Vectren’s Safety Management System From Concept to Reality

March 1, 2016

2

Vectren’s Gas Footprint

Vectren Energy Delivery of Indiana – South 110,000 gas customers

Vectren Energy Delivery of Indiana – North 570,000 gas customers

Vectren Energy Delivery of Ohio 315,000 gas customers

3

Agenda

• Our Journey Begins…• Gap Analysis• Preparing for Development• Plan & Execution…thus far• Path Forward

4

Our Journey Begins…

• State Regulator Relationship• Continuous Improvement Culture• Program Enhancements

• OQ, Codes & Standards, Compliance Monitoring & Assurance, Quality Management, ComplySMART, Near Miss Reporting, Damage Prevention…

5

Assessment ArchitectureVectren’s pipeline safety program was assessed using a combination of guidance frameworks that are oriented around pipeline safety, assets, and controls to emphasize the areas most pertinent to Vectren

Asset-Focused

Industry Leading Practices

Pipeline Safety Program Assessment

Controls-Focused

Pipeline Safety-Focused

API: American Petroleum Institute COSO: The Committee of Sponsoring Organizations of the Treadway CommissionRP: Recommended Practice ISO: International Standards Organization PAS: Publicly Available Standard

6Gap Analysis & Implementation Planning

7

Quality Control, Quality Assurance and Audit:

Process Step 1

Process Step 2

Process Step 3

QC Finished Product

Good

Not GoodRework

QA

Operational processes / procedures

Quality Control, Quality Assurance, and Audit enable multiple layers of controls

• QC evaluates quality outcomes within process (e.g. step level);

• Enables defects to be identified, corrected, and prevented in real-time

• Embedded within process• Performed by process expert• Fix errors before completion

• QA evaluates overall process outcomes (e.g. leak survey, Cathodic Protection, etc.)

• Establishes confidence that overall results achieve the desired level of quality

• External to process• Performed by Quality / process

improvement expert

Quality Control (QC) Quality Assurance (QA)

• Audit samples Quality Assurance plan and confirms adherence and quality levels

• Conducted after QC and QA have completed their tasks

• Documentation review validates adherence to procedures

Audit

Illustrative

8

Organizational Changes – Safety Focused

Vice PresidentSafety & System Integrity

Gas Compliance & Damage Prevention

Electric Compliance

Codes & Standards

Quality Assurance

Corporate Safety & Technical

Training

Corporate Security

Integrity Management

9

Preparing for Development

• Communication Plan focused on Board, Executives & Directors

• Drawing on the expertise of others:• Pharmaceutical, Food, Health Care

• Building the Project Plan• Gap Analysis & Standard Requirements• Executive Planning Session – Departmental Mission & Vision• Leverage Continuous Improvement Methodology & Internal

Expertise

Tailor the message to the audience!

10

Impact Analysis

• Phase 1 (Complete)• Matrix of Elements and Documents and Departments• Simple survey from Process Owners on if the “shall”

statement would impact their processes• Phase 2 (In progress)

• Interviews with each process owner• Documenting the evidence of all the impacts

• Is it documented? If so, where.• What is the control? How is it measured? • Is it comprehensive? Is it hard to follow?

11

Development of SMS - Focus for 2016

• Procedures for SMS Elements:• Risk Management Process (Complete)• Operational Controls (Complete)• Safety Assurance (March)• Competency, Awareness, & Training (June)• Documentation & Record Keeping

• Communication & Education of Workforce

• SMS Governance Model• Board – Executive – Technical - Local

12

Risk Management Process

A Standard Methodology for identifying and documenting risks.• Structured process to combine and compare

all risks from asset specific to workforce related.

• Ties to Key Processes, Operational Controls, Performance Measures & Mitigation Plans

• Leads Budgeting, Strategic & BusinessUnit Planning Process

• Intentional Risk Reduction• Stakeholder Engagement

13

Utility ~80%

Gas~55%

Risk Management Process Overview

• Functional groups identify and rate risks.• Submit using Risk Register Submission Form.

Functional Risk Management Assessment

Risk Register Creation

Mitigation Plan and Metrics

Creation

Mitigation Plan and Metrics Monitoring

14Functional Risk Management Assessment

Risk Register Creation

Mitigation Plan and Metrics

Creation

Mitigation Plan and Metrics Monitoring

Safety Management System Risk Register - Submission

• Risk register contains key information such as:• Description, category & risk ranking• Identification of Interactive Threats & Related Areas of Corporate Risk• Key processes related to the area of risk with associated Operational

Controls, Performance Metrics, & Mitigation Plans

15

Utility ~80%

Gas~55%

Risk Management Process Overview

• Risk Register Submission Forms compiled into single comprehensive Register by QA.

• Governance Committees review and approve Risk Register.

Functional Risk Management Assessment

Risk Register Creation

Mitigation Plan and Metrics

Creation

Mitigation Plan and Metrics Monitoring

16

Utility ~80%

Gas~55%

SMS Risk Management Process Overview

• Threshold established by Executive Governance Committee• Mitigation plans developed for identified risks.

Functional Risk Management Assessment

Risk Register Creation

Mitigation Plan and Metrics

Creation

Mitigation Plan and Metrics Monitoring

17

Utility ~80%

Gas~55%

SMS Risk Management Process Overview

• Mitigation plans executed and projects developed.• Metrics monitored to determine progress and change.

Functional Risk Management Assessment

Risk Register Creation

Mitigation Plan and Metrics

Creation

Mitigation Plan and Metrics Monitoring

18

Risk Management Process

• Challenges from the Process Event• Large group of stakeholders• Level setting for Vectren’s Vision for SMS• Understanding the requirements from Section 7• Understanding the current state for each stakeholder

group• Keeping it simple!• Is it process risks or asset specific risks or what is it

really…

19

Operational Controls

• Most of the requirements are met with existing procedures and/or work practices• Materials Management & Tracking Process• Procedural Review Process• Management of Change Process• Inspection Guide and Checklists• Contractor Compliance Governance

• Challenges of this event• 4 events in 1, Hodgepodge of Requirements

20

SMS Governance ModelSMS Governance provides intentional and regular communications regarding risk identification and reduction strategies. This tiered model:

- Allocates resources to support the development, implementation, and continuous improvement of the SMS Framework

- Provides visibility to safety trends and provides guidance on mitigation plans and control measures

- Empowers employees to identify risks and raise awareness- Creates a feedback loop between the Board and Front Line

Employees

LocalTechnical

Executive

21

SMS Governance Cadence

Note: Calendar represents a conceptual timeline and topics

• Governance Model will cover SMS requirements, key areas of risk, performance against mitigation plans, and reoccurring items

• Discussions will be tailored to the various governance levels (local, technical & executive)• Consideration should be given to other timelines – (budgeting, business unit planning, & goal

setting)Jan Feb Mar Apr May June July Aug Sept Oct Nov Dec

SMS Element Review

Risk Management &

Operational Controls

Safety Assurance &

Record Keeping

Incident Investigation &

Lesson's Learned

Competence, Training & Awareness

Emergency Response

Leadership & Stakeholder Engagement

Program Spotlights

Damage Prevention DIMP TIMP

Pipeline Modernization

Workforce Safety

Operator Qualification &

Training

Contractor Quality

Management

Storage & Liquid Propane

Leak Management Corrosion

Engineering & Construction

Control Room Management

SMS Scorecard Review

SMS Scorecard Review

SMS Scorecard Review

SMS Scorecard Review

SMS Scorecard Review

SMS Scorecard Review

SMS Scorecard Review

SMS Scorecard Review

SMS Scorecard Review

SMS Scorecard Review

SMS Scorecard Review

SMS Scorecard Review

Compliance Updates

Compliance Updates

Compliance Updates

Compliance Updates

Compliance Updates

Compliance Updates

Compliance Updates

Compliance Updates

Compliance Updates

Compliance Updates

Compliance Updates

Compliance Updates

Safety Culture Safety Culture Safety Culture Safety Culture Safety Culture Safety Culture Safety Culture Safety Culture Safety Culture Safety Culture Safety Culture Safety CultureIncident Reviews

Incident Reviews

Incident Reviews

Incident Reviews

Incident Reviews

Incident Reviews

Incident Reviews

Incident Reviews

Incident Reviews

Incident Reviews

Incident Reviews

Incident Reviews

Mitigation Plan Reviews

Mitigation Plan Reviews

Mitigation Plan Reviews

Mitigation Plan Reviews

Mitigation Plan Reviews

Mitigation Plan Reviews

Mitigation Plan Reviews

Mitigation Plan Reviews

Mitigation Plan Reviews

Mitigation Plan Reviews

Mitigation Plan Reviews

Mitigation Plan Reviews

Approvals Approvals Approvals Approvals Approvals Approvals Approvals Approvals Approvals Approvals Approvals Approvals

Standing Agenda Items

22

Path Forward

• Beginning the first cycle of the Risk Register• Developing process documents for the SMS Framework• Continuing to develop the Vectren SMS Brand and

Communications• Establishing QA/QC testing strategies and sampling plans• Check and adjust cycles for newly created or modified

processes around Risk Management, Operational Controls, and Safety Assurance

23

Questions?