Consumer Forum September 2013 1 Consumer Representative Forum - September 2013
Consumer Forum September 2013 1
Consumer Representative Forum - September 2013
Consumer Forum September 2013 2
Introductions
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Today’s Agenda
Introduction to TransGrid and our consumer engagement to date
Getting the best out of the proposed program– What we have in mind– Understanding your needs, interests and priorities
Network vision– What’s important to you?
Operating expenditure– What it is and a discussion of how we can work with you
to engage consumers
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Why we are here
Revenue reset timing
External environment
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Consumer program objectives
Our objectives for this phase are to:
Seek your advice about our approach to consumer engagement
Understand your priorities and interests
Ensure our business plans meet consumers needs and expectations
Test if we are striking the right balance for consumers in terms of investment and maintenance in our network while managing the impact on electricity prices
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Introduction to TransGrid
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Introduction to TransGrid
TransGrid has a statutory duty to deliver high voltage electricity from power generators to the distribution network that supplies power to homes and businesses. TransGrid’s electricity transmission system includes:
Over 12,772km of overhead transmission line and underground cable
36,000 transmission line structures
More than 94 substations and switching stations
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Introduction to TransGrid
Consumer Forum September 2013 9*IPART Fact Sheet - Regulated Retail Prices
20% Electricity generators
8%Transmission network – transporting electricity from power stations at high voltage (the highway)
42%
15%
Distribution network – transporting it from the highway to your home or business (your local road network)
Retailers
15% The carbon price and State and Federal government green schemes
What makes up my bill?
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Why are we essential?
Why are we essential infrastructure? Impact of failure
– India– Eastern seaboard of the USA– Auckland– Along with your homes and businesses electricity is
essential for traffic lights, sewerage works, water pumping, trains, hospitals……
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What is in the revenue proposal?
Revenue =
Capital expenditure
Operating expenditure
Return on investments
To be discussed in October forum
Being discussed today
December forum
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TransGrid’s Revenue Split
Return on Capital Depreciation Tax Operating Expenditure
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What is the Revenue Reset Process?
TransGrid submits a Revenue Proposal to
the AER
The AER scrutinises this proposal and
undertakes its own investigation
The AER makes a draft revenue decision
TransGrid is able to submit a revised Revenue
Proposal addressing issues of concern with the
AER’s draft decision
The AER makes a final revenue decision
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How does this affect consumers?
TransGrid applies its pricing methodology to translate this revenue to prices to be collected from customers
The AER determines the revenue TransGrid can earn each year
TransGrid’s customers are 4 NSW and ACT
electricity distributors
3 direct connect customers (very large electricity users)
These costs are paid for through
consumer electricity bills
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The approach so far…
Defined audience
•Primary consumers
•Consumer representative groups and organisations
Approach
•Roundtable discussions
•Randomly selected participants
•Metropolitan and regional split
Inform, involve
engage
•Mix of presentations, facilitation tools and techniques
•Factsheets
•Discussed the ‘energy conversation’, TransGrid’s role and the impact to consumers
Collaborate
•Asked consumers what they want and need to know about the ‘energy conversation’ and TransGrid’s business activities specific to its revenue reset proposals
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TransGrid’s Consumer Program
•Introduction to the program
•Operating Expenditure
September
•Capital Expenditure•Powering Sydney
October
•Demand Management
•Asset Tour
November
•Transitional Proposal
•Return on Investments
December
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TransGrid’s Consumer Program•Treat
ment of confidential information
•Pricing methodology
February
•Full revenue proposal discussion
March
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Are we on track?
Engaging with consumer representatives Holding discussions with a Consumer Advisory
Panel Listening to consumers views posted to the “Have
Your Say” section of our website Consumers emailing us or calling us directly Feedback from our newsletter Survey results
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Group activity
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Framing operating expenditure – The Network Vision
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Network Vision
TransGrid’s network vision sets out the key characteristics of the future high voltage electricity transmission network in NSW
– These characteristics will provide a guiding direction for the long term development of this network
We are seeking your feedback on the objectives of the vision and to understand what’s important to you
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Purpose
The purpose of the network vision is:– Guide the company and its stakeholders in making
longer term decisions about investments in the development and renewal of the network
– Demonstrate to stakeholders that network development, renewal and maintenance strategies and plans are sustainable for the long term
– Benchmark shorter term asset management strategies against the direction provided in the longer term network vision
– Facilitate a ‘line of sight’ from the corporate plan to the asset management strategies and plans
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Factors Taken into Consideration
Real electricity price rises to be minimised Drive the asset base harder to deliver efficiencies
whilst balancing risk, performance and cost over the entire asset lifecycle
Respond to customer requests to connect to the network in a timely and cost effective way
Current reliability and quality of supply levels, as a minimum, to be maintained
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Factors Taken into Consideration
Deliver increased levels of public safety and awareness
Minimise environmental impacts Promote and develop non-network solutions to
meet future load growth Undertake condition based asset replacement
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Factors Taken into Consideration
Develop and augment the network to:– Meet future load and emerging constraints, where this
growth and constraints are more certain– Cater for connection of renewable generation sources– Leverage technology to drive efficiencies (eg access to
real time data, better monitoring and control systems)– Respond to changing consumer behaviours (eg use of
solar panels, smart meters)– Cater for increased volatility in load and energy flows
(eg arising from the intermittent and variable renewable generation output from wind and solar generation)
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Factors Taken into Consideration
Develop and augment the network to:– Cater for growth in emerging distributed generation (eg
local energy storage devices connected to the network)
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Proposed objectives
Proposed objectives for the network of the future1. Deliver electricity transmission services to meet
stakeholder requirements in a safe, secure, environmentally responsible and cost effective way
2. Maintain flexibility and responsiveness of the network in an uncertain future
3. Develop the network to meet future growth in demand and generation sources
4. Leverage technology and innovation to enhance the capability and capacity of the network to deliver long term benefits for consumers
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Specific to operating expenditure…
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Operating Expenditure
Operating expenditure is the ongoing expenditure required to provide transmission services
Asset management activities– Plan– Manage the assets– Maintain– Operate
Corporate activities– Finance, HR, IT, Health & Safety, Environment
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TransGrid’s opex costs to consumers…
Indicative costs to residential consumers: TransGrid’s total revenue contributes approx $130 per year Operating expenditure accounts for approximately $30 of
this
Indicative costs to small business consumers: TransGrid’s total revenue contributes approx $170 per year Operating expenditure accounts for approximately $40 of
this
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Operating Expenditure
Grid Planning
Maintenance Support & Asset Management
Maintenance
System Operations
Property Management
Health, Safety and Environmental
Information Technology
Business Management (Finance, HR, Payroll)
Corporate and Regulatory Management
Insurance, Rates and Statutory Taxes
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Benchmarks
Maintenance expenditure – TransGrid participates in benchmarking studies and
industry forums with international peers
– TransGrid’s maintenance approach, intervals and costs are consistent with international best practice
Non-maintenace expenditure– For cost categories where benchmarks are available,
TransGrid compares its costs against other similar utilities
– TransGrid’s costs are generally in line with similar utilities
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Maintenance Expenditure
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Maintenance Expenditure
Drivers– Manufacturers’ instructions– Industry experience– Safety & environmental standards– National Electricity Rules and jurisdictional
requirements– Technology developments
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Maintenance Expenditure
Principles– Maintenance to be minimised consistent with safety,
reliability and risk– Periodic maintenance focuses on diagnostic condition
measurement (with exceptions where appropriate)– Continuous online monitoring used where economic– Compliance with limits for acceptable service condition– Condition based maintenance in response to out of
tolerance condition
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Maintenance Expenditure
Principles– Work methods developed in consultation with
maintenance staff– New equipment to be of a proven safe, reliable and low
maintenance design
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Non-Maintenance Expenditure
Principles– Cost control through continuous improvement (such as
process review)– Regular reviews of sourcing strategies for activities
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Operating Expenditure Forecasting Method
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Group activity