AGA – Quality Management Best Practices Roundtable BGE Supplier Quality Program

1. AGA – Quality Management Best Practices RoundtableBGE Supplier Quality Program February 14, 2013

2. Gas Delivery System Overview • Gas Franchise Territory: 3,000 Sq Miles • Serve Customers in 9 Counties & Baltimore City

3. Material Quality • Ensuringquality of pipeline materials and installations are becoming a strong focus of PHMSA, NTSB and legislative action • Materials quality is critical to ensure the systems safe operation • Usually the first questions asked in incident investigation • Materials records (traceability) and basis for use • “Prudency”

4. For Operators/Utilities • The life of the facility records – includes materials : due diligence • Material in-field performance is essential to long term system safety • Public expectation of reliability

5. BGE established the Supplier Quality Program in 1997 Focus was on: • Reduce regulatory risk • Reduce material failures • Consistent supplier performance measures • Reduce waste/rejections • Optimize total cost of operations • Establish supplier relationships

6. SQP – Building Blocks“Road Map” • Material Stratification: • Risk • Criticality • Economic • Material Standardization • Supply/Value determination – 80/20 Focus on Critical Suppliers

7. Supplier/Material Quality ManagementProgram Components • Manufacturers quality program • Audits, sampling rates, certification, acceptance levels, etc. • Code compliance certification • Product performance testing/measurement • Failure analysis, corrective action • Manufacturing processes (JIT, lean, etc.) • Supplier plant auditing

8. Supplier Quality ProgramSome of the hard stuff - • Management support – there will be cost and relationship pressures • Long term focus • Critical coordination between engineering, field forces and purchasing – equal partners

9. SQP – Results at BGE • Material standardization • Supplier consolidation • Reduced incoming product inspections • Lower inventory – costs • Lower total costs – material spend • Increased service level • Reduced OQ scope for materials • Closer supplier relationships – support • Finding issues before they “hit the field”

10. SQP - Program Observations • Time for culture change • Better procurement efficiency • Field force confidence • Market insight – planning • Training – standardization • Must have a strong audit program • Trust but verify • Include outside testing • Ensure credentials of utility auditors

11. SQP - Recent Implications • Material traceability • Component origin – certification • Buy America Act (FHWA) • System records • Field inspection – construction quality • Manufacturing /ownership changes • Locations/plants/consolidation • Outsourcing • Specifications (outside of code)

12. Communication & Industry Awareness is Key • The current marketplace is dynamic and global • Monitor the marketplace – stay plugged in • Develop strategies for international sourcing with regulatory compliance assurance • Keep specifications current • Contract flexibility • Always remember – we own the safety of our systems

13. BGE - SQP • Some statistics • Q&A Thank you • Steve Troch – Manager of Gas Compliance (steve.troch@bge.com) • Joe Opert – Principal Engineer of Gas Engineering (joseph.opert@constellation.com)