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Load PPrrooffiilliinngg ffoorr tthhee 
NNSSWW GGaass MMaassss MMaarrkkeett 
Prepared by 
Trowbridge Consulting 
26 June 2001 
NSW Natural Gas 
Achieving Strategic and Operational Readiness For FRC 
2001
Outline of Presentation 
Introduction 
Full Retail Competition 
Forms of Load Profiling 
The Objectives of Load Profiling 
Summary of Arrangements for NSW Gas 
Retailer Impacts 
Key Customer Impacts 
Profiling in Electricity and Victorian Gas 
Conclusions 
1 
2 
3 
4 
5 
6 
7 
8 
9 
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Introduction 
1 
 The wholesale gas market in NSW is a Contract Carriage 
Model (compared to Victoria which is a Market Carriage 
Model.) 
 There is no current spot market for gas in NSW. 
 Retailers are expected to bring gas to the market in order 
to meet its customers load in both terms of timing and 
volume. 
 With no time of year price signals (eg: a spot market) 
timing is less important. 
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Full Retail Competition 
2 
 Rollout of full retail competition (FRC) to mass market 
requires a mechanism for allocating the wholesale energy 
costs for a franchise area between multiple retailers. 
 Current contestable customers ( 10TJ pa or 2nd Tier  1 TJ 
pa) are daily metered and as such timing and volume is 
known (with appropriate adjustments for UAFG). 
 Imposing a metering requirement on the mass market would 
be cost prohibitive and represent a barrier to competition. 
 Load profiling enables the allocation of wholesale gas and 
costs to retailers in the absence of daily metering for all 
customers. 
 The primary objective of load profiling is to facilitate FRC. 
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Forms of Load Profiling 
3 
 There are two basic forms of load profiling: 
 Net System Load Profiling (NSLP); and 
 Load Research Based Profiling. 
 A third form of profiling (Hybrid NSLP/Load Research Based 
Profiling) combines elements of these two basic forms. 
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Forms of Load Profiling 
3 
Net System Load Profiling 
 Net system load profiling is the simplest form of profiling. 
 It refers to the construction of profiles using the interval (daily 
in gas, half hourly in electricity) metered system load for a 
defined geographical area. 
 The net system load broadly represents: 
 the aggregate energy consumed during a day (gas) or 
half hour (electricity) by all customers located in an 
area; less 
 the energy consumed by customers in that area that are 
interval metered (eg. large industrial/commercial 
customers). 
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Forms of Load Profiling 
 The following chart illustrates the net system load shape for 
the Victorian Wholesale Electricity Market on two different 
days. 
3.0% 
2.5% 
2.0% 
1.5% 
1.0% 
0.5% 
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Net System Load For Victoria 
0.0% 
12:00 AM 
2:00 AM 
4:00 AM 
6:00 AM 
8:00 AM 
10:00 AM 
12:00 PM 
2:00 PM 
4:00 PM 
6:00 PM 
8:00 PM 
10:00 PM 
Time of Day 
Proportion of Daily Consumption within Half Hour 
Hot Summer Weekend Day 
Cold Winter Weekday 
3
Forms of Load Profiling 
3 
 The following chart illustrates the net system load shape 
(normalised) for the three network regions in NSW gas. 
Daily Load Profiles for Three Networks 
Proportion of Daily Consumption to Annual Network Consumption 
0.8% 
0.7% 
0.6% 
0.5% 
0.4% 
0.3% 
0.2% 
0.1% 
0.0% 
Source: From Trowbridge Consulting report to Energy Corporation “Study to identify and Examine Options for Load Profiling and Reconciliation to Support Effective 
Retail Competition in the NSW Gas Market”; March 2000, based on data provided by participants. 
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Date 
Proportion of Daily Consumption to Annual Network Consumption 
Network 1 Network 2 Network 3
3 Forms of Load Profiling 
Load Research Based Profiling 
 Load research based profiling draws on a sample of 
customers’ historical or live interval metered consumption to 
construct a profile. 
 The profiles so constructed can be: 
 Deemed (ie constructed from engineering or other 
acceptable estimates eg. street lighting); 
 Static (ie drawn from a historical sample); 
 Static Adjusted (ie drawn from a historical sample but 
adjusted for current effects such as weather); and 
 Dynamic (ie drawn from a “live” sample). 
 It is more expensive to construct and maintain/refine. 
 It must be remembered that a profile is “only a profile”. 
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The Objectives 4 of Load Profiling 
 The primary objective of load profiling is to facilitate 
FRC. 
 The secondary objectives are: 
 Promote an efficient market; 
 Eliminate barriers to customer choice of retailer; 
 Minimise barriers to entry for competing retailers; 
 Protect the legitimate interests of customers; 
 Minimise cross-subsidies between host 
(incumbent) and second tier retailers;and 
 Provide an opportunity for market and 
technological evolutions. 
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The Objectives 4 of Load Profiling 
Economic efficiency- user pays 
- encourages demand side response 
User equity - history matters (ie. past investment decisions, existing 
tariff regime) 
- price shocks / volatility unfair and undesirable 
- some cross subsidies are considered socially desirable 
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/ load shifting 
Competing Objectives
The Objectives of Load Profiling 
4 
 Equity and efficiency objectives cannot be satisfied 
simultaneously in the short term. 
 Arguably, the move to more cost reflective pricing should 
not be pre-empted or driven by the selection of a profiling 
regime. 
 Instead, it is considered important for the industry to retain 
the option (but not be compelled) to gradually embrace cost 
reflective pricing over time. 
 This view is at odds with the efficient pricing objective of 
load profiling which links the effectiveness of competition to 
the removal of cross-subsidies. 
 The tension between these two views is expressed in the 
following slide in the case of the gas market: 
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4 The Objectives of Load Profiling 
“Community 
Rating” 
• Shippers book capacity and 
enter into wholesale producer 
contracts to meet the 
requirements of their portfolios. 
• Costs should be shared evenly 
across all users. 
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““UUsseerr PPaayyss”” 
• Poor load factor customers require shippers to 
book more capacity and purchase greater MDQ 
per unit of AQ 
• These customers should pay for the incremental 
“peak period”supply costs whilst good load 
factor customers should receive appropriate 
discounts to their end use prices. 
Key Considerations 
• Load profiling should not force an immediate move to “user 
pays”. 
• In IPART’s words “end users have made decisions on 
location, production and investments in energy consuming 
equipment based on existing pricing structures and 
locational differences. It would be inequitable to substantially 
change prices in the short term”.1 
1: IPART Draft Decision of 28 October 1999 on AGLGN’s Access Arrangement (Attachment 7, 
Economic Principles for Network Pricing).
Summary of Arrangements for NSW Gas 
5 
 The Wholesale Gas Market will be balanced based on 
 Net System Load Profiling (Net Section Load - NSL) 
 NSL at regional level (Network Section) 
 Will mean a large number of NSLs (30 or more) 
 Annual Apportionment (although business rules allow 
administrator to change) 
 Forward Reconciliation 
 Payback over 28 days for Total Reconciliation Amounts 
(Adjustment to Forecast Withdrawals) 
 Global Reconciliation (eg: use of equalisation amount) 
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Summary of Arrangements 5 for NSW Gas 
Key Advantage Key Disadvantage 
NSL Simplest form to implement to 
facilitate FRC 
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Does not provide cost reflective pricing 
Regionalisation 
of NSL 
Smaller Areas are balanced 
individually 
Volatility of small areas 
Impact of large consumers 
Regionalised price signals (not based on true 
customer usage) 
Annual 
Apportionment 
Maintains pricing signals in 
current tariffs 
Avoids breach of voluntary pricing 
principles 
Least Cost Reflective 
Forward 
Reconciliation 
No need to recreate Gas Day Does not reflect time of use price signals 
28 Day 
Payback Period 
Reduces Risk for Small Portfolios Does not minimise Cummulative Reconciliation 
Balances 
Global 
Settlements 
Spread Errors Across all 
Participants 
Both 1st and 2nd Tier Customers need to be 
profiled
Summary of Arrangements for NSW Gas 
5 
 Apportionment 
 Required to allocate the NSL on a daily basis 
 Used for both forecast withdrawals and deemed 
(estimated) withdrawals 
 Carried out at customer level but summed for retailer 
 Annual Apportionment 
 Annual consumption (maybe normalised for weather) 
 No seasonal effects 
 Quarterly Apportionment 
 Annual consumption (maybe normalised for weather) 
 Allows for some seasonal effects 
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Summary of Arrangements for NSW Gas 
5 
 Reconciliation Amounts 
 Calculated as Daily Amount 
 Difference between 
 Deemed (Estimated) Withdrawals; and 
 Actual Withdrawals (from Meter read, adjusted for 
UAFG) 
 Actual will have “sculpting factor” applied to get 
Daily Share from cumulative meter read 
 Considered as Borrowed or Loaned Gas 
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Summary of Arrangements for NSW Gas 
5 
 Forward Reconciliation 
 Gas Repaid by Adjusting Future Forecast and Deemed 
(Estimated) Withdrawals 
 28 Day Payback 
 Based on Total Reconciliation Amount (TRA) for Day 
 Each TRA paid back over 28 days 
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Summary of Arrangements for NSW Gas 
5 
 Replicating Portfolio (Theoretical) 
 Even Share of all “profiled” market segments 
 Large enough portfolio 
 Even distribution of timing of meter reads 
 Retailer will replicate NSLP 
 No Reconciliation Amounts 
 Host Retailers will (closely) replicate NSLP (particularly initially) 
 Other Retailers will head towards replicating portfolios if 
 Target all Mass Market 
 Win Large Enough Share 
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Summary of Arrangements for NSW Gas 
5 
 Effects of Payback (eg: Temperature Sensitive Load) 
Illustration of Withdrawal Profiles for Retailer with Temperature Sensitive Portfolio 
Based on Annual Apportionment 
12,000 
10,000 
8,000 
6,000 
4,000 
2,000 
0 
January 
February 
March 
April 
May 
June 
July 
August 
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September 
December 
October 
November 
Date 
Daily Consumption (GJ) 
True Withdrawal 
Deemed Withdrawal No Payback 
Deemed Withdrawal 100% Payback
Summary of Arrangements for NSW Gas 
5 
 Effects on Reconciliation Amounts (Host  Ret2 Replicating, 
Ret3 Temp Sensitive, Ret4 Baseload) 
Illustrative Cumulative Reconciliation Amount 
Annual Apportionment 
200,000 
150,000 
100,000 
50,000 
0 
January February March April May June July August September October November December 
-50,000 
-100,000 
-150,000 
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No PayBack 
Network 1 
-200,000 
Date 
Cumulative Reconciliation Amount GJ 
Host Retailer Retailer 1 Retailer 2 Retailer 3
Summary of Arrangements for NSW Gas 
5 
 Effects on Reconciliation Amounts 
Illustrative Cumulative Reconciliation Amount 
Annual Apportionment 
100% Forward Payback 
2,000 
1,500 
1,000 
500 
0 
January February March April May June July August September October November December 
-500 
-1,000 
-1,500 
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Network 1 
-2,000 
Date 
Cumulative Reconciliation Amount GJ 
Host Retailer Retailer 1 Retailer 2 Retailer 3
Summary of Arrangements for NSW Gas 
5 
 End of Year Cumulative Amount is Caused by 
 Difference 
 Weather Experienced 
 Weather Used for Calculating Apportionment 
Factors 
 Example Assumes Current year is colder than that used 
for apportionment. 
 Lag caused by Meter Reading Cycle and calculation of 
Cumulative Reconciliation Amounts. 
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Retailer Impacts 
6 
Level Playing Field 
 Profiling solutions attempt to maintain competitive neutrality 
between retailers with respect to their status ie: 
 incumbent / host / first-tier Vs 
 new entrant / second tier. 
 In the absence of a regulatory price cap, net system load 
profiling will act to equalise the unit energy costs loaded into a 
host retailer’s offered price regardless of the true load 
characteristics of a customer. 
 The equalisation occurs at the boundary used for the NSLP. 
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Retailer Impacts 
Equalisation of Price Loaded for Energy Costs 
Equalisation of Energy Costs 
1 2 3 4 5 6 7 8 9 
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Customer Type 
Unit Energy Cost ($/MWh or $/GJ) 
Competition 
Forces host to price at NSLP Cost or risk 
losing customers 6 to 9 
Opportunity Gain 
If Host prices at true energy cost, host will 
be giving up the opportunity to price in the 
energy cost faced by the STR for customers 
1 to 4 
NSLP Cost 
6
Retailer Impacts 
6 
Other Issues 
 There are a number of other issues that concern 
retailers: 
 choice of profiling area - must provide for host and 
new entrant to price off the same profile; 
 diversification benefits - the net system load will 
typically exhibit lower volatility than the true profile 
of small portfolios of customers; 
 reconciliation of meter reads and losses - 
unaccounted for energy must be fairly allocated; 
 informational asymmetry - host has privileged 
understanding of the load characteristics of its 
former franchise area; 
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6 Retailer Impacts 
 availability of hedges - there is some prospect that 
intermediaries will offer hedges based on profiles; 
and 
 regulatory risk - appears to fall more heavily on host 
retailers as second tier retailers have a greater 
ability to “walk away” from an unprofitable market 
segment. 
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Retailer Impacts 
6 
 A number of factors will impact on the regionalised profiles 
 Localised Weather; 
 Gas penetration (size of area); 
 Impact of Large (profiled) customers 
 Customer Types; 
 Residential versus Commercial; 
 Appliance penetration. 
 Consideration when forecasting NSLP 
 Impact on volatility of profile. 
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6 Retailer Impacts 
 Three Different TRS/POTS Profiles 
Illustration of Daily Load Profiles for Selected POTS/TRS 
Proportion of Daily Consumption to Annual Area Consumption 
1.2% 
1.0% 
0.8% 
0.6% 
0.4% 
0.2% 
0.0% 
Source: From Trowbridge Consulting report to Energy Corporation “Study to identify and Examine Options for Load Profiling and Reconciliation to Support 
Effective Retail Competition in the NSW Gas Market”; March 2000, based on data provided by participants. 
P_13072000_energy2 
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Date 
Proportion of Daily Consumption to Annual Area Consumption 
TRS/POTS 20 TRS/POTS 15 TRS/POTS 3
6 Retailer Impacts 
 Illustration of Historical Load Factor for 
Networks,Geographical Areas, TRS/POTS 
Historical Net System Profile Load Factors Based on Geographical Areas 
Broken Down to Individual Trunk Receiving and Packaged Offtake Stations 
55.0% 
50.0% 
45.0% 
40.0% 
35.0% 
30.0% 
25.0% 
20.0% 
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Area 
Load factor 
TRS/POTS 
Grouped 
Network 
Region 1 Region 2 Region 4 Region 5 Networks 
Source: From Trowbridge Consulting report to Energy Corporation “Study to identify and Examine Options for Load Profiling and Reconciliation to 
Support Effective Retail Competition in the NSW Gas Market”; March 2000, based on data provided by participants.
6 Retailer Impacts 
 Comparison of Load Factor and Annual Consumption for 
TRS/POTS 
Illustration of Historical Load Factor for Different Trunk Receiving and Packaged Offtake Stations (TRS/POTS) 
- Note Wilton not included. 
45% 
40% 
35% 
30% 
25% 
20% 
0 50,000 100,000 150,000 200,000 250,000 300,000 350,000 400,000 450,000 500,000 
P_13072000_energy2 
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Average Annual Consumption GJ 
Load factor 
Source: From Trowbridge Consulting report to Energy Corporation “Study to identify and Examine Options for Load Profiling and Reconciliation to 
Support Effective Retail Competition in the NSW Gas Market”; March 2000, based on data provided by participants.
6 Retailer Impacts 
 Comparison of Historical HDDs for different Geographical 
Areas 
Comparision of Annual HDD by Site 
2,500 
2,000 
1,500 
1,000 
500 
0 
1970 
1972 
1974 
1976 
1978 
1980 
1982 
1984 
1986 
1988 
1990 
1992 
1994 
1996 
1998 
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Year 
Annual HDD 
Canberra 
Airport 
Bathurst 
Armidale 
University of New England 
Albury 
Wagga Wagga 
Bega 
Meringo Street 
Dubbo 
Coorena Road 
Bankstown 
Airport 
Wollongong 
Sydney 
Observatory Hill 
Newcastle 
Source: Compiled by Trowbridge Consulting from Data provided by the Bureau of Meteorology
6 Retailer Impacts 
 Forecast Variations in Load Factor due to Weather 
Illustration of Geographic and Network Load Factor Variation for Different Weather Scenarios 
Based on Forecast Consumption 
60% 
55% 
50% 
45% 
40% 
35% 
30% 
Region 1 Region 2 Region 4 Region 5 Network 1 Network 2 Network 3 
Geographic Area or Network Area 
Load Factor 
Source: From Trowbridge Consulting report to Energy Corporation “Study to identify and Examine Options for Load Profiling and Reconciliation to Support 
Effective Retail Competition in the NSW Gas Market”; March 2000, based on data provided by participants. 
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Max 
Average 
Min 
Max 56% 48% 45% 47% 55% 56% 46% 
Average 51% 42% 42% 45% 50% 53% 43% 
Min 45% 36% 38% 41% 44% 51% 40%
6 Retailer Impacts 
Key Observations From Overseas Implementations 
 Load profiling is generally not mentioned in retailers’ 
communications with customers. It is commonly regarded as a 
matter of interest only to retailers for settling their wholesale 
energy purchase costs; 
 Regulators have also tended to shy away from communicating 
with customers on the method used by their retailer to 
determine the customer’s energy costs; 
 Numerous customer surveys reveal that customers are mainly 
interested in the price implications (ie net overall effect of load 
profiling) of FRC. Customers also generally require a 
significant price cut before they will be persuaded to switch 
supplier; 
 Most customers found the process of switching under a load 
profiling regime relatively easy and seamless; 
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6 Retailer Impacts 
 Some customers have complained about the difficulty of 
making price comparisons between retailers, particularly in 
respect of dual fuel offerings; 
 We are aware of one utility which has had to defend litigation 
on its adopted load research based profiling approach for 
agricultural customers on the grounds that the utility did not 
have sufficient data to produce statistically significant results. 
Although the utility in question successfully defended the 
litigation, the case highlights the need for the industry to tread 
carefully when adopting load research based profiles for some 
customer classes. 
 Larger users will be especially price conscious and aware of 
the savings available from switching suppliers. 
Transfer/switching rates for these customers are also generally 
higher. 
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6 Retailer Impacts 
 Marketers do not appear to have neglected the lower 
income/disadvantaged consumers, but the methods 
employed for marketing to these consumers are clearly 
different (greater percentage of door to door selling in 
UK). 
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7 Key Customer Impacts 
 Customer Segments for each Retail Area 
Tariff Market Consumption Split for AGLGN 
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Residential 
56% 
Commercial/Industrial 
44% 
Residential 
Commercial/Industrial 
Tariff Market Consumption Split for GSN 
Residential 
76% 
Commercial/Industrial 
24% 
Residential Commercial/Industrial 
Tariff Market Consumption Split for AGC 
Residential 
72% 
Commercial/Industrial 
28% 
Residential Commercial/Industrial 
Source: IPART Issues Paper “Review of the Delivered Price of Natural Gas to Tariff Customers Served from AGL Gas Network in NSW”; May 1998 and 
“Review of the Delivered Price of Natural Gas in Wagga Wagga and Albury”; October 1999
7 Key Customer Impacts 
 Geographical BreakDown of Mass Market (in terms of 
annual consumption) 
Geographical Dispersion of Tariff Market Consumption for AGLGN 
Source: IPART Issues Paper “Review of the Delivered Price of Natural Gas to Tariff Customers Served from AGL Gas Network in NSW”; May 1998 
P_13072000_energy2 
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Sydney 
79% 
Wollongong 
4% 
Newcastle 
6% 
Country Areas 
11% 
Sydney 
Wollongong 
Newcastle 
Country Areas
Key Customer Impacts 
7 
 Customers who are “peakier” than the NSLP 
(temperature sensitive customers) are subsidised by 
“flatter” (non temperature sensitive). 
 We explore the key customer impacts of load profiling 
under the following headings: 
 The cross subsidies inherent within the existing 
tariffs; and 
 Effect on a customer’s bill; and 
 Incentives for interval metering. 
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7 Key Customer Impacts 
Cross Subsidies Inherent Within the Existing Tariffs 
 Consumer to consumer cross-subsidies exist at present as 
retail tariffs do not reflect the true energy costs. 
 A load profiling regime that sought to reflect the customer’s 
“true” energy purchase costs (eg. a load research based 
profiling regime) or indeed the installation of daily meters 
would “undo” a significant level of cross subsidy which 
currently exists. 
 This may in lead to breach of the voluntary pricing principles 
and the risk falls to the incumbent retailer because 2nd tier 
retailers are not bound to compete for unprofitable segments 
of the market. 
 In the absence of a reduction in the non energy components 
of a customer’s bill, the effective price faced by some 
customer segments would rise. 
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7 Key Customer Impacts 
Cross Subsidies Inherent Within the Existing Tariffs 
 Currently in NSW gas, most residential and small business 
tariffs are based on Uniform Tariffs (No time of Use Signals) 
 Will this change??? 
 Households with access to gas mains that are actually 
connected. 
 AGL Retail Area 60% 
 Wagga Wagga 80% 
 Albury 85% 
 Potential growth (especially in AGL area) 
 Potential for Tariff Structure to Change 
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7 Key Customer Impacts 
 Load profiling only impacts the energy purchase cost 
component of a customer’s bill. 
Victorian Electricity Example 
Metropolitan General 
Domestic Customer 
(Annual Bill $660) 
Network Charges 
46% 
Retail Costs 
11% 
Wholesale Energy 
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Costs 
17% 
Retail Gross 
Margin 
24% 
NEMMCO 
Charges 
2% 
Network Charges 
52% 
Retail Costs 
9% 
NEMMCO 
Charges 
Wholesale Energy 
Costs 
27% 
3% 
Retail Gross 
Margin 
9% 
Effect on a Customer’s Bill 
Source: From Trowbridge Consulting report to Victorian Distributors “Victorian Electricity Load Profiling 
Study”; March 2000, based on data provided by participants. 
Rural Hot Water 
Domestic Customer 
(Annual Bill $810)
7 Key Customer Impacts 
Effect on a Customer’s Bill 
Illustration of cross subsidies for NSW residential gas 
customers under NSLP (ignoring Payback). 
Comparison of Median Consumer Cross Subsidies by Profiling Option 
Expressed as a % of Bills for House Dwellers with 3 Occupants 
16% 
14% 
12% 
10% 
8% 
6% 
4% 
2% 
0% 
-2% 
-4% 
-6% 
CK CH HW CK + HW CH + HW + CK 
Appliance Mix 
Cross Subsidies as % of Bill 
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Annual NSL 
Quarterly NSL 
Monthly NSL 
Annual NSL -2% 14% -4% -4% 6% 
Quarterly NSL -1% 7% -2% -3% 3% 
Monthly NSL -1% 4% -2% -2% 2% 
Source: From Trowbridge Consulting report to Energy Corporation “Study to identify and Examine Options for Load Profiling and Reconciliation to Support 
Effective Retail Competition in the NSW Gas Market”; March 2000, based on data provided by participants.
7 Key Customer Impacts 
Effect on a Customer’s Bill 
Illustration of cross subsidies for NSW commercial gas 
customers under NSLP (ignoring Payback). 
Comparison of Median Consumer Cross Subsidies by Profiling Option 
Expressed as a % of Bills for Sample IC Customers 
35% 
30% 
25% 
20% 
15% 
10% 
5% 
0% 
-5% 
-10% 
Small No Heating Small Heating Large No Heating Large Heating 
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Sample Customer 
Cross Subsidies as % of Bill 
Annual NSL 
Quarterly NSL 
Monthly NSL 
Annual NSL -5% 27% -6% 32% 
Quarterly NSL -3% 20% -4% 23% 
Monthly NSL -2% 15% -2% 17% 
Source: From Trowbridge Consulting report to Energy Corporation “Study to identify and Examine Options for Load Profiling and Reconciliation to 
Support Effective Retail Competition in the NSW Gas Market”; March 2000, based on data provided by participants.
7 Key Customer Impacts 
Payback reduces level of cross subsidies 
Depends on class of business 
eg: Central Heating Only Customer - reduce from 
14% to 10%. (subsidised by others) 
Cross subsidies exist in current tariff structure (as 
discussed) 
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Key Customer Impacts 
7 
Incentives for Interval Metering 
Customers with more desirable load characteristics than 
NSLP 
Reasonable size 
Clear economic signals for interval metering 
 As Metering Costs come down size threshold for economic 
metering will also reduce 
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Key Customer Impacts 
7 
Incentives for Interval Metering 
Annual Consumption per Customer Required Before there is a $400 Cross Subsidy 
Based on EAPL Costs and Annual NSL Profiling 
1,000 
900 
800 
700 
600 
500 
400 
300 
200 
100 
0 
Mandating of Daily Meters 
Could be Considered 
10% 20% 30% 40% 50% 60% 70% 80% 90% 100% 
Consumption 98 289 1,311 1,458 629 453 376 
Customer's Load Factor Calculated Using Quarterly Bill Data 
Annual Consumption Required (GJ) 
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Retailer has Economic 
Incentive to Install Meter 
Source: From Trowbridge Consulting report to Energy Corporation “Study to identify and Examine Options for Load Profiling and Reconciliation to Support Effective 
Retail Competition in the NSW Gas Market”; March 2000, based on data provided by participants.
Key Customer Impacts 
Over time the net system load shape will “deteriorate” but 
become more representative of the load characteristics of the 
profiled customers. 
Incumbent sets tariffs 
based on NSLP for all 
customers 
The new NSLP is 
peakier but more 
representative of 
remaining customers 
Flatter (Non Peaky) 
have economic 
incentive to install 
interval meters 
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Flatter/non-peaky 
customers are 
overcharged under 
NSLP 
Evolution of a NSLP Regime 
7
Profiling in Electricity 8 and Victorian Gas 
Trowbridge Consulting has undertaken quantification 
studies in load profiling options for the mass market in: 
Victorian Electricity (Vic DBs - public document) 
Victorian Gas (DNRE - public document) 
NSW Gas (ENCorp) 
NSW Electricity (advised NSW retailer on response 
to MIG paper) 
The following summarises the current situation in terms of 
implementation of profiling for FRC. 
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Profiling in Electricity 8 and Victorian Gas 
Victorian Gas 
FRC expected to commence in mid 2002 
5-10TJ customers contestable from 1 Sept 2001 based on 
a metering solution for 2nd tier only customers. 
Net System Load Profiling will be used as balancing 
arrangement. 
5-10TJ customers can choose between metering or 
profiling once full contestability implemented. 
Profiling at Distribution Business Boundary Area (DBBA) 
Partial settlements 
Backward Reconciliation (Victoria has a daily spot market) 
Apportionment Factors based on customer level “like 
billing period” data, adjusted for EDDs. 
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Profiling in Electricity 8 and Victorian Gas 
NSW Electricity 
FRC expected to commence in 1 January 2002. 
There has been a staggered approach for 40-100MWh 
and 100-160MWh commercial customers (based on 
metering solution for 2nd Tier.) 
Net System Load Profiling to settle wholesale market. 
NSLP at Local Network Service Provider (LNSP) 
boundary 
Partial settlements 
Controlled Load Profiles (CLPs) (basically Off Peak Hot 
Water) will be “peeled off” NSLP for both 1st and 2nd Tier 
customers. 
CLPs will be based on sampling 
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Profiling in Electricity 8 and Victorian Gas 
VIC Electricity 
FRC expected to commence in 1 January 2002. 
Net System Load Profiling to settle wholesale market. 
NSLP will be undertaken at Local Network Service 
Provider (LNSP) boundary 
A Partial settlements regime will operate. 
No allowance for “peel-off” of off-peak loads (Hot Water) 
P_13072000_energy2 
52
9 Conclusions 
A simple net system load profiling solution has the potential 
to afford residential and small commercial  industrial 
customers the opportunity to share in the benefits of full 
retail competition. 
Implementation must be carefully managed recognising the 
key customer and retailer impacts. 
The single largest risk is that the load profiling solution is 
“over engineered” to the point where the industry loses 
sight of the primary objective (ie to facilitate FRC). 
In considering the optimal solution for preserving the “load 
shifting” and energy conservation incentives, we believe 
there is limited value in refining the profiling solution. 
The benchmark against which any such refinements 
should be measured is the cost of interval metering. 
A profile can never be made to “behave like an interval 
meter”. 
P_13072000_energy2 
53

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Load Profiling for the NSW Gas Mass Market

  • 1. Load PPrrooffiilliinngg ffoorr tthhee NNSSWW GGaass MMaassss MMaarrkkeett Prepared by Trowbridge Consulting 26 June 2001 NSW Natural Gas Achieving Strategic and Operational Readiness For FRC 2001
  • 2. Outline of Presentation Introduction Full Retail Competition Forms of Load Profiling The Objectives of Load Profiling Summary of Arrangements for NSW Gas Retailer Impacts Key Customer Impacts Profiling in Electricity and Victorian Gas Conclusions 1 2 3 4 5 6 7 8 9 P_13072000_energy2 2
  • 3. Introduction 1 The wholesale gas market in NSW is a Contract Carriage Model (compared to Victoria which is a Market Carriage Model.) There is no current spot market for gas in NSW. Retailers are expected to bring gas to the market in order to meet its customers load in both terms of timing and volume. With no time of year price signals (eg: a spot market) timing is less important. P_13072000_energy2 3
  • 4. Full Retail Competition 2 Rollout of full retail competition (FRC) to mass market requires a mechanism for allocating the wholesale energy costs for a franchise area between multiple retailers. Current contestable customers ( 10TJ pa or 2nd Tier 1 TJ pa) are daily metered and as such timing and volume is known (with appropriate adjustments for UAFG). Imposing a metering requirement on the mass market would be cost prohibitive and represent a barrier to competition. Load profiling enables the allocation of wholesale gas and costs to retailers in the absence of daily metering for all customers. The primary objective of load profiling is to facilitate FRC. P_13072000_energy2 4
  • 5. Forms of Load Profiling 3 There are two basic forms of load profiling: Net System Load Profiling (NSLP); and Load Research Based Profiling. A third form of profiling (Hybrid NSLP/Load Research Based Profiling) combines elements of these two basic forms. P_13072000_energy2 5
  • 6. Forms of Load Profiling 3 Net System Load Profiling Net system load profiling is the simplest form of profiling. It refers to the construction of profiles using the interval (daily in gas, half hourly in electricity) metered system load for a defined geographical area. The net system load broadly represents: the aggregate energy consumed during a day (gas) or half hour (electricity) by all customers located in an area; less the energy consumed by customers in that area that are interval metered (eg. large industrial/commercial customers). P_13072000_energy2 6
  • 7. Forms of Load Profiling The following chart illustrates the net system load shape for the Victorian Wholesale Electricity Market on two different days. 3.0% 2.5% 2.0% 1.5% 1.0% 0.5% P_13072000_energy2 7 Net System Load For Victoria 0.0% 12:00 AM 2:00 AM 4:00 AM 6:00 AM 8:00 AM 10:00 AM 12:00 PM 2:00 PM 4:00 PM 6:00 PM 8:00 PM 10:00 PM Time of Day Proportion of Daily Consumption within Half Hour Hot Summer Weekend Day Cold Winter Weekday 3
  • 8. Forms of Load Profiling 3 The following chart illustrates the net system load shape (normalised) for the three network regions in NSW gas. Daily Load Profiles for Three Networks Proportion of Daily Consumption to Annual Network Consumption 0.8% 0.7% 0.6% 0.5% 0.4% 0.3% 0.2% 0.1% 0.0% Source: From Trowbridge Consulting report to Energy Corporation “Study to identify and Examine Options for Load Profiling and Reconciliation to Support Effective Retail Competition in the NSW Gas Market”; March 2000, based on data provided by participants. P_13072000_energy2 8 Date Proportion of Daily Consumption to Annual Network Consumption Network 1 Network 2 Network 3
  • 9. 3 Forms of Load Profiling Load Research Based Profiling Load research based profiling draws on a sample of customers’ historical or live interval metered consumption to construct a profile. The profiles so constructed can be: Deemed (ie constructed from engineering or other acceptable estimates eg. street lighting); Static (ie drawn from a historical sample); Static Adjusted (ie drawn from a historical sample but adjusted for current effects such as weather); and Dynamic (ie drawn from a “live” sample). It is more expensive to construct and maintain/refine. It must be remembered that a profile is “only a profile”. P_13072000_energy2 9
  • 10. The Objectives 4 of Load Profiling The primary objective of load profiling is to facilitate FRC. The secondary objectives are: Promote an efficient market; Eliminate barriers to customer choice of retailer; Minimise barriers to entry for competing retailers; Protect the legitimate interests of customers; Minimise cross-subsidies between host (incumbent) and second tier retailers;and Provide an opportunity for market and technological evolutions. P_13072000_energy2 10
  • 11. The Objectives 4 of Load Profiling Economic efficiency- user pays - encourages demand side response User equity - history matters (ie. past investment decisions, existing tariff regime) - price shocks / volatility unfair and undesirable - some cross subsidies are considered socially desirable P_13072000_energy2 11 / load shifting Competing Objectives
  • 12. The Objectives of Load Profiling 4 Equity and efficiency objectives cannot be satisfied simultaneously in the short term. Arguably, the move to more cost reflective pricing should not be pre-empted or driven by the selection of a profiling regime. Instead, it is considered important for the industry to retain the option (but not be compelled) to gradually embrace cost reflective pricing over time. This view is at odds with the efficient pricing objective of load profiling which links the effectiveness of competition to the removal of cross-subsidies. The tension between these two views is expressed in the following slide in the case of the gas market: P_13072000_energy2 12
  • 13. 4 The Objectives of Load Profiling “Community Rating” • Shippers book capacity and enter into wholesale producer contracts to meet the requirements of their portfolios. • Costs should be shared evenly across all users. P_13072000_energy2 13 ““UUsseerr PPaayyss”” • Poor load factor customers require shippers to book more capacity and purchase greater MDQ per unit of AQ • These customers should pay for the incremental “peak period”supply costs whilst good load factor customers should receive appropriate discounts to their end use prices. Key Considerations • Load profiling should not force an immediate move to “user pays”. • In IPART’s words “end users have made decisions on location, production and investments in energy consuming equipment based on existing pricing structures and locational differences. It would be inequitable to substantially change prices in the short term”.1 1: IPART Draft Decision of 28 October 1999 on AGLGN’s Access Arrangement (Attachment 7, Economic Principles for Network Pricing).
  • 14. Summary of Arrangements for NSW Gas 5 The Wholesale Gas Market will be balanced based on Net System Load Profiling (Net Section Load - NSL) NSL at regional level (Network Section) Will mean a large number of NSLs (30 or more) Annual Apportionment (although business rules allow administrator to change) Forward Reconciliation Payback over 28 days for Total Reconciliation Amounts (Adjustment to Forecast Withdrawals) Global Reconciliation (eg: use of equalisation amount) P_13072000_energy2 14
  • 15. Summary of Arrangements 5 for NSW Gas Key Advantage Key Disadvantage NSL Simplest form to implement to facilitate FRC P_13072000_energy2 15 Does not provide cost reflective pricing Regionalisation of NSL Smaller Areas are balanced individually Volatility of small areas Impact of large consumers Regionalised price signals (not based on true customer usage) Annual Apportionment Maintains pricing signals in current tariffs Avoids breach of voluntary pricing principles Least Cost Reflective Forward Reconciliation No need to recreate Gas Day Does not reflect time of use price signals 28 Day Payback Period Reduces Risk for Small Portfolios Does not minimise Cummulative Reconciliation Balances Global Settlements Spread Errors Across all Participants Both 1st and 2nd Tier Customers need to be profiled
  • 16. Summary of Arrangements for NSW Gas 5 Apportionment Required to allocate the NSL on a daily basis Used for both forecast withdrawals and deemed (estimated) withdrawals Carried out at customer level but summed for retailer Annual Apportionment Annual consumption (maybe normalised for weather) No seasonal effects Quarterly Apportionment Annual consumption (maybe normalised for weather) Allows for some seasonal effects P_13072000_energy2 16
  • 17. Summary of Arrangements for NSW Gas 5 Reconciliation Amounts Calculated as Daily Amount Difference between Deemed (Estimated) Withdrawals; and Actual Withdrawals (from Meter read, adjusted for UAFG) Actual will have “sculpting factor” applied to get Daily Share from cumulative meter read Considered as Borrowed or Loaned Gas P_13072000_energy2 17
  • 18. Summary of Arrangements for NSW Gas 5 Forward Reconciliation Gas Repaid by Adjusting Future Forecast and Deemed (Estimated) Withdrawals 28 Day Payback Based on Total Reconciliation Amount (TRA) for Day Each TRA paid back over 28 days P_13072000_energy2 18
  • 19. Summary of Arrangements for NSW Gas 5 Replicating Portfolio (Theoretical) Even Share of all “profiled” market segments Large enough portfolio Even distribution of timing of meter reads Retailer will replicate NSLP No Reconciliation Amounts Host Retailers will (closely) replicate NSLP (particularly initially) Other Retailers will head towards replicating portfolios if Target all Mass Market Win Large Enough Share P_13072000_energy2 19
  • 20. Summary of Arrangements for NSW Gas 5 Effects of Payback (eg: Temperature Sensitive Load) Illustration of Withdrawal Profiles for Retailer with Temperature Sensitive Portfolio Based on Annual Apportionment 12,000 10,000 8,000 6,000 4,000 2,000 0 January February March April May June July August P_13072000_energy2 20 September December October November Date Daily Consumption (GJ) True Withdrawal Deemed Withdrawal No Payback Deemed Withdrawal 100% Payback
  • 21. Summary of Arrangements for NSW Gas 5 Effects on Reconciliation Amounts (Host Ret2 Replicating, Ret3 Temp Sensitive, Ret4 Baseload) Illustrative Cumulative Reconciliation Amount Annual Apportionment 200,000 150,000 100,000 50,000 0 January February March April May June July August September October November December -50,000 -100,000 -150,000 P_13072000_energy2 21 No PayBack Network 1 -200,000 Date Cumulative Reconciliation Amount GJ Host Retailer Retailer 1 Retailer 2 Retailer 3
  • 22. Summary of Arrangements for NSW Gas 5 Effects on Reconciliation Amounts Illustrative Cumulative Reconciliation Amount Annual Apportionment 100% Forward Payback 2,000 1,500 1,000 500 0 January February March April May June July August September October November December -500 -1,000 -1,500 P_13072000_energy2 22 Network 1 -2,000 Date Cumulative Reconciliation Amount GJ Host Retailer Retailer 1 Retailer 2 Retailer 3
  • 23. Summary of Arrangements for NSW Gas 5 End of Year Cumulative Amount is Caused by Difference Weather Experienced Weather Used for Calculating Apportionment Factors Example Assumes Current year is colder than that used for apportionment. Lag caused by Meter Reading Cycle and calculation of Cumulative Reconciliation Amounts. P_13072000_energy2 23
  • 24. Retailer Impacts 6 Level Playing Field Profiling solutions attempt to maintain competitive neutrality between retailers with respect to their status ie: incumbent / host / first-tier Vs new entrant / second tier. In the absence of a regulatory price cap, net system load profiling will act to equalise the unit energy costs loaded into a host retailer’s offered price regardless of the true load characteristics of a customer. The equalisation occurs at the boundary used for the NSLP. P_13072000_energy2 24
  • 25. Retailer Impacts Equalisation of Price Loaded for Energy Costs Equalisation of Energy Costs 1 2 3 4 5 6 7 8 9 P_13072000_energy2 25 Customer Type Unit Energy Cost ($/MWh or $/GJ) Competition Forces host to price at NSLP Cost or risk losing customers 6 to 9 Opportunity Gain If Host prices at true energy cost, host will be giving up the opportunity to price in the energy cost faced by the STR for customers 1 to 4 NSLP Cost 6
  • 26. Retailer Impacts 6 Other Issues There are a number of other issues that concern retailers: choice of profiling area - must provide for host and new entrant to price off the same profile; diversification benefits - the net system load will typically exhibit lower volatility than the true profile of small portfolios of customers; reconciliation of meter reads and losses - unaccounted for energy must be fairly allocated; informational asymmetry - host has privileged understanding of the load characteristics of its former franchise area; P_13072000_energy2 26
  • 27. 6 Retailer Impacts availability of hedges - there is some prospect that intermediaries will offer hedges based on profiles; and regulatory risk - appears to fall more heavily on host retailers as second tier retailers have a greater ability to “walk away” from an unprofitable market segment. P_13072000_energy2 27
  • 28. Retailer Impacts 6 A number of factors will impact on the regionalised profiles Localised Weather; Gas penetration (size of area); Impact of Large (profiled) customers Customer Types; Residential versus Commercial; Appliance penetration. Consideration when forecasting NSLP Impact on volatility of profile. P_13072000_energy2 28
  • 29. 6 Retailer Impacts Three Different TRS/POTS Profiles Illustration of Daily Load Profiles for Selected POTS/TRS Proportion of Daily Consumption to Annual Area Consumption 1.2% 1.0% 0.8% 0.6% 0.4% 0.2% 0.0% Source: From Trowbridge Consulting report to Energy Corporation “Study to identify and Examine Options for Load Profiling and Reconciliation to Support Effective Retail Competition in the NSW Gas Market”; March 2000, based on data provided by participants. P_13072000_energy2 29 Date Proportion of Daily Consumption to Annual Area Consumption TRS/POTS 20 TRS/POTS 15 TRS/POTS 3
  • 30. 6 Retailer Impacts Illustration of Historical Load Factor for Networks,Geographical Areas, TRS/POTS Historical Net System Profile Load Factors Based on Geographical Areas Broken Down to Individual Trunk Receiving and Packaged Offtake Stations 55.0% 50.0% 45.0% 40.0% 35.0% 30.0% 25.0% 20.0% P_13072000_energy2 30 Area Load factor TRS/POTS Grouped Network Region 1 Region 2 Region 4 Region 5 Networks Source: From Trowbridge Consulting report to Energy Corporation “Study to identify and Examine Options for Load Profiling and Reconciliation to Support Effective Retail Competition in the NSW Gas Market”; March 2000, based on data provided by participants.
  • 31. 6 Retailer Impacts Comparison of Load Factor and Annual Consumption for TRS/POTS Illustration of Historical Load Factor for Different Trunk Receiving and Packaged Offtake Stations (TRS/POTS) - Note Wilton not included. 45% 40% 35% 30% 25% 20% 0 50,000 100,000 150,000 200,000 250,000 300,000 350,000 400,000 450,000 500,000 P_13072000_energy2 31 Average Annual Consumption GJ Load factor Source: From Trowbridge Consulting report to Energy Corporation “Study to identify and Examine Options for Load Profiling and Reconciliation to Support Effective Retail Competition in the NSW Gas Market”; March 2000, based on data provided by participants.
  • 32. 6 Retailer Impacts Comparison of Historical HDDs for different Geographical Areas Comparision of Annual HDD by Site 2,500 2,000 1,500 1,000 500 0 1970 1972 1974 1976 1978 1980 1982 1984 1986 1988 1990 1992 1994 1996 1998 P_13072000_energy2 32 Year Annual HDD Canberra Airport Bathurst Armidale University of New England Albury Wagga Wagga Bega Meringo Street Dubbo Coorena Road Bankstown Airport Wollongong Sydney Observatory Hill Newcastle Source: Compiled by Trowbridge Consulting from Data provided by the Bureau of Meteorology
  • 33. 6 Retailer Impacts Forecast Variations in Load Factor due to Weather Illustration of Geographic and Network Load Factor Variation for Different Weather Scenarios Based on Forecast Consumption 60% 55% 50% 45% 40% 35% 30% Region 1 Region 2 Region 4 Region 5 Network 1 Network 2 Network 3 Geographic Area or Network Area Load Factor Source: From Trowbridge Consulting report to Energy Corporation “Study to identify and Examine Options for Load Profiling and Reconciliation to Support Effective Retail Competition in the NSW Gas Market”; March 2000, based on data provided by participants. P_13072000_energy2 33 Max Average Min Max 56% 48% 45% 47% 55% 56% 46% Average 51% 42% 42% 45% 50% 53% 43% Min 45% 36% 38% 41% 44% 51% 40%
  • 34. 6 Retailer Impacts Key Observations From Overseas Implementations Load profiling is generally not mentioned in retailers’ communications with customers. It is commonly regarded as a matter of interest only to retailers for settling their wholesale energy purchase costs; Regulators have also tended to shy away from communicating with customers on the method used by their retailer to determine the customer’s energy costs; Numerous customer surveys reveal that customers are mainly interested in the price implications (ie net overall effect of load profiling) of FRC. Customers also generally require a significant price cut before they will be persuaded to switch supplier; Most customers found the process of switching under a load profiling regime relatively easy and seamless; P_13072000_energy2 34
  • 35. 6 Retailer Impacts Some customers have complained about the difficulty of making price comparisons between retailers, particularly in respect of dual fuel offerings; We are aware of one utility which has had to defend litigation on its adopted load research based profiling approach for agricultural customers on the grounds that the utility did not have sufficient data to produce statistically significant results. Although the utility in question successfully defended the litigation, the case highlights the need for the industry to tread carefully when adopting load research based profiles for some customer classes. Larger users will be especially price conscious and aware of the savings available from switching suppliers. Transfer/switching rates for these customers are also generally higher. P_13072000_energy2 35
  • 36. 6 Retailer Impacts Marketers do not appear to have neglected the lower income/disadvantaged consumers, but the methods employed for marketing to these consumers are clearly different (greater percentage of door to door selling in UK). P_13072000_energy2 36
  • 37. 7 Key Customer Impacts Customer Segments for each Retail Area Tariff Market Consumption Split for AGLGN P_13072000_energy2 37 Residential 56% Commercial/Industrial 44% Residential Commercial/Industrial Tariff Market Consumption Split for GSN Residential 76% Commercial/Industrial 24% Residential Commercial/Industrial Tariff Market Consumption Split for AGC Residential 72% Commercial/Industrial 28% Residential Commercial/Industrial Source: IPART Issues Paper “Review of the Delivered Price of Natural Gas to Tariff Customers Served from AGL Gas Network in NSW”; May 1998 and “Review of the Delivered Price of Natural Gas in Wagga Wagga and Albury”; October 1999
  • 38. 7 Key Customer Impacts Geographical BreakDown of Mass Market (in terms of annual consumption) Geographical Dispersion of Tariff Market Consumption for AGLGN Source: IPART Issues Paper “Review of the Delivered Price of Natural Gas to Tariff Customers Served from AGL Gas Network in NSW”; May 1998 P_13072000_energy2 38 Sydney 79% Wollongong 4% Newcastle 6% Country Areas 11% Sydney Wollongong Newcastle Country Areas
  • 39. Key Customer Impacts 7 Customers who are “peakier” than the NSLP (temperature sensitive customers) are subsidised by “flatter” (non temperature sensitive). We explore the key customer impacts of load profiling under the following headings: The cross subsidies inherent within the existing tariffs; and Effect on a customer’s bill; and Incentives for interval metering. P_13072000_energy2 39
  • 40. 7 Key Customer Impacts Cross Subsidies Inherent Within the Existing Tariffs Consumer to consumer cross-subsidies exist at present as retail tariffs do not reflect the true energy costs. A load profiling regime that sought to reflect the customer’s “true” energy purchase costs (eg. a load research based profiling regime) or indeed the installation of daily meters would “undo” a significant level of cross subsidy which currently exists. This may in lead to breach of the voluntary pricing principles and the risk falls to the incumbent retailer because 2nd tier retailers are not bound to compete for unprofitable segments of the market. In the absence of a reduction in the non energy components of a customer’s bill, the effective price faced by some customer segments would rise. P_13072000_energy2 40
  • 41. 7 Key Customer Impacts Cross Subsidies Inherent Within the Existing Tariffs Currently in NSW gas, most residential and small business tariffs are based on Uniform Tariffs (No time of Use Signals) Will this change??? Households with access to gas mains that are actually connected. AGL Retail Area 60% Wagga Wagga 80% Albury 85% Potential growth (especially in AGL area) Potential for Tariff Structure to Change P_13072000_energy2 41
  • 42. 7 Key Customer Impacts Load profiling only impacts the energy purchase cost component of a customer’s bill. Victorian Electricity Example Metropolitan General Domestic Customer (Annual Bill $660) Network Charges 46% Retail Costs 11% Wholesale Energy P_13072000_energy2 42 Costs 17% Retail Gross Margin 24% NEMMCO Charges 2% Network Charges 52% Retail Costs 9% NEMMCO Charges Wholesale Energy Costs 27% 3% Retail Gross Margin 9% Effect on a Customer’s Bill Source: From Trowbridge Consulting report to Victorian Distributors “Victorian Electricity Load Profiling Study”; March 2000, based on data provided by participants. Rural Hot Water Domestic Customer (Annual Bill $810)
  • 43. 7 Key Customer Impacts Effect on a Customer’s Bill Illustration of cross subsidies for NSW residential gas customers under NSLP (ignoring Payback). Comparison of Median Consumer Cross Subsidies by Profiling Option Expressed as a % of Bills for House Dwellers with 3 Occupants 16% 14% 12% 10% 8% 6% 4% 2% 0% -2% -4% -6% CK CH HW CK + HW CH + HW + CK Appliance Mix Cross Subsidies as % of Bill P_13072000_energy2 43 Annual NSL Quarterly NSL Monthly NSL Annual NSL -2% 14% -4% -4% 6% Quarterly NSL -1% 7% -2% -3% 3% Monthly NSL -1% 4% -2% -2% 2% Source: From Trowbridge Consulting report to Energy Corporation “Study to identify and Examine Options for Load Profiling and Reconciliation to Support Effective Retail Competition in the NSW Gas Market”; March 2000, based on data provided by participants.
  • 44. 7 Key Customer Impacts Effect on a Customer’s Bill Illustration of cross subsidies for NSW commercial gas customers under NSLP (ignoring Payback). Comparison of Median Consumer Cross Subsidies by Profiling Option Expressed as a % of Bills for Sample IC Customers 35% 30% 25% 20% 15% 10% 5% 0% -5% -10% Small No Heating Small Heating Large No Heating Large Heating P_13072000_energy2 44 Sample Customer Cross Subsidies as % of Bill Annual NSL Quarterly NSL Monthly NSL Annual NSL -5% 27% -6% 32% Quarterly NSL -3% 20% -4% 23% Monthly NSL -2% 15% -2% 17% Source: From Trowbridge Consulting report to Energy Corporation “Study to identify and Examine Options for Load Profiling and Reconciliation to Support Effective Retail Competition in the NSW Gas Market”; March 2000, based on data provided by participants.
  • 45. 7 Key Customer Impacts Payback reduces level of cross subsidies Depends on class of business eg: Central Heating Only Customer - reduce from 14% to 10%. (subsidised by others) Cross subsidies exist in current tariff structure (as discussed) P_13072000_energy2 45
  • 46. Key Customer Impacts 7 Incentives for Interval Metering Customers with more desirable load characteristics than NSLP Reasonable size Clear economic signals for interval metering As Metering Costs come down size threshold for economic metering will also reduce P_13072000_energy2 46
  • 47. Key Customer Impacts 7 Incentives for Interval Metering Annual Consumption per Customer Required Before there is a $400 Cross Subsidy Based on EAPL Costs and Annual NSL Profiling 1,000 900 800 700 600 500 400 300 200 100 0 Mandating of Daily Meters Could be Considered 10% 20% 30% 40% 50% 60% 70% 80% 90% 100% Consumption 98 289 1,311 1,458 629 453 376 Customer's Load Factor Calculated Using Quarterly Bill Data Annual Consumption Required (GJ) P_13072000_energy2 47 Retailer has Economic Incentive to Install Meter Source: From Trowbridge Consulting report to Energy Corporation “Study to identify and Examine Options for Load Profiling and Reconciliation to Support Effective Retail Competition in the NSW Gas Market”; March 2000, based on data provided by participants.
  • 48. Key Customer Impacts Over time the net system load shape will “deteriorate” but become more representative of the load characteristics of the profiled customers. Incumbent sets tariffs based on NSLP for all customers The new NSLP is peakier but more representative of remaining customers Flatter (Non Peaky) have economic incentive to install interval meters P_13072000_energy2 48 Flatter/non-peaky customers are overcharged under NSLP Evolution of a NSLP Regime 7
  • 49. Profiling in Electricity 8 and Victorian Gas Trowbridge Consulting has undertaken quantification studies in load profiling options for the mass market in: Victorian Electricity (Vic DBs - public document) Victorian Gas (DNRE - public document) NSW Gas (ENCorp) NSW Electricity (advised NSW retailer on response to MIG paper) The following summarises the current situation in terms of implementation of profiling for FRC. P_13072000_energy2 49
  • 50. Profiling in Electricity 8 and Victorian Gas Victorian Gas FRC expected to commence in mid 2002 5-10TJ customers contestable from 1 Sept 2001 based on a metering solution for 2nd tier only customers. Net System Load Profiling will be used as balancing arrangement. 5-10TJ customers can choose between metering or profiling once full contestability implemented. Profiling at Distribution Business Boundary Area (DBBA) Partial settlements Backward Reconciliation (Victoria has a daily spot market) Apportionment Factors based on customer level “like billing period” data, adjusted for EDDs. P_13072000_energy2 50
  • 51. Profiling in Electricity 8 and Victorian Gas NSW Electricity FRC expected to commence in 1 January 2002. There has been a staggered approach for 40-100MWh and 100-160MWh commercial customers (based on metering solution for 2nd Tier.) Net System Load Profiling to settle wholesale market. NSLP at Local Network Service Provider (LNSP) boundary Partial settlements Controlled Load Profiles (CLPs) (basically Off Peak Hot Water) will be “peeled off” NSLP for both 1st and 2nd Tier customers. CLPs will be based on sampling P_13072000_energy2 51
  • 52. Profiling in Electricity 8 and Victorian Gas VIC Electricity FRC expected to commence in 1 January 2002. Net System Load Profiling to settle wholesale market. NSLP will be undertaken at Local Network Service Provider (LNSP) boundary A Partial settlements regime will operate. No allowance for “peel-off” of off-peak loads (Hot Water) P_13072000_energy2 52
  • 53. 9 Conclusions A simple net system load profiling solution has the potential to afford residential and small commercial industrial customers the opportunity to share in the benefits of full retail competition. Implementation must be carefully managed recognising the key customer and retailer impacts. The single largest risk is that the load profiling solution is “over engineered” to the point where the industry loses sight of the primary objective (ie to facilitate FRC). In considering the optimal solution for preserving the “load shifting” and energy conservation incentives, we believe there is limited value in refining the profiling solution. The benchmark against which any such refinements should be measured is the cost of interval metering. A profile can never be made to “behave like an interval meter”. P_13072000_energy2 53