Corporate governance and ethics

Fig. 1. PSE Organisational chart

GRI 102-17 GRI 103-1 Our company has implemented a compliance system aimed at ensuring the compliance of the Company's operations with law provisions, internal regulations and ethical standards. One of the main functions of compliance is supporting the protection of the company, its employees and management bodies against threats in terms of reputation, conflict of interest or protection of market participants.

In 2017 we carried out 12 training courses on compliance. They focused on:

• Responsibility, including non-abuse of a dominant position
• ethics
• corruption and gifts
• conflict of interests
• reputation and cooperation with business partners
• cooperation with regulators
• mobbing and labour rights
• Remit
• personal data protection.

In 2017, within the framework of education in the area of compliance, we also carried out on-line training, which covered the publication of information materials in the internal network of PSE. The subject of these trainings was conflict of interest and gift policy at PSE CG. We have also started the publication of educational materials in the form of a new column, which has become a permanent position on the pages of the "Przesył" magazine - a periodic, internal publication of PSE.

For all new employees, we provide the "Compass for start" training program; training is provided by the Compliance Officer, and the respective guidelines are published on the intranet.

GRI 102 -16

PSE vision, mission and value

Reliability, credibility and responsibility are the highest values described in the PSE Strategy; they also form the basis for the newly developed Code of Ethics.

Works on its implementation are being finalized. We worked on the creation of the new Code in employee groups with the participation of representatives of many PSE units. According to the survey conducted among our employees, the key values for the coming years should be: Partnership, Responsibility, Openness, Development and Professionalism.

The new Code of Ethics will be strongly related to HR Policy. Both of these documents intertwine and co-form a framework for the rules of cooperation we want to govern at PSE. Studies show that those who are aware of the company's values and identify with them, become more loyal and integrated with their company. For many years, PSE has paid great attention to the employees' motivation to diligently perform their duties, and also to willingly represent PSE outside.

Failures of substation and line equipment:

• Reduction of the frequency or elimination of failure events of technical character that limit the operational scope of a substation, by implementing the predictive maintenance approach and the reliability based inventory management to the process of replacement and maintenance of the substation infrastructure components and maintaining an adequate inventory level (standard apparatus, devices and other elements of the substation’s equipment);
• Development and implementation of a uniform operation model for all network assets, which allows for carrying out, in a cyclical, standardized and measurable manner, measurements of the technical condition of devices and their work environment, as well as preventive replacement of the most worn-out and oldest elements of network assets; 
• Technological standardization of the main classes of technical devices allowing to increase the reliability of the failure probability assessment based on the evaluation of operating parameters (e.g., failure and availability indicators);
• Conclusion of central support and failure management agreements for substation, line and transformer facilities. Parallel implementation of the Maintenance Services Development Programme allowing for continuous improvement of the competences of the company’s own maintenance services, including Network Maintenance Units (ZES) performing field works;
• Investment activities aimed at alleviating overloads of the busiest transmission lines;
• Analysis and modification of the ZES-based operation model and maintenance-free stations in terms of optimization from the point of view of the balance between the cost and safety of the substation's operation (and PPS), including the review of requirements for the occupation rate of the posts at ZES;
• Improving the model of contracting key equipment, especially substation equipment.

Disruption of the investment processes:

• Implementation of absolute requirements for the contractors of investment tasks regarding their financial condition, performance capacity and experience;
• Optimization of routes and locations of network investments aimed at reducing the risk of public protests;
• Agreeing the routes of the transmission lines with the participation of local communities;
• Paying attention to the issues of timely acquisition of legal titles for the use of land property, for which specialized legal services are used.
• Conducting work on a deeper modification of the contracting and investment project management model to improve the efficiency of:
• supervision of contractors,
• control over the quality of supplied equipment and performed works, including the insight into production processes,
• the process related to planning and granting necessary shutdowns of PPS elements.

Power shortages in the PPS:

• Conclusion of contracts for services reducing the consumers’ energy demand (DSR, Demand Side Response), agreeing optimal repair schedules of generating units with manufacturers, concluding contracts for nJWCD availability services, as well as contracts for emergency assistance with neighbouring transmission system operators;
• Maintenance of reserves with the use of the operating power reserve mechanism and the cold intervention reserve;
• Planning and making investments aimed to increase the transmission capacity and improve the security of transmission networks.

Cyber security:

• Technical and organisational solutions based on good practices in cyber security;
• Implementation of the Information Security Management System based on the ISO 27001 standard in the company, supported by the activities of the organisational units responsible for security, technical tools implemented at each level of information processing, and physical protection systems for server rooms, electrical substations and offices;
• Audit and advisory actions taken under the projects, aimed to identify gaps in the protection system in place.

Regulations:

• Continued support provided by PSE for lobbying relating to the legislative works on the “Clean Energy for All Europeans” package;
• In the case of the Capacity Market Act, the analyses carried out by PSE played the key role in the negotiations with the EC, and in the case of the package the company’s actions contributed to the significantly more beneficial for Poland modifications of the provisions of individual legal acts.

The second stage is the preparation and implementation of a risk management plan executed by the different organisational units and the monitoring or its performance. In principle, risk management measures must be economically acceptable and take into account the need to maintain the required level of PSE's operation security.

In 2017, PSE started or planned a range of new measures related to risk management in different business areas.

These measures relate to:

• the development of the methodology and manner of carrying out the criticality/materiality scoring of the PPS infrastructure elements, which has already become a basis for maintenance planning, prioritisation and planning of repairs, including in a multi-annual cycle, and the development of standards for solutions used at electrical substations,
• the development of a new risk management standard for investment contracts, which includes combining contractual sanctions with key needs of our company, performance guarantee, insurance requirements, payment schedule, as well as work progress monitoring methods,
• PPS network operation procedures and tools in the emergency mode,
• analyses and day-to-day monitoring of PSE's financial exposure resulting from the operation of balancing market mechanisms,
• monitoring the risk of PPS imbalance by expanding a tool for the estimation of stochastic operating power reserve launched in 2016,
• developing the SMTA (short and medium term adequacy assessment) tool for the stochastic analysis of sufficiency over the one-week horizon together with the flexibilisation of the tool according to the needs of ENTSO-E.

As of 2018, the implementation of a risk monitoring system based on KRIs (Key Risk Indicators) has been initiated. The KRI analysis provides information on changes and trends (e.g. on the frequency of events and incidents), which will constitute the basis for updating the risk measures.

In risk management, a professional IT tool developed by PSE GC specialists is used, which is regularly upgraded and tailored to current needs.

GRI 102-11We analyse our impact on the natural environment and take measures to reduce negative impact while pursuing initiatives that have a positive impact. Risk management is part of each certified management system in place in our organisation.

The risk map presents the risk identified in the course of risk review and qualified to be entered in the risk registry. The vertical axis expresses the expected frequency of risk materialisation within a year. The horizontal axis expresses the measure of risk effects with the use of a monetary unit (PLN).

Under the measure of risk we understand the product of the sum of expected frequencies of materialisation of each of the risk’s causes in a year, adjusted by the conditional probability of risk materialisation in case of occurrence of individual causes, and of the total value of direct and indirect effects of its materialisation. The individual risks are presented on the map in the form of pie charts where the diameter of the circle indicates the total measure of the risk and the individual parts of the chart (colour scale) correspond to the categories of effects.

These categories are as follows:

• ensuring business continuity expressed in MWh of undelivered energy,
• direct impact on finances,
• impact on health and life expressed as the percentage of health loss,
• impact on the company’s image translated into reputation and expressed in a descriptive scale.

All effects were recalculated according to the algorithms accepted in the methodology and expressed in money.