We have in place long-term investment plans to manage the entire lifecycle of our assets, looking decades into the future. We develop proposals to address the risks we might face and the potential for long-term improvements and upgrades. All this is done on a rolling basis and reviewed against current performance levels.

Our medium-term investment in the network is managed in conjunction with Ofgem, which agrees how much new investment is required in each five-year 'price control review period'. The current five-year period began in April 2005, and will see a substantial increase in investment. Like many other UK electricity distribution companies, much of our network is 40 to 50 years old and will need to be replaced before it starts to cause significant problems. Our investment allowance this time round (£1.2 billion) will help us to maintain and improve the service we provide our customers and is an increase of some 55% over the previous five years.

In addition to replacing these parts of the network, we also plan to invest in:

• new rural and urban remote control schemes to restore supplies as quickly as possible
• automatic circuit breakers to limit the number of customers who experience faults
• putting select sections of cable underground to reduce the number of faults
• reconfiguring 'rogue' circuits to reduce the number of customers experiencing faults and enabling supplies to be restored more quickly.

Ofgem has also introduced a separate funding mechanism that will allow companies to use some of their allowable expenditure to put overhead cables underground in Areas of Outstanding Natural Beauty and National Parks. We intend to use this allowance fully and we are in discussions with local environmental groups about how and where to do this.

Distributed generation

Central Networks plays an important role in connecting renewable and other forms of distributed generation (DG) to the network. Applications for connection are processed with the developers to find the most technically viable and economic solution. This can involve making changes to network feeding arrangements, such as splitting parallel feeding transformers, to reduce system fault levels. Two examples of this technique are detailed below.

Connection of a large CHP scheme

A 60MW CHP scheme was to be connected to a 33kV network but the scheme caused the 132kV switchgear fault levels at the National Grid in-feed to be exceeded. The cost of changing this switchgear together with the long timescales involved made the scheme unviable. Central Networks developed an alternative way of running the 132kV network to National Grid, which involved running the four supergrid transformers, which normally ran in parallel, with a split running arrangement consisting of three transformers in parallel and one on its own coupled to the others by the network. This arrangement reduced the fault levels and after studies by both parties this arrangement was accepted, saving the customer considerable costs and delay.

Connection offer to a wind farm

A 20MW wind farm has applied for connection to a 33kV network, which will exceed the 33kV switchgear at the 132/33kV in-feeding substation. The cost of changing this switchgear together with the long timescales involved will mean the scheme would be unlikely to proceed. Central Networks has analysed the splitting of the in-feeding transformers to reduce the fault levels and enable the wind farm to connect at a much reduced cost and timescale. The investigation into the split running arrangement involved ensuring the loads could be balanced as much as possible on the transformers, installing a sequence scheme and ensuring the reduced fault levels would not cause a problem with any disturbing loads. The analysis proved all these criteria could be met allowing the wind farm to be able to connect without the expense of the switchgear change.

Central Networks adopts more innovative approaches to address network issues associated with DG. In one example, a voltage regulator was used to prevent repeated tripping of a connected generator. If emerging technologies such as micro-CHP and other low-carbon forms of generation are to flourish, there will need to be substantial new investment to give the network the increased flexibility it will need. In April 2005, Ofgem introduced the Registered Power Zone (RPZ), an initiative which provides a financial incentive to distribution companies to develop and implement innovative projects connecting distributed generation to networks where this may not have otherwise been economically feasible. Central Networks has the UK's first RPZ on the east coast of England. It uses an automated control system capable of analysing the network in real time and sending signals to distributed generators connected to it. This controls output in a way that best uses the existing network and avoids the installation of costly new infrastructure associated with traditional circuit loading policies. We hope to share data from the project with other network operators across the UK and potentially help address the challenge of connecting distributed generation to the distribution network.

Developing this scheme has also highlighted further innovative opportunities across the Company and brought about the prospect of a second RPZ.

Central Networks also publishes a Long Term Development Statement (LTDS) containing information about the electricity network in its area. Developers can use this information in identifying which areas of the network are most suitable for connection of new DG. The newly introduced planning standard (P2/6) also gives more consideration to connected generation in assessing network security of supply.

Initiatives to extend electricity services and percentage of population unserved

The Electricity Acts place an obligation on the UK's electricity distributors to connect any premises to their network on request. We are not aware of any properties in our region that are not connected. However, for very remote locations, the cost of connection - borne in part by the owner - may mean that the property owners decide not to connect to the network. This is very rare however, and would generally apply only to the most remote properties - often barns and other agricultural buildings the owner is considering converting into homes.   In practice, virtually all habitable properties in the UK are connected to mains electricity and those that are not connected continue to have the right, albeit principally at the owners' cost.