AGA – Quality Management Best Practices Roundtable BGE Supplier Quality Program February 14, 2013

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

Material Quality Ensuring quality 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”

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

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

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

Supplier/Material Quality Management Program 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

Supplier Quality Program Some 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

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”

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

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)

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

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)