Otahuhu Substation Security Upgrade

Otahuhu Security Upgrade Proposal August 2006

Otahuhu Substation Security Upgrade

Proposal Summary Transpower proposes to:

construct a new 220 kV gas insulated switchgear (GIS) facility adjacent to, but physically separate from the existing outdoor 220 kV switchyard at Otahuhu to reduce the probability of one failure affecting all (or most) circuits;

share transmission key circuits between the new facility and existing switchyard to improve resilience against major substation equipment failures; and

remove crossovers of transmission lines over the existing outdoor busbars to prevent (the low probability of) falling conductors causing multiple faults.

This proposal will:

• provide switchyard diversity that significantly increases the reliability of the supply to Auckland and Northland;

• largely mitigate a switchyard wide event that could result in total loss of supply; and

• be consistent with short and longer term strategic plans to improve the reliability of supplies into Auckland.

Transpower regards this project as a core grid reliability investment and the proposal is justified against the Grid Reliability Standards to the extent that it is consistent with good electricity industry practice for a substation supplying a critical load centre. Conversely, the existing substation is considered not to be up to current industry practice and requires upgrading.

This project is consistent with Transpower’s initial proposal for diversification of the substation at Otahuhu as included in the 2005 Grid Upgrade Plan for the Auckland project.

Transpower has not made any financial commitments to this project (as at 11 August 2006) other than the normal ‘business as usual’ investigative costs.

The table below provides the estimated cost of the project:

Otahuhu Security Upgrade EC submission final.doc 1 of 20


Project Capital Cost Estimated, $m 2006 (1)

Approval sought from Transpower

Board and EC, $m (2)

Build new 220kV substation at Otahuhu

60.5 77.3

(1) represents the mid-range estimated cost, in $m 2006, excluding allowance for contingencies;

(2) represents the upper-range (5% Probability of Exceedance) estimated costs, $m real dollars in 2008, including allowance for project and financial contingencies(eg inflation). These represent the costs that Transpower will be seeking to recover and form the basis of the submission to the EC.

1 Introduction Transpower has recognised an issue with the reliability of transmission through the existing 220 kV Otahuhu substation. Most of the power supplied into Auckland and Northland flows through Otahuhu substation, and its reliability is of critical importance to these areas.

Transpower’s Otahuhu substation is a legacy asset, having been developed over the past 50 years. Although there have been a number of security upgrades over the years, such as the addition of bus zone protection and bus couplers that help mitigate the impact of failures, its remains a basic double bus design, that is not considered under good electrical industry practice to be appropriate for the level of power being transferred through the substation.

Some of the historical developments have resulted in certain transmission lines crossing over both the 110 kV and 220 kV switchyards at the substation. These ‘over crossings’ are considered to be undesirable from the perspective of modern



substation design practice because of the risk posed by falling conductors – a rare but high consequence event.

Recent events at Otahuhu have also highlighted the vulnerability of the existing switchyard to low probability, high consequence events. Although by definition, these events are rare, they are also highly unpredictable and can have a major impact on supplies to consumers.

Transpower proposes to address these issues and improve the reliability of the 220 kV Otahuhu substation by building a new 220 kV switchgear facility on the same site, but physically and geographically separated from the existing switchyard.

The new switchgear facility will be built to current industry design and reliability standards. It will also be specified to accommodate Transpower’s longer term strategic goals for the site. Key incoming and outgoing circuits will be split between the existing switchyard and new switchgear so that the loss of either facility will not result in a total loss of transmission capacity into Auckland and Northland.

Furthermore, Transpower proposes to remove all over crossings at both the existing and the new facilities at Otahuhu in order to further improve supply reliability at the site. This will be achieved by using underground cables to connect incoming lines to both the new and existing facilities, where these incoming lines currently cross over busbars in the substation.

The proposal to build a new 220 kV switchyard, and diversify connections between them was first proposed in Transpower’s initial 400 kV Grid Upgrade Plan dated 13 June 2005. The ‘North Island 400 kV Upgrade Project Investment Proposal’ recommended that “the existing 220 kV circuits … will be rearranged so that key loads are supplied from both the existing and new 220 kV busses to achieve diversity”. The current proposal is wholly consistent with this recommendation.

This proposal document outlines why Transpower believes it is necessary to build a new, separate substation at Otahuhu and seeks approval for the recommended type and configuration of switchgear facility.

2 Assumptions

Auckland Supply Upgrade Project

It is assumed that Transpower’s proposed major upgrade to the Auckland region, or an equivalent, will ultimately be approved by the Electricity Commission and proceed.

Transpower’s original proposal was a line from Whakamaru to Otahuhu but a future connection to Pakuranga or Penrose was also contemplated. As a result of recent events Transpower is reconsidering the most suitable termination site for the first line and the sequence of subsequent terminations. Irrespective of which option is selected, there will still be a significant and ongoing energy transfer through Otahuhu substation.

The proposal to build a new substation at Otahuhu stands independently of the final termination point of the Auckland Upgrade Project. This is because even if the new



line is terminated at an alternative location, such as Pakuranga, there will remain a large portion of load supplied via Otahuhu, hence it is considered to be prudent to improve the reliability and diversity at Otahuhu irrespective of the termination of the new line.

An additional consideration is the issue of timing and risk. Providing diversity through the building of new transmission capacity into Pakuranga will take in the order of five or six years. The almost complete dependence on Otahuhu will exist for this period of time. Building a new, reliable substation at Otahuhu provides electrical and physical diversity and can be accomplished in the much shorter period of two years.

Cross Auckland Project

It is assumed that the Cross Auckland Reinforcement project will proceed.

All options under consideration involve two additional 220 kV outgoing lines from Otahuhu by about 2012 or 2013. These will either be as new cables directly to Penrose, or via Pakuranga on a combination of existing and new transmission lines / cables.

Existing System

Auckland is primarily supplied from the south through western and central paths. The western path consists of three 220 kV circuits from Huntly to Otahuhu. The central path consists of three 220 kV circuits from Whakamaru to Otahuhu. All these circuits pass through the Otahuhu 220 kV bus.

Auckland is also supplied by two 110 kV circuits from Bombay and a 110 kV circuit from Arapuni. However, their contribution is significantly less than the 220 kV circuits. The existing configuration of the Otahuhu substation is shown in Figure 2-1.



220 kV (Existing)

110 kV

Henderson

WKM 1WKM 2HLY

OTC Bus-tiePEN 5

HLE21

220 kV110 kV

Figure 2-1: Existing configuration at Otahuhu Substation

(110 kV lines omitted for clarity)

3 Needs The justification for this project is the need to improve reliability of supply into the greater Auckland area, the North Shore and Northland. The reliability of the existing air insulated switchgear (AIS) switchyard at Otahuhu needs to be improved because:

• Low probability, high consequence events that result in the tripping of multiple feeders in a switchyard, can and do occur. This is evidenced in the events of June 12 2006 where a single unforeseen event resulted in the loss of most of the switchyard at Otahuhu. These events are difficult to define or predict, but local



and international experience proves that they will occur regardless of best endeavours to ensure that they don’t. Where rare events such as these have a low impact, they can be tolerated. However at critical sites such as Otahuhu substation where they have very high impact, they cannot.

• Good industry practice for critical loads requires the use of multiple substations. For example, National Grid UK requires more than one terminal station for loads greater than 1500MW.1 The peak load supplied through Otahuhu is presently around 2200 MW.

• The recent outage at Otahuhu which resulted in a loss of supply to most of Auckland following the failure of an overhead earth wire crossing over the existing AIS switchyard illustrated the vulnerability of the existing substation in its present configuration. The government’s independent report on the failure (the Connell Wagner report) recommends the removal of all crossovers, requiring cabling of some feeder entry and exit points. The proposal in this document meets this recommendation.

• Transpower’s strategic plan for Otahuhu substation is to improve the underlying security of the switchyard. The existing switchyard is constructed using air insulated switchgear which is vulnerable to ambient conditions and unforeseen localised external events. The desirability of reducing this vulnerability is obvious in light of recent events at Otahuhu.

• The existing switchyard has an exposure to a single busbar fault that will remove two major transmission items from service. As an incremental solution, this may be remedied through the addition of a new bus section involving three new circuit breakers, however such a solution will not address the low probability, high consequence events that are of concern for Otahuhu substation.

• Reliability analysis modelling of possible substation configurations shows that the mean time between failure (MTBF) for an outgoing circuit from the existing AIS switchyard is considerably lower than that attainable from a modern switchyard utilising current standard configurations. For example, simplified analysis shows that in the case of a feeder circuit outage caused by a substation fault, the average MBTF figures are as follows (for the case examined):

o Existing AIS switchyard2: 4 years o New AIS switchyard3: 14 years o New GIS switchgear: 52 years

Note that the Grid Reliability Standards (GRS) stipulated by the EC do not relate specifically to substations, hence reference is instead made to good electricity industry practice.

1 GB Security and Quality of Supply Standard, 2004; www.nationalgrid.com 2 Existing substation is of the single breaker, double bus design. 3 Assumes 1½ circuit breaker configuration for new substation.



4 Options considered Transpower considered three primary options to improve the reliability of the Otahuhu substation:

Redevelop the existing substation

This option involves:

o removing all crossovers of the existing switchyard and cabling relevant feeder entry and exit points; and

o adding bus sections to reduce bus fault severity. This includes:

adding a new 220 kV bus coupler circuit breaker and two new bus section circuit breakers to the existing AIS switchyard; and

removing over crossings of the existing switchyard.

This option should only be considered as an incremental solution at best, in that it represents the absolute minimum of work that is required to provide an incremental improvement in the reliability of the existing AIS switchyard at Otahuhu.

This option does not address the underlying issue of having all of Auckland’s supplies routed through a single switchyard or using a lower reliability switching configuration (single breaker double bus).

It also disregards the impact of low probability, high consequence events that can result in the loss of the entire switchyard. Hindsight shows that if Transpower’s proposed diversity option was implemented prior to 12 June, then a major outage might have been avoided. There remains, though, the possibility of another type of unforeseen, low probability event causing a similar outage in the future.

To re-emphasise this point, redeveloping the existing substation will remove the risk of an outage being caused by failures such as those experienced in June when a failed D shackle resulted in an overhead line falling on the bus bars. Upgrading the existing substation will not prevent outages from occurring as the result of other, unforeseen events that could have equally major consequences. It is for this reason that the incremental solution of upgrading the existing substation does not address the real issue of concern, which is the lack of diversity at Otahuhu.

This option is therefore not recommended.



Establish a second Air Insulated Switchgear (AIS) Switchyard

This involves building a new AIS switchyard adjacent to the existing switchyard with:

o a modern standard high reliability configuration of at least 1.5 circuit breaker per feeder circuit; and

o all over-crossings removed by cabling all relevant feeder entry and exit points.

The substation would be configured for one of each pair of incoming and outgoing feeders with provision for expected developments (next five years). The new switchyard would be securely connected to the existing switchyard busbars using cabled and switched ties.

This option is preferable to the previous option in that it addresses the concern of having all of the Otahuhu circuits routed through a single switchyard.

There are however has a number of drawbacks when compared to the Gas Insulated Switchgear option. These include:

• Timing. The consenting process for a large new AIS switchyard may take considerably more time than for a new GIS switchyard, therefore Auckland supplies will be exposed to the risk of low probability, high consequence event for longer.

• Limitation of future development options. This is due to the large amount of space that a new AIS switchyard would occupy. In occupying this space, limitations will be placed on how future switchyard development may take place, including:

o Additional reactive support

o Additional 220 kV circuits o Eventual refurbishment/replacement of the existing switchyard

• Limited separation. A new AIS switchyard would be large and therefore will have to be located relatively close to the existing AIS switchyard in order to fit on the existing site. This reduces the benefits of a new switchyard with respect to localised events than can effect both switchyards.

• Vulnerability to the elements and localised external events. A new AIS switchyard will be vulnerable to the same type of events that can effect the existing switchyard. Installing a new GIS switchyard will provide a high level of immunity to these events.

For these reasons, and for the reasons developed in the sections below, the AIS switchyard option is not recommended.



Establish a new Gas Insulated Switchgear (GIS) facility

This involves building a new GIS facility adjacent to the existing switchyard, with similar design specification to the AIS option. This is Transpower’s preferred option for the reasons described in the following sections.

Comparison of options

Table 4-1 shows a comparison of these options:

Options considered

Comparison criterion

Upgrade existing switchyard

(Fallback option) Establish new AIS

switchyard Establish new GIS

facility

Diversity None – all AKL load still dependent on single outdoor switchyard. Improves bus faults performance.

Improved diversity because of added switchyard. Some exposure to local events, particularly weather related.

Improved diversity because of added facility. Some exposure to local events. Low weather exposure.

Reliability Relies on single circuit breaker double busbar design. Low resilience to busbar faults

Good reliability with 1.5 circuit breaker design. Exposure to ambient risk (falling conductors, blown metal sheeting, wires etc)

Very good reliability with 1.5 circuit breaker design. Indoor and enclosed con-figuration provides low ambient exposure.

Consentability High. Falls within ‘existing use’ requirements.

Low – will require designation of whole site and probable call-in.

Medium – possible to achieve within ‘existing use’ terms because of low site intensity.

Project risk Medium. Implementing bus section will require outages that will be difficult to schedule.

High. Delays due to designation likely. Implementation risks medium- switchyard works remote from existing switchyard.

Medium. Unlikely to have designation delays. Facility implementation risks low due to compact size.

Scalability Not readily scalable. Switchyard already congested and bus selectors used for multiple connections.

Would use most of existing space in switchyard. Further redevelopment of existing switchyard would require additional land purchase. Space for SVCs/capacitors/ transformers restricted by switchyard size.

Readily scalable because of compact size. Preserves space for SVCs/ Cap-acitors/transformers. Ability to redevelop existing switchyard without further land purchase.

Costs $14.1M $41.9M (initial project) $60.5M

Table 4-1: Comparison of Otahuhu substation reliability improvement options



Costs and benefits Transpower considers this project to be an urgent reliability upgrade to reduce the probability of further low probability – high consequence events disrupting power supply to the Auckland area.

Because all significant supply currently connects through Otahuhu, a major substation fault has the potential to disrupt all or a significant portion of Auckland load, currently peaking at around 2200 MW. Until additional supply projects to Auckland are implemented, the loading of the transmission system is expected to be high while the risk of multiple contingencies increases all the time.

Furthermore, the transmission capability into Auckland is limited by reactive support capability and a multiple contingency at a time of high loading would have the potential to cause a loss of voltage control and possibly collapse. Such a voltage collapse incident could affect a wider area than just Auckland.

The cost of a widespread supply interruption – such as the one that occurred on 12 June 2006 – is difficult to assess with precision but is thought to be of the order of $50-$100M. In addition to these costs, there is a potential loss of confidence for investors that could result in lost investments. Given that two major supply events have occurred in Auckland in the last decade, a further problem would potentially have a significant effect on confidence in supply reliability.

The annualised cost of a $60M project is around $4-5M. The average annual benefit of avoiding one $100M incident due to a 1 in 20 year event or a larger, lower probability incident is of the same order. Given that some investment is required in any event at this substation, the incremental cost of bringing the substation up to something approaching international practice and significantly reducing the probability of a multiple contingency that could cause a major supply interruption to Auckland appears not unreasonable.

The cost recovery for provision of this project is estimated to be approximately 0.02c/kWh. This cost needs to be offset by the benefits discussed above. Given that the existing substation is not up to current international practice for a load the size of Auckland, and transmission charges for this asset have consequently been lower than they would have been if the asset was to an appropriate standard, increasing the recovered charges appears not unreasonable.

Transpower believes the need to bring the substation up to international standards is clear and the following sections discuss the relative merits of the proposed solution.

5 Investment Proposal Transpower’s proposal for the Otahuhu substation is to construct a new 220 kV Gas Insulated Switchgear (GIS) facility adjacent to but physically separate from the existing 220 kV switchyard. The old and new buses will be connected by two cable tie lines that have circuit breakers at each end.

The existing 220 kV lines to Henderson and Penrose to the north and the large 220 kV lines from Huntly and Whakamaru will be rearranged so that one circuit from each line will be reconnected to the new 220 kV GIS facility. Existing 220 kV crossovers of the 110 kV bus will also be removed and cabled underground.



The long term strategic plan for the new facility involves expanding it over time to include connections for additional incoming and outgoing circuits, transformers and voltage support equipment such as capacitor banks and SVC’s as they are required. An overview of the layout of the new GIS facility and its connections into the existing AIS switchyard is provided below. A single line diagram of the proposed new 220 kV GIS facility is provided in appendix A.

220 kV (Existing)

110 kV

Henderson

WKM 1WKM 2HLY

OTC Bus-tiePEN 5

220 kV cable

HLE21

Transformer(future)

400 kV(future)

New 220 kV

Substation

Spare

Figure 5-1: Proposed new configuration at Otahuhu Substation

(110 kV lines omitted for clarity). Details of the switchgear layout for the GIS facility are in the appendix.



Switchgear Technology

Transpower is proposing to use Gas Insulated Switchgear (GIS) technology for the new switching facility. GIS has a higher capital cost than air insulated switchgear (AIS) as used at the substation currently, however GIS has the following advantages:

Smaller foot print - As GIS is much smaller than AIS, larger physical separation between the existing switchyard and new switchgear can be achieved and less enabling works are required at the site.

Security of plant – As the GIS is fully enclosed it is more secure for deliberate acts of damage and vandalism, and locality wide events that could effect an AIS switchyard.

Resource Consents – The GIS is physically much smaller and the GIS building will be similar in size, or possibly smaller than, the existing warehouses on the Otahuhu site. Initial indications based on discussions with Manukau City Council are that installation of a GIS facility will likely be a non-notified consent as it has a very low impact on the existing site. The site intensity associated with the AIS option is considerably higher as most of the available land is taken up with switchgear standing well above ground level. As such, there is a risk that a notifiable consent could be required. Considering these impacts, the use of GIS technology substantially reduces the risk of resource consent being declined, or the need for extensive public consultation delaying project delivery.

Long term Strategic Plan – Transpower ultimately plans to replace the existing AIS switchyard at Otahuhu. Site surveys have confirmed that there is sufficient space available at Otahuhu to accommodate two new facilities while the existing AIS switchyard remains in service (this is necessary for construction purposes) provided the new facility as proposed in this document is constructed using GIS. If the new facility was constructed in AIS, there would not be sufficient space at Otahuhu to rebuild the existing AIS switchyard, and additional property would have to be acquired to accommodate it. This would:

• raise the cost of this future project considerably as current land prices in the area are in the order of $220 square meter;

• require designation of the newly acquired land; and

• depending on where the land is acquired, mean re-direction of existing overhead lines and/or further cabling to connect feeders to the new substation.

The amount of land required for a second, equivalently sized AIS switchyard would be approximately $6M based on a 170m*140m plus a 10m perimeter for cable entries / trenches. Additional land would be required to accommodate SVCs, capacitors or transformers as required. Even if land could be acquired adjacent to the potential location of new AIS switchyard, it is likely that the offset location will require longer cable runs and have more property related costs for diverting and cabling the entries of existing lines.



Switchgear Configuration

The proposal is to employ a combination of 1½ circuit breaker, and single breaker, double bus (SBDB) configurations for the new GIS facility.

The 1½ circuit breaker configuration is demonstrably more reliable than alternative SBDB configurations, as it provides a high level of bus redundancy in the event of a circuit breaker fault and is considered to be good industry practice for high voltage substations4. The ‘breaker and a half’ configuration is proposed for incoming and outgoing feeder circuits where reliability is of primary importance.

The alternative SBDB design as used in the existing AIS switchyard, is less reliable than the 1½ breaker design, however it has the advantage of being less costly to procure and install. The SBDB configuration is thus proposed for transformers, SVC’s and capacitor banks because it will provide an adequate level of reliability for these components at a reduced capital cost.

The hybrid arrangement of 1½ breaker configuration for all incoming, outgoing and tie lines with SBDB configuration for all other connections (transformers etc) is regarded as a prudent balance between providing high reliability and the cost of providing such reliability.

It should be noted that expanding or extending a GIS facility in the future will involve adding new switchgear to an existing GIS busbar (incremental changes) or developing a second, similarly sized GIS facility (to replace the existing AIS switchyard). For incremental extensions, the interface between the new and existing switchgear will be likely to be expensive and complicated. It is thus prudent and normal practice to specify sufficient circuit breaker bays/diameters to accommodate all likely requirements for the next 5-10 years. This is a complicating factor that has cost implications. For this reason, Transpower’s proposal includes two ‘spare’ bays for future works that have a high probability of proceeding in the near future, namely the provision of new 220 kV connection for a new line from the south, and a new circuit to Penrose/Pakuranga as part of the Cross-Auckland project. Crossovers The existing AIS switchyard features a number of ‘crossovers’ where an overhead line crosses over the top of the switchgear. The failure of a crossover was the cause of a recent outage in Auckland. Crossovers are removed by installing underground cables from the ‘termination’ towers of the overhead lines as they enter the substation, to the switchgear equipment itself. The construction of a new facility will involve removal of all of the existing crossovers. Location The proposal will improve the physical and electrical diversity of supply into and out of Otahuhu substation by constructing a new 220 kV GIS facility adjacent to, but physically separate – about 150m to closest point - from the existing 220 kV AIS switchyard.

4 PJM TSDS Technical Requirements 2002; www.pjm.com



Diversity and Connections Diversity will be achieved by splitting the major incoming and outgoing 220 kV transmission circuits between the new and existing facilities. The following lines will each have one of their circuits re-routed to terminate in to the new GIS facility: • Huntly – Otahuhu A (incoming) • Otahuhu – Whakamaru C (incoming) • Henderson – Otahuhu A line (outgoing) • Otahuhu – Penrose C line (outgoing) Together, these circuits represent about half of the total transmission capacity presently routed through the existing Otahuhu substation. Two, 220 kV cable tie lines will be installed to link the new and existing switchgear facilities. This arrangement will provide diversity such that the extreme contingency event of the loss of one of the switchgear facilities will not result in a total outage to Auckland and Northland. However, some degree of load control may still be required depending on if an extreme event occurs. Existing Switchyard and Transformers The existing AIS 220 kV and 110 kV switchgear will be retained following the construction of the new GIS facility and the reallocation of circuits. The existing interconnecting (220/110 kV) transformers will remain connected to the existing switchyard pending the outcome of the Cross Auckland reinforcement project. The Cross Auckland project will determine the final configuration of the 110 kV system at Otahuhu, hence it would be premature to rearrange the interconnecting transformers until a preferred option has been identified and approved. Under all Cross Auckland reinforcement scenarios however, at least one pair of 220/110 kV interconnecting transformers will be retained, therefore provision for this has been made by including one connection bay as part of the initial 220 kV GIS facility proposal. The relatively small load presently supplied out of Otahuhu via the two 220/33kV supply transformers (< 50 MW) does not warrant at this stage the cost associated with installing a new bay in the GIS facility and the relocation of a transformer. Accordingly, it is proposed to leave both of these transformers in their current location and supplied off the existing AIS switchyard. However, there will be space available for a supply transformer at the new GIS facility should this be required in the future. Future Expansion – New GIS Facility Over the medium term the new facility will expand over time to include connections for additional incoming and outgoing circuits, transformers and voltage support equipment such as capacitor banks and SVC’s as they are required. The indicative development plan for the new GIS facility is as follows:



2008 New 220 kV GIS, 1½ circuit breaker facility. Provides segregation and diversification of existing major incoming and outgoing circuits

2011 Connect new line from south, one circuit to the new and one circuit to the existing switchgear facility5.

2012 Install new 220 kV circuits as part of the Cross Auckland reinforcement project (either to Penrose or Pakuranga). Connect one circuit each into the new and existing 220 kV switchgear facilities

Relocate (at least) one interconnecting transformer into the new GIS facility

After 2012 Expansion as required to accommodate reactive support, transformers etc as required.

Implementation issues The design of the proposed new GIS facility has been carried out on the assumption the existing switchyard must remain in service. The GIS building is located in a position where it can be built and fitted-out without impinging on the existing switchyard. Likewise the ‘removal of over crossings’ can be safely carried out by installing the cable sections and transition points while the existing switchyard is live. The only interruptions to small sections of the existing switchyard will occur when some individual circuits will be taken out of service for a short period while they are changed over from the existing switchyard to the new GIS facility. Note that any work on the existing AIS switchyard (eg refurbishment or addition of section breakers) will be difficult as it will involve installing new equipment (circuit breakers etc) in a live AIS switchyard. The risks to personnel and equipment would be greater than building the new GIS facility, as the GIS construction works would take place well clear of any live equipment. Strategic long term plan Transpower’s strategic long term plan for Otahuhu substation is to convert the entire substation to breaker and a half configuration (for feeders – transformers, SVCs capacitor banks can remain on SBDB) which will align with good industry practice for a transmission node of this size. This will ultimately involve building a new switchyard to replace the existing AIS switchyard, while retaining segregation and diversity between it and the new GIS facility proposed in this document.

5 This may be sequenced to occur as a later stage if the first connection is via Pakuranga.



6 Property Requirements Transpower owns the land at Otahuhu substation, however some new property rights will need to be secured, and some existing property rights re-negotiated, to allow for construction of the new 220 kV GIS facility and associated re-arrangement of existing infrastructure at Otahuhu substation.

Additional land, currently in the ownership of Manukau City Council is required for re-alignment and under-grounding / termination of the Henderson-Otahuhu A line into Otahuhu substation; and cabling one circuit of the Otahuhu-Penrose C line into the existing Otahuhu switchyard.

The GIS and associated infrastructure will encroach on land owned by Transpower but subject to an existing lease. Some re-negotiation of the lease is expected.

Subject to discussions with Contact Energy Limited, transmission easements may be required for minor realignments of existing lines into Otahuhu substation, in particular, the Otahuhu A tie-line 2, and the Otahuhu-Penrose C line.

7 Environmental Impact The environmental impact is expected to be minimal, being primarily restricted to the visual addition of the GIS building, some tower relocations and new gantries.

The fact that the switchgear is contained within a building of similar scale and character to adjacent buildings reduces the overall impact and is expected to greatly facilitate expeditious granting of a non-notified consent.

8 Estimated Cost

Capital Costs

Current cost estimates have been used to examine significant sources of variation in cost and estimate a cost threshold which is likely to be exceeded in only 5% of projects (P95).

Table 2 below summarises the current cost estimates for the major components of the project, and the corresponding P95 cost estimates.



Category

Capital Cost Estimate as at 30 June 2006 $m

(excluding contingency)

Expected Cost plus

Contingency (P95) Real 2008 $m

Line capital costs 14.2 18.1

Substation capital costs 44.8 57.5

Property 0.2 0.2

Project Management costs 1.0 1.2

Approval Costs 0.2 0.2

Investigations 0.1 0.1

Total 60.5 77.3

Table 2 - Estimated Capital Expenditure for OTA Security Upgrade

8.1 Assumptions

Reference Date

Initial cost estimates have been prepared as at 30 June 2006. For calculating costs at commissioning time a commissioning date of 15 October 2008 has been used. This reflects the date is which costs for the project are likely to be included in Transpower’s regulated asset base as opposed to the physical commissioning date of 15 August 2008, so is the appropriate date when estimating the amount that would need to be recovered.

Inflation

For the purposes of inflation adjustment and the calculation of nominal amounts average inflation rate over the course of the project is assumed to be between 2% and 4% per annum with any outcome between those bounds being equally likely.

Interest Rates

The interest rate for the purpose of calculating interest during construction the average interest rate over the course of the project is assumed to be between 2% and 4% per annum with any outcome between those bounds being equally likely. Note that interest during construction has not been calculated for retention payments.

Exchange Rates

Base on likely supplier country of origin current cost estimates assumed foreign exchange transactions occurred in Swiss Francs and Euros.



Exchange rates are assumed to be normally distributed with a mean equal to the 10 year average, and a standard deviation of 10% of the mean.

The 10 year average exchange rates are:

• NZD = 0.8067 CHF • NZD = 0.5150 EURO

Cost Accuracy

Cost accuracy bounds were given for cost categories and sub-categories. These ranged from +/- 15% to +/- 25/30% reflecting the difficulty of establishing projects costs accurately prior to the completion of detailed designs.

For clarity these bounds have been considered to reflect the accuracy of cost estimates, and not cost variation due to changes in scope – which have not been included.

Contingent Amounts Table 3 provides a summary of the various contingent amounts.

Cost Category

Estimated Cost

Exchange Rate

Cost Escalation (Inflation &

IDC)

Expected Cost

Cost Contingency

Expected Cost Plus

Contingency

$m 2006 $m $m $m 2008 $m 2008 $m 2008Lines Capital 14.2 0.7 0.9 15.8 2.3 18.1Substations 44.8 2.9 3.2 51.0 6.5 57.5Property 0.2 0.0 0.0 0.2 0.0 0.2Project Management 1.0 0.0 0.2 1.1 0.1 1.2Approval 0.2 0.0 0.0 0.2 0.0 0.2Investigations 0.1 0.0 0.0 0.1 0.0 0.1Total 60.5 3.5 4.3 68.4 9.0 77.3

Table 3: Relationship between Project Costs in Real and Nominal Terms.

The difference between estimated capital costs and capital cost costs including contingencies is approximately $19 million. Interest during construction and inflation (which do not affect the economic merits of the project) represent $5.6 million of this difference. Cost contingencies are 13% of real capital costs.

The “Expected cost plus contingency” is the P95 cost, that is, the cost estimate with a 5% probability of exceedance. This represents the cost that Transpower will be seeking to recover for this project, and it forms the basis of this submission to the Electricity Commission.

Expenditure Scheduling

The table below shows the expected timing of capital expenditures. Amounts in 2009 and 2010 are retention payments.



Expected Cost plus Contingency

Real 2008 $m 2006 2007 2008 2009 2010 Total

Lines Capital 3.1 11.3 2.0 0.5 0.3 17.2

Substation Capital 4.3 38.5 13.6 0.5 1.4 58.4

Property 0.2 0.0 0.0 0.0 0.0 0.2

Project Management 0.5 0.5 0.2 0.0 0.0 1.2

Approval 0.2 0.0 0.0 0.0 0.0 0.2

Investigations 0.1 0.0 0.0 0.0 0.0 0.1

Total 8.4 50.3 15.9 1.0 1.8 77.3

Table 3: Anticipated Incidence of Expenditure on the proposed new Otahuhu 220kV GIS substation

Timing of Capital Expenditure Including Contingency

0

10,000

20,000

30,000

40,000

50,000

60,000

2006 2007 2008 2009 2010

year begining July

$ 00

0

Lines CapitalSubstation CapitalPropertyProject ManagementApprovalInvestigations

Figure 3: Expenditure scheduling



8.2 Non-transmission Alternatives Not applicable to this proposal

8.3 Project Timeline A project of the proposed investment’s magnitude would normally be expected to take between two and two and a half years from approval to proceed to final commissioning.

Transpower has identified that the earliest date the proposed investment can be in place is mid to late 2008, provided investigation and planning commences now6.

A tentative timeline for the project is provided in Appendix B.

Any delay in project commencement will result in delay through the project.

6 This timeline assumes there will be no appeals to the courts.



Appendix A Single Line Diagrams


Appendix B Programme of Works

Documents

Otahuhu Substation Security Upgrade