Risk assessment and risk hierarchy

Risk assessment and risk hierarchy – UK DNO (UKPN, SPN)

Risk Matrix

As mentioned by Ritchie (2014), a risk exposure should be analyzed using a formulaic risk matrix. As indicated in fig.1, the likelihood of SPN’s power cut events are categorized such as ‘highly unlikely’ (1), ‘unlikely’ (2), ‘possible’ (3), ‘likely’ (4) and ‘almost certain’ (5).

Consequential impacts of such events are classified as ‘consumer suffering/losses’. Such losses could be prompted as ‘HSE/regulatory and financial’ impact on the UKPN management. These impact areas are scaled from ‘(1) to (5)’. Severity of impact will be highest at ‘5’ and least at ‘1’.

The Operation team at SPN works closely with the Meteorological office to obtain the latest weather data. These weather data are useful to identify the location and likelihood of specific power line breakdown events and following on to the risk of power cuts to location specific consumer groups. There can be other reasons (as listed in risk matrix) behind power cut events. The matrix focuses on risks from variable weather as well as other perspective risks of failure. Scale ‘1’ is considered as one off power failure incident in isolation, which could be solved within few hours by local field crews.

risk-matrix

Fig. 1 Risk Matrix (SPN operation. Ritchie, 2014 – working paper)

The next level ‘2’ is considered as failure of power for a thousand consumers due to human error or technology failure. Due to the inbuilt resilience of power distribution networks, power could be restored within the regulatory requirement of a period of under eighteen hours.

Level ‘3’ is such as a power cut of affecting ten thousand consumers, due to tree falling on overhead power lines or strong winds in the specific SPN area. Power cuts lasting more than eighteen hours constitute a breach of the regulator’s license requirement and entails financial losses due to claims for compensation from consumers. Consequences of a level ‘4’ incident could generate similar results with large scale claims for compensation and possibly injury to elderly consumers (on life supporting equipments) in longer power cuts.

Finally, level ‘5’ would be a ‘worst case scenario’ with a higher probability of fatalities due to longer power cuts or falling power lines. The failure event of Christmas 2013 is classified as such event under “unacceptable level of risks’. Even though severe weather was forecasted by the Meteorological office on 18th of December 2013, SPN operations team was failed to carry out resource planning for the fast recovery from any events.

Risk Hierarchy

In Richie (2014), ‘risk hierarchy’ is defined as an efficient tool to identify consequential/systematic failure while assessing risks. A risk hierarchy is developed below (fig.2). Risks are categorized as casual and consequential. Casual risks (tier 3) are incidents of power cuts to a large/small group of consumers for a short duration.

Power could be restored within a short time by a control engineers/field crews team within the regulator’s license conditions’ requirement. If a large/small consumer group loses power for short time, it could never result in consequential risk. Any fatality due to a longer power cut, even if a small group of consumers are affected, the ‘tier 3’ risk would be linked with the consequential risk of ‘Tier 1’. Trees falling on overhead power lines, strong windy weather and the flooding of power assets are classified as consequential risks (tier 2). Such events could result in serious injuries or fatalities of operational staff or members of the public.

Due to the serious nature of outcomes linked to consequential risks they are classified under ‘Tier 2’. ‘Tier 2’ risks are closely linked with ‘Tier 1’ risks, which are regulatory and financial.
Although the issues were specific to the performance of SPN, their effect was widely felt throughout the power distribution industry in the UK. Questions were raised by OFGEM on the preparedness of all DNO companies to restore power quickly under severe weather conditions.

risk-hierarchy

Fig. 2 Risk Hierarchy (Ritchie, 2014 – working paper)

References:

Ritchie R., 2014b – Working paper, Risk Matrix, Warwick Business School, unpublished.
Ritchie R., 2014c – Working paper, Risk Hierarchy, Warwick Business School, unpublished.
Slegg, B.; Faiers, S.; 2014. ‘Stage 2 Review of Distribution Network Operators’ performance during the December 2013 storms’. Ofgem. [Online] Available at: https://www.ofgem.gov.uk/ofgem- publications/88914/energy people stage2stormreviewreportappendicesv1.0.pdf [Access on 22 DECEMBER 2014].

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