview of the electric and gas infrastructure capital investment plans that are reflected in the Company’s filing.

A.

Although Niagara Mohawk has met its commitment to make significant infrastructure

5

investments in its electric and gas distribution systems, and continues to meet or exceed

6

its reliability performance targets, much work remains to be done on the system to

7

maintain safe and reliable service for customers.

8

Mohawk’s gas and electric capital investment plans, which are designed to enable the

9

Company to continue to maintain safe and reliable service and meet customer

10

These filings present Niagara

expectations.

11 12

The Company’s capital spending programs are described in the testimony of the Electric

13

Infrastructure and Operations Panel and Gas Infrastructure and Operations Panel. The

14

Company proposes the following levels of capital spending for its electric and gas

15

businesses during the Rate Years and Data Years:

16 17 18 19 20

Page 32 of 56 33

Testimony T of o Kenneth D. Daly 1 2 3

Table 5: Prroposed Cap pital Spend ding ($000)

4 5 6

Q.

7 8

Iss the Company proposing to hire additional eemployees tto support eelectric and gas op perations?

A.

Yes. Y To deliver our in nvestment plans and too meet increeased O&M M workload, the

9

Company C neeeds an addittional 141.5 and 77 fulll time equivvalent positiions for elecctric

10

an nd gas, resp pectively, in the Rate Yeear. These aadditional positions are necessitatedd by

11

th he Company y’s increasin ng infrastructure investm ments and hiigher volum me workload.. In

12

th he coming months, m Natiional Grid will w look to recruit and train emplooyees needed to

13

su upport capiital and O& &M program ms, includiing jobs inn gas enginneering, prooject

14

management, m , field operaations, and quality q assuraance. Thesee positions w will providee the

15

op pportunity to t develop coveted ST TEM work skills and experience,, and offer the

16

prrospect of long term caareers in thee energy inddustry. As I discuss beelow, givenn the

17

im mmediate neeed to hire highly h skilled d field and ccustomer serrvice employyees and to pplan Pag ge 33 of 56 34

Testimony of Kenneth D. Daly 1

for the future retirements and transition of a deeply experienced workforce, National

2

Grid is playing a leadership role in the industry and launching new natural gas and

3

customer service academies and building on the Company’s school partnerships and

4

STEM programs.

5 6

Q.

What is the Company doing to hire and train the next generation of utility workers?

7

A.

Both National Grid and the broader utility industry are facing a challenge as a result of

8

the aging demographic of its workforce.

In the coming years, many of the most

9

experienced and skilled utility professionals will be eligible for retirement. Therefore,

10

National Grid must attract and retain the next generation of utility workers to support the

11

business and operate and maintain electric and gas infrastructure. As discussed in the

12

testimony of Company Witness Heaphy, National Grid has formed a Strategic Workforce

13

Planning Center of Excellence that will analyze our workforce demographics and future

14

business requirements and develop plans to address short and long-term staffing plans. In

15

an effort to ensure that National Grid will have access to qualified candidates in the

16

future, National Grid is partnering with vocational schools, community colleges and

17

veterans’ associations to create a job “pipeline.” In addition, National Grid is committed

18

to supporting STEM education, and we have developed a long term plan, known as

19

Engineering Our Future to attract students to STEM careers. National Grid is working

20

with educators and students, from kindergarten to college, to promote STEM education.

21

Specifically, National Grid has partnered with Erie, Onondaga and Hudson Valley

22

Community Colleges to develop programs that will provide access to future line workers.

23

To date, National Grid has hired more than 260 workers through these programs.

Page 34 of 56 35

Testimony of Kenneth D. Daly 1

National Grid also plans to launch an “Upstate Gas Academy” that will build upon the

2

first-of-its-kind gas training program National Grid successfully launched with SUNY

3

Farmingdale in 2016.

4 5 6

B. Q.

7 8

Electric System Investments and Outdoor Lighting

Please describe the Company’s objectives with regard to its electric infrastructure investments.

A.

The Company’s electric system is comprised of over 6,000 circuit miles of transmission

9

lines, more than 300 transmission substations, over 4,800 circuit miles of sub-

10

transmission lines, over 525 distribution substations, more than 700 large power

11

transformers, 36,000 circuit miles of primary distribution lines on over 1.2 million

12

distribution poles supplying over 400,000 line transformers, and many more assets. A

13

significant number of assets have been in service for 70 years or more, and exhibit

14

conditions consistent with their age.

15 16

The current need for system upgrades is not due to lack of recent investment. Over the

17

past five years, the Company exceeded, by more than $150 million, its commitment in

18

the 2012 Rate Case to invest $1.47 billion in Niagara Mohawk’s electric infrastructure.

19

These investments have enabled Niagara Mohawk to maintain reliable service to

20

customers. But significant electric infrastructure investment is still needed to satisfy

21

requirements established by various state and federal authorities, to address asset

22

condition issues and to ensure sufficient system capacity to meet our customers’ needs.

23

Through collaboration with customers, municipalities and other local organizations,

Page 35 of 56 36

Testimony of Kenneth D. Daly 1

Niagara Mohawk is gaining information about where new, large customers may be sited

2

in the service territory for consideration in system planning.

3 4

Attention to these assets is essential to continued reliable operation of the system,

5

including: the Northeast Region Reinforcement Program, which will provide

6

reinforcement of the transmission system in the Saratoga and Glens Falls area and which

7

is necessitated by current thermal and voltage needs and area load growth related to the

8

proposed Luther Forest Technology Campus ($128.1 million); the Gardenville rebuild

9

project will involve construction of a new 115kV breaker and substation at the

10

Gardenville substation site, which is an important station in the Western Division,

11

supplying approximately 750MVA of load to distribution stations in the region ($24.8

12

million); the Lockport-Batavia 115 kV transmission circuit upgrade project will enhance

13

safety and system reliability by replacing 17.5 miles of transmission lines, as well as

14

several tower and wood pole structures ($49.9 million); and the Sodeman Road

15

substation will add needed capacity to the Northeast Region and enable retirement of

16

poor performing facilities in the area ($19 million).

17 18

A key feature of the Company’s electric capital program, and one that is integral to the

19

Company’s transition to the role of a DSP, is implementation of Advanced Metering

20

Infrastructure (AMI). AMI will provide customers with more information and greater

21

control over their energy usage and associated costs and the ability to choose new and

22

innovative solutions from authorized energy vendors. Further, AMI will enable the use

23

of metering data to support DSP planning functions such as demand modeling, load

Page 36 of 56 37

Testimony of Kenneth D. Daly 1

forecasting, and capital investment planning. AMI will also serve as a foundation for

2

innovative rate design options. Without AMI, Niagara Mohawk would be challenged to

3

provide its customers with the expanded levels of service they expect. Recently, the

4

Commission approved AMI for Consolidated Edison and is considering AMI proposals

5

filed by other utilities. Niagara Mohawk customers expect and should be entitled to the

6

same level of service and benefits that AMI can deliver.

7 8

As described in the testimony of the AMI Panel, the Company’s AMI proposal is

9

supported by a detailed business case and benefit-cost analysis.

The business case

10

supports full electric AMI meter and gas ERT deployment over a five and a half year

11

program. In developing the AMI proposal, the Company was mindful of steps it could

12

take to mitigate bill impacts as well as deliver the benefits of AMI to customers sooner.

13

At the same time, it was important for the Company to allow time before meters were

14

deployed to engage stakeholders and ensure the development of a robust customer

15

engagement and outreach strategy.

16

implementation strategy. Over an 18 month period, beginning in the middle of the Rate

17

Year and extending through Data Year 1 (twelve months ending March 31, 2020), the

18

Company will complete the design, procurement, and back-office system installation of

19

the project. In Data Year 2 (twelve months ending March 31, 2021), the Company will

20

begin a four year deployment of electric meters and gas ERTs. AMI is a foundational

21

component of the Company’s grid modernization effort that will provide numerous

22

customer, societal, safety, and operational benefits to the Company and its customers.

Therefore, the Company is proposing a phased

23

Page 37 of 56 38

Testimony of Kenneth D. Daly 1

Q.

Does the Company address non-wires alternatives in its filing?

2

A.

Yes. As described in the Electric Infrastructure and Operations Panel testimony, the

3

Company has developed an improved process to integrate non-wires alternatives

4

(“NWAs”) into system planning to promote more cost-effective and environmentally

5

sustainable solutions for addressing system needs. Through this process, the Company

6

initially identifies areas where NWAs may potentially benefit the system and then assess

7

the feasibility of deploying NWAs and design options. Niagara Mohawk has identified

8

more than twenty areas/projects that have passed the initial screen and will be evaluated

9

for viable NWA solution options. The Company issued a request for proposal (“RFP”)

10

soliciting NWAs to address a system need identified in the area of Baldwinsville, New

11

York. RFPs relating to other areas/projects will be issued this coming summer. To

12

promote innovation in this area, the Company describes a proposed incentive mechanism

13

that would allow it to share in any customer benefits realized by displacing traditional

14

wires solutions with NWAs while ensuring that the majority of savings will benefit our

15

customers.

16 17

Q.

18 19

Will the investments reflected in the Company’s capital program help achieve the goals of the Commission’s REV proceeding?

A.

Yes. The Company’s efforts to create a more modern, resilient electric system fully align

20

with the goals of REV. In Niagara Mohawk’s initial Distributed System Implementation

21

Plan (“DSIP”) filed on June 30, 2016 in Case 14-M-0101, the Company set forth a self-

22

assessment of actions it was already taking to modernize its infrastructure, as well as the

23

incremental investments needed for its evolution to a DSP provider. Notwithstanding the

Page 38 of 56 39

Testimony of Kenneth D. Daly 1

REV proceeding, many of these investments would have been made by the Company to

2

modernize its system and address the expansion of DER in the Company’s service

3

territory.

4 5

Q.

What is the Company’s proposal to enhance its outdoor lighting business?

6

A.

As discussed by the Outdoor Lighting and the Electric Rate Design Panels, the

7

Company is proposing to update its outdoor lighting pricing provision, to implement

8

revenue decoupling for its outdoor lighting services, and to take a series of proactive

9

steps to enable municipal conversions to light emitting diode (“LED”) luminaries. The

10

Company is also embarking on two pilot projects aimed at evaluating different outdoor

11

lighting technologies, and stepping up its efforts to work together with municipalities to

12

ensure the safe attachment of powered, non-lighting equipment to the Company’s

13

facilities, as well as working with municipalities interested in acquiring the outdoor

14

lighting assets that currently serve them. Additionally, as described by the Electric

15

Customer Panel, the Company is proposing to implement an LED street lighting energy

16

efficiency program and undertake a “Smart City” street lighting demonstration project

17

in partnership with the City of Schenectady.

18 19 20 21

C. Q.

Gas Investments and Operations

Please explain the Company’s objectives and proposals with respect to gas infrastructure investment.

Page 39 of 56 40

Testimony of Kenneth D. Daly 1

A.

The primary objective of the Company’s gas capital investment program is maintaining

2

safe and reliable delivery service, continuing the accelerated removal of leak prone pipe

3

and reinforcing the gas distribution system to maintain reliability and enable growth.

4 5

Niagara Mohawk’s gas capital program will require capital expenditures in the Rate Year

6

and Data Years as follows:

7 8

Table 6: Gas Capital Investments FY 2019-2021 ($000)

FY 2019

Growth

FY 2020

FY 2021

39,184

42,058

47,949

Mandated

103,307

120,112

130,985

Reliability

24,360

52,733

54,183

Non-Infrastructure

1,758

1,807

1,850

Common

2,887

2,618

2,618

171,496

219,467

237,703

Total 9 10

Niagara Mohawk shares the Commission’s objective of removing leak prone pipe to

11

maximize the safety of New York’s gas distribution networks.

12

Company’s filing maintains the current aggressive pace of leak prone pipe replacement,

13

replacing on average at least 50 miles of leak prone pipe each year, and proposes limited

14

incentives to encourage additional main replacements and productivity improvements to

15

reduce the costs of this program.

Accordingly, the

16 17

The Company’s gas capital investment program includes a number of other projects that

18

will enhance the safety and reliability of its gas distribution system including:

Page 40 of 56 41

Testimony of Kenneth D. Daly 

1

Integrity Management Program investments that will enhance the Company’s

2

ability to identify and address potential issues affecting the Company’s facilities

3

before they become safety or performance issues 

4

Construction of the Albany Loop Closure project, which involves the installation

5

of 38,000 feet of 16-inch transmission main from the south end of the Albany

6

Loop in Glenmont, New York to the northeast end in Troy, New York. This

7

project will reduce the possibility of curtailments that might otherwise be

8

necessary if Dominion Transmission Inc. (“DTI”) were to curtail firm service to

9

Niagara Mohawk at its Troy Gate Station. This project will also increase supply

10

flexibility and reliability in the eastern portion of Niagara Mohawk’s service

11

territory and support future growth. 

12

The commencement of the replacement of 15,000 feet of eight-inch main on

13

Pipeline 34 located in Oswego, New York. The pipeline was installed using a

14

“lap welding” technique that is outdated. This project will significantly enhance

15

the reliability of Pipeline 34.

16 17

Q.

What does the Company propose with respect to leak repairs?

18

A.

Since its last rate filing, Niagara Mohawk has dedicated significant resources to

19

improving its management of total leaks - having reduced its total backlog by more than

20

700 leaks.

21

conditions and increasing leak rates on aging leak prone facilities that contributed to

22

additional system leaks. Going forward, Niagara Mohawk proposes to maintain a leak

23

backlog of no more than 1,000 non-hazardous leaks. While these leaks do not present

This was accomplished despite several years of harsh winter weather

Page 41 of 56 42

Testimony of Kenneth D. Daly 1

safety risks, maintaining a relatively low backlog of non-hazardous leaks helps system

2

performance and minimizes methane emissions. The Company also proposes to use the

3

Gas Safety and Reliability Surcharge to fund the repair of additional leaks below the

4

1,000 leak target, capped at 250 additional leaks per year. At the same time, Niagara

5

Mohawk is proposing targets for reducing its hazardous leaks that will require it to

6

improve on its strong performance in this area to ensure that the non-hazardous leak

7

metrics do not divert resources from repairing hazardous leaks.

8 9

Q.

What is the Company’s proposal with respect to gas safety and compliance?

10

A.

Niagara Mohawk is committed to improving its compliance performance and is

11

undertaking a series of measures to improve in this area. The Company is implementing

12

a process safety program that adopts the American Petroleum Institute’s recommended

13

pipeline safety management system standards (Recommended Practice 1173). These

14

standards provide a framework for identifying hazards, controlling potential risks and

15

addressing safety and maintenance requirements throughout a pipeline’s life cycle to

16

reduce the likelihood of safety incidents. The Company has also engaged a pipeline

17

safety expert to conduct an independent assessment of the Company’s gas operations to

18

identify any compliance gaps and develop remediation plans.

19 20

Longer term, systems and automation are required to improve performance, particularly

21

on the records audits. The Company is in the process of delivering these enhancements

22

through its work to implement Gas Business Enablement (discussed below).

23

Page 42 of 56 43

Testimony of Kenneth D. Daly 1

The Company is also implementing enhancements to its gas safety outreach program to

2

better educate the public on the importance of recognizing and reporting gas odors,

3

improving training and coordination with first responders, and deploying additional

4

damage prevention resources to protect underground facilities.

5

residential methane detection technology, the Company is proposing to deploy residential

6

methane detectors to customers in the service territory.

Finally, to advance

7 8

With regard to its gas safety performance metrics, the Company proposes to modify the

9

metrics to provide more stringent performance targets in areas such as damage prevention

10

and leak management and to adjust the safety violations metric to focus more attention on

11

addressing compliance deficiencies going forward.

12 13

Q.

14 15

Please describe the Gas Business Enablement (“GBE”) Program and the benefits for the Company’s upstate gas business and customers.

A.

Niagara Mohawk’s gas business is focused on maintaining its strong safety and

16

reliability performance, delivering an expanding capital program, improving

17

compliance, meeting growing demand for gas service, and supporting evolving

18

customer expectations. It is critical that we have in place the people, processes, and

19

systems capable of supporting these priorities. But the Company’s current systems are

20

significantly older than industry average, and we are over reliant on dated technology

21

and paper records that are not meeting our business requirements.

22

comprehensive program to update our gas business processes and systems with the goal

23

of reducing operational risk, enhancing performance, and creating a platform to support

GBE is a

Page 43 of 56 44

Testimony of Kenneth D. Daly 1

future growth and customer demands. Specifically, GBE will deploy industry standard

2

asset management, work management, and geospatial information systems to better

3

manage our gas assets, work records, and system data. These systems will improve our

4

ability to plan and execute capital investments, promote safety and compliance, and lead

5

to better utilization of workforce and contractor resources. The program also involves a

6

new data interface that will provide our employees in the field with real time access to

7

maps, records, procedures, and other data.

8

capabilities will improve customer service, and customers will also have access to

9

additional information on the status of service appointments and other work. Work is

10

already underway to deliver this important project, and the first components are

11

expected to go in service in 2018.

12

discusses the GBE program initiatives, benefits, and costs in more detail.

Enhanced dispatching and scheduling

The Gas Infrastructure and Operations Panel

13 14

D.

Information Systems Investments

15

Q.

What is the Company’s proposal to upgrade its information systems?

16

A.

Modern energy networks rely on state-of-the-art information systems to monitor,

17

manage, and optimize system performance, integrate renewables and other distributed

18

resources, and stay ahead of emerging cyber-security threats. Many of National Grid's

19

legacy information systems, however, are at or near the end of their useful lives and rely

20

on outdated technology that is insufficient to support these evolving business

21

requirements. Aged infrastructure is more prone to outages and extended down time,

22

which can negatively impact network reliability and resiliency. The current systems

Page 44 of 56 45

Testimony of Kenneth D. Daly 1

also lack the flexibility to incorporate new technologies that will serve customer

2

expectations or drive performance improvements and efficiencies in the future.

3 4

To address these IS challenges, National Grid has designed an IS Technology

5

Modernization Program to (i) upgrade information system infrastructure to address

6

reliability and ensure business continuity, and (ii) modernize critical applications to

7

deliver new capabilities. The Company’s share of these investments is approximately

8

$13 million over the Rate Year and Data Years, which is a significant, but necessary,

9

investment to develop IS infrastructure that is capable of supporting our current and

10

future business needs. This program will improve network capabilities, enable cloud

11

and mobile technologies, improve cyber-security, and enhance the Company’s ability to

12

adopt future upgrades and new applications.

13

enable key customer and operations programs, including the Company’s Gas Businesses

14

Enablement, low income, and customer service programs.

These systems investments will also

15 16

Q.

17 18

Please describe the Company’s strategy for delivering the IS investments presented in this case.

A.

In 2012, National Grid implemented a new IS delivery model that utilizes external

19

partners to perform various IS functions. Since that time, our business demands have

20

evolved and now require increasingly sophisticated IS capabilities to support grid

21

modernization, dynamic networks, and distributed platforms, digital customer

22

applications, advanced data analytics, and workforce efficiency tools (e.g., field data

23

capture devices). To provide this support, National Grid is refining its IS delivery

Page 45 of 56 46

Testimony of Kenneth D. Daly 1

model to incorporate lessons learned through experience working with our vendors,

2

address areas of poor performance, and meet evolving business requirements. We will

3

continue to rely on external vendors, which is appropriate in the extremely fast paced

4

evolving IS world to enable efficient delivery, but will develop greater in-house

5

capacity to be able to better manage and leverage these external resources and assure

6

that the specific IS needs of the Company and its customers are clearly understood,

7

communicated, and addressed.

8 9

The Information Systems Panel, Gas Infrastructure and Operations Panel, Electric

10

Infrastructure and Operations Panel, Revenue Requirements Panel, and Company

11

Witness Maureen Heaphy discuss in more detail the Company’s investments in

12

information systems and strategy to deliver on these investments.

13 14

Q.

15 16

Please discuss the Company’s approach to addressing cybersecurity concerns and how these efforts are reflected in the filing.

A.

Enhanced cyber security is one of the Company’s top priorities. With the grid becoming

17

more interactive by the day, and with increasing amounts of data being exchanged

18

between the Company, customers, and third-parties, incremental investment in cyber

19

security is required to mitigate risk and ensure reliability.

20

Information Systems Panel, the Company is preparing to invest approximately $7.5

21

million over the next three years to enhance cyber security. The investment will protect

22

National Grid’s energy networks, information systems, and company/customer data from

23

the ever increasing threat of cyber intrusions.

As described by the

Page 46 of 56 47

Testimony of Kenneth D. Daly 1

E.

Enhancing the Customer Experience

2

Q.

Please describe the Company’s proposal to enhance the customer experience.

3

A.

Everything Niagara Mohawk does begins and ends with the customer – and these rate

4

filings are no different. These rate filings are designed to facilitate various investments

5

and programs that are needed to enhance customers’ experience. For example, the

6

Company proposes to improve call center operations by utilizing new technology to

7

increase the capabilities of remote customer agents and by fully utilizing the resources of

8

National Grid’s New York contact centers to improve service levels. Niagara Mohawk is

9

also upgrading its customer call center technology, including a new interactive voice

10

response system, to better manage customer calls.

11 12

Q.

13 14

Please provide an overview of the Company’s proposed products, services, and new technologies to engage customers and promote new energy solutions.

A.

As discussed by the Electric Customer Panel, Niagara Mohawk developed a suite of new

15

products and services to increase customer engagement and enable the creation of an

16

animated energy marketplace in Upstate New York. These include new platforms that

17

will provide customers with expanded access to energy marketplaces and tools to help

18

them better assess their energy use and make informed decisions to lower their energy

19

bills. The proposals also include projects to test and deploy new technologies to create a

20

smarter and cleaner energy distribution network.

21

Page 47 of 56 48

Testimony of Kenneth D. Daly 1

The Company is also investing in applications to make system data available to

2

developers and third-parties to facilitate the increased integration of DER.

3

investments are described by the Electric Infrastructure and Operations Panel.

These

4 5

For gas, Niagara Mohawk is proposing to test and deploy alternatives to traditional gas

6

main construction projects as potentially cost effective and environmentally sustainable

7

solutions for addressing customer demands. As described by the Gas Customer Panel,

8

this work includes projects designed to address system constraints in the eastern portion

9

of the service territory.

10 11

Beyond these efforts, the Company sees other opportunities to advance the State’s clean

12

energy policies. While these projects, such as an electric transportation initiative, are not

13

included in the revenue requirements, we believe that they provide important benefits to

14

customers and our communities and are eager to explore them with parties during these

15

proceedings. These efforts are described by the Electric Customer Panel.

16 17

Q.

Please explain the Company’s low income proposals.

18

A.

Niagara Mohawk recognizes that many customers struggle to make ends meet. The

19

Shared Services Panel presents the Company’s proposal to enhance its low income

20

program and provide additional assistance to our customers most in need. Specifically,

21

the Company is proposing to implement the new regulatory policy framework for

22

addressing low income customer needs recently adopted by the Commission through a

23

new Energy Affordability Program that will provide fixed low income discounts of

Page 48 of 56 49

Testimony of Kenneth D. Daly 1

varying levels based on needs. This expanded program has the potential to provide an

2

unprecedented $70 million in low income benefits. The Company anticipates the new

3

program will also significantly increase - by as many as 55,000 customers – participation

4

in low income assistance programs.

5 6

While the Company has already expanded its efforts to reach out to low income

7

customers to encourage greater enrollment in the Energy Affordability Program, the

8

Company is proposing a new Energy Affordability Engagement Initiative designed to

9

engage low income customers and increase awareness and interest in energy affordability

10

programs, energy efficiency and gas safety. The Company is also proposing programs

11

that will enable low income customers to save money on their heating bills by converting

12

to natural gas. These programs will reduce or eliminate the upfront conversions costs by

13

providing rebates for high efficiency gas heating equipment and connecting qualifying

14

customers at no cost. The Shared Services Panel and Gas Customer Panel discuss the

15

Company’s low income proposals in greater detail and explain how the Company

16

proposes to recover the costs of its expanded low income program.

17 18

Q.

Please explain the Company’s economic development proposals.

19

A.

The Company administers a portfolio of incentive programs that support New York’s

20

economic development objectives. These programs include electric delivery discount

21

programs, such as the Empire Zone Rider and Excelsior Jobs Program that provide

22

millions of dollars in energy discounts to customers expanding business and create jobs

23

in Upstate New York, as well as grant programs that are designed to promote economic

Page 49 of 56 50

Testimony of Kenneth D. Daly 1

development and urban revitalization in the Company’s service territory. The Company

2

supports 17 active electric grant programs that help customers manage energy issues to

3

remain competitive; promote sustainable “smart” growth by redeveloping vacant

4

buildings and brownfield sites; and facilitate regional growth through the development

5

and deployment of renewable energy technologies. Niagara Mohawk also partners with

6

state, regional, and local economic development organizations to market the Upstate New

7

York region to businesses looking to expand or relocate.

8 9

The Company proposes to continue its economic development discounts and grant

10

programs at their current levels. Collectively, these programs will help offset customer

11

costs for natural gas infrastructure upgrades to accommodate business expansion and

12

economic growth, conversion to gas from an alternate fuel or new construction, and

13

promote regional economic growth through the development, demonstration and

14

deployment of new sustainable gas technologies.

15 16

V.

Niagara Mohawk’s Electric and Gas Rate Filing

17

Q.

Please address the review and presentation of the cost of service data in the

18 19

Historic Test Year and the Rate Year. A.

The Revenue Requirements Panel describes how the cost data included in the

20

Company’s filing was reviewed and prepared. To facilitate Staff’s review of Historic

21

Test Year costs, National Grid engaged PricewaterhouseCoopers (“PwC”) to review the

22

accounting for costs charged to the Company in the Historic Test Year. This detailed

23

review included an assessment of various service company and operating company costs

Page 50 of 56 51

Testimony of Kenneth D. Daly 1

in the Historic Test Year. PwC’s review was focused on verifying that the reviewed

2

Historic Test Year costs were charged correctly in accordance with National Grid’s cost

3

allocation methodologies, and were appropriate to include in Niagara Mohawk’s cost of

4

service. In addition, the Historic Test Year and the forecast Rate Year underwent

5

significant internal reviews.

6

facilitate Staff’s timely audit of costs included in Niagara Mohawk’s gas and electric

7

revenue requirements.

Together, these internal and external reviews should

8 9

Q.

10 11

Please provide an overview of National Grid’s efforts to reduce costs through efficiency initiatives?

A.

As discussed in the testimony of the Revenue Requirements Panel, the Company

12

revenue requirements reflect the impact of various efforts to achieve cost efficiencies,

13

all without compromising the ability to provide safe and reliable service. These efforts

14

will pay significant dividends for Niagara Mohawk’s customers.

15 16

Of the $30 million of cost reductions from initiatives to be implemented before the start

17

of the Rate Year, approximately $8.5 million are allocable to Niagara Mohawk and 100

18

percent of these cost reductions are reflected in the Company’s Rate Year labor forecast

19

and non-labor savings adjustment.

20

realized through National Grid’s Performance Excellence (PEX) strategy, which

21

combines end-to-end process work with the development of enhanced leadership

22

qualities and business capabilities. In addition to the sustainable savings from various

23

initiatives that are reflected in the Historic Test Year, we are proposing a productivity

The revenue requirement also reflects savings

Page 51 of 56 52

Testimony of Kenneth D. Daly 1

factor of one percent of payroll and payroll taxes be applied in the Rate Year and Data

2

Years to encourage the Company to continue to seek cost efficiency measures.

3 4

The Revenue Requirements Panel presents the cost data for the two additional data

5

years that we hope will facilitate a multi-year rate settlement. This panel also addresses

6

cost tracker and recovery mechanisms to protect both the Company and our customers

7

from costs that deviate from the rate allowances.

8 9

Q.

What rate of return on equity and capital structure does the Company propose?

10

A.

Niagara Mohawk is proposing a return on equity of 9.79 percent for the Rate Year and a

11

capital structure with a 48 percent equity component. For a multi-year rate plan, the

12

Company proposes that its return on equity reflect a premium of 50 basis points. While

13

the Company’s actual capital structure is higher than 48 percent equity, the Company is

14

proposing a 48 percent equity structure consistent with the Commission’s recent

15

precedent, as discussed in the testimony of Company Witnesses Ann E. Bulkley of

16

Concentric Advisors and Stephen Caldwell.

17 18

The interests of both Niagara Mohawk and its customers will be served if the results of

19

these rate filings are rates that fully compensate the Company’s cost of providing service

20

to customers and afford the Company a reasonable opportunity to earn its allowed returns

21

on equity that is commensurate with enterprises of similar risk. The Company’s ability to

22

retain access to capital markets on terms favorable to our customers will be directly

23

affected by the rates authorized by the Commission in this proceeding.

Page 52 of 56 53

Testimony of Kenneth D. Daly 1

Investors use the return on equity as a key benchmark in assessing investment

2

opportunities in public utilities. A return on equity that is below what investors believe

3

they can earn on investments in companies with similar risk would impair our ability to

4

attract capital, both debt and equity, on reasonable terms. A downgrade could impact the

5

Company’s credit quality and raise costs for customers as the cost of borrowing

6

increases.

7 8

Q.

9 10

Please discuss the earnings adjustment mechanisms (EAMs) proposed for the electric business.

A.

In this filing, Niagara Mohawk proposes a number of investments, products, and services

11

that are interrelated.

These investments, products, and services are presented as a

12

portfolio designed to further build on existing Company and industry momentum, and in

13

doing so, deliver outcomes that benefit customers while at the same time achieving the

14

Commission’s objectives of animating the energy market and creating system-wide

15

efficiencies.

16 17

To emphasize the value of these outcomes for customers the Company has included

18

EAMs to incent performance in the areas of system efficiency, energy efficiency,

19

interconnections, and customer engagement. Achievement of the ambitious targets set

20

out in the EAMs will require the Company not only to leverage the programs and

21

services that will be created through the investments contained in the filing, but to go

22

beyond what is known today and seek innovative new solutions to these challenges. The

23

Electric Customer Panel describes the proposed EAMs.

Page 53 of 56 54

Testimony of Kenneth D. Daly 1

Q.

What are the rate impacts of the Company’s filing?

2

A.

Because the Company’s revenue deficiencies are significant, the rate impacts are

3

significant as well. Table 7 shows the rate impact of the Company’s filings on a typical

4

residential heating customer based on a comparison of total bills in the Rate Year with

5

and without the proposed increase.

6

Table 7: Residential Customer Bill Impacts – One Year Case Average Usage Customer

Monthly Usage

Delivery Increase

Electric: SC-1

600 kWh

$11.23

Gas: SC-1

Total Bill Increase % 13.94% (21.78% delivery portion) 14.91%

77 Therms

$10.50 (24.81% delivery portion)

7 8

As discussed in the testimony of our Electric Rate Design and Gas Rate Design Panels,

9

the Company’s proposal results in total bill increases for average usage residential

10

electric customers and gas customers of 13.94 percent and 14.91 percent, respectively,

11

before applying approximately one third of the current net electric and gas deferral

12

balances to mitigate the proposed rate increases.

13 14

The Revenue Requirements Panel and the Electric and Gas Rate Design Panels discuss

15

and illustrate how Niagara Mohawk’s rate increases could be spread over a three-year

16

rate plan. The testimony of these panels demonstrates that distributing the revenue

17

increases over multiple years, and applying the Company’s deferral account balances,

Page 54 of 56 55

Testimony of Kenneth D. Daly 1

would help to mitigate the impacts on electric and gas customers by reducing, on average,

2

the delivery bill increase across all customer classes to approximately ten percent a year

3

over the term of the rate plan. Niagara Mohawk looks forward to working with Staff and

4

the other parties to arrive at a multi-year rate plan that permits recovery of the

5

Company’s cost of service and mitigates the impacts for our customers.

6 7

V.

Summary

8

Q.

Please summarize your testimony.

9

A.

Our more than 2.2 million Upstate New York electricity and natural gas customers rely

10

on Niagara Mohawk to deliver the energy that enables virtually every aspect of their daily

11

lives.

12

developed a comprehensive rate proposal that addresses our customers’ energy needs

13

today and lays the groundwork for the dynamic networks that will serve us tomorrow.

14

The Company’s challenge is to strike a balance that allows us to deliver on the shared

15

priorities of safety, reliability and affordability, while continuing to make smart

16

infrastructure investments, integrate renewable energy into the grid, implement new

17

technologies that offer more options and control, and advance economic growth and

18

energy efficiency across Upstate New York.

It is a responsibility the Company takes very seriously.

The Company has

19 20

Niagara Mohawk has listened to its customers, Staff and other stakeholders and their

21

input informed the development of this case. These filings propose necessary investment

22

in the upstate distribution systems to make sure customers can count on the Company to

23

power their homes and businesses, to comply with existing and emerging safety

Page 55 of 56 56

Testimony of Kenneth D. Daly 1

regulations, to make the gas and electric networks more resilient to extreme weather

2

events, and to enable growth.

3 4

As the energy provider to over two million customers in New York, Niagara Mohawk is

5

investing in our communities and advancing clean energy solutions that further our

6

commitment to environmental stewardship.

7

assistance and conversion rebates to our low income customers. We propose economic

8

development funding to promote business expansion that will create jobs and to promote

9

clean energy technology. We are working with educational partners to promote STEM

10

skills and creating educational opportunities for the workforce of the future to learn the

11

critical math, engineering and customer service skills needed in the energy industry. We

12

present demonstration programs that would advance energy technologies and a

13

commercial demand response program that would credit customers for reducing energy

14

usage during peak periods.

We are proposing increased financial

15 16

The energy future will be very different than today, but one thing that will never change

17

is Niagara Mohawk’s commitment to delivering safe, reliable, affordable and clean

18

energy. With the input and partnership of all stakeholders, the Company will invest,

19

provide greater value and deliver an energy future that is smarter, cleaner, and stronger.

20 21

Q.

Does that conclude your testimony?

22

A.

Yes.

Page 56 of 56 57

Testimony of Keri Sweet Zavaglia

Before the Public Service Commission

NIAGARA MOHAWK POWER CORPORATION d/b/a NATIONAL GRID Direct Testimony of Keri Sweet Zavaglia

Dated: April 28, 2017

58

Testimony of Keri Sweet Zavaglia Table of Contents I. 

Introduction and Qualifications ...................................................................1 

II. 

Purpose of the Testimony ............................................................................2 

III. 

Management Audit Implementation Plan ....................................................4 

IV. 

Management Audit Implementation Costs ................................................11 

V. 

Data and Staffing Audits ............................................................................13 

59

Testimony of Keri Sweet Zavaglia 1

I.

Introduction and Qualifications

2

Q.

Please state your name and business address.

3

A.

My name is Keri Sweet Zavaglia.

4

My business address is 300 Erie

Boulevard West, Syracuse, New York 13202.

5 6

Q.

By whom are you employed and in what capacity?

7

A.

I am employed by National Grid USA Service Company, Inc., a subsidiary

8

of National Grid USA (“National Grid”), as Vice President, New York

9

Performance & Strategy.

I am responsible for the performance

10

management of National Grid’s New York businesses, including Niagara

11

Mohawk Power Corporation d/b/a National Grid (“Niagara Mohawk” or

12

the “Company”), and executing their business strategy.

13 14

Q.

15 16

Please

describe

your

educational

background

and

business

experience. A.

I received a Bachelor of Arts in Journalism, Public Relations and

17

Advertising from Temple University in 1999. I received a Juris Doctorate

18

from Temple University Beasley School of Law in 2002 and served as an

19

Assistant District Attorney in Philadelphia, Pennsylvania for more than

20

three years. I have worked for National Grid for 11 years, primarily as an

21

attorney in various roles in the New York Regulatory Legal group. From

Page 1 of 15 60

Testimony of Keri Sweet Zavaglia 1

January 2015 through March 2017, I served as the Acting Vice President

2

of Gas Operations for Upstate New York, where I oversaw the

3

approximately 300 employees responsible for maintenance, construction

4

and damage prevention. In the beginning of 2016, I assumed my current

5

role.

6 7

Q.

Have you previously testified before the Commission?

8

A.

Yes. I testified on behalf of KeySpan Gas East Corporation d/b/a National

9

Grid (“KEDLI”) and The Brooklyn Union Gas Company d/b/a National

10

Grid NY (“KEDNY”) in Cases 16-G-0058 and 16-G-0059 (collectively,

11

the “2016 KEDLI and KEDNY Rate Cases”).

12 13

II.

Purpose of the Testimony

14

Q.

What is the purpose of your testimony?

15

A.

The purpose of my testimony is to describe the Company’s progress in

16

implementing

the

recommendations

from

the

Comprehensive

17

Management and Operations Audit (the “Management Audit”) of National

18

Grid’s New York gas business (Case 13-G-0009), conducted by NorthStar

19

Consulting Group (“NorthStar”). The testimony also discusses the status

20

of two other audits: Operations Audit of the Accuracy of New York State

21

Utilities’ Self-Reported Data in Case 13-M-0314 (“Data Audit”); and Case

Page 2 of 15 61

Testimony of Keri Sweet Zavaglia 1

13-M-0449, Focused Operations Audit of Major Utility Internal Staffing

2

Levels and Use of Contractors for Selected Core Utility Functions at

3

Major New York Energy Utilities (“Staffing Audit”).

4 5

Q.

Are you sponsoring any exhibits through your testimony?

6

A.

Yes. I sponsor three exhibits that were prepared under my direction and

7

supervision:

8



9

implementation plan deliverables and (ii) NorthStar’s cost benefit

10 11

Exhibit ___ (KSZ-1) is a chart summarizing (i) the key

analysis for each of the Management Audit recommendations; 

Exhibit ___ (KSZ-2) is a copy of National Grid’s recent

12

Implementation Plan Update (filed with the Public Service

13

Commission (“Commission”) on January 19, 2017) summarizing the

14

status of National Grid’s implementation of each Management Audit

15

recommendation.

16 17



Exhibit ___ (KSZ-3) is a chart showing the implementation status of each Management Audit recommendation as of March 29, 2017.

18

Page 3 of 15 62

Testimony of Keri Sweet Zavaglia 1

III.

Management Audit Implementation Plan

2

Q.

Please provide a brief summary of the Management Audit process.

3

A.

In February 2013, the Commission authorized issuance of a Request for

4

Proposals (“RFP”) for an independent consultant to conduct an audit of

5

National Grid’s New York gas business in accordance with Section 66(19)

6

of the Public Service Law (“PSL”).

7

selected NorthStar to conduct the audit under the supervision of

8

Department of Public Service Staff (“Staff”). From August 2013 through

9

July 2014, NorthStar audited National Grid’s New York gas business,

10

In June 2013, the Commission

focusing on eight traditional audit areas:

11



Corporate mission, objectives, goals and planning;

12



Load forecasting;

13



Supply procurement;

14



System planning;

15



Capital and operations and maintenance (“O&M”) budgeting;

16



Program and project planning and management;

17



Work force management; and

18



Performance and results measurement.

19 20

In addition, the Commission directed that the scope of the Management

21

Audit include an assessment of National Grid’s information systems,

Page 4 of 15 63

Testimony of Keri Sweet Zavaglia 1

including the “adequacy and efficiency of the customer information and

2

billing systems used to support management information and customer

3

service operations.”

4 5

NorthStar, in coordination with Staff, conducted a thorough and

6

professional audit marked by open and productive discussions among the

7

parties.

8

cooperated with NorthStar in the interest of supporting audit

9

recommendations that were well-informed and meaningful.

Throughout the Management Audit, National Grid fully

NorthStar

10

received full access to National Grid’s personnel, records, and systems

11

over a ten-month discovery period during which National Grid answered

12

more than 700 data requests and participated in over 200 management

13

interviews.

14 15

Q.

Please describe the results of the Management Audit.

16

A.

In August 2014, NorthStar issued its audit report (“Management Audit

17

Report”) that described generally strong performance by National Grid in

18

a number of key functional areas, including gas operations, load

19

forecasting, supply procurement, and customer information systems. The

20

Management Audit Report offered 31 recommendations aimed at

Page 5 of 15 64

Testimony of Keri Sweet Zavaglia 1

improving National Grid’s performance. The Commission released the

2

Management Audit Report on October 2, 2014.

3 4

While the Company did not agree with all of NorthStar’s findings and

5

conclusions, National Grid acknowledged that, overall, NorthStar’s

6

recommendations provide a constructive means of enhancing the day-to-

7

day performance of the New York gas business. Accordingly, National

8

Grid generally accepted the recommendations presented in the

9

Management Audit Report.

10 11

On November 3, 2014, pursuant to PSL Section 66(19), the Company filed

12

an initial Implementation Plan with the Commission detailing its plans to

13

implement the Management Audit recommendations. Thereafter, National

14

Grid and Staff collaborated to review and discuss the initial

15

Implementation Plan. Staff determined that the initial Implementation

16

Plan was generally acceptable, but recommended certain changes and

17

clarifications. Based on feedback from Staff, National Grid filed a revised

18

Implementation Plan with the Commission on April 21, 2015.

19

Page 6 of 15 65

Testimony of Keri Sweet Zavaglia 1

Q.

Did the Commission accept National Grid’s Implementation Plan?

2

A.

Yes. On May 14, 2015, the Commission issued an Order Approving an

3

Implementation Plan (“Order”). In the Order, the Commission approved

4

National Grid’s revised Implementation Plan and directed the Company to

5

implement the proposed actions described therein.

6 7

Q.

8 9

Please describe National Grid’s approach to implementing the Management Audit recommendations.

A.

National Grid viewed the Management Audit process as an opportunity to

10

assess and improve its management of gas operations, systems,

11

governance, and processes as part of its ongoing effort to drive overall

12

improvement for the benefit of customers. National Grid has appreciated

13

the collaborative efforts of NorthStar and Staff throughout the process and

14

recognizes that the Management Audit recommendations provide positive

15

and constructive insights about how the Company may improve its

16

processes. Therefore, the Company is making every effort to implement

17

the Management Audit recommendations.

18 19

The Implementation Plan reflects the Company’s consideration of the

20

Management Audit Report recommendations and desire to realize the

21

benefits identified by NorthStar, as well as the collaboration with Staff

Page 7 of 15 66

Testimony of Keri Sweet Zavaglia 1

that helped to improve it. Accordingly, the Implementation Plan outlines

2

constructive, cost effective solutions to the Management Audit

3

recommendations that will enhance National Grid’s ability to provide

4

service to our customers in New York.

5 6

Q.

7 8

What does the Order require with regard to reporting on the status of the Implementation Plan?

A.

National Grid must file a written update to the Implementation Plan at

9

least every four months. The update must describe the implementation

10

status of each recommendation, implementation action steps (major

11

activities), and associated implementation schedules.

12

Company has submitted six updates to the Implementation Plan. These

13

reporting requirements continue until Staff determines that the

14

Implementation Plan is fully implemented.

15

reporting requirements, the Company and Staff have periodically met to

16

address key initiatives the Company is undertaking, such as the

17

recommendations regarding National Grid’s gas supply procurement and

18

forecasting functions.

To date, the

In addition to the formal

19 20

Page 8 of 15 67

Testimony of Keri Sweet Zavaglia 1

Q.

2 3

What is the current status of the Company’s compliance with the Implementation Plan?

A.

The Company’s most recent implementation plan update, filed January 19,

4

2017, is attached as Exhibit ___ (KSZ-2). Based on discussions with

5

Staff, as of March 29, 2017, 16 recommendations are “Implemented,” 13

6

recommendations are “Pending Review,” and two recommendations are

7

“In Progress.”

8

implement the recommendation have been completed and are pending

9

review by Staff.

“Pending Review” means the Company’s actions to

Upon acceptance by Staff, the recommendation is

10

deemed “Implemented.” A recommendation that is “In Progress” has

11

implementation action steps that are either ongoing or on hold pending

12

other decisions or activities. A summary of the current status is attached

13

as Exhibit ___ (KSZ-3).

14 15

Q.

Please explain the recommendations that are “In Progress.”

16

A.

The Company is mindful of the need to implement the recommendations

17

in the most efficient and effective manner possible. The two remaining

18

“In Progress” recommendations, Recommendations VII-1 and 2, involve

19

National Grid’s productivity and work management tracking and reporting

20

capabilities.

21

Page 9 of 15 68

Testimony of Keri Sweet Zavaglia 1

In the Implementation Plan, the Company identified short and long term

2

solutions to implementing enhanced productivity and work management

3

tracking capabilities. To date, the Company has made good progress in

4

developing and implementing daily and weekly individual worker

5

productivity reporting for the customer meter services function, including

6

the capability to track productivity at the yard level. Productivity reports

7

in this area now measure and report on individual worker productivity for

8

the business.

9

tracking unit costs at the yard level.

The Company has also developed a methodology for For the long term solution to

10

implementing these recommendations, National Grid is currently

11

designing a new front-office system that will consolidate multiple work

12

management and mobility applications and processes to enhance the

13

Company’s ability to deliver standardized productivity reporting in these

14

areas. This system, known as Gas Business Enablement, is described in

15

more detail in the testimony of the Gas Infrastructure and Operations

16

Panel.

17 18

Page 10 of 15 69

Testimony of Keri Sweet Zavaglia 1

IV.

Management Audit Implementation Costs

2

Q.

Did the Management Audit consider the costs to implement and any

3 4

savings associated with the recommendations? A.

Yes, in the RFP for the Management Audit, the Commission directed that

5

the “recommendations developed by the [auditor] should be accompanied

6

by customer benefit analyses which take into account, among other things,

7

one-time and ongoing costs, potential benefits and risks, and potential

8

savings or efficiencies.”

9

“customer benefit analysis” (“CBA”) that describes the expected costs and

10

benefits resulting from the implementation of each recommendation and,

11

where applicable, a five-year payback analysis. NorthStar’s estimates of

12

implementation costs and any potential savings for each of the

13

recommendations are summarized in Exhibit ___ (KSZ-1).

Accordingly, NorthStar filed a separate

14 15

Q.

16 17

Are there incremental costs associated with the Management Audit recommendations in the gas revenue requirement?

A.

Yes. The gas revenue requirement includes the cost of one incremental

18

full time equivalent (“FTE”) in Energy Procurement to implement

19

Recommendation IX-4. The FTE was hired in January 2017, as discussed

20

in the testimony of Company Witness Elizabeth D. Arangio. The cost in

Page 11 of 15 70

Testimony of Keri Sweet Zavaglia 1

the gas revenue requirement reflects Niagara Mohawk’s allocable share of

2

labor costs for this FTE.

3



4

Q.

5 6

How are the benefits of implementing the Audit recommendations reflected in this filing?

A.

7

The Management Audit Report identified several primary categories of benefits of implementing the recommendations, including:

8



Enhancing corporate governance and decision making;

9



Improving work management and tracking;

10



Increasing data availability and analysis; and

11



Improving work methods and processes.

12

Potential Company and customer benefits of implementing the various

13

recommendations include reliability and safety improvements, customer

14

service enhancements, future cost avoidance, and risk or volatility

15

reduction. The benefits may be one-time, enduring, or of limited duration.

16 17

Q.

18 19

Did NorthStar identify cost savings for all of the Management Audit recommendations? If so, are they reflected in the Rate Year?

A.

While NorthStar’s CBA identified qualitative benefits for all of the

20

recommendations, most recommendations do not have quantifiable cost

21

savings. For example, Recommendation III-1, directed at recruiting and

Page 12 of 15 71

Testimony of Keri Sweet Zavaglia 1

appointing an independent Director for the NG USA Board, will benefit

2

the Company and customers, but such benefits are not readily measured.

3 4

For the recommendations where NorthStar identified potential cost

5

savings, those savings are not separately reflected in the Rate Year

6

because (i) the recommendation involves costs that are not included in the

7

Company’s costs of service because they are pass through items (e.g., the

8

recommendations relating to gas supply procurement (Recommendation

9

VIII-2)) or (ii) the recommendation is not yet implemented and the cost to

10

implement is expected to outweigh any savings over the next few years

11

(e.g., work productivity tracking systems (Recommendation VII-1)).

12 13

V.

Data and Staffing Audits

14

Q.

Please provide a brief summary of the Data Audit.

15

A.

In August 2013, pursuant to PSL Section 66(19), the Commission

16

instituted an operations audit of the accuracy of the New York utilities’

17

self-reported data regarding electric reliability, gas safety, and customer

18

service. The Commission selected Overland Consulting (“Overland”) to

19

conduct the audit. On April 20, 2016, the Commission issued an order

20

publishing the final report and directing the utilities to file implementation

21

plans for certain audit recommendations. With respect to the majority of

Page 13 of 15 72

Testimony of Keri Sweet Zavaglia 1

the customer service recommendations, the Commission remanded those

2

recommendations to a separate proceeding (Case 15-M-0566) for further

3

consideration.

4 5

Q.

What is the status of National Grid’s implementation plan efforts?

6

A.

National Grid filed its implementation plan on May 19, 2016 in Case 13-

7

M-0314.

In the implementation plan, National Grid identified 69

8

recommendations as “Pending Review” and 37 recommendations as “In

9

Progress.”

On March 10, 2017, the Commission issued an order

10

approving the plan and directing National Grid to begin implementation

11

efforts. The Company is currently in the process of implementing the

12

recommendations.

13 14

Q.

Please provide a brief summary of the Staffing Audit.

15

A.

In January 2014, the Commission instituted an audit of the internal

16

staffing levels and use of contractors for selected core utility functions at

17

the major New York utilities. The Commission selected The Liberty

18

Consulting Group (“Liberty”) to conduct the audit. On February 21, 2017,

19

the Commission authorized the public release of Liberty’s audit report.

20

Liberty identified a total of 27 recommendations aimed at enhancing

21

National Grid’s staffing and workforce management processes. National

Page 14 of 15 73

Testimony of Keri Sweet Zavaglia 1

Grid filed its implementation plan on March 23, 2017 in Case 13-M-0449.

2

A Commission order regarding the Company’s implementation plan is

3

expected later this year.

4 5

Q.

6 7

Are there incremental costs or quantifiable benefits associated with the Data Audit or Staffing Audit recommendations?

A.

No. The audits were both designed to improve processes across the New

8

York utilities and benefits from the recommendations are largely

9

qualitative. Neither Overland nor Liberty performed a CBA. Benefits

10

include improvements to the processes for collecting and reporting data

11

and enhancements to the staffing and workforce management processes.

12

Costs to implement the recommendations are largely de minimis.

13 14

Q.

Does that conclude your testimony?

15

A.

Yes it does.

Page 15 of 15 74

Exhibits of Keri Sweet Zavaglia

Testimony of Keri Sweet Zavaglia

Index of Exhibits

Exhibit__ (KSZ-1)

Management Audit Recommendations and Cost Benefit Analysis Summary

Exhibit__ (KSZ-2)

National Grid’s Implementation Plan Update (January 2017)

Exhibit__ (KSZ-3)

Implementation Status of Each Management Audit Recommendation (March 29, 2017)

75

Exhibit__ (KSZ-1)

Testimony of Keri Sweet Zavaglia

Exhibit __ (KSZ-1) Management Audit Recommendations and Cost Benefit Analysis Summary

76

#

1

2

3

Chapter

III

III

III

Continue to evolve the Jurisdictional organization model to establish a clear command and control structure for the NY Jurisdictional President

Reconstitute the BODs for KEDLI, KEDNY, and NMPC by: 1) limiting the number of members who are part of the New York Jurisdictional team, regardless of reporting relationship, to no more than one Director; and 2) filling the remaining two Director positions with executives from the other NY jurisdictions or NGUSA who do not have responsibilities for New York operations. Define the roles and responsibilities of the subsidiary boards.

Reconstitute the NGUSA BOD by: 1) limiting the number of members who are also part of the US Executive Team, NGUSA Officers and Senior Managers to no more than two; 2) appoint at least one truly independent, qualified Director who is not employed by any National Grid company; 3) filling the remainder of Director seats with either NG UK or NG-plc executives, or other independent, qualified individuals. Define the roles and responsibilities of the NGUSA BOD.

NorthStar Recommendation

Implement modifications to jurisdictional model.

Adopt terms of reference to clearly define role and responsibilities.

Appoint new NY boards.

Adopt terms of reference to clearly define Board’s role and responsibilities.

Recruit/appoint new NG USA Board, including independent director.

Major Implementation Items

None

None

Update: Independent fee is approximately $30,000/year; no incremental labor or travel

Reoccurring: $330,000/year Independent director fee; incremental labor and travel time for board members

NorthStar’s Estimated Implementation Cost

AND CUSTOMER BENEFIT ANALYSES

SUMMARY OF NORTHSTAR RECOMMENDATIONS

None

None

None

NorthStar’s Estimated Cost Savings

Exhibit __ (KSZ-1) Page 1 of 6

Exhibit __ (KSZ-1) Page 1 of 6

77

#

4

5

6

1

Chapter

III

III

III

IV

Keep the Finance and SAP related costs (termed “rent” charges) at previous rate case agreed upon levels. Do not allow consequential costs for fixing the USFP, Financial Remediation and IS issues to be borne by ratepayers. Identify and justify any cost increases above previously rate case approved capital and operating expense levels.

Conduct, or contract with qualified outside auditor for, an investigation into the cost impacts of the LIPA separation on ratepayers, and provide a report to the PSC staff within six months. (Details in chapter)

Prepare a true strategic plan for National Grid’s New York operations to serve as a road map for National Grid's investments, programs and operations in the state.

Establish a Chief Risk Officer within the NGUSA organization, reporting to the President NGUSA, with responsibility and appropriate authority, for coordinating, reviewing challenging the results of all the various risk assessment groups.

NorthStar Recommendation

Prepare USFP cost report.

Prepare LIPA separation report

Develop NY business plans

Appoint US Chief Risk and Compliance Officer

Major Implementation Items

N/A

One Time: $19,000 80 hours to perform analysis with internal audit staff or external auditors

One Time: $115,000 Reoccurring: $60,000/year Incremental labor to prepare strategic plans

One Time: $75,000 Reoccurring: $625,000700,000/year Recruiting fee, salary and administration Update: Appointed US GC for CRO position; minimal incremental cost.

NorthStar’s Estimated Implementation Cost

Review $560 million of USFP costs ($129 million allocable to NY); no specific savings identified.

None

None

Cannot be quantified

NorthStar’s Estimated Cost Savings

Exhibit __ (KSZ-1) Page 2 of 6

Exhibit __ (KSZ-1) Page 2 of 6

78

#

2

1

2

3

1

2

3

Chapter

IV

V

V

V

VI

VI

VI

Implement a WBS system to organize and manage gas projects as part of the implementation of Primavera P6.

Complete the development of a new estimating process for project-managed gas projects that more closely reflects complex project requirements by the end of CY2014.

Address deficiencies identified in the Project Management group’s adherence to the Playbook project documentation requirements. (Details in chapter)

Update procedural documentation/manuals to comply with § 192.614 and § 192.615. (Details in chapter)

Update the companies’ IMPs to comply with § Part 192.911. (details in Chapter)

Develop an integrated natural gas systemwide plan. The system plan should include all reliability work, mandated replacements, growth projects and system planning work identifiable over a five-year period. (Details in chapter)

Develop SLAs to govern the relationship between the jurisdictional operating companies and the Service Company. For all products and services provided to NY gas utilities from ServCo, SLAs must become the equivalent of commercial agreements. (Details in chapter)

NorthStar Recommendation

Develop a Gas Estimating Department within the Gas Systems Engineering Organization. Implement Primavera’s project management tool into the Gas organization.

Update the Project Management Documentation Policy/Playbook

Review procedural documentation/manuals.

Update IMP

Develop and formalize an integrated 5 Year System Planning Process

Develop FY16 and FY17 SLAs

Major Implementation Items

One Time: $100,000 Reoccurring: $30,000/yr Company: One Time: $200,000-300,000 Reoccurring: $100,000/yr

Company: Labor - $900k to $1.2M/year Software - $400k-500k

Minimal; $7,000/year

Minimal

Minimal

None

None

NorthStar’s Estimated Implementation Cost

None

None

None

None

None

None

Cannot be quantified

NorthStar’s Estimated Cost Savings

Exhibit __ (KSZ-1) Page 3 of 6

Exhibit __ (KSZ-1) Page 3 of 6

79

#

4

5

6

1

2

1

Chapter

VI

VI

VI

VII

VII

VIII

Retain day-ahead forecasts of send out and weather and other input assumptions, and conduct comparison of forecast to actual send out, including forecast weather, actual weather, forecast send out and actual send out. Develop a reporting process for determining the performance of the day ahead model.

Develop a manpower planning program. (Details in chapter)

Develop and implement, within the existing work management processes and systems, a program to track and manage crew and individual worker productivity. (Details in chapter)

Resolve data issues regarding the KPIs for materials services and the fleet metrics reports.

Institute controls to ensure the project change control logs are updated on a timely basis and that accurate change order information is contained in the Project Summary Reports.

Institute a process to track, monitor and report complex project status, including: budget variances, committed costs and actual costs to date, estimated cost at completion, projected year-end expenditures, schedule variance, pending and approved scope changes, and progress-to-date.

NorthStar Recommendation

Capture the daily results of its day-ahead forecast.

Covered in VII-1.

Develop a new work management system.

Resolve KPI data issues.

O&M: $150,000/year

One Time: $500,000 Systems and Training

One Time: $650,000 Systems and Training Company: $5.8M

None

Minimal

Included in VI-3

Incorporate the use of a WBS for complex gas projects.

Various process improvements to ensure accurate recording of change controls for gas complex projects.

NorthStar’s Estimated Implementation Cost

Major Implementation Items

Unquantified savings in gas supply purchases

Cannot be quantified

Cannot be quantified

None

None

None

NorthStar’s Estimated Cost Savings

Exhibit __ (KSZ-1) Page 4 of 6

Exhibit __ (KSZ-1) Page 4 of 6

80

#

2

3

4

1

2

3

4

Chapter

VIII

VIII

VIII

IX

IX

IX

IX

Modify policies and procedures covering the monthly and daily procurement forecasting and “set up” processes for each of the operating companies.

Add a representative from the Energy Procurement group to the NY Leadership Team as a regular full participant.

As part of the annual gas supply plan submitted to the PSC, or in a separate filing, specifically document the five-year supply/demand balance and capacity plans.

Modify policies and procedures regarding the procurement of long-term supply and delivery commitments (longer than one year).

Analyze the treatment of energy efficiency goals in the sales, send out and design day forecasting processes and models, to identify opportunities to improve accuracy and minimize impacts of over forecasting future savings.

Due to the complexity of the forecasting platform, improve reporting of performance on a level that is easily understood by upper management and outsiders.

Re-evaluate the residential forecasting model to identify opportunities to improve accuracy in forecasting during warm winters and to reduce variations from year to year in forecast results.

NorthStar Recommendation

Reoccurring: $10,000 year Incremental labor

Included in XIII(1) above

Enhancing its policies and procedures consistent with the recommendation.

$40,00-60,000 Incremental labor

One Time: $62,500 Reoccurring: $85,000 year Incremental labor

Included in VIII-2

Included in VIII-2

One Time: $20,000 Reoccurring: $45,000 Incremental labor to perform additional analyses

NorthStar’s Estimated Implementation Cost

Add Energy Procurement rep to New York Leadership Team.

Transition to a ten-year forecast and planning horizon.

Various process improvements.

Analyze treatment of energy efficiency goals.

Develop output reports from the Gas Load Forecasting process

Review residential forecasts for the New York Operating Companies

Major Implementation Items

Cannot be quantified

None

None

Cannot be quantified

Included in VIII-2

Included in VIII-2

As much as $500,000 in gas supply savings

NorthStar’s Estimated Cost Savings

Exhibit __ (KSZ-1) Page 5 of 6

Exhibit __ (KSZ-1) Page 5 of 6

81

#

5

6

1

2

Chapter

IX

IX

XI

XI

Continue to evolve the SLAs.

With the FY 2016 planning cycle (beginning in FY15), modify the performance management process to replace Elevate 2015 and better align NG-plc, NGUSA, NY jurisdiction, and NY Operating Company goals and objectives with a more robust set of performance metrics.

Conduct a thorough investigation of the allocation and assignment of costs, particularly labor costs, from Energy Procurement to the NY gas utilities to identify the reasons for the NY Gas utilities receiving an apparent disproportionate share of costs.

Develop a gas supply performance review process, including a monthly metrics scorecard and associated reporting that assesses the overall performance of the Energy Procurement group in managing the gas supply portfolio.

NorthStar Recommendation

Covered in IV-2

Establish FY16 Objectives and Metrics.

Prepare a report addressing allocation of costs to Energy Procurement.

Developed four performance metrics for the gas supply function.

Major Implementation Items

None

None

One Time: $30,000 Incremental labor

None

NorthStar’s Estimated Implementation Cost

Cannot be quantified

Update: The Company’s report explained that these costs were the result of changes in allocations and cost centers; no savings. None

$250,000-300,000/year Labor savings

None

NorthStar’s Estimated Cost Savings

Exhibit __ (KSZ-1) Page 6 of 6

Exhibit __ (KSZ-1) Page 6 of 6

82

Exhibit__ (KSZ-2)

Testimony of Keri Sweet Zavaglia

Exhibit __ (KSZ-2) National Grid’s Implementation Plan Update (January 2017)

83

Exhibit ___ (KSZ-2) Page 1 of 50

Philip A. DeCicco, Jr NY Regulatory

January 19, 2017

VIA ELECTRONIC FILING Honorable Kathleen H. Burgess, Secretary New York State Public Service Commission 3 Empire State Plaza, 19th Floor Albany, NY 12223-1350

Re:

Comprehensive Management and Operations Audit of National Grid USA’s New York Gas Companies; Case Number 13-G-0009

Dear Secretary Burgess, Attached please find The Brooklyn Union Gas Company d/b/a National Grid NY, KeySpan Gas East Corporation d/b/a National Grid and Niagara Mohawk Power Corporation d/b/a National Grid’s January 2017 Implementation Plan Update for the Comprehensive Management and Operations Audit of National Grid USA’s New York Gas Companies prepared by NorthStar Consulting Group. Implementation updates for the thirty-one recommendations in the Audit Report are grouped into three status categories: “In Progress”; “Pending Review”; and “Implemented.” Since the Company’s last update report in September 2016, the status of four recommendations (III-3: Jurisdictional Model, III-4: Chief Risk Officer, IX-2 and 3: Gas Supply Procurement) have been updated to reflect that they are now Implemented; the status of three recommendations (III-1: US/NY Boards, VI-2 Estimating Program for Gas Projects and IX-4 Gas Procurement Procedures) have been updated to reflect that they are now Pending Review. Please call me with any questions regarding the Implementation Plan Update. Very truly yours, /s/ Philip A. DeCicco Philip A. DeCicco

One MetroTech Center, Brooklyn, New York 11201 T : 929-324-4543 [email protected]

www.nationalgrid.com

84

Exhibit ___ (KSZ-2) Page 2 of 50

Comprehensive Management and Operations Audit of National Grid USA’s New York Gas Companies Case No. 13-G-0009

IMPLEMENTATION PLAN UPDATE

PREPARED FOR: THE STATE OF NEW YORK PUBLIC SERVICE COMMISSION THREE EMPIRE STATE PLAZA ALBANY, NEW YORK 12223

January 2017

85

Exhibit ___ (KSZ-2) Page 3 of 50

INTRODUCTION A. Background In accordance with the Commission’s May 14, 2015 Order,1 The Brooklyn Union Gas Company d/b/a National Grid NY, KeySpan Gas East Corporation d/b/a National Grid and Niagara Mohawk Power Corporation d/b/a National Grid (collectively, “National Grid” or the “Company”) offer the following Implementation Plan Update in connection with the August 2014 “Comprehensive Management and Operations Audit of National Grid USA’s New York Gas Companies” (the “Audit Report”) prepared by NorthStar Consulting Group. The Audit Report contains thirty-one recommendations aimed at improving the Company’s performance. For each recommendation, the Company’s Implementation Plan (filed on April 21, 2015) sets forth: the Company’s proposal to implement the recommendation; the team leads and executive sponsor; an implementation schedule; a cost/benefit analysis associated with implementing the recommendation; and an implementation priority. This Implementation Plan Update describes the Company’s progress implementing each recommendation as of January 2017. B. Implementation Plan Progress Summary Table 1 provides a snapshot of implementation progress on the thirty-one recommendations in the Audit Report: Table 1: Implementation Progress—Aggregate Total Recommendations Implemented 4 Pending Review 25 In Progress 2 The three implementation status categories in Table 1 are defined as follows: •

Implemented – Action steps associated with implementing a recommendation have been completed, reviewed and accepted by Staff.



Pending Review - Action steps associated with implementing a recommendation have been completed, and are pending review by Staff. Acceptance of a recommendation as complete will be determined following Staff’s review.



In Progress – Actions associated with implementing a recommendation are on-going or on hold pending other decisions or activities.

Since the Company’s last update report in September 2016, the status of four recommendations (III-3: Jurisdictional Model, III-4: Chief Risk Officer, IX-2 and 3: Gas Supply Procurement) have been updated to reflect that they are now Implemented; the status of three recommendations (III-1: US/NY Boards, VI-2 Estimating Program for Gas Projects, and IX-4 Gas Procurement 1

Case 13-G-0009 – Comprehensive Management and Operations Audit of National Grid USA’s New York Gas Companies, “Order Approving an Implementation Plan” (Issued and Effective May 14, 2015). 2

86

Exhibit ___ (KSZ-2) Page 4 of 50

Procedures) have been updated to reflect that they are now Pending Review. Material updates on the Company’s implementation progress are highlighted in bold throughout this report. Table 2 provides an updated status summary for each individual recommendation. Table 2: Implementation Progress—Individual Recommendations Recommendation

Implementation Status

Chapter

#

III

1

Reconstitute the NG USA Board of Directors.

Pending Review

III

2

Reconstitute the Boards for KEDLI, KEDNY and NMPC.

Pending Review

III

3

Continue to evolve the Jurisdictional organization model.

Implemented

III

4

Establish a Chief Risk Officer within NG USA.

Implemented

III

5

Prepare true strategic plans for National Grid’s New York operations.

Pending Review

III

6

Investigate the cost impacts of the LIPA separation.

Pending Review

IV

1

Prepare a report that fully documents costs associated with USFP.

Pending Review

IV & XI

2

Continue to evolve the Service Level Agreements.

Pending Review

V

1

Develop an integrated natural gas system-wide plan.

Pending Review

V

2

Update the Company’s Integrity Management Plan (IMP) to comply with § 192.911.

Pending Review

V

3

Pending Review

VI

1

VI

2

Update procedural documentation/manuals to comply with § 192.614 and § 192.615. Address deficiencies to the Playbook project documentation requirements. Develop an estimating program for gas projects.

Pending Review

VI

3

Implement a WBS system to organize and manage gas projects.

Pending Review

VI

4

Institute a process to track, monitor and report complex project status, including budget variances, committed costs and actual costs to date, estimated cost at completion, projected year-end expenditures, schedule variance, pending and approved scope changes, and progress-to-date.

Pending Review

VI

5

Institute controls to ensure the project change control logs are updated on a timely basis.

Pending Review

VI

6

Resolve data issues regarding the KPIs for materials services and the fleet metrics reports.

Pending Review

Pending Review

3

87

Exhibit ___ (KSZ-2) Page 5 of 50

Implementation Status

Chapter

#

Recommendation

VII

1

Develop and implement, within the existing work management processes and systems, a program to track and manage crew and individual worker productivity.

In Progress

VII

2

Develop a manpower planning program.

In Progress

VIII

1

Retain day-ahead forecasts of send out and weather and other input assumptions, and conduct comparison of forecast to actual send out.

Pending Review

VIII

2

Re-evaluate the residential forecasting model to identify opportunities to improve accuracy in forecasting during warm winters and to reduce variations from year to year in forecast results.

Pending Review

VIII

3

Due to the complexity of the forecasting platform, improve reporting of performance on a level that is easily understood by upper management and outsiders.

Pending Review

VIII

4

Analyze the treatment of energy efficiency goals in the sales, send out and design day forecasting processes and models.

Pending Review

IX

1

Modify policies and procedures regarding the procurement of long-term supply and delivery commitments (longer than one year).

Pending Review

IX

2

As part of the annual gas supply plan submitted to the PSC, document the five-year supply/demand balance and capacity plans.

Implemented

IX

3

Add a representative from the Energy Procurement group to the NY Leadership Team.

Implemented

IX

4

Modify policies and procedures covering the monthly and daily procurement forecasting and “set up” processes for each of the operating companies.

Pending Review

IX

5

Develop a gas supply performance review process.

Pending Review

IX

6

Conduct a thorough investigation of the allocation and assignment of costs from Energy Procurement to the NY gas utilities. No recommendation

Pending Review

Modify the performance management process to replace Elevate 2015 and better align NG-plc, NG USA, NY jurisdiction, and NY Operating Company goals and objectives.

Pending Review

X XI

1

N/A

4

88

Exhibit ___ (KSZ-2) Page 6 of 50

IMPLEMENTATION PLAN UPDATES Chapter III: Corporate Mission, Objectives, Goals and Planning Recommendation III-1 and 2 Recommendation III-1. Reconstitute the NG USA BOD by: 1) limiting the number of members who are also part of the US Executive Team, NG USA Officers and Senior Managers to no more than two; 2) appointing at least one qualified truly independent Director who is not employed by any National Grid company; and 3) filling the remainder of Director seats with either NG UK or NG-plc executives, or other independent, qualified individuals. Define the roles and responsibilities of the NG USA BOD to include those typical of a corporate BOD, including review of financial performance and external auditor reports, review of risks, approval of both capital and operating budgets, and the ability and expectation to challenge and reject recommended projects and actions.

Recommendation III-2. Reconstitute the BODs for KEDLI, KEDNY, and NMPC (“New York Operating Companies”) by: 1) limiting the number of members who are part of the New York Jurisdictional team, regardless of reporting relationship, to no more than one Director; and 2) filling the remaining two Director positions with executives from the other US jurisdictions or NG USA who do not have responsibilities for New York operations. Define the roles and responsibilities of the subsidiary boards to include review of operating and financial performance, review of relevant external auditor statements, approval of service levels and budgets (e.g., SLAs), and approval of specific plans impacting their service territory, such as rate filings, major capital projects, and significant customer programs. Implementation Plan Leads Executive Sponsor:

Ronald Macklin, US General Counsel Ken Daly, President – New York Jurisdiction

Team Lead(s):

Timothy McAllister, Assistant General Counsel and Director Philip DeCicco, Assistant General Counsel and Director

Implementation Priority: III-1 High; III-2 Medium Recommendation Accepted: III-1 Yes (with modifications); III-2 Yes (with modifications) Current Status: Pending Review (III-1)/Pending Review (III-2) NG USA Board of Directors In the revised New York Gas Management Audit Implementation Plan, the Company proposed to reconstitute NG USA’s Board in a manner generally consistent with the recommendation: • No more than three (3) directors will be members of the US management team; • One director will be an independent director who is not an employee of the Company; and • Other directors will be either NG UK or NG-plc executives, or other independent, qualified 5

89

Exhibit ___ (KSZ-2) Page 7 of 50

individuals. In May 2015, the Company appointed a three person board, consisting of two US senior management members, and one independent director (Thérèse Esperdy). Ms. Esperdy has served as a Non-executive Director of the Board of National Grid plc since March 2014 and currently chairs the Finance Committee. The Company has since appointed a third director (Cheri Warren) who is member of the US management team. With regard to the recommendation that NG USA appoint additional NG UK directors, the Company has determined that appointing UK directors presents a number of logistical and other challenges, including potential adverse tax implications, that makes it impractical to implement this component of the recommendation. Accordingly, the Company does not intend to appoint additional UK directors to the NG USA Board at this time (discussed below). In addition, the NG USA Board (and each of the New York Operating Companies’ boards) has adopted terms of reference that clearly define the board’s roles and responsibilities. Major Activities/ Milestones

Estimated Completion Date

Actual Completion Date

Status

Recruit/appoint new Board, including independent director

4/30/15

Independent Director Appointed - May 2015

In Progress

Adopt terms of reference to clearly define role

1/30/15

January 2015

Completed

Implementation Plan Update. In November 2016, the Company filed an amendment to its Implementation Plan to modify the implementation deliverables for the recommendation addressing the composition of National Grid’s US holding company board. The Company believes the amendment, which will eliminate the original proposal to include non-US directors on the board, will promote efficient corporate governance and that the action items already implemented in this area, particularly the appointment of an independent director, have effectively addressed the audit recommendation. With this modification to the Implementation Plan, the Company will have fully implemented the recommendations regarding the NG USA board. (Updated January 2017) New York Operating Companies’ Board of Directors For the New York Operating Companies’ boards, following the release of the Audit Report, National Grid and Staff discussed maintaining a New York focus on these boards by appointing a majority of New York directors (notwithstanding the Audit Report recommendation to appoint non-New York managers). The Company believes it is important that the operating companies’ directors are familiar with the unique operating, financial and regulatory challenges facing the New York businesses. Accordingly, as described in the revised New York Gas Management 6

90

Exhibit ___ (KSZ-2) Page 8 of 50

Audit Implementation Plan, the Company appointed a majority of directors on the New York operating company boards who are members of the New York Jurisdictional management team.

Major Activities/ Milestones

Estimated Completion Date

Actual Completion Date

Status

Reconstitute (as necessary) the BOD to include a majority of New York executives

4/30/15

May 2015

Completed

Adopt terms of reference to clearly define role

1/30/15

January 2015

Completed

7

91

Exhibit ___ (KSZ-2) Page 9 of 50

Chapter III – Corporate Mission, Objectives, Goals and Planning Recommendation III-3 Continue to evolve the Jurisdictional organization model to establish a clear command and control structure for the NY Jurisdictional President, as described by NG USA executives during the audit. •





Improvements should include direct organizational reporting relationships between the NY Jurisdictional President and the full-time dedicated, senior managers who are responsible for the core utility operations and performance of the NY utilities. The NY Jurisdictional President should have direct reporting and control over NY-dedicated support personnel that plan, execute, monitor and control activities in support of the NY jurisdiction and operating companies. As indicated by NG USA Executives, this evolution is not a major reorganization nor should it result in increased headcount, but rather a re-alignment of reporting responsibilities and clarification of roles and responsibilities.

Implementation Plan Leads Executive Sponsor:

Dean Seavers, President – NG USA Ken Daly, President – New York Jurisdiction

Team Lead(s):

Roger Young, SVP – US Human Resources

Implementation Priority: High Recommendation Accepted: Yes Current Status: Implemented NY Jurisdiction Organization Design In April 2015, the Company modified its jurisdictional model to enhance operational accountability to the NY Jurisdictional President. Specifically, as described in the revised New York Gas Management Audit Implementation Plan, key members of the NY Leadership Team now report directly to the New York Jurisdictional President. These direct reports, which currently include senior managers from Gas Operations, Electric Operations and Network Strategy, are accountable to the NY Jurisdictional President and their performance will be evaluated based on the success of the New York Operating Companies. In addition to the realignment of key members of the New York Management Team, effective April 1, 2015, employees reporting to the Vice Presidents of New York Electric and Gas Operations moved to the NY Jurisdiction. As a result, more than 2,600 electric and gas operations personnel supporting the New York utilities now report under the NY Jurisdictional 8

92

Exhibit ___ (KSZ-2) Page 10 of 50

President. With regard to the New York regulatory function, the Company has reconsidered and determined that the NY Regulatory and Pricing officer should report directly to the Senior Vice President for US Regulation, and report to the NY Jurisdictional President in a matrix reporting relationship. This approach allows National Grid to better coordinate its regulatory strategy across the US business, while at the same time providing for a senior, dedicated New York regulatory officer to coordinate with the NY Jurisdictional President on significant regulatory matters. Organization design work to strengthen the jurisdictional model is ongoing. Going forward, the Company will continue to review the jurisdictional model to identify if additional adjustments are appropriate and beneficial. Cross-Jurisdictional Coordinating Review To further allow the Jurisdictional Presidents to monitor and review functional performance by the service company, National Grid established a cross-jurisdictional coordinating review (“CJR”) process, with executive representation from the jurisdictions and US functions. The CJR involves an operating company by operating company performance review, including a review of performance against SLA metrics. Execution of the Enhanced Jurisdictional Model With more than a year’s experience, the enhanced jurisdictional model has proven successful. The NY Jurisdiction President has direct control over the core gas and electric field operations teams and there is greater alignment and transparency among the service company functions, which is evident in weekly calls and monthly performance meetings. The enhanced structure has also resulted in improved alignment in objective setting and the priorities of the New York Jurisdiction are clearly reflected across the organization.

Schedule Major Activities/ Milestones

Estimated Completion Date

Actual Completion Date

Status

Implement modifications to jurisdictional model

April 2015

April 2015

Completed

9

93

Exhibit ___ (KSZ-2) Page 11 of 50

Chapter III – Corporate Mission, Objectives, Goals and Planning Recommendation III-4 Establish a Chief Risk Officer within the NG USA organization, reporting to the President NGUSA, with responsibility and appropriate authority, for coordinating, reviewing and challenging the results of all the various risk assessment groups, including the CRT, the CET/SOX compliance, Ethics and Compliance, and IAD to identify risk trends, track and manage financial and operating risks with materiality below NG-plc levels, and monitor that the plans prepared by the risk owners are appropriate and represent the best cost solution. This individual needs sufficient authority to direct changes in response to risks, and needs to remain sufficiently independent of the operations that they are able to identify patterns, and challenge assumptions patterns with impartiality. This individual should also work to implement necessary changes in the NG USA internal controls processes so that, as part of the controls processes, sufficient attention is paid to findings that are material at lower reporting levels, and gaps/issues are brought to the attention of the relevant Jurisdictional President and the President, NG USA.

Implementation Plan Leads Executive Sponsor:

Ronald Macklin, US General Counsel (for Dean Seavers, President – NG USA and Alison Kay, Group General Counsel & Company Secretary)

Team Lead(s):

Ronald Macklin, US General Counsel

Implementation Priority: High Recommendation Accepted: Yes (with modifications) Current Status: Implemented US Chief Risk and Compliance Officer Consistent with NorthStar’s recommendation, National Grid’s US General Counsel was appointed the US Chief Risk and Compliance Officer. The US Chief Risk and Compliance Officer is responsible for coordinating, reviewing and challenging the results of the risk, compliance and ethics groups, reporting to US management and the NG USA BOD, where appropriate. In addition, as described in the Implementation Plan, National Grid appointed a new Global Head of Assurance (with a reporting relationship to the US Chief Risk and Compliance Officer) who is primarily responsible for coordinating, reviewing and challenging the results of various risk assessment groups, including compliance and ethics. The Global Head of Assurance is also responsible for defining risks, providing assurance and ensuring consistency across all National 10

94

Exhibit ___ (KSZ-2) Page 12 of 50

Grid businesses. Schedule Major Activities/ Milestones

Estimated Completion Date

Actual Completion Date

Status

Effective Date of the US Chief Risk and Compliance Officer

April 2015

April 2015

Completed

Appoint Global Head of Assurance

April 2015

November 2014

Completed

11

95

Exhibit ___ (KSZ-2) Page 13 of 50

Chapter III – Corporate Mission, Objectives, Goals and Planning Recommendation III-5 Prepare a true strategic plan for NG USA’s New York operations to serve as a road map for investments, programs and operations in the state. The strategic plan should build on the state energy policy and Connect21 whitepapers and incorporate other PSC, state and federal energy and regulatory initiatives. The initial strategic plan should be presented to the NG USA BOD and the PSC within six months, and should be updated and presented annually thereafter.

Implementation Plan Leads Executive Sponsor:

Ken Daly, President – New York Jurisdiction

Team Lead(s):

Keri Sweet Zavaglia, Vice President – NY Performance & Strategy

Implementation Priority: Low Recommendation Accepted: Yes Current Status: Pending Review Consistent with the audit recommendation, in 2015, the Company developed a preliminary business plan for the New York Operating Companies. As suggested by NorthStar, the business plan outlines the Company’s New York strategic priorities and growth plans. The Company is now focused on enhancing the format, content and usability of its business plan and, therefore, is currently working to develop a new business plan consistent with the auditor’s recommendation. The business plan will incorporate the strategy in the Connect21 paper regarding the future of the utility industry, as well as the paper on New York State Energy Policy (including various REV initiatives). The business plan will also reflect National Grid USA’s annual priorities and goals to ensure alignment. National Grid has enhanced the format, content and usability of its business plans, which were effective April 1, 2016. The Company has created one New York business plan with information specific to each operating company clearly defined. The plan was presented to the New York leadership team at its April performance meeting and will be distributed across the teams supporting the New York business. The intent of the plans is to reflect National Grid’s strategy and vision and describe the goals and priorities of the New York businesses and how they are consistent with and advance National Grid’s strategy. The plan describes how the goals and objectives will be achieved and identifies the metrics that will be used to measure performance. The intent of the plan was also to create a single source document for employees as a reference and guidance on National Grid and the New York operating company strategies. In preparing the plan, it was evident that this information was previously contained in numerous documents and not 12

96

Exhibit ___ (KSZ-2) Page 14 of 50

readily accessible by employees. The Company has also taken care to reflect the input from Staff and NorthStar and is committed to continuous improvement and will refine and improve its plan each year. Schedule Major Activities/ Milestones Initial New York Business Plan

Estimated Completion Date

Actual Completion Date

Status

December 2015

April 2016

Completed

13

97

Exhibit ___ (KSZ-2) Page 15 of 50

Chapter III – Corporate Mission, Objectives, Goals and Planning Recommendation III-6 Conduct, or contract with qualified outside auditor for, an investigation into the cost impacts of the LIPA separation on remaining NY operating company ratepayers, and provide a report to the PSC staff within six months. The investigation should include: •

True stranded costs broken out by labor and non-labor sources, and by capital investments and operating charges



Expected revenues by basis (e.g., real estate, IT) and the time period for the revenue agreement.



Incremental costs, both labor and non-labor, and capital and on-going operating costs or benefits



Allocated costs (labor and non-labor combined if necessary), and an estimate of the aggregate impact of the reallocation of these costs on the remaining NY utilities.

The investigation should include a broad review of activities and functions that were performed with, or for the benefit of LIPA, rather than relying solely on prior listings of impacted areas. Where applicable and reasonable, existing studies can be used as sources for the cost estimates, with adjustments clearly specified. The investigation seeks to define and document the costs associated with the separation for future use.

Implementation Plan Leads Executive Sponsor:

Sharon Partridge, Vice President – Financial Planning & Analysis & Decision Support David Doxsee, Vice President – Finance (New York)

Team Lead(s):

Chip Benson, Director – Finance Business Partners

Implementation Priority: Medium Recommendation Accepted: Yes Current Status: Pending Review As described in the Implementation Plan, the Company updated its analysis of the stranded, incremental and re-allocated costs resulting from the loss of the of the LIPA management agreement. The Company’s analysis includes an assessment of the following transition cost items: 14

98

Exhibit ___ (KSZ-2) Page 16 of 50

(i) an accounting of stranded costs (capital and O&M) resulting from the LIPA transition broken out by labor, systems, facilities, etc.; (ii) any incremental costs (labor and non-labor) and capital and on-going operating costs or benefits incurred as a result of the loss of the LIPA agreement; (iii) an estimate of the aggregate impact of reallocated costs on the New York Operating Companies; and (iv) offsetting LIPA transition charges paid by PSEG-LI. The Company provided its LIPA transition cost analysis to Staff in September 2015. Schedule Major Activities/ Milestones

Estimated Completion Date

Actual Completion Date

Status

Form team to perform stranded cost analysis

November 2014

November 2014

Completed

Develop workplan

December 2014

December 2014

Completed

June 2015

September 2015

Completed

Submit report to Staff

15

99

Exhibit ___ (KSZ-2) Page 17 of 50

Chapter IV – Capital and O&M Budgeting Recommendation IV-1 Prepare a report for submittal to the PSC staff within six months that fully documents the capital and O&M costs associated with USFP, USFP Stabilization, Finance Remediation and other financial and IS system related initiatives so that ratepayers are protected from SAP-related costs in excess of levels agreed upon in the previous NMPC and KEDNY rate cases (and for KEDLI by default). At a minimum, NG USA should: • Document and re-establish the original capital and O&M costs underlying the rate case level. • Clearly and specifically define the distinctions (e.g., timing, scope and cost) between the original USFP project, the USFP Stabilization Project, other SAP/USFP-related projects, the Finance Remediation Project and other financial and IS system activities. • Specify how the costs associated with each of these activities are being tracked, monitored and verified, including: the specific project or cost codes used for dedicated internal labor, part-time or as-needed internal labor, contractors, other direct, indirect and capital costs, and the procedures for review, verification, challenge and correction of costs. • Explain and document the impact of back-filling positions assigned to these initiatives. • Explain and document the sources of the increase in “other IS” capital and O&M expenditures (see Exhibit IV-11) to confirm the costs are not related to the USFP Stabilization initiatives. The purpose of the report is to provide the PSC staff with contemporaneous documentation so the costs for fixing USFP/SAP will not be borne by ratepayers, and the costs of Finance Remediation and other IS issues can be appropriately assessed in future rate cases. National Grid would continue to have the right to justify costs for SAP enhancements and other initiatives for inclusion in rates as a part of the normal rate case process.

Implementation Plan Leads Executive Sponsor:

Vivienne Bracken, SVP – Shared Services

Team Lead(s):

Rachel Patton – Finance

Implementation Priority: High Recommendation Accepted: Yes (with modifications)

16

100

Exhibit ___ (KSZ-2) Page 18 of 50

Current Status: Pending Review Consistent with NorthStar’s recommendation, the Company prepared a report that identified the capital and O&M costs associated with USFP, USFP Stabilization, incremental Finance Remediation costs and the capital costs associated with other IS system-related initiatives. Specifically, the Company’s report (i) identified the original capital and O&M costs associated with USFP as currently included in rates; (ii) identified actual O&M and capital costs associated with USFP, USFP Stabilization, and incremental Finance Remediation costs; (iii) explained the distinctions (i.e., timing, scope and cost) among the original USFP project, the USFP Stabilization Project, and the Finance Remediation Project; and (iv) explained how the costs associated with each of these activities are being tracked, monitored and verified. The Company submitted its USFP cost report to Staff in April 2015. Schedule Major Activities/ Milestones Submit USFP cost report to Staff

Estimated Completion Date

Actual Completion Date

Status

April 2015

April 2015

Completed

17

101

Exhibit ___ (KSZ-2) Page 19 of 50

Chapter IV – Capital and O&M Budgeting Recommendations IV-2 and XI-2 • Develop improved SLAs to govern the relationship between the jurisdictional operating companies and ServCo. For products and services provided to NYS utilities from the ServCo, SLAs must emulate commercial agreements and should include: o Improved dialogue among the various National Grid management teams. o Detailed metrics addressing product and service units, volumes provided, timeframe, quality and unit prices. o Tracking mechanisms including quantifiable and meaningful KPIs. o Standardized reports across all NG USA entities. o Enforcement via payment only for product and service units actually provided. o Jurisdictional management authority to terminate and change service providers. • Continue to evolve the SLAs to include additional KPIs addressing each of the major functions performed, include measures of efficiency, cost-effectiveness and unit costs, provide greater budgetary detail, include financial penalties for failure to achieve performance targets, relate the service company employee performance evaluation process to the SLAs, require more frequent reporting, incorporate the results of the benchmarking exercises, and improve performance targets. Implementation Priority: Medium Recommendation Accepted: Yes (with modifications) Implementation Plan Leads Executive Sponsor:

Keri Sweet Zavaglia, Vice President – NY Performance & Strategy

Team Lead(s):

Don Wolf, Director – Service Company Peter Fitzgerald, Director – Financial Planning & Analysis

Current Status: Pending Review Consistent with NorthStar’s recommendations, National Grid has continued to expand the command and control of the New York Jurisdictional President. With gas and electric field operations now reporting to the Jurisdictional President (see Recommendation III-3), the majority of core day to day business is within his control. Accordingly, the scope of Service Level Agreements (“SLAs”) is reduced as agreements are no longer required for those functions. However, performance management of the service company functions remains a critical component for the success of each operating company. Historically, National Grid has relied extensively on its individual employee performance process to manage performance. The result 18

102

Exhibit ___ (KSZ-2) Page 20 of 50

was inconsistent, resulting in recommendations from Staff and independent auditors to improve the process. In response, National Grid looked holistically at its performance management structure, identified opportunities for improvement and has implemented a rigorous new process. Specifically, National Grid’s executive leadership team now executes a monthly cadence process that demands service company accountability and includes review and discussion of extensive material, including data on functional performance measures and cost. Structured and documented action lists are maintained and reviewed to ensure items are addressed as expected. The cadence meetings include a comprehensive and thorough look at year to date and forecast performance. In addition, each jurisdiction hosts a monthly meeting to review and discuss the performance of each operating company. In New York, compliance, financial and other metrics are reviewed in detail. Importantly, extensive documentation is continuously updated to ensure current and transparent data is reviewed throughout the month to address issues, concerns and monitor leading indicators, where applicable. The focus is enhancing accountability and substantially improving reporting and the Company is confident it has a robust performance management structure in place. This structure does not, however, obviate the need for SLAs. National Grid recognizes that improved SLAs remain an important tool for meaningful performance management. To that end, National Grid is further improving SLAs to govern the relationship between the jurisdictional operating companies and the service company. The documents are being prepared with careful detail to include the data that is used monthly to manage performance. In the past, National Grid has prepared SLAs that are technically compliant with external requirements, but not entirely effective as management tools. The fiscal year 2017 SLAs will include the cost and services provided by the service company functions to each operating company and the metrics identified by the jurisdictional president as most important to delivering the required services. The financial data will be consistent with the detail reviewed monthly by the jurisdictional president and a process is in place to continuously monitor all metrics. The comprehensive effort completed this past year to revise, refine and enhance key performance indicators continues to be leveraged and improved. Consistent with NorthStar’s recommendation, the metrics continue to evolve to include service units, volumes, timeframe, quality and unit costs, where possible. Indeed, an extensive effort is underway to further identify unit cost metrics that will enhance the data reported monthly and enable transparency of various operations related activities. As additional unit cost metrics are developed, they will be incorporated in the reporting process. Templates for presenting compliance, financial and regulatory metrics ensure detail and standardize reporting, thereby facilitating informed and consistent review of performance. In addition to providing enhanced transparency and rigor to the oversight of the quality and cost from service company functions, these changes also enable the successful and consistent execution of National Grid’s individual employee performance management process. Employees’ objectives are aligned to the priorities of each jurisdiction and individual actions required to achieve those objectives are identified at the beginning of the year. Each action is tied to a key performance indicator used by the business to measure the quality and cost of the service provided. The historic disconnect between individual metrics and those used by the business to measure the service provided has been eliminated. Accordingly, individual employee performance is directly linked to the performance of the service company function. Failure to achieve a performance 19

103

Exhibit ___ (KSZ-2) Page 21 of 50

metric informs the individual employee rating, which drives each employee’s incentive compensation. Failure to achieve a performance metric therefore has a direct financial consequence for employees, which is consistent with National Grid’s overall performance management strategy of driving performance improvements through individual accountability and transparency of data. FY17 SLAs have been executed and implemented. The Director, NY Performance and Strategy has been assigned to monitor and track performance and report progress in monthly performance meetings.

Schedule Major Activities/ Milestones

Estimated Completion Date

Actual Completion Date

Status

FY16 SLAs

July 2015

July 1, 2015

Completed

FY17 SLAs

April 2016

April/May 2016

Completed

20

104

Exhibit ___ (KSZ-2) Page 22 of 50

Chapter V– System Planning Recommendation V-1 Develop an integrated natural gas system-wide plan. The system plan should include all reliability work, mandated replacements, growth projects and system planning work identifiable over a five-year period. •

The system plan should include all projects identified based on their relative merit and need dates. It should not be limited by budget amounts.



The system plan should be updated annually.



It should also include associated project cost estimates, risk scores and resource requirements.



The integrated system plan should provide input to the Investment Planning process to create the Five-Year Investment Plan.

Implementation Plan Leads Executive Sponsor:

Ross Turrini, SVP – Gas Process and Engineering

Team Lead(s):

Laurie T. Brown, Director – Network Strategy, Gas Amy Smith, Director – Regulatory Support Reporting

Implementation Priority: Medium Recommendation Accepted: Yes Current Status: Pending Review National Grid’s Network Strategy organization has restructured Gas System Engineering to provide for separate asset management and gas engineering functions. The new Asset Management Engineering group will act as the “asset owners” responsible for identifying future system reinforcement, reliability and special projects for the gas system. National Grid’s Asset Management group has developed an integrated, five-year natural gas system-wide plan that includes all reliability work, mandated replacements, growth projects and system planning work identified through FY 2022. The plan includes estimates of each New 21

105

Exhibit ___ (KSZ-2) Page 23 of 50

York operating company’s labor requirements for major capital programs (e.g., growth, leak prone pipe, public works) in these years. The labor estimates are based on an analysis of crew sizes and forecast work requirements/units in each category. In addition to the five year plan, Asset Management will continue to prepare longer term (10 year) system plans as part of its Strategic Infrastructure initiative. The Company will share its five and ten year gas system plans with Staff when available. Schedule

Major Activities and Milestones

Estimated Start Date

Estimated Actual Completion Completion Date Date

Current Status

New structure separating the engineering and asset management functions

08/1/2014

Complete

Integrate Investment Planning Group into Gas Asset Management organization

09/1/2014

Complete

7/15/2016

Completed

Develop and formalize an integrated 5 Year System Planning Process

10/04/2014

7/1/2016

22

106

Exhibit ___ (KSZ-2) Page 24 of 50

Chapter V – System Planning Recommendation V-2 Update the companies’ IMPs in § Part 192.911, including: •

An identification of all high consequence areas, in accordance with § 192.905.



A baseline assessment plan meeting the requirements of § 192.919 and § 192.921.



An identification of threats to each covered pipeline segment, which must include data integration and a risk assessment. An operator must use the threat identification and risk assessment to prioritize covered segments for assessment (§ 192.917) and to evaluate the merits of additional preventive and mitigation measures (§ 192.935) for each covered segment.



A direct assessment plan, if applicable, meeting the requirements of § 192.923, and depending on the threat assessed, of §§ 192.925, 192.927, or 192.929.



Provisions meeting the requirements of § 192.933 for remediating conditions found during an integrity assessment.



A process for continual evaluation and assessment meeting the requirements of § 192.937.



If applicable, a plan for confirmatory direct assessment meeting the requirements of § 192.931.



Provisions meeting the requirements of § 192.935 for adding preventive and mitigation measures to protect the high consequence area.



A performance plan as outlined in ASME/ANSI B31.8S, section 9 that includes performance measures meeting the requirements of § 192.945.



Record keeping provisions meeting the requirements of § 192.947.



A management of change process as outlined in ASME/ANSI B31.8S, section 11.



A quality assurance process as outlined in ASME/ANSI B31.8S, section 12.



A communication plan that includes the elements of ASME/ANSI B31.8S, section 10, 23

107

Exhibit ___ (KSZ-2) Page 25 of 50

and that includes procedures for addressing safety concerns.

Implementation Plan Leads Executive Sponsor:

Ross Turrini, SVP – Network Strategy

Team Lead(s):

Michael Kern, Director – Gas Transmission Engineering

Implementation Priority: High Recommendation Accepted: Yes Current Status: Pending Review The updated and consolidated Integrity Management Program (IMP) addressing the items identified in the Audit Report was submitted to Staff in January 2015.

24

108

Exhibit ___ (KSZ-2) Page 26 of 50

Chapter V – System Planning Recommendation V-3 Update procedural documentation/manuals per § 192.614 and § 192.615, including: • Correct any documentation deficiencies in relation to § 192.614. o Include the identity, on a current basis, of persons who normally engage in excavation activities in the area in which the pipeline is located. o If the operator has buried pipelines in the area of excavation activity, provide for actual notification of persons who give notice of their intent to excavate of the type of temporary marking to be provided and how to identify the markings. • Correct any documentation deficiencies in relation to § 192.615. o Provide information about the responsibility and resources of each government organization that may respond to a gas pipeline emergency. o Develop plan for how the operator and officials can engage in mutual assistance to minimize hazards to life or property.

Implementation Plan Leads Executive Sponsor:

Ross Turrini, SVP – Network Strategy

Team Lead(s):

Michael McCallan, Director – Emergency Planning Diane Benedetto, Manager – Damage Prevention

Implementation Priority: High Recommendation Accepted: Yes Current Status: Pending Review National Grid reviewed and updated the procedural documentation/manuals to ensure compliance with 192.614, Procedure 070005-PL [Preparation of Gas Facility Records] and Procedure 0010015-PL [Gas Pipeline Public Awareness and Communication]. Schedule Major Activities

Review procedural documentation/manuals for compliance with 192.614 & 192.615

Estimated Start Date

Estimated Completion Date

Actual Completion Date

Current Status

11/1/2014

12/31/2014

January 2015

Complete

25

109

Exhibit ___ (KSZ-2) Page 27 of 50

If required, update procedural documentation/manuals

1/1/2015

3/31/2015

February 2015

Complete

Finalize revised Gas ERP 11/1/2014

12/31/2014

January 2015

Compete

26

110

Exhibit ___ (KSZ-2) Page 28 of 50

Chapter VI – Project Management Recommendation VI-1 Address deficiencies identified in the Project Management group’s adherence to the Playbook project documentation requirements. This should include: • Update the Project Management Documentation Policy to identify the requirements and responsibilities for records management on project-managed projects • Continue periodic audits of project files by Internal Audit or an external auditor.

Implementation Leads Executive Sponsor:

Cedric Williams, VP – Project Management & Complex Construction Gas Robert DeMrinis, VP – Maintenance & Construction (NY Gas)

Team Lead(s):

Timothy Moore, Director - Gas Project Management

Implementation Priority: Low Recommendation Accepted: Yes Current Status: Pending Review Schedule The Project Management Documentation Policy/Playbook was updated to include an audit schedule, supervisory control mechanisms and performance objectives in 2015.

27

111

Exhibit ___ (KSZ-2) Page 29 of 50

Chapter VI – Project Management Recommendation VI-2 Develop an estimating program for gas projects that is consistent with that used for NG USA’s electric utilities.

Implementation Leads Executive Sponsor:

Ross Turrini, SVP – Network Strategy

Team Lead(s):

Thomas Bennett, VP – Gas System Engineering Arthur Paul, Director – Project Engineering & Design

Implementation Priority: Medium Recommendation Accepted: Yes Current Status: Pending Review National Grid is developing a Gas Estimating Department (i.e., Estimating Center of Excellence or ECoE) within the Gas Systems Engineering Organization. This new group will support development of a consistent estimating end-to-end process including documentation of responsibilities and KPI’s to measure performance. The scope of the Gas ECoE will include complex capital projects, as defined by the Gas Project Engineering & Design Playbook. This work includes, but is not limited to, pressure regulating stations, transmission pipeline projects, and bridge crossings. The number of projects this group will manage on an annual basis is estimated to be approximately 400 – 450 projects. The Commission’s May 19, 2016 Order in Case 15-M-0744 implemented a new gas estimating metric for NMPC, which will track and measure the Company’s performance in this area. In response, Gas Project Estimating adjusted its scope, and staffing plan, to support non-complex project estimates that are now subject to the new estimating metric. The Company has hired five estimating employees to support the New York operating companies. Gas Project Estimating has developed a charter and process documents for the department. A major revision to the gas estimating tool has was reviewed and completed, and the new version of the estimating tool was rolled out in 2016. Gas Project Estimating is currently performing project variance analysis and FY18 project estimating. (Updated January 2017)

28

112

Exhibit ___ (KSZ-2) Page 30 of 50

Schedule Estimated Completion Date (Updated)

Actual Completion Date

Current Status

Phase I - Establish Gas ECoE Group Charter Development End-to-End Estimating Process Review PE&D Playbook Review/Update RACI Development Staffing Department

Q1 – 2016

10/31/16

Complete

Phase II - ECoE Capability Build Estimator Training Estimating Tool Evaluation Estimating Tool Enhancements and Maintenance Future ECoE Estimating Software Review and Evaluation

Q3 – 2016

9/26/16

Complete

Phase III – Estimating Process Benchmarking Variance Analysis – FY16 Projects

Q3 – 2016

11/1/16

Complete

Phase IV - Implementation FY18 Projects Estimating KPI Tracking / Reporting Established

Q4 – 2016

11/14/16

Complete

Major Activities

29

113

Exhibit ___ (KSZ-2) Page 31 of 50

Chapter VI – Project Management Recommendation VI-3 Implement a WBS system to organize and manage gas projects as part of the implementation of Primavera P6.

Implementation Leads Executive Sponsor:

Cedric Williams, VP – Project Management & Complex Construction Gas Robert DeMarinis, VP – Maintenance & Construction (NY Gas)

Team Lead(s):

William Kern, Manager – Long Term Resource Planning Timothy Moore, Director - Gas Project Management

Implementation Priority: Medium Recommendation Accepted: Yes Current Status: Pending Review National Grid has implemented Primavera’s project management tool into the Gas organization. All complex gas projects have been built into Primavera. Schedule Major Activities Create Gas Project Templates Establish a Gas Library (Codes, Roles/Resources) Build Pilot gas Projects into P6 • Review logic and template for accuracy Training Build remaining project managed gas projects into P6

Estimated Completion Date

Actual Completion Date

Current Status

January 2015

July 2015

Completed

March 2015

August 2015

Completed

August 2015

August 2015

Completed

August 2015 August 2015

Completed

May 2015 August 2015

Completed

30

114

Exhibit ___ (KSZ-2) Page 32 of 50

Chapter VI – Project Management Recommendation VI-4 Institute a process to track, monitor and report complex project status, including: budget variances, committed costs and actual costs to date, estimated cost at completion, projected year-end expenditures, schedule variance, pending and approved scope changes, and progress-to-date.

Implementation Leads Executive Sponsor:

Cedric Williams, VP – Project Management & Complex Construction Gas Robert DeMarinis, VP – Maintenance & Construction (NY Gas)

Team Lead(s):

Timothy Moore, Director - Gas Project Management

Implementation Priority: Medium Recommendation Accepted: Yes Current Status: Pending Review The Gas Project Management & Complex Construction organization has migrated all complex projects into the Primavera project management tool. This new tool will facilitate the tracking of schedules for project managed gas capital projects (discussed in the response to Recommendation VI-3). Schedule Estimated Start Date

Estimated Completion Date

Actual Completion Date

Current Status

Develop Complex Project Reports

3/01/15

12/31/15

March 2016

Completed

Schedule Monthly Complex Project Review Meetings

1/31/15

1/31/15

January 2015

Completed

Major Activities

31

115

Exhibit ___ (KSZ-2) Page 33 of 50

Chapter VI – Project Management Recommendation VI-5 Institute controls to ensure project change control logs are updated on a timely basis and that accurate change order information is contained in the Project Summary Reports. Include a review of the change order logs and the change order portion of the Project Summary Report as part of the periodic audits of project files recommended in Recommendation VI-1.

Implementation Leads Executive Sponsor:

Cedric Williams, VP – Project Management & Complex Construction Gas

Team Lead(s):

Timothy Moore, Director - Gas Project Management

Implementation Priority: Low Recommendation Accepted: Yes Current Status: Pending Review The Company has implemented various process improvements to ensure accurate recording of change controls for gas complex projects. Schedule The Company implemented the Project Management process improvements addressed in this recommendation in 2014.

32

116

Exhibit ___ (KSZ-2) Page 34 of 50

Chapter VI – Project Management Recommendation VI-6 Resolve data issues regarding the KPIs for materials services and the fleet metrics reports.

Implementation Leads Executive Sponsor:

William Hilbrunner, Acting Vice President – Operations Support

Team Lead(s):

Craig Berlette, Director – Inventory Management

Implementation Priority: Low Recommendation Accepted: Yes Current Status: Pending Review Inventory Management/Warehouse Management (IMWM) has completed its review of the Line and Order Fill Rate report as well as the Stock Availability report. Line and Order Fill Rate is now reported as a KPI and Stock Availability is used in reporting an Inventory Turns KPI. These KPIs are now fully implemented and no further action is required with regard to IMWM’s KPIs. Fleet KPIs include on-time completion of vehicle inspection reporting and performance of planned maintenance. These KPIs are now in place and no further action is required with regard to Fleet’s KPIs.

Schedule Completed.

33

117

Exhibit ___ (KSZ-2) Page 35 of 50

Chapter VII – Work Management Recommendation VII-1 Develop and implement, within the existing work management processes and systems, a program to track and manage crew and individual worker productivity.

Implementation Leads Executive Sponsor:

Annette Saxman, VP – Gas Investment Resource and Rate Plan

Team Lead(s):

Patricia McVeigh - Director, Invest Planning Rate Case Support

Implementation Priority: Medium Recommendation Accepted: Yes Current Status: In Progress National Grid identified three major categories of work to fully implement this recommendation. First, the Company will need to develop a methodology to track non-productive work time. Second, the Company will need to link its systems to implement consistent and accurate reporting of productivity metrics. Third, as a longer term solution, the Company will need to refresh its mobile technology in the field for KEDNY and KEDLI, and deploy this technology for NMPC to implement productivity tracking. Short Term Progress The Company has developed daily and weekly individual worker productivity reporting for its Customer Meter Services function at the yard level. These reports measure and track individual worker productivity to the CMS business. Productivity metrics include: Metric Productive jobs per productive hours Shift start to onsite first job Average travel time per job Start Shift + Available + Idle + End of Day Last job to sign off/end of shift Minutes on job Unable To Complete (UTC) Rate

Unit of Measure Number of jobs Minutes Minutes Minutes Minutes Minutes % of jobs

34

118

Exhibit ___ (KSZ-2) Page 36 of 50

This methodology will be used to monitor productivity for major categories of Capital and O&M work. The Company has also dedicated new Process and Performance personnel/resources focused on tracking and analyzing the Company’s gas capital expenditures. Among other initiatives, this group will help develop more robust productivity reporting/metrics in the construction area. At the same time, the Company is developing a methodology for tracking productivity/efficiency through an analysis of unit costs at the region (e.g., upstate/downstate) and yard levels. Once developed, this unit cost data will be used to measure productivity and efficiency for main replacements and other construction work at the region/yard level. For the longer term solution, the Company is completing the first phase of a multi-year business transformation program. This program will replace the core work and asset management systems with new, modern day applications. The benefits are reduced operational risk, improvements in compliance performance, as well as enhancing the customer experience. Additionally, the new solutions will support standardization of business processes that will drive improvements through enhanced visibility of the work with more efficient scheduling. Implementation Plan Update In November 2016, the Company filed a notice to update the Implementation Plan with regard to the deliverable and schedule for implementing this recommendation. Specifically, the Company proposed to modify its Implementation Plan to extend by six months (October 2017) the timeline for fully implementing the short term solutions for these recommendations. (Updated January 2017) Schedule National Grid estimates that the near-term implementation plans will be phase in by October 2017.

35

119

Exhibit ___ (KSZ-2) Page 37 of 50

Chapter VII – Work Management Recommendation VII-2 Develop a manpower planning program.

Implementation Leads Executive Sponsor:

Annette Saxman, VP – Gas Investment Resource and Rate Plan,

Team Lead(s):

Patricia McVeigh - Director, Invest Planning Rate Case Support

Implementation Priority: Medium Recommendation Accepted: Yes Current Status: In Progress The ability to estimate the hours and costs associated with a work plan will improve the Company’s manpower planning. The system enhancements set forth in the implementation plan for recommendation VII-1 may provide accurate productivity metrics, which can be used to improve the Company’s manpower planning capabilities. Once the solution for recommendation VII-1 has been implemented, the Company will update its current excel-based work planning tools to address recommendation VII-2. The implementation timeline for Recommendation VII-2 is consistent with the implementation of Recommendation VII-1, with short term deliverables currently expected to be place by October 2017.

36

120

Exhibit ___ (KSZ-2) Page 38 of 50

Chapter VIII – Load Forecasting Recommendation VIII-1 Establish a process to retain day-ahead forecasts of send out volumes, and of weather and other input assumptions for each of the operating companies. On a regular basis, conduct comparisons of forecast to actual send out volumes under forecast and actual weather conditions. Develop a process for assessing and reporting on the performance of the day-ahead model.

Implementation Leads Executive Sponsor:

James Cross, VP – Customer Analytics & Risk Management

Team Lead(s):

Theodore Poe, Jr, Manager – Gas Forecasting & Analysis Elizabeth Arangio, Director – Gas Supply Planning Thomas Amerige, Director – Gas Control and Meter Data Services

Implementation Priority: Low Recommendation Accepted: Yes Current Status: Pending Review The Company is capturing the daily results of its day-ahead forecast. Additionally, the Analytics group has implemented a newer high-dimensional data analysis and forecasting routine that is being tested side-by-side with the existing forecast. Schedule Gas Control, in consultation with the Gas Supply Planning and Analytics, Modeling and Forecasting groups, will continue to enhance its framework for day-ahead forecasting that will address these requirements. (Completed)

37

121

Exhibit ___ (KSZ-2) Page 39 of 50

Chapter VIII – Load Forecasting Recommendation VIII-2 Re-evaluate the residential forecasting model to identify opportunities to improve accuracy in forecasting during warm winters and to reduce variations from year to year in forecast results.

Implementation Leads Executive Sponsor:

James Cross, VP - Customer Analytics & Risk Management

Team Lead(s):

Theodore Poe, Jr., Manager – Gas Forecasting & Analysis

Implementation Priority: Low Recommendation Accepted: Yes Current Status: Pending Review The Company reviewed its residential forecasts for the New York Operating Companies as part of its annual planning cycle, updated its historical data to capture the most recent residential behavior, and is currently monitoring the data during this winter season. Schedule This review will take place over the next four to six months and is being factored into the 2015 Q2 Gas Load forecasting cycle. (Completed)

38

122

Exhibit ___ (KSZ-2) Page 40 of 50

Chapter VIII – Load Forecasting Recommendation VIII-3 Due to the complexity of the forecasting platform, improve reporting of forecast results and model performance on a level that is easily understood by upper management, internal customers and users, and outsiders. Examples include forecasts of number of customers by rate class, sales by rate class, separate reporting of firm vs non-firm customers, and reporting accuracy.

Implementation Priority: Low Recommendation Accepted: Yes Implementation Leads Executive Sponsor:

James Cross, VP – Customer Analytics & Risk Management

Team Lead(s):

Theodore Poe, Jr., Manager – Gas Forecasting & Analysis

Current Status: Pending Review The Company developed output reports from the Gas Load Forecasting process that can be easily under understood by the various parties reviewing the forecast results. In 2015, an executive summary for management was developed and circulated. This report will now be part of the annual forecasting process. Schedule The Analytics, Modeling and Forecasting enhanced reporting format will be completed by the end of 2015. (Completed)

39

123

Exhibit ___ (KSZ-2) Page 41 of 50

Chapter VIII – Load Forecasting Recommendation VIII-4 Analyze the treatment of energy efficiency goals in the sales, send out and design day forecasting processes and models to identify opportunities to improve accuracy and minimize impacts of over-forecasting future savings. In collaboration with PSC staff, determine an appropriate approach for handling energy efficiency program goals and achieved savings in future modeling.

Implementation Leads Executive Sponsor:

James Cross, VP – Customer Analytics & Risk Management

Team Lead(s):

Theodore Poe, Jr., Manager – Gas Forecasting & Analysis

Implementation Priority: Low Recommendation Accepted: Yes Current Status: Pending Review Implementation of this recommendation requires the Company to work with internal parties and DPS Staff to explore options for handling treatment of energy efficiency program results and goals in the forecasting process, including investigating the impact of non-achievement of savings on gas procurement decisions. In March 2015, the Company and Staff discussed whether the Company should consider the full impact of its energy efficiency goals (or some portion of the goals based on the Company’s historic success rate) in the peak day gas forecast. The parties acknowledged that, by including the full amount of the efficiency goals, the Company could be understating its resulting peak day gas resource requirements. Accordingly, it was agreed that the Company will not deduct any impact for its energy efficiency goals over and above the success rate in its 2015 Q2 Gas Load Forecasting cycle. The Company subsequently presented its plan to better address EE goals in the models at the annual Winter Supply review.

Schedule Completed. 40

124

Exhibit ___ (KSZ-2) Page 42 of 50

Chapter IX – Supply Procurement Recommendation IX-1 Modify policies and procedures regarding the documentation and approval for the procurement of long-term supply and delivery commitments (longer than one year).

Implementation Leads Executive Sponsor: Team Lead(s):

John Vaughn, VP – Energy Procurement Chris McConnachie, VP – US Treasury John Allocca, Director – Gas Contracting and Compliance Elizabeth Arangio, Director – Gas Supply Planning Alex Zhukovsky, Director – Quantitative Risk & Financial Reporting

Implementation Priority: Medium Recommendation Accepted: Yes Current Status: In Progress The Company has implemented the following improvements in this area: 1. Energy Procurement will document policies and procedures: The Company has reviewed and revised, as appropriate, its Energy Procurement FERC Compliance & Contracting Standard Operating Procedures to address this recommendation. Completed. (Updated January 2017) 2. Middle Office to finalize the EPRMC process: Completed. 3. Energy Procurement to comply with documented policies and procedures: Compliance with policies and procedures will begin immediately following finalization of the policies and procedures. 4. Middle Office to hold EPRMC meetings and provide support: Completed. EPRMC will meet at least once per month.

41

125

Exhibit ___ (KSZ-2) Page 43 of 50

Chapter IX – Supply Procurement Recommendation IX-2 As part of the annual gas supply plan submitted to the PSC, or in a separate filing, specifically document the five-year supply/demand balance and capacity plans. For capacity contracts that are up for renewal during the five-year planning horizon, provide a discussion of the current expectations regarding those plans. If the long-term supply portfolio review, including contracts not expected to be renewed, shows the need for new capacity to meet design day requirements, provide information on options being explored. Update information provided in previous plans regarding new capacity and capacity renewals.

Implementation Leads Executive Sponsor:

John Vaughn, VP – Energy Procurement

Team Lead(s):

Elizabeth Arangio, Director – Gas Supply Planning Marybeth Carroll and Robert Moore, Managers – Gas Supply Planning

Implementation Priority: Medium Recommendation Accepted: Yes Proposal to Implement Recommendation Current Status: Implemented The Company initially met with Staff to discuss the five-year supply/demand balance and capacity information to be included in its annual gas supply reporting. The Company subsequently included this information in its response to Question 6 of the 2015-16 National Grid Winter Supply Review (Case 15-G-0213) and will continue to do so in future winter supply reviews. National Grid is transitioning to a ten-year forecast and planning horizon, which will better position the Company the make long-term supply decisions, including the need for pipeline projects that require significant lead time to be placed in service. The Company’s Energy Procurement team met with DPS Staff on September 10, 2015 to present the status of each of the Audit Report recommendations for Chapter IX. Schedule Complete 42

126

Exhibit ___ (KSZ-2) Page 44 of 50

Chapter IX – Supply Procurement Recommendation IX-3 Add a representative from the Energy Procurement group to the NY Leadership Team as a regular full participant. Implementation Leads Executive Sponsor:

Ken Daly, President – New York Jurisdiction

Team Lead(s):

Elizabeth Arangio, Director – Gas Supply Planning

Implementation Priority: Medium Recommendation Accepted: Yes Current Status: Implemented The Vice President of Energy Procurement joined the NY Leadership Team as of October 2014. The Vice President of Energy Procurement is responsible for both gas and electric procurement in New York and represents the energy/supply procurement functions for the gas and electric businesses on the NY Leadership Team. Schedule This recommendation has been implemented and is complete.

43

127

Exhibit ___ (KSZ-2) Page 45 of 50

Chapter IX – Supply Procurement Recommendation IX-4 Modify policies and procedures covering the monthly and daily procurement forecasting and “set up” processes for each of the operating companies.

Implementation Leads Executive Sponsor:

John Vaughn, VP – Energy Procurement

Team Lead(s):

Elizabeth Arangio, Director – Gas Supply Planning Marybeth Carroll and Robert Moore, Managers – Gas Supply Planning

Implementation Priority: Low Recommendation Accepted: Yes Current Status: In Progress The Company is enhancing its policies and procedures consistent with the recommendation, including hiring an additional FTE responsible for all analysis associated with daily and monthly setup plans and look-back review of plans based on actual weather and actual sendout. Schedule 1. Hiring of FTE: The Company has hired a new FTE who will be responsible for analyzing and reviewing daily and monthly setup plans. Completed (Updated January 2017). 2. Consultations with Gas Control & Load Forecasting: Dependent on implementation of Recommendation VIII-1. Completed. 3. Development of new spreadsheet for daily and monthly set up for both DNY and UNY; the Company expects to develop and utilize new spreadsheets for daily and monthly set-up within the next three months. Completed. • The new Downstate NY spreadsheet has been in use since May 2015. The spreadsheet for Upstate NY is under development and will be in use no later than November 2015. • Gas Supply Planning, in conjunction with the development of its new spreadsheets, is now saving both the day-ahead setup, intraday setup, and final setup. • Gas Control is now retaining weather data and load forecasts for the same intervals.

44

128

Exhibit ___ (KSZ-2) Page 46 of 50

4. Documentation of daily and monthly parameters/objectives/guidelines: The Company expects to complete documentation of daily and monthly parameters within the next five to six months. Completed. 5. Schedule quarterly reviews for daily forecast and daily set-up plans: Dependent on implementation of Recommendations VIII-1 and 2. (Completed) •

The Company has conducted four review meetings to date (two in 2015, two in 2016); two more are scheduled in 2016.

45

129

Exhibit ___ (KSZ-2) Page 47 of 50

Chapter IX – Supply Procurement Recommendation IX-5 Develop a gas supply performance review process, including a monthly metrics scorecard and associated reporting that assesses the overall performance of the Energy Procurement group in managing the gas supply portfolio. Implementation Leads Executive Sponsor:

John Vaughn, VP – Energy Procurement

Team Lead(s):

John Allocca, Director – Gas Contracting and Compliance Elizabeth Arangio, Director – Gas Supply Planning Mark Leippert, Director – Wholesale Gas Supply Steve McCauley, Director – Origination and Price Volatility Management Alex Zhukovsky, Director – Quantitative Risk & Financial Reporting

Implementation Priority: Medium Recommendation Accepted: Yes Current Status: Pending Review The Company has developed four performance metrics for the gas supply function: 1. On an annual basis, the Company will forecast Gas Off-System Sales (OSS) Customer Savings Targets for Downstate NY and Upstate NY and measure actual performance against these targets. 2. The Company will provide a measure of the volatility of the hedge portfolio relative to the overall volatility in the natural gas markets. 3. The Company will provide a metric of supply cost as a ratio of the actual gas costs to a theoretical cost. The Company will compare the monthly ratio to the 12 month rolling average of the ratio. 4. The Company will provide a metric of the actual weighted average purchase cost compared against the weighted average market cost for gas purchases executed for the Downstate NY and Upstate NY gas customers. Schedule The Company’s Energy Procurement team met with DPS Staff in September 2015 to present its implementation plans for the Audit Report recommendations for Chapter IX. The Company has updated the metrics based on feedback from that meeting, and the metrics are now in use.

46

130

Exhibit ___ (KSZ-2) Page 48 of 50

Chapter IX – Supply Procurement Recommendation IX-6 Conduct a thorough investigation of the allocation and assignment of costs, particularly labor costs, from Energy Procurement to the NY gas utilities to identify the reasons for the NY Gas utilities receiving an apparent disproportionate share of costs. Verify that costs charged to the NY gas utilities by other parts of the Customer functional areas, including the Analytics Modeling and Forecasting group that prepares the forecasts used for gas supply planning and procurement, and are appropriate and supportable. Modify cost assignments, time reporting and allocation procedures to resolve any identified inconsistencies. Document the results of the investigation and resulting recommendations to the PSC within six months.

Implementation Leads Executive Sponsor:

John Vaughn, VP – Energy Procurement David Doxsee, Vice President – Finance (New York)

Team Lead(s):

Mark Leippert, Director – Wholesale Gas Supply Theodore Poe, Jr., Manager – Gas Forecasting & Analysis

Implementation Priority: High Recommendation Accepted: Yes Current Status: Pending Review The Company performed a detailed review of non-gas operating expenses of the Energy Procurement group as well as the Analytics Modeling and Forecasting group. The Company submitted its final report to staff on June 24, 2015. Schedule Completed

47

131

Exhibit ___ (KSZ-2) Page 49 of 50

Chapter XI – Performance Management Recommendation XI-1 With the FY 2016 planning cycle (beginning in FY15), modify the performance management process to replace Elevate 2015 and better align NG-plc, NGUSA, NY jurisdiction, and NY Operating Company goals and objectives with a more robust set of performance metrics. The revised performance management program should address/include the following: • NG-plc, US, NY and operating company priorities should be aligned but reflect individual priorities. • All priorities and strategies should have defined performance measures and targets and be reported monthly, at a minimum. Ideally metrics would be at the jurisdiction and operating company level in addition to the US level. Gaps such as those illustrated in Exhibit XI-5 (of the Audit Report) should not exist. • Metrics should include leading indicators and should be used to monitor performance and address performance issues. • The revised SLAs performance measures should be included in the performance management system. • Operating and process improvement team metrics should continue to be robust and not driven to the minimal level of aggregate detail currently represented by Elevate 2015. • NY Jurisdictional performance should be routinely reported at an operating company level, and should include SLA performance. • Any construct developed to communicate the Line of Sight to employees such as Elevate 2015 should be clearly defined, easy to communicate, tie to the NY/operating company objectives/priorities and be supported by metrics that actually measure performance against the stated ambition or objective. Employee performance evaluation objectives and measures should: • Be defined and objective. • Involve quantified performance targets, wherever possible, and milestones or specific deliverables. • Reflect US goals and objectives, NY, operating company and business unit priorities, along with relevant SLA targets. • Consider the employee’s job function and include performance objectives related to that job function. • Not be artificially tied to broader US ambitions that are not as applicable to the employee’s job. • Include a manageable set of performance requirements. Too many performance requirements make objective performance measurement difficult and can result in a loss of focus. • Provide objective explanations as to how various performance objectives are weighted or used in the rating determination.

48

132

Exhibit ___ (KSZ-2) Page 50 of 50

Implementation Leads Executive Sponsor:

Ken Daly, President – New York Jurisdiction

Keri Sweet Zavaglia, Vice President – NY Performance & Strategy Implementation Priority: Medium Team Lead(s):

Recommendation Accepted: Yes (with modifications) Current Status: Pending Review National Grid is committed to ensuring that the US priorities are designed to achieve the National Grid plc vision. For FY 2017, National Grid developed its Elevate 2018 strategy, which sets forth National Grid’s ambitions and priorities and provides the framework for measuring performance. As discussed in the Audit Report, Elevate 2018 connects the Company's ambitions, priorities, metrics, SLAs, jurisdictional model, and business plans to provide clear alignment among NG plc, NG USA and the New York operating companies. The US objectives were established by the jurisdictions based on key performance measures. The objectives represent the specific actions required to achieve the performance measures, thereby increasing clarity among employees of their role in delivering the objectives. By design, the New York operating companies’ priorities are consistent with the US priorities and more specific. In addition, consistent with NorthStar’s recommendation, National Grid is strengthening its employee performance evaluation P4G processes. Discussions with senior leadership and the materials presented to managers across the organization clarified that employee objectives and measures of success must, among other items, (i) reflect US objectives, NY, operating company and business unit priorities, along with relevant SLA targets; (ii) consider the employee’s job function and include performance objectives related to that job function; (iii) not be artificially tied to broader US ambitions that are not as applicable to the employee’s job; and (iv) provide objective explanations as to how various performance objectives are weighted or used in the rating determination. See the Company’s response to Recommendations IV-2 and XI-2 regarding enhancements to the performance management process. Schedule Major Activities/ Estimated Actual Completion Date Status Milestones Completion Date Establish FY16 Objectives and Metrics

April 2015

Completed – FY16/17

Pending Review

49

133

Exhibit__ (KSZ-3)

Testimony of Keri Sweet Zavaglia

Exhibit __ (KSZ-3) Implementation Status of Each Management Audit Recommendation (March 29, 2017)

134

Exhibit ___ (KSZ-3) Page 1 of 2

Implementation Status — Individual Recommendations (As of March 29, 2017)

Recommendation

Implementation Status

Chapter

#

III

1

Reconstitute the NG USA Board of Directors.

Implemented

III

2

Reconstitute the Boards for KEDLI, KEDNY and NMPC.

Implemented

III

3

Continue to evolve the Jurisdictional organization model.

Implemented

III

4

Establish a Chief Risk Officer within NG USA.

Implemented

III

5

Prepare true strategic plans for National Grid’s New York operations.

Implemented

III

6

Investigate the cost impacts of the LIPA separation.

Implemented

IV

1

Prepare a report that fully documents costs associated with USFP.

Implemented

IV & XI

2

Continue to evolve the Service Level Agreements.

Implemented

V

1

Develop an integrated natural gas system-wide plan.

Pending Review

V

2

Update the Company’s Integrity Management Plan (IMP) to comply with § 192.911.

Pending Review

V

3

Pending Review

VI

1

VI

2

Update procedural documentation/manuals to comply with § 192.614 and § 192.615. Address deficiencies to the Playbook project documentation requirements. Develop an estimating program for gas projects.

VI

3

Implement a WBS system to organize and manage gas projects.

Pending Review

VI

4

Institute a process to track, monitor and report complex project status, including budget variances, committed costs and actual costs to date, estimated cost at completion, projected year-end expenditures, schedule variance, pending and approved scope changes, and progress-to-date.

Pending Review

VI

5

Institute controls to ensure the project change control logs are updated on a timely basis.

Pending Review

VI

6

Resolve data issues regarding the KPIs for materials services and the fleet metrics reports.

Pending Review

Pending Review Pending Review

135

Exhibit ___ (KSZ-3) Page 2 of 2

Implementation Status

Chapter

#

Recommendation

VII

1

Develop and implement, within the existing work management processes and systems, a program to track and manage crew and individual worker productivity.

In Progress

VII

2

Develop a manpower planning program.

In Progress

VIII

1

Retain day-ahead forecasts of send out and weather and other input assumptions, and conduct comparison of forecast to actual send out.

Implemented

VIII

2

Re-evaluate the residential forecasting model to identify opportunities to improve accuracy in forecasting during warm winters and to reduce variations from year to year in forecast results.

Implemented

VIII

3

Due to the complexity of the forecasting platform, improve reporting of performance on a level that is easily understood by upper management and outsiders.

Implemented

VIII

4

Analyze the treatment of energy efficiency goals in the sales, send out and design day forecasting processes and models.

Implemented

IX

1

Modify policies and procedures regarding the procurement of long-term supply and delivery commitments (longer than one year).

Pending Review

IX

2

As part of the annual gas supply plan submitted to the PSC, document the five-year supply/demand balance and capacity plans.

Implemented

IX

3

Add a representative from the Energy Procurement group to the NY Leadership Team.

Implemented

IX

4

Modify policies and procedures covering the monthly and daily procurement forecasting and “set up” processes for each of the operating companies.

Pending Review

IX

5

Develop a gas supply performance review process.

IX

6

Conduct a thorough investigation of the allocation and assignment of costs from Energy Procurement to the NY gas utilities. No recommendation

Pending Review

Modify the performance management process to replace Elevate 2015 and better align NG-plc, NG USA, NY jurisdiction, and NY Operating Company goals and objectives.

Pending Review

X XI

1

Implemented

N/A

136

Testimony of Information Services Panel

Before the Public Service Commission

NIAGARA MOHAWK POWER CORPORATION d/b/a NATIONAL GRID Direct Testimony of Information Services Panel

Dated: April 28, 2017

137

Testimony of the Information Services Panel

Table of Contents I.

Introduction and Qualifications .............................................................................................1

II.

Purpose of Testimony ............................................................................................................9

III.

Services Provided by National Grid IS ..................................................................................9

IV.

IS Costs in the Historic Test Year and Rate Year Investment Goals.....................................16

V.

Rate Year IS Capital Projects and Initiatives .........................................................................20 A. Technology Modernization ...............................................................................................22 B. System Modernization.......................................................................................................25 C. Cyber Security ...................................................................................................................32 D. Physical Security ...............................................................................................................38 E. Human Resources (“HR”) Simplification System ............................................................41 F. DG Customer Information System (“CIS”) Solution ........................................................44

VI.

Rate Year IS Operating Costs ................................................................................................45

138

Testimony of the Information Services Panel

1

I.

Introduction and Qualifications

2

Q.

Please introduce the members of the Information Services (“IS”)

3 4

Panel. A.

5

The Panel consists of Anuraag Bhargava, Daniel J. DeMauro, Mukund Ravipaty, and Aman S. Aneja.

6 7

Q.

Mr. Bhargava, please state your name and business address.

8

A.

My name is Anuraag Bhargava. My business address is 40 Sylvan Road,

9

Waltham, Massachusetts 02451.

10 11

Q.

By whom are you employed and in what capacity?

12

A.

I am employed by National Grid USA Service Company, Inc. (“National

13

Grid Service Company”), a subsidiary of National Grid USA (“National

14

Grid”), and currently hold the position of Senior Vice President and U.S.

15

Chief Information Officer.

16

continuously improving the performance of the IS organization,

17

overseeing internal IS workforce development, and partnering with the

18

business to develop, build, and implement new technologies and IS

19

strategies to support business initiatives and customer needs.

My responsibilities include leading and

20

Page 1 of 52 139

Testimony of the Information Services Panel

1

Q.

2 3

Please

describe

your

educational

background

and

business

experience. A.

I received a Bachelor of Science in Mechanical Engineering from G.B.

4

Pant University in Pantnagar, India in 1992, and a Master of Business

5

Administration

6

Pennsylvania in 2000. From 1992 to 1998, I served as Senior Project

7

Engineer and Department IT Head for Larsen & Tourbro, an engineering

8

and construction firm, where I was responsible for the chemical, petro-

9

chemical, and cryogenics engineering departments. From 1999 to 2008, I

10

served as a Principal in the strategy practice group at global management

11

consulting firm, A.T. Kearney, Inc. As a Principal, I provided consulting

12

services related to corporate strategy, IT, supply chain, engineering, and

13

design to Fortune 500 companies. From 2008 to 2011, I served as Vice

14

President and Chief Information Officer at Electro-Motive Diesel, a diesel

15

locomotive manufacturing corporation. Specifically, I was responsible for

16

Electro-Motive Diesel’s global supply chain and Information Technology

17

(“IT”) organizations, and led many global corporate strategic initiatives.

18

From 2011 to 2014, I served as the Chief Operating Officer and Board

19

member for PeopleGuard LLC, a subsidiary of LakeEffect Ventures LLC,

20

which provided global security products and services. From 2011 to 2016,

21

I also served as Partner and Chief Technology Officer of LakeEffect

from

Carnegie

Mellon

University

in

Pittsburgh,

Page 2 of 52 140

Testimony of the Information Services Panel

1

Ventures LLC, an equity group with worldwide interests in retail,

2

manufacturing, railroads, and mining. In May 2016, I joined National

3

Grid as Senior Vice President and U.S. Chief Information Officer, which

4

is my current role.

5 6

Q.

Mr. DeMauro, please state your name and business address.

7

A.

My name is Daniel J. DeMauro.

8

My business address is 300 Erie

Boulevard West, Syracuse, New York 13202.

9 10

Q.

By whom are you employed and in what capacity?

11

A.

I am employed by National Grid Service Company, and currently hold the

12

position of Director, IS Regulatory. My current responsibilities include

13

oversight of IS activities in regulatory proceedings for all of National

14

Grid’s New York electric and gas distribution operations, including

15

Niagara Mohawk Power Corporation (“Niagara Mohawk” or the

16

“Company”).

17 18

Q.

19 20 21

Please

describe

your

educational

background

and

business

experience. A.

I graduated from LeMoyne College in Syracuse, New York in 1983 with a Bachelor of Science in Accounting. In 1986, I joined Niagara Mohawk as

Page 3 of 52 141

Testimony of the Information Services Panel

1

an Accountant.

In 1991, I became Plant Accounting Manager after

2

holding several other positions in the financial accounting department for

3

Niagara Mohawk and its successor company, National Grid. In 2006, I

4

became Director, Internal Audit U.S., for National Grid Service Company.

5

From 2007 through 2015, I held several positions in the accounting

6

department, including Director – Finance Integration, Director – Balance

7

Sheet Integrity, and Accounting Program Director. In these roles, I had

8

direct involvement with a number of accounting processes within the

9

Company, including oversight of the Fixed Asset Accounting, Cash

10

Accounting, Account Reconciliations and Revenue Accounting work

11

teams (Director – Balance Sheet Integrity). I was promoted to my current

12

position in January 2016.

13 14

Q.

Have you previously testified before a regulatory commission?

15

A.

Yes. I recently testified in a rate proceeding before the Massachusetts

16

Department of Public Utilities on behalf of the Massachusetts Electric

17

Company and Nantucket Electric Company, subsidiaries of National Grid.

18

This is my first time testifying before the New York State Public Service

19

Commission (“Commission”).

20

Page 4 of 52 142

Testimony of the Information Services Panel

1

Q.

Mr. Ravipaty, please state your name and business address.

2

A.

My name is Mukund Ravipaty. My business address is 40 Sylvan Rd,

3

Waltham, Massachusetts 02451.

4 5

Q.

By whom are you employed and in what capacity?

6

A.

I am employed by National Grid Service Company, and currently hold the

7

position Director, Global Head Security Services, Design & Architecture.

8

My responsibilities include oversight of the development of cyber security

9

strategy and architecture to ensure National Grid cyber and security

10

protections are developed to keep pace with evolving threats, thereby

11

enabling and supporting resilient business operations and customer

12

service.

13 14

Q.

15 16

Please

describe

your

educational

background

and

business

experience. A.

I received a Bachelor of Science in Computer Science from Andhra

17

University in India in 1998. I am currently pursuing a Master of Business

18

Administration at the Massachusetts Institute of Technology Sloan School

19

of Management. I have over 20 years of professional experience focused

20

exclusively on cyber security. Prior to National Grid, I worked across

21

multiple

information

security

domains

(e.g.,

security

and

risk

Page 5 of 52 143

Testimony of the Information Services Panel

1

management, asset security, security assessment and testing, and identity

2

and access management) within the outsourcing, local government,

3

banking, utilities, telecoms, and new media and internet sectors.

4 5

Q.

Mr. Aneja, please state your name and business address.

6

A.

My name is Aman S. Aneja.

7

My business address is 175 East Old

Country Road, Hicksville, New York 11801.

8 9

Q.

By whom are you employed and in what capacity?

10

A.

I am employed by National Grid Service Company, and currently hold the

11

position of Director, IS Relationship Management. My responsibilities

12

include providing overarching direction to the business and IS team to

13

manage demand and leverage IS technology to meet business goals and

14

objectives; monitoring the progress of IS delivery services to ensure

15

expected deliverables and results; and ensuring that key IS project risks

16

and issues are identified and addressed. I currently support the following

17

functions: Customer, U.S. Control Center Operations, Federal Energy

18

Regulatory Commission Jurisdiction, and Electric Systems Engineering.

19

Page 6 of 52 144

Testimony of the Information Services Panel

1

Q.

2 3

Please

describe

your

educational

background

and

business

experience. A.

In 1999, I received a Bachelor of Science in Computer Science from St.

4

John’s University with a minor in Business. Prior to National Grid, I was

5

employed as Manager, Business Continuity Crisis Management, at

6

Goldman Sachs. I joined National Grid as a contract Project Manager in

7

February 2009. In September 2010, I joined National Grid as a full-time

8

employee in the position of Business Support Manager for Global Head of

9

Business Relationship Management.

Between 2010 and 2014, I held

10

various positions in IS. In February 2014, I was promoted to Director, IS

11

Relationship Management, and have served in this role for the last three

12

years.

13 14

Q.

15 16

Does the Panel sponsor any exhibits as part of its testimony in this proceeding?

A.

Yes. The Panel sponsors the following exhibits that were prepared or

17

compiled under our supervision and direction:

18

(i)

Exhibit __ (ISP-1) presents the allocation codes used to determine

19

the forecast annual rent expense to Niagara Mohawk for IS

20

projects in the Rate Year (the twelve months ending March 31,

21

2019), Data Year 1 (the twelve months ending March 31, 2020),

Page 7 of 52 145

Testimony of the Information Services Panel

1

and Data Year 2 (the twelve months ending March 31, 2021) (Data

2

Year 1 and Data Year 2 are collectively the “Data Years”);

3

(ii)

Exhibit __ (ISP-2) presents the operating expenses incurred by

4

Niagara Mohawk for IS during the twelve months ended December

5

31, 2016 (“Historic Test Year”);

6

(iii)

7 8

planned for the Rate Year and Data Years; (iv)

9 10

(v)

Exhibit __ (ISP-5) summarizes National Grid’s cyber security IS projects from January 2017 through the Data Years;

(vi)

13 14

Exhibit __ (ISP-4) summarizes the IS Technology Modernization projects and customer benefits in the Rate Year and Data Years;

11 12

Exhibit __ (ISP-3) presents the IS capital projects and investments

Exhibit __ (ISP-6) summarizes National Grid’s cyber security protections for system modernization.

(vii)

Exhibit __ (ISP-7) details the incremental run the business costs

15

and project operating expenses comprising investment plan

16

operating costs by project for the Rate Year and Data Years; and

17 18

(viii) Exhibit __ (ISP-8) presents the IS operating expenses for the Historic Test Year as well as for the Rate Year and Data Years.

19

Page 8 of 52 146

Testimony of the Information Services Panel

1

II.

Purpose of Testimony

2

Q.

What is the purpose of the Panel’s testimony?

3

A.

The purpose of the Panel’s testimony is to describe National Grid’s IS

4

function, specifically as it relates to Niagara Mohawk. The Panel will

5

explain the services provided by IS and describe how IS proposes to

6

provide these services. The Panel will describe the major IS investments

7

and initiatives during the Rate Year and Data Years, including investments

8

in technology modernization, system modernization, cyber security,

9

physical security, and a human resources information system. Finally, the

10

Panel will discuss the operating costs that National Grid and Niagara

11

Mohawk will incur in the Rate Year and Data Years for IS services.

12 13

III.

Services Provided by IS

14

Q.

What services does IS provide?

15

A.

IS provides, maintains, and manages the computer hardware, computer

16

software, cyber security, telecommunications and other related

17

infrastructure, systems, and services across all of National Grid’s service

18

territories. IS delivers three primary categories of services:

19



Development/Delivery Services – identifying new computer and

20

communication technology trends and developing relevant

21

innovative solutions for the business.

Page 9 of 52 147

Testimony of the Information Services Panel



1 2

Support and Maintenance Services – ongoing support for business applications and infrastructure.



3

End User Services – products and services such as desktop and

4

email services, collaboration services, communications media, and

5

printer/fax support.

6 7

Q.

Please explain IS’s approach to service delivery.

8

A.

National Grid’s IS delivery model utilizes external partners, each of which

9

performs a specific IS function.

10

follows:

11



The specialized IS functions are as

Application development and maintenance: full range of

12

application service, including development of new applications as

13

well as day-to-day support of existing applications;

14



Internet, collaboration, and e-mail: email, web conferencing,

15

instant messaging and collaboration tools, such as SharePoint,

16

operated on vendor-owned and hosted infrastructure;

17



Networks and communications: managed single network service

18

that consolidates National Grid’s Local Area Network (“LAN”),

19

Wide Area Network (“WAN”), telephony, and video and audio

20

conferencing;

Page 10 of 52 148

Testimony of the Information Services Panel

1



Data center and client services/enterprise services: data center

2

services (e.g., servers, data storage); management of hardware,

3

software, and storage located in data centers providing security,

4

back-up capability, and disaster recovery services; and client

5

services, such as the provision and support of end user devices

6

(e.g., laptops), and deployment and maintenance of the operating

7

systems and applications that run on those devices;

8



9

standardized fleet of print devices enabling increased security for

10 11

Managed print: managed support service for a refreshed and

printing, copying, faxing and scanning; 

Service management integrator: coordinates the activities of all the

12

vendor partners to ensure they work collaboratively for effective

13

end-to-end delivery of services and manage the Service/Help Desk,

14

to assist employees experiencing problems with technological

15

devices (laptops, desktops, mobile telephones, et cetera), having

16

difficulty accessing the National Grid network, or needing

17

assistance in performing a specific computing function.

18

Page 11 of 52 149

Testimony of the Information Services Panel

1

Q.

2 3

Please describe how IS identifies the projects and investments necessary to serve Niagara Mohawk’s customers.

A.

National Grid annually identifies investments that will be required over

4

the next three years. IS Business Relationship Managers work closely

5

with functional leadership and the jurisdictional presidents on an ongoing

6

basis to determine the IS needs of the business and the cost and timing for

7

the required investments. The investments are then prioritized against

8

overall expenditure targets. Project development follows a sanctioning

9

process for all U.S. IS investments.

10 11

Q.

12 13

How are the costs of IS projects and investments assessed to Niagara Mohawk?

A.

IS capital projects and investments that are shared investments across

14

operating companies are implemented and owned by National Grid

15

Service Company, and allocated to Niagara Mohawk in the form of an

16

annual rent expense. Exhibit __ (ISP-1) provides the allocations utilized

17

to determine the forecast annual rent expense for the IS projects planned

18

for the Rate Year and Data Years.

19

Page 12 of 52 150

Testimony of the Information Services Panel

1

Q.

How are the costs of IS capital projects amortized?

2

A.

The amortization period is determined by plant accounting rules that are

3

specific to each type of asset, and applied based on the replacement cycle

4

for the particular asset type. Recovery of hardware and equipment and

5

amortization of software intangible assets will approximate the useful life

6

of the new system, taking into consideration technological and functional

7

obsolescence and vendor support options.

8

experience, National Grid typically amortizes software applications over

9

84 months reflecting expected releases of new versions by the vendor.

10

The exception is certain significant systems, such as SAP, which are

11

assigned a ten year life.

For example, based on

12 13

Assuming an asset is not prematurely retired, it would be retired when it is

14

fully recovered and the amortization expense (and thus the resulting rent

15

expense allocation from National Grid Service Company to the Company)

16

would cease at that point. In the rare instance where a software intangible

17

asset is impaired or otherwise prematurely retired before it is fully

18

recovered, the net book value of the asset is written off to expense and the

19

amortization expense would cease at that point. The write off expense is

20

charged to the Company using the same allocation percentages as the asset

21

was deployed for the benefit of the Company in the first place.

Page 13 of 52 151

Testimony of the Information Services Panel

1

Q.

2 3

How does National Grid determine whether to purchase systems from a third-party vendor as opposed to developing systems internally?

A.

During new software development, IS evaluates whether commercially

4

available vendor products are suitable for implementation as opposed to

5

developing and constructing the software internally. If vendor products

6

are deemed appropriate, both from a financial and practical perspective,

7

the Company enters into contracts to lease software as a service (“SaaS”)

8

from a vendor for specified period of time. The Company uses SaaS to

9

support various business needs and functions, such as recruitment,

10

employee management, development and training, finance, legal, and

11

regulatory. The Company currently has several SaaS contracts in place,

12

including Learning Link (an online training database for office and field

13

employees); DREAM (a web based docket management system used to

14

prepare and submit responses in regulatory proceedings); and the National

15

Grid Benefit Services Center (an online system for the administration of

16

healthcare and other employee benefits).

17 18

Q.

Please explain the benefits of SaaS.

19

A.

There are a number of customer benefits associated with SaaS, most

20

notably in terms of efficiency, cost effectiveness, accessibility, and

21

longevity. First, SaaS generally results in faster implementation because

Page 14 of 52 152

Testimony of the Information Services Panel

1

the Company does not have to build IS infrastructure, but instead leases it

2

from third party providers that have already constructed and tested the

3

technology. The Company can also manage to a fixed budget over the

4

lease term rather than embark upon a potentially costly infrastructure

5

build. Under a SaaS approach, pursuant to the vendor contract, upgrades

6

and maintenance are typically the responsibility of the vendor, which

7

reduces the risk of obsolescence as well as the need to invest in major

8

program updates during the life of the contract. SaaS solutions can also be

9

more easily scaled for additional capacity as well as integrated with

10

existing solutions when required to enable growth. Finally, using SaaS

11

provides the Company with access to industry-leading expertise and

12

service levels when integrating the technology that may otherwise be

13

unavailable if the Company was implementing the technology on its own.

14 15

Q.

16 17

How are SaaS agreements treated for accounting and ratemaking purposes?

A.

If National Grid prepays the cost for a fixed number of years, the expense

18

is amortized over the prepaid term and allocated to Niagara Mohawk as

19

rent expense. If National Grid does not prepay for the application, it treats

20

the costs as operating expense.

21

Page 15 of 52 153

Testimony of the Information Services Panel

1

Q.

2 3

How do the services provided by IS benefit Niagara Mohawk and its customers?

A.

IS services range from critical electric and gas transmission/distribution

4

support systems to standard office desktop applications. These services

5

underpin the safe, reliable, and secure physical and commercial operation

6

of Niagara Mohawk’s electric and gas businesses. IS also provides a suite

7

of software applications that serves the needs of customers and allows for

8

the effective management and operation of Niagara Mohawk. National

9

Grid operates these applications on hardware systems that are centrally

10

located as well as distributed to employees in the form of personal

11

computers and other devices. IS also provides Niagara Mohawk with

12

asset and work management systems that provide the administrative

13

support required to manage electric and gas service.

14 15

IV.

IS Costs in the Historic Test Year and Rate Year Investment Goals

16

Q.

What were Niagara Mohawk’s IS costs for the Historic Test Year?

17

A.

Niagara Mohawk’s IS costs for the Historic Test Year totaled $103.8

18

million and consisted of $73.1 million of operating expenses as set forth

19

on Exhibit __ (ISP-2) and $26.3 million and $4.3 million of service

20

company rents for the electric and gas businesses, respectively, as set forth

Page 16 of 52 154

Testimony of the Information Services Panel

1

on Exhibit __ (RRP-11), the Workpapers to Exhibit __ (RRP-3), Schedule

2

9, Workpaper 1.

3 4

Q.

5 6

What are the goals of the IS capital investment and operating plans for the Rate Year and Data Years?

A.

Substantial IS capital investment, as shown in Exhibit __ (ISP-3), is

7

needed for the Rate Year and Data Years to (i) address aged and

8

unsupported systems and infrastructure; (ii) reduce operational/cyber risk

9

and inefficiencies; (iii) support evolving customer and business demands,

10

and (iv) facilitate other key utility and market trends.

11 12

Q.

Please explain the significance of each of these goals.

13

A.

Replacement of Aged and Unsupported Systems and Infrastructure

14

Currently, IS manages a number of disparate and aged assets with varying

15

degrees of vendor support.

16

beginning in fiscal year (“FY”) 2018 to modernize aged technology and

17

infrastructure to maintain service levels, support day-to-day business

18

requirements, meet new business requirements, obtain necessary hardware

19

and required patches in the marketplace, and develop and test new IS

20

projects.

IS must undertake significant investment

21

Page 17 of 52 155

Testimony of the Information Services Panel

1

Reduction in Operational/Cyber Risk and Inefficiencies

2

A significant update to IS systems and technologies is required to reduce

3

the operational and cyber risk and inefficiencies resulting from the aged

4

technologies discussed above. Specifically, National Grid must address

5

the risks that existing systems may experience (i) unplanned downtime

6

disruptive to business operations; (ii) a lack of robust vendor support that

7

provides monitoring capability or resiliency to stop cascading failures; and

8

(iii) the inability to perform standard upgrades and rationalize and/or

9

remediate old applications.

10 11

Meeting Evolving Customer and Business Demands

12

Customers are increasingly interested in managing their energy

13

consumption, connecting with the Company on social media and other

14

interaction channels, accessing their energy usage data and analytics, and

15

using applications with more functionality and accessibility through

16

multiple devices, including mobile devices.

17 18

Similarly, employees, whether they are field workers, customer service

19

agents, or back office workers, are requiring increased connectivity

20

through multiple devices; the ability to relay real-time information in the

21

form of pictures, videos, and telemetry; greater opportunities for internal

Page 18 of 52 156

Testimony of the Information Services Panel

1

and external collaboration; and access to increased bandwidth and cloud

2

services to improve customer service. At the same time, National Grid’s

3

business units are demanding capabilities to support evolving business and

4

regulatory demands (e.g., system modernization and Utility of the Future

5

functionality).

6 7

Addressing Other Key Utility and Market Trends

8

Increased use and expectations on use of cloud computing and SaaS

9

solutions internally as well as by customers and business partners require

10

upgraded IS infrastructure. Fully supported and upgraded infrastructure

11

and software is also required to accommodate more sophisticated data

12

management and analytics platforms increasingly utilized in the market

13

and sought by customers and the business.

14 15

Q.

16 17

How does IS plan to address these strategic goals in the Rate Year and Data Years?

A.

National Grid IS’s approach to achieving these goals consists of (i)

18

significant infrastructure and application investments (with accompanying

19

operations and maintenance (“O&M”) expenditures to develop the

20

solutions) over the next few years, including the Rate Year and Data

21

Years; and (ii) increased operational support and maintenance of IS

Page 19 of 52 157

Testimony of the Information Services Panel

1

investments and vendor contracts, implementation of vendor sourcing

2

strategy activities, and refinements to its service delivery model to

3

establish strategic, internal expertise, support and capabilities to better

4

meet customer and business needs.

5 6

V.

Rate Year IS Capital Projects and Initiatives

7

Q.

How are IS capital investments presented in these rate filings?

8

A.

Exhibit __ (ISP-3) lists the IS capital investment projects included in the

9

Rate Year and Data Years. The exhibit breaks out the projects by program

10

(e.g., cyber security, FY 2018 plan, NY REV/grid modernization projects,

11

Gas Business Enablement). Although a number of Company witnesses

12

discuss the need for various IS investments, the costs of all IS capital

13

investment projects included in the Rate Year and Data Years are

14

supported by this Panel and are included in Exhibit __ (ISP-3). Exhibit __

15

(RRP-3), Schedule 9, Page 7, to the Revenue Requirements Panel’s

16

testimony further breaks out the IS investments reflected in these rate

17

filings..

18 19

The following Company witnesses discuss various IS capital investments:

20



21

Electric Customer Panel (Residential Solar Marketplace, E-Commerce Marketplace, and Demand Response Management System);

Page 20 of 52 158

Testimony of the Information Services Panel

1



Electric Infrastructure and Operations Panel (supervisory control and

2

data acquisition system (“SCADA”) system and a Demand

3

Management System for Control Center operators and Distributed

4

Generation Interconnection Online Application Portal);

5



Gas Infrastructure and Operations Panel (Gas Business Enablement);

6



Shared Services Panel (Call Center Customer Contact Center/SDC

7

Technology Upgrade Implement Solution and proposed system

8

changes for recent orders in the Low Income proceeding, Case 14-M-

9

0565);

10



Outdoor Lighting Panel (Outdoor Lighting Inventory Portal); and

11



Advanced Metering Infrastructure Panel

12 13

This Panel discusses the need for and benefits of the following IS

14

investments:

15



Technology Modernization

16



Projects to Support System Modernization

17



Cyber Security

18



Physical Security

19



HRIS

20

Page 21 of 52 159

Testimony of the Information Services Panel

1

Q.

2 3

What are the projected total rent expenses for IS projects and investments to Niagara Mohawk in the Rate Year and Data Years?

A.

In the Historic Test Year, Niagara Mohawk’s existing IS service company

4

rent expense balance was $26.283 million for electric and $4.262 million

5

for gas. The rent expense to Niagara Mohawk’s electric and gas business

6

in the Rate Year and Data Years is shown in the Revenue Requirement

7

Panel’s Exhibit __ (RRP-11), Workpapers to Exhibit __ (RRP-3),

8

Schedule 9, Workpapers 3, 6 and 9.

9

Schedule 9, Page 6, the Company is forecasting IS rent expense of

10

$39.530 million and $8.788 million in the Rate Year for the electric and

11

gas business, respectively, of which $24.051 million and $4.255 million,

12

respectively, represents the portion of Historic Test Year rent expense

13

continued into the Rate Year. The level of Rate Year IS investment is

14

projected to continue into the Data Years.

As shown in Exhibit RRP-3,

15 16

A. Technology Modernization

17

Q.

Please describe the IS Technology Modernization Program.

18

A.

The IS Technology Modernization Program is a multi-year investment

19

program that will (i) upgrade aged IS infrastructure to address reliability

20

concerns, sustain high operational efficiency and ensure business

21

continuity; (ii) modernize critical applications to improve health and

Page 22 of 52 160

Testimony of the Information Services Panel

1

availability, deliver new capabilities, and simplify application landscape;

2

and (iii) update operational technology networks to enable distribution

3

automation, monitoring, and metering. Specifically, the IS Technology

4

Modernization Program will deliver the following benefits:.

5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 29 30 31 32 33 34 35 36



With respect to applications, the program will: o upgrade applications at end of life to current and supported versions; o retire at risk applications; o consolidate core systems to simplify application landscape; o develop architecture that allows reuse and easy application “plug-in”; o develop new tools to manage applications and automate business process monitoring; o roll out agile development practices at scale for effective and timely delivery; and o and reduce cyber risk through upgrades to operating systems and/or applications



With respect to infrastructure, the program will: o remediate high risk, failure-prone assets to ensure business continuity; o improve network capabilities to enable cloud and mobile adoption, improve cyber-security, and ease maintainability; o modernize the end user environment to provide new and flexible collaboration capabilities (internally and externally); and o adopt strategic data centers to mitigate risk and enable robust, scalable infrastructure solutions.



With respect to operational technology networks, the program will: o improve asset management and operation; and o enable operational effectiveness through retirement of dated assets as well as enhanced connectivity,

Page 23 of 52 161

Testimony of the Information Services Panel

1 2 3

monitoring, automation, and improved procurement processes.

4

Initiatives proposed as part of the IS Technology Modernization Program

5

are also necessary to enable and support the capabilities for the Gas

6

Business Enablement Program, system modernization, and the upgrade

7

work required for customer experience solutions, including Outage

8

Management System (“OMS”) server upgrades, Customer Service System

9

billing upgrades, and online self-service portals and updates to National

10

Grid’s work management systems, Storms and Maximo, for customers to

11

request Distributed Generation (“DG”) interconnections and new electric

12

and gas connections.

13 14

Q.

15 16

What projects are included in the IS Technology Modernization Program?

A.

The capital projects included in the IS Technology Modernization

17

Program for the Rate Year and Data Years, and their benefits, are

18

described in Exhibit __ (ISP-4).

19

Page 24 of 52 162

Testimony of the Information Services Panel

1

Q.

2 3

What costs are associated with the IS Technology Modernization Program?

A.

The costs of IS Technology Modernization include a $125.935 million

4

capital investment. As shown in Exhibit __ (RRP-11), the Workpapers to

5

Exhibit __ (RRP-3), Schedule 9, Workpaper 3, Niagara Mohawk’s rent

6

expense forecast for these investments is $1.548 million for its electric

7

business and $0.297 million for its gas business in the Rate Year. Exhibit

8

__ (RRP-11), the Workpapers to Exhibit __ (RRP-3), Schedule 9,

9

Workpapers 6 and 9 also show the forecast rent expense for the projects to

10

Niagara Mohawk in the Data Years.

11 12

B. System Modernization

13

Q.

Please describe the System Modernization projects.

14

A.

The Company proposes to implement five additional, interconnected IS

15

projects needed to support evolving business and customer needs, and

16

system modernization. The five projects are (1) Cloud Computing and

17

Data Lake; (2) Information Management and Advanced Analytics; (3)

18

Enterprise

19

Programming Interface (API) Integration Services; (4) Plant Information

20

(“PI”) Historian; and (5) Load and DER Forecasting (also referred to as

21

Acquisition of Remote Sensing – New York).

Service

Bus

(“ESB”)

Architecture

and

Application

Page 25 of 52 163

Testimony of the Information Services Panel

1

Q.

Please describe the Cloud Computing and Data Lake project.

2

A.

To support grid modernization, the Company needs to enhance its data

3

management capabilities and make data more accessible to both customers

4

and employees. To that end, the Cloud Computing and Data Lake project

5

will establish a scalable, cloud-based repository for National Grid’s data.

6

The repository will not only include internal data, such as asset and meter

7

information, but also external data, such as weather and real estate

8

information.

9

capability to analyze data, create a holistic customer view, and provide

10

data accessibility to customers and third parties. Once implemented, the

11

cloud based repository will reduce computing time, allow for scalability,

12

enable the Company to respond to various business and customer

13

demands, and allow for the timely delivery of software applications and

14

other business capabilities. Because the Cloud Computing and Data Lake

15

is required to host the Information Management and Advanced Analytics

16

platform (discussed below) in the cloud, the project will be placed in-

17

service by March 31, 2021.

The repository will provide employees with greater

18

Page 26 of 52 164

Testimony of the Information Services Panel

1

Q.

2 3

What are the costs associated with the Cloud Computing and Data Lake project?

A.

The costs of the Cloud Computing and Data Lake project include a $2.54

4

million capital investment for the costs associated with hosting a

5

dashboard environment (production, development, quality assurance). As

6

shown in Exhibit __ (RRP-11), Workpapers to Exhibit __ (RRP-3),

7

Schedule 9, Workpaper 9, Niagara Mohawk’s rent expense forecast for

8

these investments is $0.327 million for its electric business and $0.015

9

million for its gas business in Data Year 2.

10 11

Q.

12 13

Please describe the Information Management and Advanced Analytics project.

A.

The Information Management and Advanced Analytics platform will

14

provide next level capability and algorithms for data processing and trend

15

analysis to identify potential opportunities to add value, ranging from

16

expense reduction to customer satisfaction, for both the Company and its

17

customers. Specifically, the platform will analyze data from internal

18

operating systems and third party data providers, and provide holistic

19

output that the Company can use for advanced data processing and

20

analytics to support integrated DER planning and load forecasting

21

hosting capacity analysis, and the integration of DER into real-time

Page 27 of 52 165

Testimony of the Information Services Panel

1

operations. The program is projected to be in-service by March 31,

2

2021.

3 4

Q.

5 6

What are the costs of the Information Management and Advanced Analytics platform?

A.

The costs of the Information Management and Advanced Analytics

7

project include a $19.875 million capital investment for the purchase of

8

software licenses and costs associated with data import, data quality and

9

dashboard development. As shown in Exhibit __ (RRP-11), Workpapers

10

to Exhibit __ (RRP-3), Schedule 9, Workpaper 9, the rent expense for

11

this investment in Data Year 2 is $0.939 million for the electric business

12

and $0.045 million for the gas business.

13 14

Q.

15 16

Please describe the ESB Architecture and API Integration Services project.

A.

A number of IS systems are being deployed or enhanced to support the

17

Company’s portfolio of system modernization projects. Data will need

18

to be exchanged between these systems to optimize performance and

19

encourage synergies. The Company’s current systems cannot support the

20

required data exchange, and thus the Company needs to implement two

21

main enabling components – (1) a new Distribution ESB and (2)

Page 28 of 52 166

Testimony of the Information Services Panel

1

configuration of various integrations to connect programs and software –

2

to allow internal systems to communicate and transfer data, automate and

3

manage business processes, and enable real-time and batch integration.

4

This project is expected to be in-service by March 31, 2021.

5 6

Q.

7 8

What are the costs of the ESB Architecture and API Integration Services project?

A.

The costs of the ESB Architecture and API Integration Services project

9

include a $15.956 million capital investment for software costs and

10

installation of the software in the development, testing, production, and

11

disaster recovery environments.

12

Workpapers to Exhibit __ (RRP-3), Schedule 9, Workpaper 9 Niagara

13

Mohawk’s rent expense forecast for this investments beginning in Data

14

Year 2 is $0.723 million for the electric business and $0.066 million for

15

the gas business.

As shown in Exhibit __ (RRP-11),

16 17

Q.

What is the PI Historian project and when will it be implemented?

18

A.

The PI Historian project will implement a dedicated, real-time data

19

historian database that will retrieve and record data from process control

20

systems into a compressed time series database to enable efficient data

21

storage and fast retrieval.

The PI Historian project will support grid

Page 29 of 52 167

Testimony of the Information Services Panel

1

modernization, system modernization and the deployment of the new

2

Distribution Supervisory Control and Data Acquisition (“DSCADA”)

3

system, and is expected to be placed in service by September 30, 2018.

4 5

Q.

What are the costs of the PI Historian project?

6

A.

The costs of the PI Historian project will include $11.43 million in capital

7

investment related to a one-time licensing fee for the PI software and

8

hardware and application installation costs.

9

(RRP-11), Workpapers to Exhibit __ (RRP-3), Schedule 9, Workpaper 3,

10

Niagara Mohawk’s rent expense forecast for these investments is $0.474

11

million for its electric business in the Rate Year. Exhibit __ (RRP-11),

12

Workpapers to Exhibit __ (RRP-3), Schedule 9, Workpapers 6 and 9 also

13

shows the forecast rent expense for the capital expenditures needed to

14

support the project in the Data Years.

As shown in Exhibit __

15 16

Q.

Please describe the Load and DER Forecasting project.

17

A.

This project will create an image data library of customer buildings and

18

Company assets in Niagara Mohawk’s service territory. Flyovers of the

19

Company’s service territory will be conducted to capture data that is more

20

current and detailed than what is publicly available and currently

21

accessible to National Grid. The flyovers will provide updated imagery on

Page 30 of 52 168

Testimony of the Information Services Panel

1

asset condition and building characteristics such as square footage and

2

roof pitch.

3

understanding of current DER penetration and how DER could be used by

4

customers in the future, improve the Company’s existing customer and

5

asset data, and improve grid operation, planning and management. The

6

imagery will be acquired in FY18, and, once complete will be maintained

7

by the Company in the cloud environment for future analytics.

This imagery will provide the Company with a better

8 9

Q.

10 11

What are the costs associated with the Load and DER Forecasting project?

A.

The costs of Load and DER Forecasting project include an $8.632 million

12

capital investment for costs associated with the flyovers and creation of

13

the image inventory. As shown in Exhibit __ (RRP-11), Workpapers to

14

Exhibit __ (RRP-3), Schedule 9, Workpaper 3, Niagara Mohawk’s rent

15

expense forecast for these investments is $1.345 million for its electric

16

business and $0.499 million for its gas business in the Rate Year. Exhibit

17

__ (RRP-11), Workpapers to Exhibit _ (RRP-3), Schedule 9, Workpapers

18

6 and 9 also shows the forecast rent expense for the capital expenditures

19

needed to support the project in the Data Years.

20

Page 31 of 52 169

Testimony of the Information Services Panel

1

C. Cyber Security

2

Q.

How is Niagara Mohawk addressing cyber security threats?

3

A.

In 2010, National Grid established the Digital Risk and Security

4

organization within the IS organization to protect National Grid’s energy

5

networks, IS systems, and confidential company and customer information

6

from cyber security threats. Digital Risk and Security addresses known

7

threats, evaluates emerging threats against National Grid’s control

8

environment, and reviews and evolves its program of cyber security

9

initiatives to proactively identify and protect National Grid from emerging

10

threats.

11 12

The Cyber Security 1 Program (INVP 3614) has been developed to

13

enhance National Grid’s cyber capabilities, outlining a multi-year

14

investment strategy targeted to better keep pace with the escalating threats.

15

The intention of the Cyber Security 1 Program is to deliver an additional

16

set of safeguards within the National Grid digital environment to address

17

key areas of threat identified as high risk including:

18 19 20 21 22 23





Unauthorized Access / Insider Attack: This includes threats to National Grid facilities, personnel, systems and data due to unauthorized access or from a trusted source within the National Grid security perimeter. System Availability / Malfunction: These are threats to National Grid systems or data due to system malfunction.

Page 32 of 52 170

Testimony of the Information Services Panel

1 2 3 4 5 6 7 8 9 10 11 12 13 14 15









Q.

16 17

Malware / Virus Attack: These include threats to National Grid systems or data from an indirect attack via malware or virus infestation. Advanced Persistent Threat / External Attack: This includes threats to National Grid facilities, personnel, systems or data via a directed attack by an outside party from outside the security perimeter with the intent of causing damage or destruction. Data Leakage / Loss: These include a threat to National Grid data confidentiality and integrity when sensitive data is disclosed to unauthorized personnel either by malicious intent or an inadvertent mistake. Regulatory Non-Compliance: These are threats of fine or sanction resulting in monetary loss or negative reputational impact.

What is National Grid’s plan to address cyber security in the Rate Year and Data Years?

A.

National Grid’s approach to cyber security must evolve constantly to keep

18

pace with the changing threats. Digital Risk and Security’s approach to

19

cyber security is a holistic one, intended to span from global enterprise IT

20

security down through the more challenging arena of Niagara Mohawk’s

21

SCADA system. Digital Risk and Security’s strategy is organized around

22

strategic goals of enabling and safeguarding the business, positioning

23

cyber measures as a true first, second, and third line of defense, and

24

establishing a risk management

25

communicate cyber risk and prioritize projects.

and governance framework to

26

Page 33 of 52 171

Testimony of the Information Services Panel

1

As shown in Exhibit __ (ISP-3) and Exhibit __ (ISP-5), National Grid will

2

deliver a number of projects after the Historic Test Year but prior to the

3

Rate Year from (1) the original scope of the Cyber Security 1 Program and

4

(2) an expanded and re-sanctioned November 2016 scope of the Cyber

5

Security 1 Program to include a single view of business and Critical

6

Network Infrastructure (“CNI”) network operations in a central location.

7

Specifically, in November 2016, National Grid IS re-sanctioned the Cyber

8

Security 1 Program after being advised by U.S. and U.K. governmental

9

agencies of a real threat of a malicious cyber attack against energy

10

networks and a further review of the overall design of National Grid’s

11

security solutions.

12 13

Beginning May 2017 and continuing into the Rate and Data Years,

14

National Grid’s cyber strategy will include initiatives and investments

15

needed to ensure the continued and evolving protection of the Company’s

16

cyber and information assets (“Cyber Security 2 Program,” INVP 3683).

17

The Cyber Security 2 Program will provide National Grid with the ability

18

to support new business capabilities as they are introduced, such as system

19

modernization, as well as provide the capability to perform fully

20

automated state security monitoring with real time remediation. A

21

definition phase of the Cyber Security 2 Program is currently in process

Page 34 of 52 172

Testimony of the Information Services Panel

1

with an expected completion in Spring 2017. The program of work will

2

assess the level of capability needed, finalize costs, implement a

3

prioritized set of investments, set a delivery plan, and ensure the scope of

4

work aligns with the goals and objectives of Digital Risk and Security’s

5

cyber strategy as discussed earlier.

6 7

Q.

Please explain how National Grid’s planned cyber security

8

investments for the Rate Year and Data Years support the Company’s

9

system modernization and distributed platform investments.

10

A.

The convergence of information and operational technology, and

11

evolution of the utility into an interconnected system of systems is

12

presenting unprecedented cyber security challenges. The Cyber Security 2

13

Program, as well as system modernization cyber security safeguards, were

14

developed to address those challenges, enabling the modernization of the

15

system while enhancing cyber security capabilities and protections to

16

address the threats that have been introduced from the new utility digital

17

landscape.

18 19

System modernization will advance the integration of DER both in front

20

of and behind the meter, the development of the Company’s DSP, and a

21

myriad of customer energy products and services. These initiatives will

Page 35 of 52 173

Testimony of the Information Services Panel

1

provide the Company a host of opportunities to improve the way it

2

operates, but consequently, introduce new channels through which

3

vulnerabilities can be exploited and potentially hinder safe, secure, and

4

reliable operation. As a result, the Company has developed a framework,

5

including a range of cyber security capability investments, to address the

6

new challenges introduced by system modernization. A risk-based, end-to-

7

end, “defense-in-depth” approach utilizing repeatable security processes

8

with a series of defense capabilities has been developed to proactively

9

identify

and

mitigate

cyber

security

risks

and

strengthen

the

10

confidentiality, integrity, and availability of smart grid infrastructure, data,

11

and processes.

12 13

The system modernization capabilities have minimal overlap with

14

capabilities set forth by the Cyber Security 1 and Cyber Security 2

15

Programs as modernization introduces new objectives and complexities,

16

such as increased third party and customer interactions, that were not

17

previously taken into account during definition of the Cyber Security 1

18

and Cyber Security 2 Programs. Where overlap may occur, investments

19

will be reassessed to leverage potential synergies in capability, cost, and

20

delivery. Timing of modernization investments will also play a role, as

Page 36 of 52 174

Testimony of the Information Services Panel

1

delivery of capability in the Cyber Security 2 Program cannot be further

2

deferred without introducing additional security risk.

3 4

Q.

5 6

What cyber security projects is National Grid planning for the Rate Year and Data Years?

A.

A description of each of National Grid’s forecast cyber security projects

7

for (i) the period between the Historic Test Year and the Rate Year, (ii) the

8

Rate Year and (iii) the Data Years, is contained in Exhibit __ (ISP-5). The

9

cyber security investments for system modernization capabilities are

10

detailed in Exhibit __ (ISP-6).

11 12

Q.

13 14

What are the projected costs of the cyber security projects National Grid has planned for the Rate Year and Data Years?

A.

The cyber security projects, including those supporting system

15

modernization, are forecast to require $97.597 million in capital

16

investment, as shown in Exhibit __ (ISP-3). As shown in Exhibit __

17

(RRP-11), Workpapers to Exhibit __ (RRP-3), Schedule 9, Workpaper 3,

18

Niagara Mohawk’s rent expense forecast for the projects is $1.391 million

19

for its electric business and $0.267 million for its gas business in the Rate

20

Year. Exhibit __ (RRP-11), Workpapers to Exhibit __ (RRP-3), Schedule

Page 37 of 52 175

Testimony of the Information Services Panel

1

9, Workpapers 6 and 9 also show the forecast rent expense for the projects

2

to Niagara Mohawk for the Data Years.

3 4

D. Physical Security

5

Q.

What is the purpose of National Grid’s physical security investments?

6

A.

National Grid operates electric and gas energy infrastructure that could be

7

subject to physical attack. Physical security threats include the risk that

8

unauthorized individuals will attempt to enter the Company’s facilities

9

with the intent of vandalizing property, equipment or facilities, theft of

10

tangible or intellectual property, or damage of critical equipment.

11

National Grid’s physical security measures are intended to mitigate the

12

risk of such threats by deploying enhanced security systems across

13

company networks and facilities to detect and deter physical attacks.

14 15

Q.

16 17

Please describe the physical security counter measures in place for Niagara Mohawk.

A.

Over the past several years, as a result of heightened understanding of

18

evolving physical security risks, National Grid has significantly increased

19

its deployment of physical security assets, such as facility access card

20

readers, security cameras, and alarm systems, to meet regulatory

21

requirements, enhance customer and employee safety, and safeguard

Page 38 of 52 176

Testimony of the Information Services Panel

1

assets.

In 2013, National Grid created a centralized organization to

2

address physical security issues, the Physical Security Control Center

3

(“Security Control Center”). The Security Control Center operates around

4

the clock to monitor physical security incidents and provide immediate

5

operations and emergency response for all National Grid facilities,

6

including those of Niagara Mohawk. National Grid monitors 241 sites in

7

total, of which 84 are Niagara Mohawk sites. The staff of the Security

8

Control Center disseminates security information and notifications,

9

monitor cameras and receives and responds to alarms. National Grid has,

10

and is continuing to increase, the number of sites monitored by the

11

Security Control Center.

12 13

Q.

14 15

What incremental physical security projects and expenses is the Company planning for the Rate Year and Data Years?

A.

As shown in Exhibit __ (ISP-3), the Physical Security Control Center is

16

planning incremental projects, commencing after the Historic Test Year

17

and continuing into the Rate Year and Data Years, to implement:

18



19 20 21

scheduled replacement of end of life security equipment at several Niagara Mohawk facilities;



improvements to the access management system at the Kensington and Albany facilities and other facilities;

Page 39 of 52 177

Testimony of the Information Services Panel

1



a build out of an alternate Security Control Center; and

2



an upgrade of National Grid’s video management system used for

3

recording, viewing and video analytics for intrusion detection at

4

critical and non-critical facilities.

5

These projects are forecast to cost $5.713 million in capital expense, as

6

shown in Exhibit __ (ISP-3).

7

Workpapers to Exhibit __ (RRP-3), Schedule 9, Workpaper 3, Niagara

8

Mohawk’s rent expense forecast for these investments is $0.194 million

9

for its electric business and $0.037 million for its gas business in the Rate

10

Year. Exhibit __ (RRP-11), Workpapers to Exhibit __ (RRP-3), Schedule

11

9, Workpapers 6 and 9 also show the forecast rent expense for the projects

12

to Niagara Mohawk for the Data Years.

As shown in Exhibit __ (RRP-11),

13 14

In addition, the Physical Security Control Center is planning a project for

15

break/fix and scheduled replacement of end of life security systems at

16

Niagara Mohawk bulk power stations and transmission control centers.

17

Exhibit__(RRP-11), Workpapers to Exhibit (RRP-7) Schedule 1,

18

Workpaper 9 (work order 90000180238) includes the costs of the

19

improvements to Niagara Mohawk of $0.200 million in the Rate Year,

20

$0.200 million in Data Year 1 and $0.228 million in Data Year 2.

21

Page 40 of 52 178

Testimony of the Information Services Panel

1

E. Human Resources (“HR”) Simplification Program

2

Q.

Please describe the HRIS Simplification Program.

3

A.

The HRIS Simplification Program (“HRIS Program”) is a global program

4

that will leverage new, cloud-based technologies to significantly improve

5

HR systems, processes, and data. The program is intended to provide

6

simple, intuitive, and user friendly human resources tools and processes.

7

Specifically, the program will implement SAP SuccessFactors, a cloud-

8

based human resources platform, and reconfigure core HR processes to

9

align with industry best practices.

10 11

Q.

Why is National Grid implementing the HRIS Program?

12

A.

HRIS Program implementation will (i) eliminate present and potential

13

future issues with the existing HR systems; (ii) serve as the foundation for

14

future system upgrades; and (iii) provide numerous benefits and

15

capabilities unavailable in existing systems.

16 17

The Company currently utilizes the SAP Human Capital Management

18

(“HCM”) framework to provide HR services. The HCM framework does

19

not support an integrated HR framework, results in data duplication and

20

process inefficiencies, and requires intensive resources for maintenance.

21

Transitioning away from the HCM framework will modernize the

Page 41 of 52 179

Testimony of the Information Services Panel

1

technology, allow for integration across multiple platforms, and resolve

2

data integrity issues. Additionally, SAP is no longer developing software

3

for the HCM framework, and plans to end its support in 2025, encouraging

4

migration to the SuccessFactors. The migration to SuccessFactors under

5

the HRIS Program allows National Grid to proactively replace the HCM

6

framework before it becomes obsolete and more expensive to maintain.

7

Finally, implementation of SuccessFactors will replace several systems

8

currently used by HR, and thus reduces the number of software upgrades

9

that would have been required for those systems.

10 11

The timing of HRIS Program implementation, more specifically SAP

12

SuccessFactors, is critical as it will serve as the foundation for the

13

transition of other back office systems, for example finance and payroll, to

14

a cloud-based environment. Further, implementing SAP SuccessFactors

15

now reduces the risk associated with transitioning multiple back office

16

systems (HR and Payroll) at the same time.

17 18

Q.

What are the benefits of the HRIS Program?

19

A.

The HRIS Program will result in certain benefits and efficiencies that will

20

help HR and the business operate more efficiently. These benefits and

21

efficiencies can be grouped into four general categories:

Page 42 of 52 180

Testimony of the Information Services Panel

1



2 3

Data Integrity – The program will provide a single, reliable source of data for incorporation into business processes.



Simplification – The program will automate and simplify HR

4

processes, thereby reducing the amount of time and resources

5

spent on those processes.

6



Workforce Planning – The program will allow the Company

7

to respond to and anticipate changing workforce trends and

8

engage new candidates in a timely fashion.

9



10

Accessibility – The program will provide real-time access to information from any location, including mobile devices.

11 12

The HRIS Program will also deliver tangible benefits to the business

13

resulting from the reduction of manual employee inputs, administrative

14

tasks, HR interfaces, and software costs associated with the existing HR

15

systems. The total annual savings for the program are estimated at $1.164

16

million.

17

incremental run the business costs as shown in Exhibit __ (ISP-7) and

18

discussed below.

These total savings have been applied against the total

19

Page 43 of 52 181

Testimony of the Information Services Panel

1

Q.

What is the implementation date of the HRIS Program?

2

A.

The HRIS Program is scheduled in service by May 2018.

Q.

What are the costs to Niagara Mohawk associated with the HRIS

3 4 5 6

Program? A.

The HRIS Program will be owned by National Grid plc, and thus Niagara

7

Mohawk will not see an increase in its rent expense associated with the

8

asset. However, once the HRIS Program is in service, there will be annual

9

costs to run the program and support the business, including license and

10

maintenance fees as well as vendor payments for the cloud operating

11

infrastructure. Niagara Mohawk’s allocated share of these costs have been

12

included in the incremental project operating expenses discussed below as

13

shown in Exhibit __ (ISP-8).

14 15

F. DG Customer Information System (“CIS”) Solution

16

Q.

Please describe the DG CIS project.

17

A.

The DG CIS project involves the re-design of the Company’s customer

18

system platform, CSS, to an adaptable model supported by more current

19

technologies and skillsets. The Company’s customer systems are

20

increasingly difficult to support, lack flexibility in new businesses, and

21

require far too long to adapt to new business processes. The evolution of

Page 44 of 52 182

Testimony of the Information Services Panel

1

DG will lead to new forms of energy trading, commerce, and information

2

exchange across smart meters, appliances, and network devices. The

3

Company must implement a new customer system solution that will

4

handle new DG customer processes from enrollment through the meter to

5

cash process cycle and will enable the future energy marketplace. The DG

6

CIS project will also facilitate complete or targeted movement of customer

7

businesses to the new platform allowing planned retirements. The

8

Company expects the DG CIS project to be in-service in March 2020.

9 10

Q.

What costs are associated with the DG CIS project?

11

A.

National Grid is in the early planning stages of this project. The Company

12

plans on utilizing the capital forecast for Regulatory Mandates as shown in

13

Exhibit __ (ISP-3) for the planning work on the DG CIS project.

14 15

VI.

Rate Year IS Operating Costs

16

Q.

What is the forecast of Niagara Mohawk’s total IS operating costs for

17 18

the Rate Year and Data Years as compared to the Historic Test Year? A.

As set forth on Exhibit __ (ISP-8), National Grid’s IS operating costs,

19

excluding the operating costs associated with the Gas Business

20

Enablement Program and the system modernization investments, are

21

projected to increase from $233.4 million in the Historic Test Year to

Page 45 of 52 183

Testimony of the Information Services Panel

1

$273.3 million in the Rate Year, $283.2 million in Data Year 1, and

2

$272.3 in Data Year 2. Adjusting for inflation, total IS operating costs

3

increase by $28.3 million in the Rate Year and $3.2 million in Data Year

4

1, decreasing by $16.9 million in Data Year 2. As shown in Exhibit __

5

(ISP-8), Niagara Mohawk’s allocated share of these incremental operating

6

expenses for its electric business, including the impact of inflation, is

7

$6.76 million in the Rate Year and $0.77 million in Data Year 1 with a

8

decrease of $4.04 million in Data Year 2. Niagara Mohawk’s allocated

9

share of these incremental operating expenses for its gas business,

10

including the impact of inflation, is $1.30 million in the Rate Year and

11

$0.15 million in Data Year 1 with a decrease of $0.78 million in Data Year

12

2. Increases in operational costs and investment plan costs are driving the

13

increase in forecasted IS operating costs for the Rate and Data Years as

14

shown in Exhibit __ (ISP-8) and discussed more fully below.

15 16

Q.

What are the significant elements of the increases in National Grid’s

17

IS operational costs between the Historic Test Year and the Rate Year

18

and Data Years?

19 20

A.

As set forth on Exhibit __ (ISP-8), the primary areas where National Grid projects an increase in IS operational costs are as follows:

21

Page 46 of 52 184

Testimony of the Information Services Panel

1

Commercial Management – The Commercial Management area is

2

responsible for the negotiation of Master Service Agreements and the

3

management of enterprise software purchasing and licensing agreements

4

with significant IS vendors such as SAP, Microsoft and Oracle.

5

Additional operating costs will be incurred in this area to strengthen the

6

oversight of third party agreements, to assess and manage existing external

7

providers and to manage the renegotiation of IS contracts that are expiring

8

over the next few years.

9 10

Application maintenance costs – These are the costs of support from IBM

11

and Wipro for all the applications National Grid has developed for internal

12

use. Newly released applications are added to the inventory of supported

13

applications as they are placed in service under fixed priced contracts with

14

annual price reviews. These costs are increasing because of the continued

15

need to operate and maintain multiple complex systems such as SAP; the

16

need to support new capabilities in FY17 and FY18 (e.g., Energy

17

Management System (“EMS”), OMS and system modernization); and the

18

evolving need to match technical capabilities of solutions with ever-

19

changing technology options (e.g., technology modernization).

20

Page 47 of 52 185

Testimony of the Information Services Panel

1

Critical Network Infrastructure (“CNI”) operations – CNI operations

2

involve the administration of systems that permit Niagara Mohawk to

3

operate its energy grids, including the Company’s critical electric and gas

4

management systems, its OMS, EMS and its distribution management

5

system. The Company’s recent re-investments in the EMS and OMS in

6

February 2015 and November 2015, respectively, are enabling increased

7

capabilities and monitoring that require incremental support from the CNI

8

area.

9 10

Enterprise Service Delivery – This includes the management and oversight

11

of internal operations of IS infrastructure, including user service and

12

support,

13

Email/SharePoint services, Data Centers and user desktops and laptops.

14

Costs are increasing in this area due to the need to manage increased

15

application maintenance (described above), and to ensure new applications

16

operate properly in the increasingly complex technology environment –

17

cyber security, cloud capability, integration with new application

18

investments.

vendor

management

for

application

maintenance,

19 20

Cyber security – As discussed earlier, cyber security is a constantly

21

evolving area that requires increased vigilance and support for changing

Page 48 of 52 186

Testimony of the Information Services Panel

1

threats. Additional operational support costs will be required to manage

2

the security toolsets in place to monitor, detect, and mitigate cyber

3

security threats; and for governance, risk and compliance and program

4

administration activities to work closely with the business to identify and

5

address emerging cyber risks to systems supporting the electric and gas

6

networks.

7 8

Physical security – As also discussed earlier, physical security manages

9

and implements physical measures at the Company’s business sites, office

10

buildings and operational facilities. Incremental costs are required for

11

monitoring and controlling access. In addition, increased operational costs

12

for physical security break/fixes are expected in the Rate Year compared

13

to the Historic Test Year, which experienced a milder than usual winter.

14 15

Administrative – Additional incremental costs are required to manage the

16

sanctioning process resulting from increased demand for IS services;

17

conduct program assurance activities to implement common and best

18

practices; manage projects and oversee development of applications; and

19

manage and develop the overall cyber security strategy. Many of the

20

existing vendor contracts that support the current IS delivery model are up

21

for renewal over the next few years and National Grid has determined that

Page 49 of 52 187

Testimony of the Information Services Panel

1

greater internal attention is also needed to assist with the negotiation and

2

administration of new vendor agreements in an increasingly complex

3

technological environment.

4 5

In addition, National Grid will make some refinements to its service

6

delivery model to build and partner internal skills and expertise with

7

business areas in the prioritization and delivery of strategic investments.

8

This will result in greater internal technical expertise and control over

9

vendors, accelerate IS project delivery due to improved coordination

10

between IS and the business functions, and enable the needed IS support

11

of system modernization.

12 13

The remaining IS operational costs are projected to either grow at rates

14

less than or equal to inflation or to decline slightly.

15 16

Q.

17 18

What is the projected increase in IS operating expenses associated with investment plan costs?

A.

Investment plan costs are costs associated with particular projects that

19

have not yet been placed in service and include (i) project operating

20

expenses (“Project OpEx”) that may not be capitalized under applicable

21

accounting rules (i.e., O&M incurred to support investment planning

Page 50 of 52 188

Testimony of the Information Services Panel

1

during the startup stage and post application development); and (ii) costs

2

incurred to operate and maintain projects after they are placed in service

3

such as license fees, maintenance costs and other operating costs (“run the

4

business costs”).

5 6

Excluding the impact of the incremental project operating expenses of Gas

7

Business Enablement and system modernization projects, the investment

8

plan costs are expected to increase from $11.8 million in the Historic Test

9

Year to $42.7 million and $46.0 million in the Rate and Data Year 1,

10

respectively.

As shown in Exhibit __ (ISP-7), these increases are

11

primarily related to the capital investments for Technology Modernization

12

and the cyber security investments discussed above. Project operating

13

costs are expected to decrease to $27.7 million in Data Year 2 as a result

14

of the conclusion of the three year implementation of Technology

15

Modernization commencing in FY18. In addition, the reduced Data Year

16

2 costs reflect the return to more typical levels of investment after a period

17

of significant investment and a tailing off of the initial project operating

18

costs (i.e., startup, requirements) near the end of the typical three year

19

planning horizon for the IS investment plan.

20

Page 51 of 52 189

Testimony of the Information Services Panel

1

Q.

Does this conclude your testimony?

2

A.

Yes.

Page 52 of 52 190

Exhibits of ISP

Testimony of the Information Services Panel

Index of Exhibits

Exhibit__ (ISP-1)

Allocations codes used to determine the forecast annual rent expense to Niagara Mohawk for IS projects

Exhibit__ (ISP-2)

Operating Expenses

Exhibit__ (ISP-3)

IS capital projects and investments

Exhibit__ (ISP-4)

IS Technology Modernization projects and customer benefits

Exhibit__ (ISP-5)

National Grid’s cyber security IS projects

Exhibit__ (ISP-6)

National Grid’s cyber security projections for system modernization

Exhibit__ (ISP-7)

Forecast of Purchased Gas Expense Rate Year and Data Years

Exhibit__ (ISP-8)

IS operating expenses for the Historic Test Year, Rate Year and Data Years

191

Exhibit__ (ISP-1)

Testimony of the Information Services Panel

Exhibit __ (ISP-1) Allocations codes used to determine the forecast annual rent expense to Niagara Mohawk for IS projects

192

SAP Alloc. Code Description C-113 NMPC Electric and NMPC Gas C-170 NMPC-E&G, KEDNY, KEDLI C-175 All Retail Companies C-195 NIMO & KEDLI C-198 All Electric Distribution C-210 All Gas Retails G-012 All Companies (largest set) G-020 Parents, Retail, TRAN, Hydros, NG LNG Reg, KS GEN, GW, PJ, Metrowest, Wayfinder, Transgas, KEDC, KS G-077 Legacy NG Retails, NMPC-T, NEP-T, Hydros G-113 NMPC Electric and NMPC Gas G-114 Niagara Mohawk (Elec, Gas and Trans) G-138 All Retail, NMPC-T, NEP-T, KS Generation, GW and Port Jefferson G-148 Retails, Transission G-149 All Retails, TRAN, Hydros, NG LNG Reg, KS Generation, GW and Port Jefferson G-160 LegNG Retail, TRAN segment G-170 NMPC-E&G, KEDNY, KEDLI G-175 All Retail Companies G-179 Legacy NG Retail Companies G-181 Niagara Mohawk Electric and Transmission G-186 NMPC-E&T, MECO-E&T, Nantucket, NECO-E&T, and NEP-T G-198 All Electric Distribution G-207 Niagara Mohawk Gas, KEDNY and KEDLI G-210 All Gas Retails G-220 Transmission, excl Hydro G-327 All Retail and Trans segments, NEP-T, Hydros G-352 All Retail, All TRAN, KS Generation, GW and Port Jefferson G-376 All Retail excl NMPC-E, plus NMPC-T, NECO-T and KS Generation G-432 NMPC-T, NECO-T, NEP-T, KS Generation G-750 NMPC - Internal allocation negotiated with NYPSC H-173 All Retail Companies H-T71 Retails plus LIPA TSA Billing Entity (5190S) J-063 Reservoir Woods U-186 NMPC-E&T, MECO-E&T, Nantucket, NECO-E&T, and NEP-T

Allocation Basis C - Number of Customers via Count of Meters Installed C - Number of Customers via Count of Meters Installed C - Number of Customers via Count of Meters Installed C - Number of Customers via Count of Meters Installed C - Number of Customers via Count of Meters Installed C - Number of Customers via Count of Meters Installed G - General Allocator, 3-Point Formula G - General Allocator, 3-Point Formula G - General Allocator, 3-Point Formula G - General Allocator, 3-Point Formula G - General Allocator, 3-Point Formula G - General Allocator, 3-Point Formula G - General Allocator, 3-Point Formula G - General Allocator, 3-Point Formula G - General Allocator, 3-Point Formula G - General Allocator, 3-Point Formula G - General Allocator, 3-Point Formula G - General Allocator, 3-Point Formula G - General Allocator, 3-Point Formula G - General Allocator, 3-Point Formula G - General Allocator, 3-Point Formula G - General Allocator, 3-Point Formula G - General Allocator, 3-Point Formula G - General Allocator, 3-Point Formula G - General Allocator, 3-Point Formula G - General Allocator, 3-Point Formula G - General Allocator, 3-Point Formula G - General Allocator, 3-Point Formula G - General Allocator, 3-Point Formula H - Number of Bills Rendered H - Number of Bills Rendered J - Facilities - Multiple Sites U - RTU's

Niagara Mohawk Power Corporation d/b/a National Grid ISP-1 Allocations used for IS Projects

NMPC - ELECNMPC - GASNMPC - TRANSNMPC Total ALL OTHER CO' TOTAL 72.91% 27.09% 0.00% 100.00% 0.00% 100.00% 40.06% 14.88% 0.00% 54.94% 45.06% 100.00% 23.28% 8.65% 0.00% 31.93% 68.07% 100.00% 57.91% 21.56% 0.00% 79.47% 20.53% 100.00% 47.71% 0.00% 0.00% 47.71% 52.29% 100.00% 0.00% 16.89% 0.00% 16.89% 83.11% 100.00% 17.76% 4.58% 6.11% 28.45% 71.55% 100.00% 17.76% 4.58% 6.11% 28.45% 71.55% 100.00% 27.98% 7.38% 9.98% 45.34% 54.66% 100.00% 79.46% 20.54% 0.00% 100.00% 0.00% 100.00% 63.00% 15.97% 21.03% 100.00% 0.00% 100.00% 18.29% 4.73% 6.32% 29.34% 70.66% 100.00% 18.77% 4.83% 6.43% 30.03% 69.97% 100.00% 17.88% 4.61% 6.15% 28.64% 71.36% 100.00% 27.24% 7.15% 9.63% 44.02% 55.98% 100.00% 43.49% 10.92% 0.00% 54.41% 45.59% 100.00% 21.83% 5.73% 0.00% 27.56% 72.44% 100.00% 35.18% 9.55% 0.00% 44.73% 55.27% 100.00% 74.79% 0.00% 25.21% 100.00% 0.00% 100.00% 30.74% 0.00% 10.99% 41.73% 58.27% 100.00% 41.93% 0.00% 0.00% 41.93% 58.07% 100.00% 0.00% 19.47% 0.00% 19.47% 80.53% 100.00% 0.00% 12.44% 0.00% 12.44% 87.56% 100.00% 0.00% 0.00% 48.12% 48.12% 51.88% 100.00% 18.70% 4.82% 6.41% 29.93% 70.07% 100.00% 17.94% 4.63% 6.17% 28.74% 71.26% 100.00% 0.00% 6.09% 8.15% 14.24% 85.76% 100.00% 0.00% 0.00% 35.13% 35.13% 64.87% 100.00% 83.00% 17.00% 0.00% 100.00% 0.00% 100.00% 19.12% 7.07% 0.00% 26.19% 73.81% 100.00% 16.66% 6.16% 0.00% 22.82% 77.18% 100.00% 9.74% 2.55% 3.88% 16.17% 83.83% 100.00% 26.20% 0.00% 35.42% 61.62% 38.38% 100.00%

Exhibit__(ISP-1) Page 1 of 1

Exhibit__(ISP-1) Page 1 of 1

193

Exhibit__ (ISP-2)

Testimony of the Information Services Panel

Exhibit __ (ISP-2) Operating Expenses

194

Exhibit __ (ISP-2) Page 1 of 1 Niagara Mohawk Power Corporation d/b/a National Grid CY16 IS Operating Expenses ($Millions) for NMPC

Operational Cost Commercial Management Cyber Security Physical Security Apps Maintenance CNI Ops Data Centers Verizon Email & Xerox Enterprise Service Delivery Admin Subtotal Operational Cost

CY16 (HTY) 6.3 2.3 3.1 4.5 15.4 8.0 10.3 2.2 4.8 6.4 63.3

Investment Plan IS Base Investment Plan

5.4 5.4

CTA (IS Transformation)

4.4

Total IS Opex to NMPC

73.1

195

Exhibit__ (ISP-3)

Testimony of the Information Services Panel

Exhibit __ (ISP-3) IS capital projects and investments

196

Investment Name

INVP 3614D1 Ent Network Security INVP 3614B7 CNI Network Security INVP 3614E4 US CNI Security I&E INVP 4045 Double Pole Mgmt DB INVP 4373 Contingent Labor Admin Replacement INVP 3955 EJ Ward Upgrade INVP 4188 Aging System Stabilize INVP 4280 US VSTIG Bandwidth Ph2 INVP 4307 US Win 7 Refresh Ph 3 INVP 4364 Wireless Network S005242 M112 Systemic Improvement INVP 4289 US Network Improvement INVP 2577C ArcFM Software Upgrade INVP 4631 Box Enablement INVP 4170 Time Transformation INVP 4420 US CNI OMSFocalPoint Infrastructure Upgrade INVP 4274 VSTIG Hardware Refresh INVP 4464 Data Visualization INVP 4461 Unix51 Interface Migration INVP 4287 Active Directory Upgrade INVP 4408 Doc Mgmt Systems Replacement Delivery INVP 3486 US MDS-Itron Enterprise Edition (IEE) INVP 4390 Plastic Fusion II INVP 4397 Ariba TLS and CI Update Call Center Customer Contact Center/SDC Technology Upgrade Implement Solution INVP 4398 Storms/ISched Upgrade INVP 3737 US CNI GMS SCADA Upgrade & INVP 3882 NYS Pipeline Safety CMS INVP 3851 Consolidated Voice Recorder for US Electric Control Rooms Physical Security Replacements - FY17 Physical Security Replacements - FY18 All NIMO Physical Security Replacements - FY18 Physical Security Replacements - FY19 All NIMO Physical Security Replacements - FY19 Physical Security Replacements - FY20 All NIMO Physical Security Replacements - FY20 Physical Security Replacements - FY21 All NIMO Physical Security Replacements - FY21 INVP 4451 Gas Transportation System Phase II INVP 4347 NYC Leave on for Landlord Program INVP 4124 Auto Remote Net Meter INVP 3839A NY Retail Access Ph2 INVP 4411AB Distributed Generation Portal INVP 4383 NY Community Choice Aggregation INVP 4448 Low Income Order CRIS INVP 4448 Low Income Order CSS INVP 4411C New Electric Connections INVP 4411D New Gas Connections

In-flight projects

Cyber Security Cyber Security Cyber Security FY18 Plan FY18 Plan FY18 Plan FY18 Plan FY18 Plan FY18 Plan FY18 Plan FY18 Plan FY18 Plan FY18 Plan FY18 Plan FY18 Plan FY18 Plan FY18 Plan FY18 Plan FY18 Plan FY18 Plan FY18 Plan FY18 Plan FY18 Plan FY18 Plan FY18 Plan FY18 Plan FY18 Plan Other Mandates Other Mandates Physical Security Physical Security Physical Security Physical Security Physical Security Physical Security Physical Security Physical Security Physical Security PSC Mandate PSC Mandate PSC Mandate PSC Mandate PSC Mandate PSC Mandate PSC Mandate PSC Mandate PSC Mandate PSC Mandate

Programs 3614D1 3614B7 3614E4 4045 4373 3955 4188 4280 4307 4364 N/A 4289 2577C 4631 4170 4420 4274 4464 4461 4287 4408 3486 4390 4397 3932 4398 3737 3882 3851 N/A N/A N/A N/A N/A N/A N/A N/A N/A 4451 4347 4124 3839A 4411A+B 4383 4448 4448 4411C 4411D

INVP # G020 G020 G020 G198 G020 G235 G148 G020 G020 G020 G020 G020 G112 G020 G020 G198 G020 G020 G020 G020 G149 G186 G207 G020 C175 G160 C210 G207 G181 G020 G020 G114 G020 G114 G020 G114 G020 G114 G225 5220G C198 C170 C198 C170 5220G C195 C198 C210

6/30/17 12/31/17 12/31/17 2/18/17 2/20/17 2/28/17 3/31/17 3/31/17 3/31/17 3/31/17 3/31/17 3/31/17 4/7/17 4/30/17 5/1/17 5/1/17 5/31/17 7/31/17 9/1/17 9/30/17 11/1/17 3/31/18 3/31/18 3/31/18 8/31/18 12/15/18 3/31/20 3/17/17 3/31/17 3/31/17 3/31/18 3/31/18 3/31/19 3/31/19 3/31/20 3/31/20 3/31/21 3/31/21 5/31/17 7/31/17 8/31/17 10/31/17 11/30/17 12/31/17 12/31/17 12/31/17 4/30/18 10/31/18

Bill Pool In Service Date

Niagara Mohawk Power Corporation d/b/a National Grid ISP-3 Information Services (IS) Capital Projects Amortization Period 84 84 84 84 84 84 84 84 84 84 120 84 84 84 84 84 84 84 84 84 84 84 84 120 84 84 84 84 84 84 84 84 84 84 84 84 84 84 84 84 84 84 84 84 84 84 84 84

Inception To Date + FY18 9,478,590 4,829,586 1,207,045 482,153 250,692 646,004 782,710 1,998,645 11,562,999 2,303,959 8,000,000 978,717 2,087,188 254,000 3,917,000 1,366,563 608,000 4,440,000 1,386,701 804,825 3,617,542 670,943 506,000 1,462,000 24,205,719 9,523,867 16,555,091 1,308,000 1,234,000 906,050 950,000 490,000 1,629,117 870,095 3,584,165 5,356,231 3,347,611 551,447 2,207,590 2,489,410 698,000 36,000 3,519,000 432,000 6,354,200 825,000 275,000 860,000

FY19 CAPEX

835,000 282,000 -

3,021,000 -

FY20 CAPEX 860,000 290,000 -

FY21 CAPEX

Total US CapEx Spend 9,478,590 4,829,586 1,207,045 482,153 250,692 646,004 782,710 1,998,645 11,562,999 2,303,959 8,000,000 978,717 2,087,188 254,000 3,917,000 1,366,563 608,000 4,440,000 1,386,701 804,825 3,617,542 670,943 506,000 1,462,000 27,724,719 9,955,867 25,930,291 1,308,000 1,234,000 906,050 950,000 490,000 825,000 275,000 835,000 282,000 860,000 290,000 1,629,117 870,095 3,584,165 5,356,231 3,347,611 551,447 2,207,590 2,489,410 698,000 896,000

Exhibit__(ISP-3) Page 1 of 5

Exhibit__(ISP-3) Page 1 of 5

197

Investment Name

Planned Projects Cloud Security Risk Based Authentication - 2FA token alternative Threat Behavior Modeling Identity & Access Management :Role Base Access Management (RBAC) Enhanced DLP Gateway and Endpoint US CNI Intrusion Detection/Prevention Phase 1 Identity & Access Management: Fine Grain Access Management vStig Scaling Upgrades IT/OT Discovery and Implementation Phase 1 Security Research Lab US CNI Security Enhancements Phase 1 Identity & Access Management: Privileged Access Management Domain Based Security Phase 1 Security Incident Event Management Phase 4 Big Data Security Analytics Phase 1 US CNI Intrusion Detection/Prevention Phase 2 Identity & Access Management: Shared Area Access Management Security Incident Event Management Phase 5 Domain Based Security Phase 2 Security Incident Event Management (SIEM) 6 Big Data Security Analytics - Phase 2 IT/OT Discovery and Implementation: Phase 2 US CNI Security Enhancements - Phase 2 Data Visualization HANA License Costs Microsoft ELA Renewal Mobile Device Refresh - FY17 Zscaler US Video Conferencing upgrade for RW Hix D/C Improvement Server Refresh Mobility - (MDM) Mobile Device Changes to ACIS for PMCC Civil Vendor Billing US Control-Gas System Operating Procedure (SOP) Upgrade Enterprise Labs Cascade Electric Application Upgrade Project WIFI for Fleet Services Diagnostic Laptops Gas Service Database - UNY Gas Service Database - DNY (LI and NYC) Substation Monitoring-DobleARMS Gas Capital Investment Planning Tool Computapole Enhancements to Support Inspection Types Travel & Expense Management (T&E) and Global Master Service Provider (MSP) Strategy Ageing System Stabilization/Upgrades - FY18 US Mobile Device Refresh US SAP: Infrastructure Landscape US CNI Tech Services-Network Equipment Lifecycle Replacements US CNI-EMS Lifecycle Hardware and Software Upgrade Network Transformation Completion - CEMS Application monitoring, Network/IDS, Operations monitoring Aged Printer refresh RSA Token refresh Acquisition of Remote Sensing Data - Mass INVP4449 - EPA File Informatica Upgrade/Microstrategy Replacement Program Cyber Security Cyber Security Cyber Security Cyber Security Cyber Security Cyber Security Cyber Security Cyber Security Cyber Security Cyber Security Cyber Security Cyber Security Cyber Security Cyber Security Cyber Security Cyber Security Cyber Security Cyber Security Cyber Security Cyber Security Cyber Security Cyber Security Cyber Security Cyber Security FY18 Plan FY18 Plan FY18 Plan FY18 Plan FY18 Plan FY18 Plan FY18 Plan FY18 Plan FY18 Plan FY18 Plan FY18 Plan FY18 Plan FY18 Plan FY18 Plan FY18 Plan FY18 Plan FY18 Plan FY18 Plan FY18 Plan FY18 Plan FY18 Plan FY18 Plan FY18 Plan FY18 Plan FY18 Plan FY18 Plan FY18 Plan FY18 Plan FY18 Plan FY18 Plan

Programs 3683 3683 3683 3683 3683 3683 3683 3683 3683 3683 3683 3683 3683 3683 3683 3683 3683 3683 3683 3683 3683 3683 3683 3683 4649 4642 4671 4681 4632 4676 3430 4487 4480 4693 3986 3956 3949 3948 3982 4466 4462 4578 4389 4395 4348 4570 4568 4647 4677 4689 4683 4670 4449 4469

INVP # G020 G020 G020 G020 G020 G020 G020 G020 G020 G020 G020 G020 G020 G020 G020 G020 G020 G020 G020 G020 G020 G020 G020 G020 G020 G020 G020 G020 G020 G020 G020 G186 G210 G020 G198 G352 5210G G225 G381 G210 G186 G020 G148 G020 G020 G186 U186 G020 G020 G020 G020 C310 C170 G020

5/1/17 6/1/17 8/1/17 10/1/17 12/1/17 3/31/18 3/31/18 8/1/18 10/1/18 10/1/18 11/1/18 3/31/19 3/31/19 5/1/19 5/1/19 3/31/20 3/31/20 5/1/20 3/31/21 5/1/21 5/1/21 10/1/21 11/1/21 12/1/21 3/31/17 3/31/17 3/31/17 3/31/17 6/1/17 7/1/17 7/31/17 8/2/17 10/2/17 10/30/17 10/31/17 11/1/17 12/1/17 12/4/17 1/1/18 1/17/18 3/1/18 3/1/18 3/15/18 3/31/18 3/31/18 3/31/18 3/31/18 3/31/18 3/31/18 3/31/18 3/31/18 3/31/18 3/31/18 5/1/18

Bill Pool In Service Date 84 84 84 84 84 84 84 84 84 84 84 84 84 84 84 84 84 84 84 84 84 84 84 84 84 84 84 84 84 84 84 84 84 84 84 84 84 84 84 84 84 84 84 84 84 84 84 84 84 84 84 84 84 84

Amortization Period 1,460,000 235,080 800,000 1,650,000 2,238,480 550,000 1,650,000 1,000,000 3,300,000 325,000 1,650,000 633,150 2,310,776 3,500,000 1,900,000 4,546,000 2,100,000 1,330,000 1,000,000 1,162,000 382,000 542,000 668,000 375,000 838,000 325,000 300,000 622,000 572,000 450,000 1,232,000 1,500,000 5,000,000 4,603,000 250,000 13,348,000 250,000 750,000 50,000 200,000 4,112,000 700,000 3,287,000

Inception To Date + FY18 -

229,000

-

-

2,200,000 1,740,000 800,000 633,150 2,310,776 300,000 -

FY19 CAPEX -

-

-

-

-

3,000,000 733,150 2,310,776 3,230,770 1,320,000 1,000,000 -

FY21 CAPEX

-

500,000 1,740,000 733,150 3,000,000 3,466,164 3,769,230 2,640,000 -

FY20 CAPEX $1,460,000 $235,080 $800,000 $1,650,000 $2,238,480 $550,000 $1,650,000 $1,000,000 $5,500,000 $325,000 $1,650,000 $1,740,000 $800,000 $1,266,300 $4,621,552 $800,000 $1,740,000 $733,150 $6,000,000 $733,150 $5,776,940 $7,000,000 $3,960,000 $1,000,000 $3,500,000 $1,900,000 $4,546,000 $2,100,000 $1,330,000 $1,000,000 $1,162,000 $382,000 $542,000 $668,000 $375,000 $838,000 $325,000 $300,000 $622,000 $572,000 $450,000 $1,232,000 $1,500,000 $5,000,000 $4,603,000 $250,000 $13,348,000 $250,000 $750,000 $50,000 $200,000 $4,112,000 $700,000 $3,516,000

Total US CapEx Spend

Exhibit__(ISP-3) Page 2 of 5

Exhibit__(ISP-3) Page 2 of 5

198

Investment Name

US MDS-Energy Accounting System (EAS) migration to Wholesale Settlement Application (WSA) General Ledger Interface CRIS SAP STORMS Capital Cost Estimates CRIS Data Archival US CNI Tech Services-Network Equipment Lifecycle Replacements Inventory Management Handheld Devices Customer Bill Redesign Cisco Prime Contractor Management Modernization Risk Management (Tx Mains & Dx Mains) AM Program Leadership-1 Enhancements Additional IM Modules AM Program Leadership-2 Data Remediation, GIS Upgrade/ Migration & GIS Mobility EAM-FIN Integration Integrity Management Integrations AM Program Leadership-3 Design (GWD), Estimating (CU), & Mobility Asset Analytics Integration GIS (GWD/CU) - PPM Integration GIS-EAM Integration AM Program Leadership-4 Use Case No.1 - Asset Risk Complex Design (CAD) & Estimating (ESW) Program Learning Management-1 Program Transformational Change Office-1 Program Business Sustainment-1 Program Learning Management-2 Program Transformational Change Office -2 Program Learning Management-3 Program Transformational Change Office-3 Program Business Sustainment-2 Program Learning Management-4 Program Transformational Change Office-4 Customer Experience Program Leadership-1 CxT Portal & Channel Management Customer Interaction - First Release Employee Support Interaction - First Release Customer Experience Program Leadership-2 CRM / Contact Center Large Commercial & Landlord Interaction Employee Support Interaction - Second Release Customer Interaction - Second Release Customer Experience Program Leadership-3 Data Management Implementation (Quality & Cleansing) Data Management & Governance Program Leadership-1 Enable the Data Archive Process Data Management & Governance Program Leadership-2 Data Management & Governance Program Leadership-3 Powerplan Remediation Comprehensive Integration Services (Enhancements) Application (Environment) Infrastructure Development Operations & BPA Enablement-1 SAP and Application Integration Development- Release 1-1 Mobility CoE & End-User Computing-1 Operations/System Monitoring Development Operations & BPA Enablement-2 SAP and Application Integration Development- Release 1-2 SAP and Application Integration Development- Release 2-1 Mobility CoE & End-User Computing-2 Development Operations & BPA Enablement-3 SAP and Application Integration Development- Release 1-3 SAP and Application Integration Development- Release 2-2

Programs FY18 Plan FY18 Plan FY18 Plan FY18 Plan FY18 Plan FY18 Plan FY18 Plan FY18 Plan FY18 Plan GBE- Asset Management GBE- Asset Management GBE- Asset Management GBE- Asset Management GBE- Asset Management GBE- Asset Management GBE- Asset Management GBE- Asset Management GBE- Asset Management GBE- Asset Management GBE- Asset Management GBE- Asset Management GBE- Asset Management GBE- Asset Management GBE- Asset Management GBE- Asset Management GBE- Business Enablement GBE- Business Enablement GBE- Business Enablement GBE- Business Enablement GBE- Business Enablement GBE- Business Enablement GBE- Business Enablement GBE- Business Enablement GBE- Business Enablement GBE- Business Enablement GBE- Customer Engagement GBE- Customer Engagement GBE- Customer Engagement GBE- Customer Engagement GBE- Customer Engagement GBE- Customer Engagement GBE- Customer Engagement GBE- Customer Engagement GBE- Customer Engagement GBE- Customer Engagement GBE- Data Management GBE- Data Management GBE- Data Management GBE- Data Management GBE- Data Management GBE- Information Services Enabling GBE- Information Services Enabling GBE- Information Services Enabling GBE- Information Services Enabling GBE- Information Services Enabling GBE- Information Services Enabling GBE- Information Services Enabling GBE- Information Services Enabling GBE- Information Services Enabling GBE- Information Services Enabling GBE- Information Services Enabling GBE- Information Services Enabling GBE- Information Services Enabling GBE- Information Services Enabling 4704Q 4679 4151

4481 4486 4467 4485 4570

INVP # G186 C343 G148 C343 G186 G020 H173 G020 G327 G210 G210 G210 G210 G210 G210 G210 G210 G210 G210 G210 G210 G210 G210 G210 G210 G210 G210 G210 G210 G210 G210 G210 G210 G210 G210 G210 G210 G210 G210 G210 G210 G210 G210 G210 G210 G210 G210 G210 G210 G210 G210 G210 G210 G210 G210 G210 G210 G210 G210 G210 G210 G210 G210 G210

10/1/18 3/1/19 3/1/19 3/31/19 3/31/19 3/31/19 3/31/19 3/31/21 10/15/21 12/1/17 3/1/18 12/1/18 2/1/19 3/1/19 3/1/19 6/1/19 10/1/19 3/1/20 9/1/20 12/1/20 12/1/20 12/2/20 3/1/21 3/1/21 3/1/21 3/1/18 3/1/18 3/1/19 3/1/19 3/1/19 3/1/20 3/1/20 3/1/21 3/1/21 3/1/21 3/1/19 6/1/19 10/1/19 10/1/19 3/1/20 6/1/20 7/1/20 7/1/20 1/1/21 3/1/21 12/1/17 3/1/18 3/1/19 3/1/19 3/1/20 11/1/17 12/1/17 12/1/17 3/1/18 3/1/18 3/1/18 8/1/18 3/1/19 3/1/19 3/1/19 3/1/19 3/1/20 3/1/20 3/1/20

Bill Pool In Service Date

Amortization Period 84 84 84 84 84 84 84 84 84 120 120 120 120 120 120 120 120 120 120 120 120 120 120 120 120 120 120 120 120 120 120 120 120 120 120 120 120 120 120 120 120 120 120 120 120 120 120 120 120 120 120 120 120 120 120 120 120 120 120 120 120 120 120 120 11,100,000 58,890 6,080,111 78,624 2,174,410 2,903,920 4,765,187 604,790 500,000 -

2,110,800 277,124 2,059,930 2,426,395 117,297 689,043 -

Inception To Date + FY18 1,543,000 900,000 800,000 75,000 175,679

FY19 CAPEX 617,000 300,000 776,000 500,000 250,000 1,932,468 216,000 750,000 600,945 604,233 398,676 5,983,122 979,407 371,868 1,729,295 1,250,000 69,617 130,211 1,516,310 260,229 6,679,688 1,780,471 3,871,396 15,200,000 15,723 2,111,916 87,954 557,768 2,562,011 4,548,168 5,055,712 920,536 216,000 3,000,000 112,606 2,902,242 798,695 716,243 408,336 4,920,570 3,286,424 173,060 368,704 5,195,313 3,016,074 4,082,735 266,277 3,800,000 19,653 67,564 89,713 2,164,144 600,000 4,397,065

FY20 CAPEX 216,000 2,160,000 3,201,244 1,764,202 844,849 3,282,332 103,929 3,591,031 2,389,087 221,771 195,721 169,648 1,411,132 292,791 2,010,254 203,177 -

FY21 CAPEX

Total US CapEx Spend $2,160,000 $1,200,000 $776,000 $1,300,000 $250,000 $75,000 $2,108,147 $648,000 $5,910,000 $2,110,800 $277,124 $2,660,875 $716,840 $398,676 $11,311,759 $1,778,102 $1,088,112 $408,336 $9,851,109 $1,764,202 $844,849 $7,818,756 $103,929 $3,591,031 $2,389,087 $117,297 $689,043 $69,617 $130,211 $1,516,310 $173,060 $368,704 $221,771 $195,721 $169,648 $260,229 $11,875,000 $4,796,546 $7,954,131 $266,277 $19,000,000 $1,446,508 $292,791 $2,010,254 $203,177 $11,100,000 $58,890 $2,179,480 $87,954 $89,713 $6,080,111 $78,624 $2,174,410 $2,903,920 $4,765,187 $604,790 $1,057,768 $2,562,011 $4,548,168 $5,055,712 $920,536 $2,164,144 $600,000 $4,397,065

Exhibit__(ISP-3) Page 3 of 5

Exhibit__(ISP-3) Page 3 of 5

199

Investment Name

SAP and Application Integration Development- Release 3-1 Mobility CoE & End-User Computing-3 Test Automation Implementation Development Operations & BPA Enablement-4 SAP and Application Integration Development- Release 1-4 SAP and Application Integration Development- Release 3-2 Mobility CoE & End-User Computing-4 Portfolio Management Leadership-1 Solution Architects & Agile Coaches-1 Portfolio Management Leadership-2 Solution Architects & Agile Coaches-2 Portfolio Management Leadership-3 Solution Architects & Agile Coaches-3 Portfolio Management Leadership-4 Regulatory/ Compliance Supply Chain Program Leadership Supply Chain Program Leadership Business Architecture Design WMFE Program Leadership-1 Corrosion and I&R Work CU Governance & Library - process WMFE Program Leadership-2 Company Driven Work: Collections and non-Appointment Offs - Gas Company Driven Work: Collections and non-Appointment Offs- Electric Customer, Leak Investigation & Inspections - Gas Customer, Leak Investigation & Inspections - Electric WMFE Program Leadership-3 PowerPlan Integration & Enhancements Construction Work & Leak Repair WMFE Program Leadership-4 Work Forecasting & Planning - solution Core Projects & Program Management WMFE Optimization Customer Experience Transformation-Communication Preference Management Customer Experience Transformation-MyAccount Portal Governance Risk & Compliance (GRC) Optimization/Upgrade US SAP: Business Planning US SAP: FERC on Hana (FOH) DRMS for C&I Demand Response Load and DER Forecasting (Acquisition of Remote Sensing Data - NY) Plant Information Historian E-Commerce Marketplace AMI - Telecoms DG IOAP Tactical (Phase 2) AMI - CSS Enhancements Green Button Connect AMI - Telecoms Outdoor Lighting Inventory Portal DRMS for C&I Demand Response (Renewal) DSP - DG IOAP Grid MOD - ABB/ADMS & D-SCADA AMI - Telecoms AMI - Enterprise Service Bus & API Integration AMI - Enterprise Service Bus & API Integration AMI - Info Mgt & Advanced Analytics AMI - Info Mg & Advanced Analytics IS-Cloud Computing & Data Lake IS-Cloud Computing & Data Lake Cyber Security Cyber Security Annual HR & Payroll Mandatory Service Pack Upgrade (HRSP) - FY18 Regulatory Mandates - FY18 US Control-Gas Electronic Bulletin Board (EBB) Upgrade Regulatory Mandates - FY19 Regulatory Mandates - FY20 Regulatory Mandates - FY21

Programs GBE- Information Services Enabling GBE- Information Services Enabling GBE- Information Services Enabling GBE- Information Services Enabling GBE- Information Services Enabling GBE- Information Services Enabling GBE- Information Services Enabling GBE- Portfolio Office GBE- Portfolio Office GBE- Portfolio Office GBE- Portfolio Office GBE- Portfolio Office GBE- Portfolio Office GBE- Portfolio Office GBE- Regulatory and Compliance GBE- Supply Chain GBE- Supply Chain GBE- Work Management GBE- Work Management GBE- Work Management GBE- Work Management GBE- Work Management GBE- Work Management GBE- Work Management GBE- Work Management GBE- Work Management GBE- Work Management GBE- Work Management GBE- Work Management GBE- Work Management GBE- Work Management GBE- Work Management GBE- Work Management Growth Play Book-CXT Growth Play Book-CXT Growth Play Book-Finance Growth Play Book-Finance Growth Play Book-Finance NY REV/grid modernization NY REV/grid modernization NY REV/grid modernization NY REV/grid modernization NY REV/grid modernization NY REV/grid modernization NY REV/grid modernization NY REV/grid modernization NY REV/grid modernization NY REV/grid modernization NY REV/grid modernization NY REV/grid modernization NY REV/grid modernization NY REV/grid modernization NY REV/grid modernization NY REV/grid modernization NY REV/grid modernization NY REV/grid modernization NY REV/grid modernization NY REV/grid modernization NY REV/grid modernization NY REV/grid modernization Other Mandates Other Mandates Other Mandates Other Mandates Other Mandates Other Mandates 4479

4704F 4704G 4704I 4704J 4704J 4704L 4704L 4704M 4704M 4704N 4704N 4400

4729 4704K 4704D 4704I 4704P 4704A 4704C 4704I 4704O

4426 4427 4222 4217 4563

INVP # G210 G210 G210 G210 G210 G210 G210 G210 G210 G210 G210 G210 G210 G210 G210 G210 G210 G210 G210 G210 G210 G210 G210 G198 G210 G198 G210 G210 G210 G210 G210 G210 G210 C175 C175 G020 G020 G020 5210E C113 G198 C113 5210E 5210E C113 C113 5210E 5210E 5210E 5210E 5210E 5210E C113 5210E C113 5210E C113 5210E C113 5210E G020 G020 G210 G020 G020 G020

3/1/20 3/1/20 12/1/20 3/1/21 3/1/21 3/1/21 3/1/21 3/1/18 3/1/18 3/1/19 3/1/19 3/1/20 3/1/20 3/1/21 9/1/19 3/1/19 3/1/20 12/1/17 3/1/18 7/1/18 11/1/18 3/1/19 10/1/19 10/1/19 10/1/19 10/1/19 3/1/20 6/1/20 9/1/20 3/1/21 5/1/21 6/1/21 3/1/22 3/31/19 6/1/19 3/1/19 3/31/19 3/31/19 5/1/17 3/31/18 9/30/18 3/31/19 3/31/19 3/31/19 3/31/20 3/31/20 3/31/20 3/31/20 5/1/20 9/30/20 3/31/21 3/31/21 3/31/21 3/31/21 3/31/21 3/31/21 3/31/21 3/31/21 3/31/21 3/31/21 12/31/17 3/31/18 5/1/18 3/31/19 3/31/20 3/31/21

Bill Pool In Service Date

Amortization Period 120 120 120 120 120 120 120 120 120 120 120 120 120 120 120 120 120 120 120 120 120 120 120 120 120 120 120 120 120 120 120 120 120 84 84 84 84 84 36 84 84 84 84 84 84 84 84 84 12 84 84 84 84 84 84 84 84 84 84 84 84 84 84 84 84 84 1,126,000 5,071,622 2,455,000 -

-

-

-

Inception To Date + FY18 490,509 1,645,919 1,958,277 750,000 3,004,085 234,013 7,001,291 2,366,407 1,274,219 1,191,154 641,390 1,200,000 1,000,000 3,429,633 8,632,000 1,034,882 2,144,482 3,964,632 1,500,000 565,045 17,676,960 1,658,439 563,692 1,773,327 954,868 8,895,256 4,789,753 1,832,544 800,000 6,000,000 1,540,000 4,643,000 1,315,000 11,427,818 915,837 1,580,151 1,764,000 5,319,147 500,000 9,120,628 9,345,188 1,690,216 3,762,093 1,720,346 8,399,335 432,445 2,111,349 6,514,334 9,771,502 545,000 18,595,000 -

FY19 CAPEX

FY20 CAPEX 85,915 1,031,843 763,643 2,161,221 2,824,290 750,000 235,258 1,801,402 1,170,911 630,490 10,288,028 5,539,707 595,004 915,441 7,167,604 346,828 1,500,000 2,756,391 3,072,759 1,409,719 1,100,000 5,714,643 12,966,609 2,765,398 6,155,240 1,009,376 4,928,129 311,985 1,523,222 3,195,298 4,792,946 20,000,000 288,018 2,176,436 600,000 2,326,606 952,793 1,855,901 1,031,426 10,718,386 155,062 1,708,505 3,134,061 2,984,574 1,200,000 6,917,501 1,962,336 490,757 1,092,330 649,100 3,169,136 433,806 2,117,995 1,831,420 2,747,131 20,000,000

FY21 CAPEX

Total US CapEx Spend $85,915 $1,031,843 $2,577,052 $2,176,436 $600,000 $2,326,606 $952,793 $1,645,919 $1,958,277 $2,144,482 $3,964,632 $2,161,221 $2,824,290 $1,855,901 $3,000,000 $565,045 $235,258 $3,004,085 $234,013 $26,479,653 $1,658,439 $563,692 $5,310,645 $2,859,577 $20,374,438 $10,970,850 $595,004 $1,946,867 $19,718,534 $155,062 $1,708,505 $3,134,061 $3,331,402 $2,000,000 $8,500,000 $1,540,000 $4,643,000 $1,315,000 $3,429,633 $8,632,000 $11,427,818 $915,837 $1,580,151 $1,764,000 $8,075,538 $3,072,759 $1,409,719 $1,600,000 $1,200,000 $14,835,271 $29,229,298 $1,962,336 $4,946,371 $11,009,664 $3,378,822 $16,496,601 $1,178,236 $5,752,565 $11,541,052 $17,311,579 $1,126,000 $5,071,622 $3,000,000 $18,595,000 $20,000,000 $20,000,000

Exhibit__(ISP-3) Page 4 of 5

Exhibit__(ISP-3) Page 4 of 5

200

Investment Name

CPE Buyback Active Directory Improvements Application Performance Management (APM) RAS/VPN Re-Platform/Mobile US Network Programme US VSTIG Programme US Wireless Programme Monitoring and Alerting RSA Re-platform Cloud Broker - Hybrid Enablement Office 2010 Upgrade Citrix Infrstructure Upgrade (Xenapp and NetScaler) Business Innovation Projects 1 Data Security Orchestration and Self Service Virtual Desktop - DaaS SCI connections US SAP: Dynamic Storage Tiering ICE Replacement US Network Programme US VSTIG Programme US Wireless Programme Data Visualisation Expansion US SAP: Business Warehouse (BW) Consolidation to HANA Enterprise Cloud (HEC) Monitoring and Alerting MWORK and Netmotion Risk Avoidance Improving End User Experience- Cloud based DMZ Service Platform Mobile Broadband POC FY19 Edge Projects FY19 Network Projects Digital Asset Management (DAM) Business Innovation Projects 1 Business Innovation Projects 2 Business Innovation Projects 3 EUC, network, and data center strategy Data Security FY19 Data Centre Projects 1327 Interfaces - 523 FTS, 340 RDX, 245 MQSI, 253 JCAPS, 44 PM4D, 7 VB US Video Conference Programme IS Tools US SAP: Enhancement Pack 9 Upgrade US Network Programme US VSTIG Programme US Wireless Programme Monitoring and Alerting Service Now - Release 3 FY20 Edge Projects FY20 Network Projects EMM Licenses Business Innovation Projects 2 Business Innovation Projects 3 Data Security Hardware and Software Upgrades Data Centre Consolidation efforts FY20 Data Centre Projects Enterprise Data Management Platform Business Innovation Projects 2 Business Innovation Projects 3

Programs Tech. Modernization Tech. Modernization Tech. Modernization Tech. Modernization Tech. Modernization Tech. Modernization Tech. Modernization Tech. Modernization Tech. Modernization Tech. Modernization Tech. Modernization Tech. Modernization Tech. Modernization Tech. Modernization Tech. Modernization Tech. Modernization Tech. Modernization Tech. Modernization Tech. Modernization Tech. Modernization Tech. Modernization Tech. Modernization Tech. Modernization Tech. Modernization Tech. Modernization Tech. Modernization Tech. Modernization Tech. Modernization Tech. Modernization Tech. Modernization Tech. Modernization Tech. Modernization Tech. Modernization Tech. Modernization Tech. Modernization Tech. Modernization Tech. Modernization Tech. Modernization Tech. Modernization Tech. Modernization Tech. Modernization Tech. Modernization Tech. Modernization Tech. Modernization Tech. Modernization Tech. Modernization Tech. Modernization Tech. Modernization Tech. Modernization Tech. Modernization Tech. Modernization Tech. Modernization Tech. Modernization Tech. Modernization Tech. Modernization Tech. Modernization Tech. Modernization Tech. Modernization 4717 4718 4711 4707 4708 4728 4715 4710 4716 4706 4497 4513 4564 4496 4498 4499 4493 4261 4720 4721 4713 4708 4728 4710 4722 4709 4719 4582 4708 4728

4684 4489 4490 4269 4496 4498 4499 4493 4270 3899 4265 4279 4707 4710 4726 4727 4495 4560 4491 4496 4498 4499 4606 4562 4493 4725 4723

INVP # G020 G020 G020 G020 G020 G020 G020 G020 G020 G020 G020 G020 G020 G020 G020 G020 G020 G020 G020 G020 G020 G020 G020 G020 G020 G020 G020 G020 G020 G020 G020 G020 G020 G020 G020 G020 G020 G020 G020 G020 G020 G020 G020 G020 G020 G020 G020 G020 G020 G020 G020 G020 G020 G020 G020 G020 G020 G020

3/31/17 11/30/17 1/31/18 3/16/18 3/31/18 3/31/18 3/31/18 3/31/18 3/31/18 3/31/18 3/31/18 3/31/18 3/31/18 3/31/18 3/31/18 3/31/18 3/31/18 7/5/18 10/31/18 3/31/19 3/31/19 3/31/19 3/31/19 3/31/19 3/31/19 3/31/19 3/31/19 3/31/19 3/31/19 3/31/19 3/31/19 3/31/19 3/31/19 3/31/19 3/31/19 3/31/19 3/31/19 3/31/19 6/1/19 3/24/20 3/31/20 3/31/20 3/31/20 3/31/20 3/31/20 3/31/20 3/31/20 3/31/20 3/31/20 3/31/20 3/31/20 3/31/20 3/31/20 3/31/20 3/31/20 6/1/20 3/31/21 3/31/21

Bill Pool In Service Date

Amortization Period 84 84 84 84 84 84 84 84 84 84 84 84 84 84 84 84 84 84 84 84 84 84 84 84 84 84 84 84 84 84 84 84 84 84 84 84 84 84 84 84 84 84 84 84 84 84 84 84 84 84 84 84 84 84 84 84 84 84 771,429 2,600,000 200,000 400,000 500,000 2,000,000 -

Inception To Date + FY18 5,140,000 275,000 375,000 600,000 3,025,000 2,700,000 1,950,000 450,000 280,000 250,000 800,000 500,000 3,368,613 1,575,000 750,000 550,000 100,000 3,316,000 1,000,000 1,355,000 2,075,000 1,700,000 1,500,000 1,800,000 2,366,000 1,000,000 500,000 300,000 100,000 1,000,000 1,000,000 500,000 3,973,236 3,368,613 3,368,613 771,429 1,575,000 2,000,000 700,000 1,350,000 200,000 3,493,000 1,500,000 660,000 6,000,000 1,000,000 2,500,000 -

FY19 CAPEX 100,000 200,000 5,328,000 1,575,000 700,000 1,500,000 1,000,000 1,500,000 2,000,000 4,000,000 660,000 3,973,236 3,979,236 1,575,000 1,000,000 500,000 4,000,000 1,230,000 -

FY20 CAPEX 1,000,000 4,491,484 4,491,484

FY21 CAPEX

Total US CapEx Spend $5,140,000 $275,000 $375,000 $600,000 $3,025,000 $2,700,000 $1,950,000 $450,000 $280,000 $250,000 $800,000 $500,000 $3,368,613 $1,575,000 $750,000 $550,000 $100,000 $1,355,000 $3,316,000 $2,075,000 $1,700,000 $1,500,000 $2,800,000 $2,366,000 $1,000,000 $500,000 $300,000 $100,000 $1,000,000 $1,000,000 $500,000 $3,973,236 $3,368,613 $3,368,613 $1,542,858 $1,575,000 $2,000,000 $3,300,000 $1,650,000 $400,000 $8,821,000 $1,575,000 $700,000 $1,500,000 $1,000,000 $3,400,000 $2,000,000 $4,000,000 $1,320,000 $3,973,236 $3,979,236 $1,575,000 $7,500,000 $3,500,000 $4,000,000 $4,730,000 $4,491,484 $4,491,484

Exhibit__(ISP-3) Page 5 of 5

Exhibit__(ISP-3) Page 5 of 5

201

Exhibit__ (ISP-4)

Testimony of the Information Services Panel

Exhibit __ (ISP-4) IS Technology Modernization projects and customer benefits

202

Exhibit __ (ISP-4) Page 1 of 10 TECHNOLOGY MODERNIZATION INVESTMENTS

Project/INVP # In Service Date(s) Business Innovation Projects April 2018 4707 April 2019 4708 April 2020 4728

Description of Project/Customer Benefits The Business Innovation Projects will deliver the following:  Big Data Analytics – Set up data lake and Companywide analytics capability  Data cleansing for reporting and data standards compliance; enable Business Message Standards (BMS) to enable safe and secure e-commerce  Data visualization and online interactive dashboards for quick decision making  Process and workflow automation with robotics  Customer Relationship Management (CRM) and Software as a Service (“SaaS”) capability for future customer experience program  CIS system upgrade pilots  Rate engine upgrades  Call center capability enhancements for chat, automated agents, and multichannel problem solving capability  Consumer document management and process simplification  Engineering systems upgrades  Network and connectivity upgrades for field force, yards and trucks  Mobile device capability enhancements with mobile access for applications  Increased collaboration with Office 365, Box and One Drive, a work anywhere, anytime, any device  Video collaboration for office workers, field force and flexible workers/ contractors

203

Exhibit __ (ISP-4) Page 2 of 10 Project/INVP # In Service Date(s) 4564 - US March 2020 SAP: Enhancement Pack 9 Upgrade

4499 – US Wireless Program

April 2018 April 2019 April 2020

Description of Project/Customer Benefits The Upgrade Project will apply the latest SAP service packs for Enterprise Central Component (ECC) , Supplier Relationship Management (SRM) , Process Integration (PI) , Portal, Business Planning and Consolidation (BPC) and Solution Manager to ensure that the SAP application stays within current vendor support and mitigates the risk of system failure by remaining current every two years on the SAP core application.  More reliable procurement, vendor management, inventory management, general ledger, financial reporting, system monitoring, and interface integration, closing and business reporting processes.  More stable and reliable core SAP solution, reduced Online Service System OSS messages and associated OSS note patches, opportunity for the elimination of custom code included in upgrade pack and faster SAP vendor resolution times for production problems and situations. 





4710 – Data Security

April 2018 April 2019 April 2020



The US Wireless Program consists of the following projects:  Wireless Bridge Replacements  Wireless LAN Expansion  Wireless LAN Mgmt. Tools  Wireless Network Expansion This program will expand the current coverage and capacity of the Wireless Local Area Network (WLAN) at various National Grid sites that have been identified as a priority. In addition, this implementation will strengthen the resilience of the WLAN by providing additional corporate and guest network Data Center infrastructure. National Grid yards have become dependent on the use of WLANs for communications to their vehicles, and many of these WLAN access points are no longer supported and are at risk of failure. This project is based around a move to protect data through information rights management and advanced cyber protection both for end points and cloud services. The project will be delivered using Microsoft Secure Productive Enterprise Plan E5, another SAAS based subscription product.

204

Exhibit __ (ISP-4) Page 3 of 10 Project/INVP # In Service Date(s) 4491 – Office October 2018 365 (ICE Replacement)

Description of Project/Customer Benefits 

  

     

This investment is required to replace the current instant messaging, collaboration, and email (ICE) services with a set of similar, or enhanced, services provided by Office 365. The current ICE platform cannot support the business demand due to limitations in the current functionality and the inability of the current service to be upgraded. Enhanced storage capability – Office 365 uses cloud based storage, giving ability to share large files securely, benefitting email and SharePoint services. Network File Share – E3 license option gives potential to unlimited storage, increasing collaboration Archiving solution – Global information records management (GIRM) has requirements to archive the information as per data protection act and regulations. Office 365 E3 licenses provide user friendly and common solution for archiving Mobility – Office 365 is designed to support mobility whether by smartphone, tablet or PC External collaboration – Office 365 is designed to support external collaboration across all services Social collaboration – The social collaboration features of Office 365 ensure employees feel more involved leading to improvements in employee engagement Agile Task Management – Office 365 has an internal planner service which eliminates the need to purchase an agile task management solution (e.g. Trello) Future desktop office upgrades – E3 licenses come with Pro Plus, helping mitigate future upgrade costs of Office 2010 Potential for future capabilities – Office 365 has many additional features which can be implemented to add further value as required

205

Exhibit __ (ISP-4) Page 4 of 10 Project/INVP # In Service Date(s) 4496 – US April 2018 Network April 2019 Program April 2020

Description of Project/Customer Benefits 

 

4722 Hardware & Software Upgrades FY19 Data Center Projects & FY 20 Data Center Projects 4716 4719

April 2020



This project will perform necessary upgrades for hardware refresh and testing for hardware refresh and hardware and software implementation.



Replacement of legacy aging equipment that are running critical applications in legacy data centers. In addition, the expectation is that there will be some services retained in these data centers using the aged infrastructure.

 April 2019 April 2020

The US Network Program consists of the following projects:  Network Data Center  Network Improvement Utilization Monitoring with NG Portal  Network Mgmt. Portal  Network Technology Refresh  Network Transformation Completion - CEMS Provision of a fit for purpose network - Legacy network infrastructure no longer meets the functional requirements of business users. Provision of a fully supported reliable network Removes reliance on aged infrastructure that doesn't meet specifications and is no longer supported, ensuring that the network continues to be reliable and fit for purpose.

206

Exhibit __ (ISP-4) Page 5 of 10 Project/INVP # In Service Date(s) 4498 – US April 2018 VSTIG Program April 2019 April 2020

Description of Project/Customer Benefits 





FY 19 Network Projects & FY 20 Network Projects 4718 4721 4706 - 1327 Interfaces - 523 FTS, 340 RDX, 245 MQSI, 253 JCAPS, 44 PM4D, 7 VB



The hardware and software that make up the legacy network services is now experiencing asset health related issues, which have an operational and business risk of hardware/service failure, performance deterioration and potential of business service interruption. These projects will address these issues.



The primary driver for this project is to mitigate the risks associated with continuing to be reliant on out of support infrastructure. These risks are :  Increased security risk as out of support infrastructure will not receive security patches.  The new technology will provide improvements in data and file transfer. The strategy roadmap for middleware that supports file transfers is SAP PI and Oracle Fusion. Work is required to migrate interfaces from legacy services to strategic services and decommission the legacy services.

April 2019 April 2020 April 2019

The US VSTIG Program consists of the following projects:  US DMZ Risk Avoidance  VSTIG Hardware Refresh  VSTIG Infrastructure Refresh  VSTIG Inter-Regional Load Balance  VSTIG Log Logic Refresh  VSTIG Upgrade This program will upgrade the network infrastructure and bandwidth of the Internet gateway (VSTIG – Verizon Telecommunications Secure Internet Gateway). This will mitigate the existing risk associated with the amount of bandwidth already in use and provide room for growth for new services and future projects which have a requirement to use additional bandwidth that cannot be provided due to current network hardware limitations and bandwidth utilization in the existing VSTIG. This program is an enabler for projects that require additional bandwidth. Mitigates risk of poor performance of internet connections as network reaches full capacity. Mitigates of risk of internet service failure as a result of VSTIG data center failure.



207

Exhibit __ (ISP-4) Page 6 of 10 Project/INVP # In Service Date(s) 4606 – Data April 2019 Visualization Expansion

Description of Project/Customer Benefits 

 

4562 - US SAP: April 2019 Business Warehouse (BW) Consolidation to HANA Enterprise Cloud (HEC) 4261 – Service Now – Release 3

April 2020

4497 – US Video Conference Program

June 2019

   

This investment will expand the use of tableau across more use cases across business areas and identify requirements for reporting, configuring and building reports. Provides data, visualizations and analytics to provide invaluable insights for both operational and strategic decision making in how we use our resources. Creates the ability to discover hidden savings potential by visualizing consumption data of many different resources. This investment is to consolidate National Grid Business Intelligence (BI) / Business Warehouse (BW) to HANA Enterprise Cloud (HEC).: Consolidates the reporting solutions onto a single platform to reduce costs, including infrastructure hosting and application support costs. Simplifies the reporting solution for the business users. Increases cross functional reporting capabilities.



Ongoing improvements to SMI (Service Management Integration) processes, including the extension of channels available for contacting help desk and resolving issues.  Improves reliability of support processes. Improving management of IS related issues.  The US Video Conference Program consists of the following projects:  Cisco Collaboration Meeting Rooms (CMR) Implementation  Collaboration Room Upgrade  Legacy IP Unit Upgrades  Legacy ISDN Unit Upgrades  Syracuse A39/40 Upgrades  Room Upgrades This program proposes that NG review the VC support provided by Verizon and make improvements in delivery and end to end reporting.

208

Exhibit __ (ISP-4) Page 7 of 10 Project/INVP # In Service Date(s) 4582 – June 2020 Enterprise Data Mgmt. Platform

Description of Project/Customer Benefits 

 



4560 - US SAP: Dynamic Storage Tiering

July 2018



   

Evaluation, selection and provision of an Enterprise Data Management platform that will provide Data Quality Management (DQM), Export Transport and Load (ETL), and Master Data Management (MDM) services. This platform will provide US enterprise services for customer, GAs, and electric business domains. This project will implement the data management platform in four major stages: building initial platform and data management tools; building ETL tool: building MDM hub; and integrating hub with National Grid systems and master records within the hub. For business benefits to be realized, subsequent applications such as GBE, will integrate and utilize the platform. Future analytic systems and BI tools will integrate with the platform to realize the benefits of more accurate and complete reporting. The HANA reporting environment is currently constrained, due to infrastructure and licensing agreements to 2 TB of in-memory storage. This investment is to implement dynamic tiering, which would allow HANA to scale so that it can handle the increasingly growing data volumes from Enterprise Central Component (ECC), Powerplan and other source systems. This project will provide options for storing data based on access, frequency of use and cost. Optimizing the storage use Increasing usage of HANA platform for business analytics and reporting Performance improvement Allowing non-SAP data storage in HANA for crossfunctional reporting

209

Exhibit __ (ISP-4) Page 8 of 10 Project/INVP # In Service Date(s) 4493 – April 2018 Monitoring and April 2019 Alerting April 2020

Description of Project/Customer Benefits        

4709 – Data Center Consolidation Efforts

April 2020

4715 – EUC, Network and Data Center Strategy FY 19 & FY 20 Edge Projects

April 2019

4717 4720

April 2019 April 2020

Build a centralized (NG owned) Application Performance Monitoring (APM) platform to collect, present and store data from an end user experience. Step-change reduction in incident MTTR (Mean Time To Recover) Earlier detection of performance issues Fewer false alarms Faster identification of fault domain (server/citrix/network etc.) Faster diagnosis of faults Real-time dashboards shared will build transparency, show good performance, and true scale of slowdowns/outages Ability to trace individual user performance history will allow validation of anecdotes



Some physical legacy data centers have to be retained while remediation work is carried out on these applications (retained apps). Once all retained applications are remediated and moved to the new data center, the legacy data centers will need to be decommissioned. Piece of strategy work to assess the current state and plan against the demands to determine whether the IS strategies and plans support achievement of those business strategies. 



As we use more cloud based services that dictate the pace of change, we will need new capability to manage this impact on National Grid. This includes services to manage the change as well as reduce complexity in estate to reduce impact of changes. As we move to any device working in the cloud, our focus will change from end points and applications to data and the need to protect the data regardless of where it resides. Includes providing end user devices to employees, and refresh and management of existing devices in new ways to react to the merging of mobile and PC worlds.

210

Exhibit __ (ISP-4) Page 9 of 10 Project/INVP # In Service Date(s) 4265 – Office April 2018 2010 Upgrade

4726 – Orchestration and Self Service

April 2018

Description of Project/Customer Benefits 

Upgrade of Office 2010 software will bring improved features, improved security, and support for real time collaboration of documents as well as better cloud integration.



The provisioning of strategic cloud provider(s) will reduce the number of cloud-hosting environment that will need integration. time to market, cost and complexity for enterprise services such as the Strategic Analytics Platform, Mobile Application Development Environment, etc. Creates the strategy that will build the processes used by these cloud services, along with the ability to selfprovision resources.

 

4727 – Virtual Desktop - DaaS

April 2018

4269 – March 2018 RAS/VPN RePlatform/Mobile





  

To implement a desktop as a service (DaaS) offering that is a virtual desktop infrastructure (VDI) hosted by a third-party cloud service provider. DaaS utilizes a multitenancy architecture, which means that a single instance of an application is served to multiple users, referred to as "tenants." The service provider is responsible for managing the cloud and the underlying infrastructure. The level of service will vary depending on the company needs. The original Juniper Remote Access SSL VPN (RAS) deployed by Verizon is now five years old and doesn’t support some of the latest mobile capability or integrate easily with other technologies that have been implemented (Cisco ISE). This Project proposes to replace the existing RAS VPN solution with a more modern platform that has improved mobile VPN capability and improved integration with National Grid technologies. Enables better mobile support - Mobile VPN capability to support deployment and use of mobile applications Improves user experience with additional VPN connection modes Integration with Identity Services Engine (ISE)

211

Exhibit __ (ISP-4) Page 10 of 10 Project/INVP # In Service Date(s) 4713 – EMM April 2020 Licenses

Description of Project/Customer Benefits

4684 – CPE Buyback



March 2017

The Enterprise Mobile Management System (EMM) project will secure corporate data and information stored on mobile devices, mainly by ensuring that policies are enforced on the device. This project will procure the necessary licenses to manage these mobile devices.



All Other – 11 Tech Mod investments with an NMPC Allocation impact of less than $0.1M each

Various



The project will purchase the Cisco assets that are currently leased from Verizon. Facilitates revisions to supplier arrangements/renegotiations as Verizon contract expires o Opens opportunity to coordinate Cisco to support future services and innovation. Includes the following projects  Active Directory Improvements  Application Performance Management (APM)  Citrix Infrstructure Upgrade (Xenapp and NetScaler)  Cloud Broker - Hybrid Enablement  Digital Asset Management (DAM)  Improving End User Experience- Cloud based DMZ Service Platform  IS Tools  Mobile Broadband POC  MWORK and Netmotion Risk Avoidance  RSA Re-platform  SCI connections

212

Exhibit__ (ISP-5)

Testimony of the Information Services Panel

Exhibit __ (ISP-5) National Grid’s cyber security IS projects

213

Exhibit __ (ISP-5) Page 1 of 5 CYBER SECURITY IS INVESTMENTS

Cyber Security Investments Prior to Rate Year (After Historic Test Year) Project/INVP # Enterprise Network Security

In Service Date June 2017

Program

Description of Project/Customer Benefits

Cyber Security 1 Program (Original Scope)

Implementation of an automated and centralized Enterprise Network Security providing National Grid with analytical information and capability to identify areas of risks that require action and adequately protect business operations from threats. CNI (Critical Network Infrastructure) Network Security will reinforce and strengthen security capabilities of current US CNI environments to mitigate external and internal threats to CNI operations. CNI SIEM will incorporate logs from critical applications in the CNI environment into the Cyber Security Operations center and deliver threat correlation and security analytics capabilities to enhance protection of assets in the CNI environment. The SSN will deliver a secured network segment comprising of different network zones to ensure that the security solutions are provisioned in accordance with industry best practice and National Grid policies and standards. This network will facilitate management of the security solutions, securing and segregating CNI security information on its own network. This project will enable Enterprise Network Security tools and solutions to be expanded to collect the CNI network security data and be migrated on to the SSN.

CNI Network Security

December 2017

Cyber Security 1 Program (Original Scope)

CNI SIEM

December 2017

Cyber Security 1 Program (Original Scope)

Security Services Network (SSN)

December 2017

Cyber Security 1 Program (Resanctioned Scope)

Migration of Enterprise Network Security (ENS) capabilities to SSN Cloud Security

December 2017

Cyber Security 1 Program (Resanctioned Scope)

May 2017

Cyber Security 2 Program

The project will deliver an enterprise capability to gain visibility into the use and risk of cloud services, detect threats, and seamlessly enforce security, compliance, and governance policies. This solution will provide enterprise business capabilities to help identify and understand cyber risk of all cloud services in use; ensure authorized users can access data stored in the cloud; monitor cloud activity, detect compromised user accounts and insider threats; avoid costly fines and reduce reputational risk by continuously monitoring cloud data usage.

214

Exhibit __ (ISP-5) Page 2 of 5 Project/INVP #

In Service Date August 2017

Program

Description of Project/Customer Benefits

Cyber Security 2 Program

Risk Based Authentication – 2FA token alternative

June 2017

Cyber Security 2 Program

Identity & Access Management: Role Based Access Management

October 2017

Cyber Security 2 Program

Enhanced DLP Gateway and Endpoint

December 2017

Cyber Security 2 Program

The project will introduce user behavior analytics that will allow National Grid the capability to find unknown and hidden threats using data science, machine learning, behavior base lining, peer group analytics and advanced correlation. The capability will enable for better detection and response to variances in baseline activity, allowing for increased focus and remediation of potential attacks. The project will enhance the capability of providing strong Risk-Based authentication using a token-less, mix and match hardware and software authenticator solution. It will introduce a new method of authentication based on a risk profile associated with a given transaction ensuring users are who they say they are and are accessing systems and information associated with their profile. Role Based Access Management (RBAC) will reduce the complexity and cost of security administration in large networked applications by grouping access into functional roles. RBAC will facilitate the management of users and their access roles in a controlled, automated and effective manner, allow for access to be limited to system applications to only authorized users and will simplify identity and access control compliance by managing access based on a user's role, rather than on an individual, user-by-user basis. Data Loss Prevention (DLP) will enable National Grid's businesses to detect sensitive data in the organization and then be able to identify, implement, and enforce policies for protecting the data without forcing any modifications to the data. It will limit the way that an authorized user who has access to data is able to use the data. Implementation of such technology provides the business with the ability to manage and reduce the risk of information loss.

Threat Behavior Modeling

215

Exhibit __ (ISP-5) Page 3 of 5 Rate Year (Cyber Security 2 Program) Investments Project/INVP # CSP 2: US CNI Intrusion Detection / Prevention Phase 1

In Service Date April 2018

CSP 2: Identity & Access Management: Fine Grained Access Management

April 2018

CSP 2: vStig Scaling Upgrades

August 2018

CSP 2: IT/OT Discovery and Implementation Phase 1

October 2018

CSP 2: Security Research Lab

October 2018

Description of Project/Customer Benefits This project will ensure adequate security protection to cyber assets supporting critical reliability functions and processes across National Grid US CNI environments. The Intrusion Detection Solution (IDS) will provide the ability to monitor the host, network and/or application for malicious activity, signaling if an attack or unauthorized activity is occurring. In addition to monitoring traffic, data can be analyzed to assist in preserving the integrity of data. The solution will provide the US CNI businesses with the capability to detect abnormal patterns that deviate from normal behavior or use known patterns of unauthorized behavior to predict and detect similar attacks. Fine Grained Access Management is a more detailed level of authorization, primarily controlled by the respective application. It takes into account the protected resources and its configured policies, as well as information that may include resource-specific and user attributes and the context of the request. This will allow for better controls around user access, enforce controls on all types of business resources or assets, create role and access control policies to define constraints regarding which users are assigned roles and access to software components, distribute policies to integrated applications, and specify who can do what to which resource, when it can be done, and how. This project will provide necessary updates to National Grids perimeter network environment, Verizon Strategic Internet Gateway (vSTIG). The updates will include enhancements to existing security capabilities that protect against an ever-changing threat landscape focused on the perimeter network. This capability will provide the US business the ability to protect its assets from any outside malicious cyber threat through the digital network overlay. This project will explore the information technology (IT) and operational technology (OT) environments to assess how best to ensure that OT systems are managed effectively, investigating the convergence, alignment, and integration with IT systems. The project will allow National Grid to assess the current risks around operational technology and be an enabler for further dialogue with the business, around best approaches to manage the growing operational technology estate and associated risks and issues. This project will ultimately allow National Grid the capabilities to discover Smart/IT/OT computing and other devices across the National Grid environment in a centralized location, allowing the business to gain a full inventory of devices/applications/technologies, determine risks associated with those components, identify relevant controls, and management of devices/applications /technologies through their lifecycle. This project will implement a National Grid Security Research Lab with a dedicated environment to performing testing and research on new technologies being introduced to the National Grid environment. The project will enable applied research focused on cyber threats and countermeasures, secure multi-level information sharing, resilient command and control network architectures, reverse engineering, information operations and exploitation, high performance computing, and data analytics. This project will ensure new technologies introduced into the National Grid environment do not introduce new vulnerabilities, as well as provide actionable information to address emerging threats.

216

Exhibit __ (ISP-5) Page 4 of 5 CSP 2: US CNI Security Enhancements Phase 1

November 2018

The CNI Security enhancements are intended to help National Grid's Critical National Infrastructure businesses and support its continual efforts to maintain the safety and reliability of their operations by enhancing and building on its security and resilience within the infrastructure. These enhancements will help mitigate external and internal evolving security threats to National Grid CNI operations; ensure adequate security protection to cyber assets supporting critical reliability functions and processes; provides the ability for the business to scale and help minimize potential loss of an operations service; and potentially reduce financial penalties and reputational damage due to security breaches

Data Year (Cyber Security 2 Program) Investments Project/INVP # CSP 2: Identity & Access Management: Privileged Access Management

In Service Date April 2019

Description of Project/Customer Benefits Privileged Access Management (PAM) will provide discovery, authentication, authorization, password management with scheduled changes, auditing and compliance reporting capabilities for privileged account users. The PAM solution will allow for privileged National Grid user accounts across CNI and business systems and applications to exist in a small and controlled number. The accounts will be managed by the PAM solution, which will temporarily provision and de-provision privileged access to users and provide a detailed audit trail of privileged user actions

CSP 2: Domain Based Security Phase 1

April 2019

This project will implement a Domain-based approach to information assurance for the identification, analysis, and documentation of security issues in the enterprise. The approach describes the requirements for security in the organization, taking into account the business that needs to be supported. Security Policy Domains will establish a set of entities, physical and logical, that are subject to a common security policy and also allow each business unit to adopt a risk-based approach to the implementation of information security controls. The first phase of the project will focus on conducting risk-assessments on the different business lines, review of current policy framework, and develop more personalized, business specific policies based on business risk appetite and tolerance.

CSP 2: Security Incident Event Management Phase 4

May 2019

This project will build on the existing SIEM infrastructure implemented as part of the Cyber Security 1 Program. The initiative will focus on identification and prioritization of additional application, system, and device logs from across National Grid into the Cyber Security Operations center to contribute to the holistic, single-pane of glass view of the company’s networks. SIEM 4 will deliver integration/onboarding of a subset of the identified cyber assets, with SIEM 5 delivering the rest. The project will deliver enhanced monitoring and provide log auditing and review and incident response. The project will ensure alignment with cyber security best practices and provide the CSOC and Network teams

217

Exhibit __ (ISP-5) Page 5 of 5 with actionable information to allow faster response to security incidents. CSP 2: Big Data Security Analytics Phase 1

May 2019

This project will introduce the new business capability focused on Big Data Security Analytics. This initiative will provide the capability to examine large volumes of security related data from various sources – including traditional security sources such as log or audit files, images, social data, sensors, etc. This project will provide real-time analysis, providing prediction and mitigation means to uncover hidden threats, detect attack patterns and trends, identify suspicious anomalies, and aid in the removal of security threats.

CSP 2: US CNI Intrusion Detection / Prevention Phase 2

April 2020

This project will introduce an Intrusion Protection Solution that will operate the process of performing intrusion detection, with the added capability of attempting to prevent detected possible incidents. This capability will reduce business impact of potential intrusions by initiating timely and appropriate responses to attacks, improve the effectives of existing preventative controls by improving the response time to major critical events and continue compliance with laws and regulations. This project will be managed and staffed internally, and will be integrated with Cyber Security Operations Center.

CSP 2: Identity & Access Management Phase: Shared Area Access Management CSP 2: Domain Based Security Phase 2

April 2020

Shared Area Access Management – Project to extend the IAM solution to administer access to the various shared files areas that exist across National Grid.

April 2020

The second phase of this project will build upon the efforts delivered by Domain Based Security Phase 1. Leveraging the risk assessments and resulting policies developed for National Grid, this phase will implement the specific information security controls (such as network segregation) identified by the policy and risk for each business.

CSP 2: Security Incident Event Management Phase 5

May 2020

This project is the second phase of SIEM 4 highlighted above. SIEM 5 will build on onboarding the next phase of identified application, system, and device logs from SIEM 4. The project will deliver enhanced monitoring, help manage users and service privileges, directory services and other system configuration changes; as well as provide log auditing and review and incident response. The project will ensure alignment with cyber security best practices and provide the CSOC and Network teams with actionable information to allow faster response to security incidents.

218

Exhibit__ (ISP-6)

Testimony of the Information Services Panel

Exhibit __ (ISP-6) National Grid’s cyber security projections for system modernization

219

E Exhibit __ (IS SP-6) Page 1 of 3  

SYSTEM M MODERN NIZATION CYBER SE ECURITY C CAPABILIITIES

Network k Security Services The proteection of thee organizatio on’s critical network n infrrastructure (ee.g., core sw witches, routeers, proxy gateways, etc.)) against cyb ber-attacks. includes i lim miting vulneraabilities in thhe network infrastruccture and preeventing unaauthorized acccess, misusse, modificattion or deniaal of a netwoork resource or network itself. i

Data Seccurity Serviices Provides protection of o data from accidental or o intentionaal but unauthhorized modiification, on or disclossure through h the use of data d protectioon solutionss and other safeguards too destructio ensure th hat confidenttiality and in ntegrity is maaintained.

Identity & Access Managemen M t Services Services provide the managemen nt of individu ual identitiess, and their aauthenticatioon, authorizaation, n or across system s and eenterprise booundaries, w with the goal of and priviileges/permissions within

220

Exhibit __ (ISP-6) Page 2 of 3  

increasing security and productivity while decreasing cost, downtime and repetitive tasks. Ensure that only authorized entities can access resources in the enterprise.

Security Operations Control Center Services Provides remediation support and consultation to mitigate threats and respond to attacks. Staffed by experienced, well- trained and well-equipped security professionals. Enables faster, accurate detection and response to security incidents to protect assets.

Host & Endpoint Security Services Monitor the state of endpoints for threat indicators, investigate events to determine severity. New smart grid technologies, and particularly smart meters, smart appliances, and similar types of endpoints, create new privacy and security risks and concerns.

Security Policy Management Services Managing and updating policies which are required for successful implementation of security strategies within National Grid. Essential to provide management direction and support for information security in accordance with business requirements and relevant laws and regulations.

Cryptography Services Strengthen the confidentiality and integrity of sensitive information during use, transmission, and storage. Forms the foundation of securing data in transit (secure communications) and data at rest (secure storage).

Change & Configuration Management Services Processes by which the organization manages and documents all configuration changes to the Smart Grid information system.. Ensures that the Smart Grid’s information system configuration – and the cybersecurity program in general – can only undergo approved and tested changes.

221

Exhibit __ (ISP-6) Page 3 of 3  

Security Awareness & Training Services Reduce the risk of a human error resulting in security breach by ensuring that customers, employees, contractors and third party users are aware of information security policies, threats and concerns as well as their responsibilities and liabilities.

Application Security Services Embedded within software development processes to protect the various applications that might be vulnerable to a wide variety of threats. Security measures to minimize the likelihood that unauthorized code will be able to manipulate applications to access, steal, modify or delete sensitive data.

Third Party Assurance Services Ensure that third parties protect information under their control from unauthorized access, copying, modification, inappropriate disclosure, or loss by having information privacy protections in policies, procedures, and practices relating to data security and to disclosure and accuracy of data disclosed to the Third Party’s Contracted Agents, or to other Third Parties.

Remote Access Services Access to Smart Grid information system by a user (or process acting on behalf of a user) communicating through an external, non-organization controlled network (e.g., the Internet).

Privacy Services Accountabilities, policies, procedures and business practices, and a fabric of technical and operational controls to manage data privacy related risks more effectively.

 

222

Exhibit__ (ISP-7)

Testimony of the Information Services Panel

Exhibit __ (ISP-7) Forecast of Purchased Gas Expense Rate Year and Data Years

223

Exhibit__(ISP-7) Page 1 of 2

Niagara Mohawk Power Corporation d/b/a National Grid Incremental Operating Expenses (Opex)

Program/Release Description Cyber Security Cyber Security Cyber Security Cyber Security Cyber Security Cyber Security Cyber Security Cyber Security Cyber Security Cyber Security Cyber Security Cyber Security Cyber Security FY18 Plan FY18 Plan FY18 Plan FY18 Plan FY18 Plan FY18 Plan FY18 Plan FY18 Plan FY18 Plan FY18 Plan FY18 Plan FY18 Plan FY18 Plan FY18 Plan FY18 Plan FY18 Plan FY18 Plan FY18 Plan Growth Play Book Growth Play Book Growth Play Book Growth Play Book Other Mandates Other Mandates Other Mandates Other Mandates PSC Mandate Tech. Modernization Tech. Modernization Tech. Modernization Tech. Modernization Tech. Modernization Tech. Modernization Tech. Modernization Tech. Modernization Tech. Modernization Tech. Modernization Tech. Modernization Tech. Modernization Tech. Modernization Tech. Modernization Tech. Modernization Tech. Modernization Tech. Modernization Tech. Modernization Tech. Modernization Tech. Modernization Tech. Modernization Tech. Modernization Tech. Modernization Tech. Modernization Tech. Modernization Tech. Modernization Tech. Modernization Tech. Modernization Tech. Modernization Tech. Modernization Tech. Modernization Tech. Modernization Tech. Modernization Tech. Modernization Tech. Modernization Tech. Modernization Tech. Modernization Tech. Modernization Tech. Modernization

Investment Name IT/OT Discovery and Implementation Phase 1 Identity & Access Management: Privileged Access Management Domain Based Security Phase 1 Security Incident Event Management Phase 4 Big Data Security Analytics Phase 1 Situation Intelligence & Cyber Intelligence: Phase 2 US CNI Intrusion Detection/Prevention Phase 2 Identity & Access Management: Shared Area Access Management Security Incident Event Management Phase 5 Security Incident Event Management (SIEM) 6 Big Data Security Analytics - Phase 2 IT/OT Discovery and Implementation: Phase 2 Data Visualization Gas Service Database - UNY INVP 3932 Call Center Customer Contact Center/SDC Technology Upgrade Implement Solution INVP 3737 US CNI GMS SCADA Upgrade & CRIS Data Archival General Ledger Interface CRIS SAP Informatica Upgrade/Microstrategy Replacement Program Cisco Prime Aged Printer refresh RSA Token refresh STORMS Capital Cost Estimates INVP 4408 Doc Mgmt Systems Replacement Delivery INVP 4398 Storms/ISched Upgrade US MDS-Energy Accounting System (EAS) migration to Wholesale Settlement Application (WSA Gas Service Database - DNY (LI and NYC) Contractor Management Modernization Substation Monitoring-DobleARMS Customer Bill Redesign US CNI-EMS Lifecycle Hardware and Software Upgrade Customer Experience Transformation-Communication Preference Managemen US SAP: Business Planning US SAP: FERC on Hana (FOH) Governance Risk & Compliance (GRC) Optimization/Upgrade Regulatory Mandates - FY19 Regulatory Mandates - FY20 Regulatory Mandates - FY21 US Control-Gas Electronic Bulletin Board (EBB) Upgrade INVP 4411D New Gas Connections US SAP: Enhancement Pack 9 Upgrade Enterprise Data Management Platform US Network Program US Network Program US VSTIG Program US Wireless Program US Wireless Program Data Visualization Expansion US SAP: Business Warehouse (BW) Consolidation to HANA Enterprise Cloud (HEC) US Video Conference Program US SAP: Dynamic Storage Tiering Monitoring and Alerting Monitoring and Alerting Service Now - Release 3 IS Tools MWORK and Netmotion Risk Avoidance Improving End User Experience- Cloud based DMZ Service Platform Mobile Broadband POC FY20 Edge Projects Business Innovation Projects 1 Business Innovation Projects 2 Business Innovation Projects 2 Business Innovation Projects 2 Business Innovation Projects 3 Business Innovation Projects 3 Business Innovation Projects 3 EUC, network, and data center strategy Data Security Data Security Orchestration and Self Service Hardware and Software Upgrades Data Centre Consolidation efforts Virtual Desktop - DaaS FY19 Data Center Projects FY20 Data Center Projects 1327 Interfaces - 523 FTS, 340 RDX, 245 MQSI, 253 JCAPS, 44 PM4D, 7 VB INVP4605 - IS Sourcing Renewal EMM Phase2 Azure Core Service Enablement Total OPEX

INVP 3683 3683 3683 3683 3683 3683 3683 3683 3683 3683 3683 3683 3683 3949 3932 3737 4485 4486 4469 4679 4689 4683 4467 4408 4398 4481 3948 4151 3982 4704Q 4568 4426 4217 4563 4222

4479 4411D 4564 4582 4496 4496 4498 4499 4499 4606 4562 4497 4560 4493 4493 4261 4513 4725 4723 4720 4707 4708 4708 4708 4728 4728 4728 4715 4710 4710 4726 4722 4709 4727 4716 4719 4706 4605

12-Months Ending March 31, 2019 $500,000 $640,000 $200,000 $12,500 $100,000 $120,000 $60,000 $0 $0 $0 $0 $0 $0 $15,000 $547,000 $317,000 $200,000 $180,000 $15,000 $0 $0 $0 $194,000 $19,380 $72,000 $265,000 $25,000 $825,000 $5,000 $190,318 $100,000 $704,000 $280,000 $280,000 $160,000 $6,000,000 $0 $0 $193,000 $136,000 $2,427,000 $450,000 $410,000 $0 $50,000 $50,000 $0 $810,000 $810,000 $590,000 $464,000 $50,000 $0 $20,000 $400,000 $20,000 $50,000 $20,000 $0 $794,647 $673,723 $0 $0 $673,723 $0 $0 $771,429 $675,000 $0 $750,000 $750,000 $250,000 $500,000 $250,000 $0 $300,000 $464,000 $200,000 $250,000 $26,278,720

12-Months Ending March 31, 2020 $0 $0 $0 $0 $0 $0 $100,000 $640,000 $12,500 $0 $100,000 $500,000 $0 $0 $0 $236,000 $0 $20,000 $0 $2,000,000 $4,000,000 $660,000 $0 $0 $0 $0 $0 $1,290,000 $0 $0 $0 $0 $0 $290,000 $140,000 $0 $6,000,000 $0 $0 $0 $592,000 $450,000 $0 $70,000 $0 $0 $50,000 $0 $0 $10,000 $0 $0 $50,000 $0 $0 $0 $0 $0 $1,000,000 $0 $0 $794,647 $0 $0 $794,647 $0 $0 $0 $675,000 $750,000 $0 $250,000 $500,000 $0 $500,000 $0 $3,850,000 $200,000 $250,000 $26,774,794

12-Months Ending March 31, 2021 $0 $0 $0 $0 $0 $0 $0 $0 $0 $12,500 $100,000 $500,000 $100,000 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $1,215,000 $0 $0 $0 $0 $0 $260,000 $0 $0 $0 $6,000,000 $0 $0 $0 $450,000 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $898,297 $0 $0 $898,297 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $10,434,094

Total OPEX Spend $500,000 $640,000 $200,000 $12,500 $100,000 $120,000 $160,000 $640,000 $12,500 $12,500 $200,000 $1,000,000 $100,000 $15,000 $547,000 $553,000 $200,000 $200,000 $15,000 $2,000,000 $4,000,000 $660,000 $194,000 $19,380 $72,000 $265,000 $25,000 $3,330,000 $5,000 $190,318 $100,000 $704,000 $280,000 $830,000 $300,000 $6,000,000 $6,000,000 $6,000,000 $193,000 $136,000 $3,019,000 $1,350,000 $410,000 $70,000 $50,000 $50,000 $50,000 $810,000 $810,000 $600,000 $464,000 $50,000 $50,000 $20,000 $400,000 $20,000 $50,000 $20,000 $1,000,000 $794,647 $673,723 $794,647 $898,297 $673,723 $794,647 $898,297 $771,429 $675,000 $675,000 $1,500,000 $750,000 $500,000 $1,000,000 $250,000 $500,000 $300,000 $4,314,000 $400,000 $500,000 $63,487,608

224

Exhibit__(ISP-7) Page 2 of 2

Niagara Mohawk Power Corporation d/b/a National Grid Incremental Run the Business (RTB) Operating Expenses

Program/Release Description FY18 Plan FY18 Plan FY18 Plan FY18 Plan FY18 Plan FY18 Plan FY18 Plan FY18 Plan FY18 Plan FY18 Plan FY18 Plan FY18 Plan FY18 Plan FY18 Plan FY18 Plan FY18 Plan FY18 Plan FY18 Plan FY18 Plan FY18 Plan FY18 Plan FY18 Plan FY18 Plan FY18 Plan FY18 Plan FY18 Plan FY18 Plan FY18 Plan FY18 Plan FY18 Plan FY18 Plan FY18 Plan FY18 Plan FY18 Plan FY18 Plan FY18 Plan FY18 Plan FY18 Plan FY18 Plan FY18 Plan FY18 Plan FY18 Plan FY18 Plan FY18 Plan Growth Play Book Growth Play Book Growth Play Book Other Mandates PSC Mandate PSC Mandate Tech. Modernization Tech. Modernization Tech. Modernization Tech. Modernization Tech. Modernization Tech. Modernization Tech. Modernization Tech. Modernization Tech. Modernization Tech. Modernization Tech. Modernization Tech. Modernization Tech. Modernization Tech. Modernization Tech. Modernization Tech. Modernization Tech. Modernization Tech. Modernization Tech. Modernization Tech. Modernization Tech. Modernization Tech. Modernization Tech. Modernization Tech. Modernization Tech. Modernization Tech. Modernization Tech. Modernization Tech. Modernization Cyber 1 Cyber 1 Cyber 1 Cyber 1 Cyber 1 Cyber 1 Cyber 1 Cyber 2

Description Of Run the Business (RTB) Costs INVP 2577C ArcFM Software Upgrade INVP 3737 US CNI GMS SCADA Upgrade & INVP 4045 Double Pole Mgmt DB INVP 4398 Storms/ISched Upgrade INVP 3486 US MDS-Itron Enterprise Edition (IEE) INVP 3932 Call Center Customer Contact Center/SDC Technology Upgrade Implement Solution INVP 4390 Plastic Fusion II INVP 4408 Doc Mgmt Systems Replacement Delivery INVP 4170 Time Transformation INVP 4420 US CNI OMSFocalPoint Infrastructure Upgrade INVP 4464 Data Visualization INVP 4631 Box Enablement US Mobile Device Refresh HRIS Simplification Program HRIS Simplification Program (Customer Benefits) Informatica Upgrade/Microstrategy Replacement Program US MDS-Energy Accounting System (EAS) migration to Wholesale Settlement Application (WSA) Ageing System Stabilization/Upgrades - FY18 CRIS Data Archival General Ledger Interface CRIS SAP Substation Monitoring-DobleARMS Gas Capital Investment Planning Tool US Control-Gas System Operating Procedure (SOP) Upgrade Computapole Enhancements to Support Inspection Types Changes to ACIS for PMCC Civil Vendor Billing Cascade Electric Application Upgrade Project Gas Service Database - UNY Gas Service Database - DNY (LI and NYC) Contractor Management Modernization WIFI for Fleet Services Diagnostic Laptops US CNI-EMS Lifecycle Hardware and Software Upgrade Travel & Expense Management (T&E) and Global Master Service Provider (MSP) Strategy Network Transformation Completion - CEMS Cisco Prime RSA Token refresh Microsoft ELA Renewal US Video Conferencing upgrade for RW INVP4298-NY REV Clifton Park Demo Information INVP4394-NE Gas Leak Recheck (next Phase) Voice Recording New Medical System FERC Wholesale Customer System Nightcrawler Asset Update MaaS 360 Payoff US SAP: Business Planning US SAP: FERC on Hana (FOH) Governance Risk & Compliance (GRC) Optimization/Upgrade US Control-Gas Electronic Bulletin Board (EBB) Upgrade INVP 4124 Auto Remote Net Meter INVP 4411D New Gas Connections US SAP: Enhancement Pack 9 Upgrade ICE Replacement US Network Program US Network Program US VSTIG Program US VSTIG Program US Wireless Program US Wireless Program Data Visualization Expansion US SAP: Business Warehouse (BW) Consolidation to HANA Enterprise Cloud (HEC) US Video Conference Program US SAP: Dynamic Storage Tiering Monitoring and Alerting Monitoring and Alerting Service Now - Release 3 IS Tools Application Performance Management (APM) RSA Re-platform FY20 Edge Projects Data Security Data Security Virtual Desktop - DaaS FY19 Data Centre Projects FY20 Data Centre Projects 1327 Interfaces - 523 FTS, 340 RDX, 245 MQSI, 253 JCAPS, 44 PM4D, 7 VB SCI connections INVP4605 - IS Sourcing Renewal Legacy Migration of Web Access Portal User to VZ RSA Service Identity and Access Management Phase 2 Identity and Access Management Phase 3 CNI Network Security End user initiated secure file & email transfer Enterprise Network Security US Cyber Security Operations Center Security Information & Event Management - Phase 2 Cyber Security 2 Delivery Total RTB

INVP 2577C 3737 4045 4398 3486 3932 4390 4408 4170 4420 4464 4631 4395 4144 4469 4481 4389 4485 4486 3982 4466 4480 4462 4487 3986 3949 3948 4151 3956 4568 4578 4647 4679 4642 4632 4298 4394 4473 3718 4214 4554 4682 4217 4563 4222 4479 4124 4411D 4564 4491 4496 4496 4498 4498 4499 4499 4606 4562 4497 4560 4493 4493 4261 4513 4490 4270 4720 4710 4710 4727 4716 4719 4706 4495 4605

For 12-Months Ending March 31, 2019 $325,000 $174,000 $32,000 $294,000 $27,000 $642,000 $264,000 $440,000 $522,000 $90,000 $506,000 $572,000 $300,000 $2,400,000 ($1,164,360) $443,000 $275,000 $200,000 $0 $2,000 $80,000 $112,000 $36,000 $50,000 $29,000 $15,000 $40,000 $15,000 $0 $40,000 ($2,000) $350,000 $27,200

For 12-Months Ending March 31, 2020 $325,000 $611,000 $32,000 $294,000 $27,000 $642,000 $264,000 $1,351,000 $522,000 $90,000 $506,000 $572,000 $300,000 $2,400,000 ($1,164,360) $443,000 $275,000 $200,000 $35,000 $6,000 $80,000 $112,000 $36,000 $50,000 $29,000 $15,000 $40,000 $15,000 $0 $40,000 ($2,000) $350,000 $27,200

$900,000 $30,000 $52,400 $75,000 $300,000 $105,000 $142,000 $2,000 ($16,800) $0 $0 $0 $779,000 $30,000 $324,000 $0 ($1,380,200) $1,155,000 $0 $120,000 $0 $165,000 $0 $640,000 $11,000 $520,000 $177,000 $75,000 $0 $150,000 $100,000 $75,000 $150,000 $0 $144,000 $0 $350,000 $100,000 $0 $62,500 $100,000 ($1,500,000) $50,000 $267,121 $168,448 $513,622 $25,043 $2,196,191 $133,415 $131,253 $1,897,000 $16,454,833

$250,000 $900,000 $30,000 $52,400 $75,000 $300,000 $105,000 $142,000 $2,000 ($16,800) $0 $0 $40,000 $779,000 $30,000 $403,000 $178,000 ($1,499,000) $0 $1,155,000 $0 $120,000 $0 $260,000 $640,000 $43,000 $370,000 $236,000 $0 $75,000 $150,000 $160,000 $75,000 $150,000 $500,000 $0 $144,000 $500,000 $0 $200,000 $62,500 $100,000 ($2,500,000) $50,000 $267,121 $168,448 $513,622 $25,043 $2,196,191 $133,415 $131,253 $3,017,000 $19,236,033

For 12-Months Ending March 31, 2021 $325,000 $1,032,000 $32,000 $294,000 $27,000 $642,000 $270,000 $440,000 $522,000 $90,000 $506,000 $572,000 $300,000 $2,400,000 ($1,164,360) $443,000 $275,000 $200,000 $35,000 $6,000 $80,000 $112,000 $36,000 $50,000 $29,000 $15,000 $40,000 $15,000 $750,000 $40,000 $0 $350,000 $27,200 $216,000 $0 $900,000 $30,000 $75,000 $300,000 $105,000 $142,000 $2,000 ($16,800) $20,000 $510,000 $0 $779,000 $30,000 $400,000 $0 ($1,533,000) $0 $0 $0 $0 $0 $0 $640,000 $43,000 $0 $236,000 $0 $0 $0 $160,000 $0 $150,000 $0 $0 $0 $0 $0 $200,000 $0 ($2,500,000) $267,121 $168,448 $513,622 $25,043 $2,196,191 $133,415 $131,253 $4,137,000 $17,251,133

Total RTB $975,000 $1,817,000 $96,000 $882,000 $81,000 $1,926,000 $798,000 $2,231,000 $1,566,000 $270,000 $1,518,000 $1,716,000 $900,000 $7,200,000 ($3,493,080) $1,329,000 $825,000 $600,000 $70,000 $14,000 $240,000 $336,000 $108,000 $150,000 $87,000 $45,000 $120,000 $45,000 $750,000 $120,000 ($4,000) $1,050,000 $81,600 $216,000 $250,000 $2,700,000 $90,000 $104,800 $225,000 $900,000 $315,000 $426,000 $6,000 ($50,400) $20,000 $510,000 $40,000 $2,337,000 $90,000 $1,127,000 $178,000 ($4,412,200) $1,155,000 $1,155,000 $120,000 $120,000 $165,000 $260,000 $1,920,000 $97,000 $890,000 $649,000 $75,000 $75,000 $300,000 $420,000 $150,000 $450,000 $500,000 $144,000 $144,000 $850,000 $100,000 $400,000 $125,000 $200,000 ($6,500,000) $100,000 $801,363 $505,344 $1,540,866 $75,129 $6,588,573 $400,245 $393,759 $9,051,000 $52,941,999

225

Exhibit__ (ISP-8)

Testimony of the Information Services Panel

Exhibit __ (ISP-8) IS operating expenses for the Historic Test Year, Rate Year and Data Years

226

Exhibit__(ISP-8) Page 1 of 1

Niagara Mohawk Power Corporation d/b/a National Grid Total Information Services Incremental Operating Expenses ($Millions)

Operational Cost Commercial Management Cyber Security Physical Security Apps Maintenance CNI Ops Data Centers Verizon Email & Xerox Enterprise Service Delivery Administration Subtotal Operational Cost

CY16 (HTY) 21.2 8.3 13.7 13.5 33.2 29.4 35.3 7.6 16.9 27.0 $206.1

FY19 (Rate Year) 25.9 12.8 15.3 20.8 34.4 28.9 36.3 6.7 20.8 28.7 $230.6

FY20

FY21

26.5 13.2 15.8 21.4 35.2 29.8 37.4 6.9 21.5 29.6 $237.2

27.4 13.6 16.2 22.0 36.4 30.7 38.5 7.1 22.1 30.6 $244.6

Investment Plan IS Base (1) (2) Investment Plan

11.8 $11.8

42.7 $42.7

46.0 $46.0

27.7 $27.7

CTA (IS Transformation)

$15.5

$0.0

$0.0

$0.0

$233.4

$273.3

$283.2

$272.3

$39.9

$49.8

$38.9

4.95%

2.72% $6.7

2.40% $6.0

Total IS Opex Total Incremental IS Opex Costs from CY16

N/A

HTY Inflation Inflation on HTY Labor & Ops

$233.4

Total HTY Spend with Inflation (already embedded in RR)

$245.0

$11.6

$279.9

$289.2 $272.3

RY forecasted Spend

$273.3

$283.2

Increase after Inflation

$28.3

$3.2

($16.9)

23.87% 4.58%

$6.76 $1.30

$0.77 $0.15

($4.04) ($0.78)

-

64.0 20.0

41.0 22.8

21.0 22.3

G012 Allocator - NMPC Electric share G012 Allocator - NMPC Gas Share

(1) CY16 excludes CRIS write-off $19.2M (2) Excludes Gas Business Enablement (GBE) and NY REV/grid modernization Gas Enablement (GBE) NY REV/grid modernization

227

Loading...

a National - New York State

Niagara Mohawk Power Corporation d/b/a National Grid PROCEEDING ON MOTION OF THE COMMISSION AS TO THE RATES, CHARGES, RULES AND REGULATIONS OF NIAGARA...

3MB Sizes 0 Downloads 0 Views

Recommend Documents

STATE OF NEW YORK
Oct 19, 2017 - Teleprompter Manhattan CATV Corp., 53 N.Y.2d 124 (1981)); the. Commission is authorized to determine the

TITLING A VEHICLE IN NEW YORK STATE
Items 1 - 9 - New York State Department of Motor Vehicles. REGISTERING/TITLING A VEHICLE IN NEW YORK STATE. See the blue

National Grid Errata - New York State Smart Grid Consortium
Jul 1, 2016 - bruary 26, 2 ase 14-M-01 egard to Refo atemaking an ay 19, 2016) lity Cost Tes olt-VAR Optim endor Assura

Publication 862 - New York State
items are installed by a commercial tenant as a trade fixture. As a general ..... sales tax on your purchases of buildin

00004 - NYSDEC - New York State
Item 1 - 29 - or to any claims, suits, or actions naming the DEC and arising under article 78 of the New York Civil ....

Bielawski, Julia - New York State
Feb 20, 2015 - Paul Tyno, Buffalo Niagara Medical Campus. John Borchert, Central Hudson. Cathy Pasion, City of New York.

new york state department of state technicalbulletin
Jan 1, 2003 - PMCNYS Section 606, Elevators, Escalators and Dumbwaiters, requires that “elevators, dumbwaiters ... Sec

New York City Health Hospitals Corporation - New York State
Jul 15, 2015 - GUELFGUAT, MARK. GUERRERO MD,MARILYN. GUERRERO, REBECCA. GUEZ MD,MARTINE. GUICO, ULPIANO. GUILLAUME, ELIZ

NEW YORK STATE THOROUGHBRED BREEDING - New York-bred
Jan 31, 2015 - preserve New York's irreplaceable farm land,” the Fund herein lays out all revenue, award payments, res

New York State Regents Exams (PDF Files) - New York State Library
Jun 13, 2017 - Online versions of New York's standard high school tests, the NYS Regents Exams, which are given in all m