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TransGrid large energy users roundtable
1. Large Energy User Roundtable
Held 13 November 2013
This TransGrid event brought together a range of key industry
stakeholders to discuss our five year business plan and revenue proposal.
Some small changes have been make to the following slide pack as details will continue to change as we
take feedback from our consultation process. All details were correct at the time of publication, E&OE.
2. Adapting to a changing energy market
Large Energy User Roundtable workshop
13 November 2013
4. Workshop objectives
• Shared understanding of the changing energy market, and how
TransGrid is responding
• Awareness of the revenue-setting process for network
businesses, and TransGrid in particular
• Open, informative and transparent discussion of TransGrid’s
planned revenue application for 2014 to 2019 and pricing
methodology
• Feedback and input from attendees on this revenue application
and pricing methodology
• Feedback on TransGrid’s strategy to engage your company and
the broader public on this revenue proposal, and future updates
4
5. Workshop agenda
10.00am
10.15am
How we are changing our business - Chum Darvall, Chairman
10.25am
Overview of TransGrid - Greg Garvin, GM Stakeholder Engagement
10.35am
Discussion of your key issues
11.00am
Morning tea
11.15am
TransGrid’s draft business plan for 2014 to 2019 - Greg Garvin
11.30am
Network planning and non-build options - Stephen Clark, GM Network Planning
11:40am
Network Support - Mal Coble, Manager Network Support & Consultations
12:10am
Invested Capital - Andrew Kingsmill, Regulatory Expenditure Manager
12.45pm
Lunch
1.45pm
Invested Capital continued
2.15pm
Operating Expense - Andrew Kingsmill
2.45pm
Pricing - Stephen Clark
3.15pm
Working afternoon tea
3.25pm
Pricing continued
3.45pm
Event feedback session and engagement looking forward
4.00pm
5
Welcome, workshop objectives and introductions
Close
7. How we are changing our business
Chum Darvall, Chairman
8. The market has changed
Total electricity
demand in NSW
1951/52
8 How we are changing our business
70,000
gigawatt
hours
2012/13
9. Painful electricity price rises
NSW residential
electricity price
Index movement
400
300
CPI
200
100
9 How we are changing our business
2009
2004
1999
1994
1990
2013
10. TransGrid’s new approach
Adaptive
planning
open, responsive planning and innovative non-build
options
eg deferral of approximately $700 million of allowed
demand-driven capital expenditure
value stakeholders’ input
Effective
eg early and broad consultation is beginning on
engagement potential network needs in the Sydney CBD
Smarter
regulation
advocate for smarter regulation
eg TransGrid / Grid Australia’s proposed ‘hybrid’
reliability standard (balancing cost against customers’
willingness to pay) has been endorsed by the rulemaker
10 How we are changing our business
12. TransGrid’s business structure and
role in the market
Large scale blackout prevention
Wholesale market facilitation
Mostly indirect consumer
relationship
38%
wholesale
plus carbon
8%
12 Overview of TransGrid
35%
• NSW population more than 7
million
• Approx 700,000 businesses in
NSW
• Three large users directly
connected to TransGrid
13% retail
7% green
schemes
Contribution to
residential
electricity bill
13. TransGrid’s network spans NSW,
and plugs in to neighbouring states
94 substations
13 Overview of TransGrid
47 kms underground
cables
• NSW state-owned corporation
• Owns, maintains and operates the
NSW transmission network
• 1,083 employees, more than 70%
based outside Sydney
12,609 kms high
voltage transmission
lines
63 generator
connections
362 distributor and
direct customer
connections
14. Revenue reset consumer engagement plan
Description
Consumer
advisory panel
Large energy
user
roundtable
• 10-30 large energy users in NSW
• Invite energy manager (sophisticated participant)
Deliberative
forums & end
user survey
• A qualitative workshop to educate participants on key issues
• Survey of consumer awareness and priorities
Broader
engagement
program
• Online education materials and collaboration opportunities
• Broader outreach and engagement methods (news stories, PR /
media, channel marketing)
Test and
revise
program
14
• Peak bodies, consumer advocates and technical experts
• 6-8 hour commitment during Revenue Reset (panel or briefings)
• Reconvene annually to review Annual Planning Report
• Customer focus groups to test engagement methods (in process)
• Survey of collaboration participants and interested public
• Direct stakeholder feedback and indirect media mentions
15. Discussion
Roundtable key issues discussion
Please let us know:
Key electricity industry issues for your company
Topics you want to cover today
Key questions
15
17. The revenue determination
framework
Natural monopolies such as TransGrid have
economic regulation in place of market
competition
The Australian Energy Regulator determines
TransGrid’s five-yearly revenue allowance.
The National Electricity Act (SA 1996) says
regulated network service providers should
be provided with a reasonable opportunity to
recover ‘at least the efficient costs’ of
providing network services and complying
with regulatory obligations
17 TransGrid’s Draft Business Plan
18. Revenue determination timeline
Australian
Energy
Regulator
31 Jan 2014
Framework &
approach
paper to
guide content
of the
proposal
31 Mar 2014
Placeholder
revenue
determination
for 2014-15
2014
TransGrid
31 Jan 2014
Placeholder
revenue
proposal for
2014-15
18 TransGrid’s Draft Business Plan
30 Nov 2015
Draft revenue
determination
for 2014-19
30 Apr 2015
Final revenue
determination
for 2014-19
2015
31 May 2014
Full revenue
proposal for
2014-19
TransGrid wishes to consult
with consumers every 6
months
Consumers can make
submissions to the Australian
Energy Regulator at each
stage of the process
19. Business plan overview
Regulatory
asset base
Proposed
capital
investment
(2014-19)
Annual revenue
allowance
Tax & depreciation
Inform
Proposed operating
expense (2014-19)
Consult
Consult
Return on proposed
capital investment
Inform
Capital
invested
historically
19 TransGrid’s Draft Business Plan
Inform
Return on capital
invested historically
Inform
20. How TransGrid’s prices compare
Prescribed revenue per energy transmitted (c/kWh nominal)
3
c/kWh nominal
2
1
0
2005-06
2007-08
2009-10
ElectraNet
Powerlink
20 TransGrid’s Draft Business Plan
2011-12
2013-14
2015-16
2017-18
SP AusNet
Transend
TransGrid
22. Minimising our build program:
past success
Demand-driven capital approved by
the regulator for 2009 to 2014
Responding changing
Responding toto changing
demand forecasts
demand forecasts
Approx
$700
million
deferred
Advocating smarter
Advocating smarter reliability
reliability standards or
standards or grid innovation
grid innovation
Continuing to procure
non-build options such
as demand management
22 Capital – Non build focus
Approx
$1.2 billion
completed
or
underway
25. Network Support Payments
Rules for eligible network support payments by a
TNSP are quite specific to :
(a) Any Generator providing network support services in
accordance with rule 5.4AA; or
(b) Any other person providing a network support service
that is an alternative a network augmentation.
25
26. ‘Energy Darwinism’
“the cost of wind energy (levellised cost of energy of LCOE) is not just cheaper than new build fossil fuel
generation in many markets, it is also competing with the existing wholesale electricity price in a number of
large markets”
Renew Economy, 18 October 20134
“China is clearly emerging as the world leader in utility-scale solar power capacity, after it became the first
country to reach the 4GW milestone in the category in October.”
Renew Economy, 7 November 2013
The California Public Utilities Commission (PUC) - “……the state's investor-owned utilities must begin
buying a combined 200 MW of energy storage technology by 2014 and reach 1.3 GW (1,325 MW) by the end
of 2020.”
Fierce Energy, 21 October 2013
“Should Australian towns buy back their grids?”
Renew Economy, 12 November 2013
26
27. The future grid: Electric vehicles?
Sale of Electric Vehicles in the US
Source: US Dept of Energy
Total number of new cars sold in the US in 2012 was 14.5mill
27
28. Innovative ‘non-build’ network
support options
Demand
management
Embedded
generation
Energy
efficiency
28 Capital – Non build focus
Peak load management
through time of use
tariffs, interruptible
loads and load shifting
etc.
Local generation
(biomass, solar,
cogeneration) to reduce
loading on network
Increasing customers’
use of efficient
appliances, lighting,
motors etc.
TransGrid’s
success so far
Sydney CBD
40 megawatts
(2012/13)
Western
Sydney supply
300 megawatts
(2009)
29. TransGrid’s network
support approach
Joint projects
with distributors
‘Large scale’
initiatives
29
Research projects
with universities
Innovation forum
Targeted customer
initiatives
Triage database
30. Sydney Inner Metropolitan project
30
TransGrid & EnergyAustralia joint
planning & development in the Sydney
Inner Metropolitan area.
TransGrid aimed to secure network
support to cover operational risk
management and allow one or two years
deferral
Commercial decision for TransGrid.
Funded from bottom line
Season: Nov 2012 – Mar 2013
Program Size: 35 MW
Notification Period: day ahead
Availability Window: 2 pm to 5:30 pm
Maximum Annual Event Hours: 21
31. Sydney Inner Metropolitan project
customer statistics
~ 48 MWe of network support capacity
~ 600 kWe on average for each site
~ (16 MWe from load curtailment)
Broadcast media
Commercial property
Other light industrial
Career/vocational training Communication providers Primary/secondary school
Defence facility
Refrigerated warehouse
Chemicals
Entertainment
Shopping centre
Club/RSL
College/University
31
Food processing
32. Consulting on requirements for
Powering Sydney’s Future
Potential network supply constraint to Sydney
metropolitan area by 2018, due to cable derating / retirement and forecast demand growth
Works underway to defer / avoid the need:
advocacy for changed reliability standard
seeking network support
energy efficiency uptake study’
electric vehicles study
planning and demographics study
‘low build’ options (eg cable backfill remediation)
Feasibility assessment underway for a possible
network solution
Reports to be made public for consultation at
www.yoursaytransgrid.com.au from Jan 2014
32 Capital - Replacement
33. Focus areas and discussion
Consumer
Education and
Research
Targeted network
support
Collaboration
‘Large scale’
innovation
initiatives
What is your organisation’s perspective on issues
surrounding network support?
How do you think TransGrid should be promoting
network support?
33
34. Replacement dominates proposed
capital investment
Proposed capital investment for 2014 to 2019
Category
Augmentation
New or upgraded infrastructure to
cater for growing demand
Replacement
Updating infrastructure which is
wearing out
Market benefits
New or upgraded infrastructure to
expand generator access and
competition
Others
34 Capital – Overview
Description
Non network infrastructure, including
commercial property and IT
systems, and security compliance
35. Peak demand has slowed and
is less certain
35 Capital - Augmentation
36. Demand driven augmentation
down
Comparison of demand driven augmentation capital investment
2009-14 and 2014-19 ($ million)
2009-14 allowed new capital
2009-14 actual new capital
2014-19 forecast new capital
36 Capital - Augmentation
37. Proposed augmentation
portfolio
Proposed augmentation projects for 2014 to 2019
Category
Description
Spot loads
Two projects driven by mining spot loads
Beryl Substation
Tamworth to Gunnedah
Transmission Line
Distribution
connections
9 distribution connections, generally
switchbays
Reliability
standards
Others
37 Capex - Augmentation
One project driven by reliability standards
- Wallaroo Switching Station for supply to
the Australian Capital Territory
Four other projects: capacitor
banks, transmission line uprating
38. History of network development
is driving replacement needs
38 Capital - Replacement
39. Proposed replacement
project portfolio
Forecast replacement projects for 2014 to 2019
Category
Powering
Sydney’s Future
Potential (contingent) project to meet
need for Sydney CBD
Substation
renewal
Rebuild and updating of substations
nearing the end of their useable life
Secondary
system renewal
Replacement of old (mechanical)
meters and relays with modern (smart)
technologies
Transmission
line renewal
Rebuilds, pole replacements and
repainting to extend life of assets
Others
39 Capital - Replacement
Description
e.g. transformer replacement, reactive
plant replacement, oil containment
40. Renewal or replacement of 11
substations built 45-60 years ago
Age of TransGrid substations
14
Planned renewal in 2015-19
Rebuilt
TransGrid has
New
undertaken
12
10
targeted
replacement for
many years
4
8
2
2
6
10
4
2
1
4
8
10
8
1
9
7
6
6
6
6
10
5
<5
3
1
0
60
55
50
40 Capital - Replacement
45
40
35
30
25
20
15
41. Secondary system renewal to
facilitate automation
Number of secondary systems by
year of installation
3000
2500
Microprocessor – uses software to analyse and control system voltages
Solid state – incoming voltages are monitored by analog circuits, not recorded
or digitised
Electromechanical – converts voltages and currents to magnetic forces that
press against spring tensions in the relay
2000
1500
1367
1000
890
485
806
313
500
1929
586
552
593
1960-69
1970-79
1980-89
757
416
370
2000-09
2010-19
0
41 Capital - Replacement
1990-99
42. Transmission line renewal and
‘low span’ remediation
Transmission tower life
extensions in coastal
areas
Rebuild of ageing wood
poles
Raising ‘low spans’ to
meet clearance
requirements
42 Capital - Replacement
43. ‘Market benefits’ projects to
dispatch cheapest generation
43 Capital – Market benefits
Queensland to New South
Wales interconnector
upgrade
Snowy to Yass / Canberra
upgrade
44. Discussion
Do you think TransGrid’s approach is
reasonable?
Are there any issues you see with the
direction TransGrid is heading?
Are there alternatives you think
TransGrid should consider?
44
48. Breakdown of draft
operating expense proposal
Proposed annual operating expense for 2014 to 2019
Category
Description
Plan and
manage assets
Planning the development of the
transmission network and capital
portfolio management
Maintenance
Inspections, preventative, conditionbased and corrective maintenance
Operate the
network
24 hour control room
operations, outage planning and
technical studies
Supporting the
business
IT, health and safety, property and
insurance
48 Operating expense – Overview
49. Increased planning costs to adapt
to changing environment
Planning cost trend
12
10
Increase in planning costs
in recent years
Portfolio management
office making better and
more responsive capex
decisions ($700 million
deferral)
Increased transparency in
investment decision
making
8
6
4
2
-
49 Operating expense – Planning
50. Automation allows more efficient
network maintenance
50 Operating expense – Maintenance
Secondary systems are
now self-checking >
reduction in preventative
maintenance
Video of transformer failure
Online condition
monitoring > reduced risk
of failure
Selection of lowmaintenance assets where
available
51. Innovation in operating practices
has driven costs down
Reduction in costs over the last decade due to innovation:
Virtual control room
Automation of outage planning (B2B link to Australian Energy Market
Operator’s systems)
Mobile switching instruction table
51 Operating expense – Network operation
52. Continued efforts to reduce the
cost of supporting the business
Efficiencies
IT sourcing review
Fleet review
Payroll efficiencies
Videoconferencing to
reduce travel
Accommodation
Insurance sourcing
Proposed step-changes
Consumer engagement
52
Operating expense –
Support the business
53. Discussion
To what extent should TransGrid incur operating expense to
pursue further ‘non-build’ options?
Are there any different approaches to operating expense
you would expect TransGrid to explore?
53
Do you think TransGrid’s recent increase in planning costs
is justified? Why or why not?
In light of changing electricity consumer behaviour in homes
and businesses, to what extent do you expect TransGrid to
engage with end-users?
55. The pricing methodology allocates
transmission revenue to consumers
The pricing methodology must be submitted to the
regulator at the time of the revenue application
TransGrid is currently consulting publicly on its
pricing methodology for 2014 to 2019
55 Pricing
56. Current pricing methodology:
from allowed revenue to charges
Prescribed revenue requirement
Entry and exit
services
Transmission use of
system services
50%
50%
Locational
Annual charge ($/day)
56 Pricing
Common services
Non-locational
Contract or peak
demand charge ($/MW)
Historical energy or
contract based
maximum demand
($/MWh or $/MW)
61. Transmission use of system services
(non-locational) and common services
Non-locational
0.6611c/kWh (energy rate), or
$2.4069/kW/month (CAMD* rate).
Common Service
0.3836c/kWh (energy rate), or
$1.3964/kW/month (CAMD* rate).
Same rate applies,
regardless of location.
*Contract Agreed Maximum Demand (CAMD)
customers have a contract with TransGrid, where
penalties apply for exceeding the CAMD.
61
62. Purpose of transmission pricing
Transmission prices must:
provide efficient signals for use of and investment, in
the transmission network
provide a mechanism for transmission businesses to
recover their efficient total costs
The Standing Council on Energy and Resources, on
distribution pricing in October 2013, said:
‘Over the longer term, more efficient pricing of networks should have
significant flow-on impacts to overall electricity expenditure faced by
consumers due to better utilisation of the network and deferral of
peak demand driven network investment.’
62 Pricing
64. Discussion – cost reflective
network pricing
The cost reflective network pricing methodology allocates a portion of
shared network costs to individual connection points, using:
An electrical model of the network
A cost model of the network
A set of load and generation patterns
64
Should the existing arrangements for determining
locational based transmission use of system charges be
amended and, if so, how?
Should TransGrid continue to apply the cost reflective
network pricing methodology (CRNP) or should it move to
modified CRNP, or some other method?
65. Discussion – operating conditions
and network support costs
TransGrid currently uses peak loading conditions from 365 days of
half hourly data to set operating conditions for cost allocation.
What operating conditions should be used for modelling
purposes, and how should the pricing outcomes from
these different conditions be taken into account in
determining the applicable transmission prices?
The Rules do not provide guidance on the treatment of network
support costs
Should TransGrid continue to recover network support
costs on a locational basis by converting the cost to an
equivalent asset value, or should these costs be treated as
an operating cost and recovered through the common
service charge?
65
66. Discussion – structure and
application of prices
Are TransGrid’s existing pricing structures appropriate?
What changes, if any, should be adopted in TransGrid’s
forthcoming Pricing Methodology proposal?
What changes, if any, should be made to the existing
Rules to provide better pricing outcomes for customers?
Under Rule clause 6A.23.4(f) locational transmission charges must
not change by more than 2 per cent per annum compared to the
regional average (a ‘side constraint’).
Should the current side constraint on locational TUOS
prices be retained, or altered in some way, and if so, how?
66
67. Discussion – prudent discounts,
transparency, and compliance
Under the Rules, a transmission business may agree to a ‘prudent
discount’ for particular customers, where ‘bypassing’ of the network
by the customer would ultimately leave other customers ‘worse off’.
What, if any, changes should be made to the existing
prudent discount provisions in the Rules?
What additional information should TransGrid provide to
improve the transparency of transmission prices and to
better enable customers to respond to the pricing signals?
What, if any, additional information should be provided to
customers to demonstrate TransGrid’s compliance with
the approved Pricing Methodology?
67
68. TransGrid is currently consulting
on its pricing methodology
TransGrid is consulting
publicly on its pricing
methodology for 2014 to
2019
The paper is available at
yoursaytransgrid.com.au/proj
ects/pricing-consultation
Submissions close 5pm
13 December 2013
68 Pricing
69. Discussion
69
Are there times when network users value the reliability of
the transmission network more than other times?
If so, when and why?
71. For further information on TransGrid or this
presentation please contact TransGrid’s External
Communication Manager on 02 9284 3016.
Alternatively visit our consultation website –
yoursaytransgrid.com.au
