More Related Content
Similar to TransGrid consumer advisory panel
TransGrid consumer advisory panel
- 1. Consumer Advisory PanelWorkshop Held 12 November 2013 This TransGrid event brought together a range of key community advocates 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 achanging energy market Consumer Advisory Panel workshop 12 November 2013
- 3. Welcome Your input todayis what counts 3
- 4. Workshop objectives • Sharedunderstanding 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 • Feedback and input from attendees on this revenue application • Feedback on TransGrid’s strategy to engage your constituents and the broader public on this revenue proposal, and future updates 4
- 5. Workshop agenda 10.00am 10.20am How weare changing our business (Peter McIntyre, Managing Director) 10.35am Overview of TransGrid (Greg Garvin, GM Stakeholder Engagement) 10.45am Q&A and discussion with Peter McIntyre 11.15am Morning tea 11.30am TransGrid’s draft business plan for 2014 to 2019 (Greg Garvin and Stephen Clark, EGM Network Planning and Performance) 11.45am Invested capital (Andrew Kingsmill, Regulatory Expenditure Manager) 12.30pm Lunch 1.30pm Invested capital continued (Andrew Kingsmill) 2.15pm Operating expense (Andrew Kingsmill) 3.15pm Afternoon tea 3.30pm Other revenue components (Nicola Tully, Revenue Reset Manager) 3.45pm Pricing (Stephen Clark) 4pm 5 Welcome, workshop objectives and introductions Close
- 6.
- 7. How we arechanging our business Peter McIntyre, Managing Director
- 8. The market haschanged 70,000 GWh Total electricity demand in NSW 1951/52 8 How we are changing our business 2012/13
- 9. Index movement Painful electricityprice rises 400 NSW residential electricity price 300 200 CPI 100 9 How we are changing our business 2009 2004 1999 1994 1990 2013
- 10. TransGrid’s new approach Adaptive planning open, responsive planning innovative non-build options ‘just in time’ capital works Effective engagement value stakeholders’ input early and broad consultation empowered consumers inform decisions Smarter regulation advocate for hybrid planning standard design incentives for efficient expenditure support non-network options 10 How we are changing our business
- 11.
- 12. Birdseye view ofTransGrid TransGrid promotional video This video is currently unavailable 12 Overview of TransGrid
- 13. TransGrid’s business structureand role in the market • NSW state-owned corporation • Owns, maintains and operates the NSW transmission network • 1,083 employees, more than 70% based outside Sydney 38% wholesale plus carbon 8% 13 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
- 14. TransGrid’s network spansNSW, and plugs in to neighbouring states 14 Overview of TransGrid 94 substations Large scale blackout prevention Wholesale market facilitation Mostly indirect consumer relationship 47 kms underground cables 12,609 kms high voltage transmission lines 63 generator connections 362 distributor and direct customer connections
- 15. TransGrid’s stakeholder engagement isevolving Activity What we learned Reviews of stakeholder best practice • The end-users of transmission services are a diverse and sometimes energy unaware group • Infrastructure building is always contentious to impacted communities • There are Australian case studies of good practice engagement in the water industry Consumer and community roundtables • Minimal interest in TransGrid unless there is direct impact • Directly impacted communities and broad consumer base have different needs • Stakeholders want to be involved early in the planning process Review of project • Network planning needs to open up consultation and • Communities want early involvement in need identification communication • Clearer, open and flexible communications are needed 15 Overview of TransGrid
- 16. Revenue reset consumerengagement 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 16 • 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
- 17. Discussion Q&A with ManagingDirector, Peter McIntyre Please let us know: Key electricity industry issues for you and those you represent Topics you want to cover today Key questions 17
- 18. TransGrid’s draft 2014 to2019 business plan
- 19. The revenue determination framework Naturalmonopolies 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 19 TransGrid’s Draft Business Plan
- 20. Revenue determination timeline Australian Energy Regulator 31Jan 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 20 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
- 21. Business plan overview Regulatory assetbase 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 21 TransGrid’s Draft Business Plan Inform Return on capital invested historically Inform
- 22. How TransGrid’s pricescompare Prescribed revenue per energy transmitted (c/kWh nominal) 3 c/kWh nominal 2 1 0 2005-06 2007-08 2009-10 ElectraNet Powerlink 22 TransGrid’s Draft Business Plan 2011-12 2013-14 2015-16 2017-18 SP AusNet Transend TransGrid
- 23. Regulatory asset base Annual revenue allowance Proposedcapital investment
- 24. Minimising our buildprogram: 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 24 Capital – Non build focus Approx $1.2 billion completed or underway
- 25. Open and responsiveplanning 25 Capital – Non build focus
- 26. Increasing focus oninnovative non-build options Demand management Local generation Energy efficiency 26 Capital – Non build focus Peak load management through time of use tariffs, interruptible loads and load shifting etc. Local generation (biomass, solar, cogeneration) to reduce loading on network Increasing customers’ use of efficient appliances, lighting, motors etc. TransGrid’s success so far Sydney CBD 35 megawatts (2012/13) Western Sydney supply 300 megawatts (2009)
- 27. Discussion 27 How do youfeel about TransGrid’s approach to ‘non-build’? Do you have any suggestions for improvement or additional ideas?
- 28. Replacement dominates proposed capitalinvestment Proposed capital investment for 2014 to 2019 Category Augmentation New or upgraded infrastructure to cater for growing demand Replacement Updating infrastructure which is wearing out Market benefits New or upgraded infrastructure to expand generator access and competition Others 28 Capital – Overview Description Non network infrastructure, including commercial property and IT systems, and security compliance
- 29. Peak demand hasslowed and is less certain 29 Capital - Augmentation
- 30. Demand driven augmentation down Comparisonof demand driven augmentation capital investment 2009-14 and 2014-19 ($ million) 2009-14 allowed new capital 2009-14 actual new capital 2014-19 forecast new capital 30 Capital - Augmentation
- 31. Proposed augmentation portfolio Proposed augmentationprojects 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 31 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
- 32. Discussion 32 Are you comfortablewith AEMO’s peak demand forecast? How do you feel about TransGrid’s augmentation capital investment proposal?
- 33. History of networkdevelopment is driving replacement needs 33 Capital - Replacement
- 34. Proposed replacement project portfolio Forecastreplacement 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 34 Capital - Replacement Description e.g. transformer replacement, reactive plant replacement, oil containment
- 35. Transmission line renewaland ‘low span’ remediation Transmission tower life extensions in coastal areas Rebuild of ageing wood poles Raising ‘low spans’ to meet clearance requirements 35 Capital - Replacement
- 36. Renewal or replacementof 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 asset 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 36 Capital - Replacement 45 40 35 30 25 20 15
- 37. Secondary system renewalto 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 37 Capital - Replacement 1990-99
- 38. Consulting on requirementsfor 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 2014 38 Capital - Replacement
- 39. Discussion Are there alternativesyou think TransGrid should consider? 39 Do you think TransGrid’s approach is reasonable? Do you have an opinion on how TransGrid can balance the trade-off between the cheapest option and the option that best meets community expectations?
- 40. ‘Market benefits’ projectsto dispatch cheapest generation 40 Capital – Market benefits Queensland to New South Wales interconnector upgrade Snowy to Yass / Canberra upgrade
- 41. Discussion 41 Are you comfortablewith the proposed market benefits projects? What alternatives do you think TransGrid should consider?
- 42.
- 43. TransGrid performs wellagainst international peers 43 Operating expense – Overview
- 44. Historical operating expenditure 200.0 200.0 190.0 Historicaloperating expenditure ($ million 2013/14) 190.0 180.0 180.0 170.0 $170m $m (2013/14) $m (2013/14) 170.0 160.0 160.0 150.0 $150m 150.0 140.0 140.0 130.0 130.0 $120m 120.0 120.0 2009-10 2009-10 2010-11 2009/102011-12 2010-11 2012/13 2011-12 2012-13 2013-14 2014-15 2015-16 2016-1 2012-13 2013-14 2014-15 2015-16 2016-17 2017 Historical Actual/Outturn - Provisions Basis Forecast - Cash Ba Historical Actual/Outturn - Provisions Basis for Employee Entitlements Forecast - Cash Basis Historical Actual/Outturn – Provisions Basis Historical Actual/Outturn - Cash Basis Historical Actual/Outturn– Cash Basis for Employee Entitlements Historical Actual/Outturn - Cash Basis 44 Operating expense – Overview
- 45. Breakdown of draft operatingexpense 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 45 Operating expense – Overview
- 46. Increased planning coststo 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 - 46 Operating expense – Planning
- 47. Automation allows moreefficient network maintenance 47 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
- 48. Innovation in operatingpractices 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 48 Operating expense – Network operation
- 49. Continued efforts toreduce 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 49 Operating expense – Support the business
- 50. Discussion (1) To whatextent should TransGrid incur operating expense to pursue further ‘non-build’ options? 50 Do you think TransGrid’s recent increase in planning costs is justified? Why or why not? Does TransGrid’s approach to maintenance meet your expectations?
- 51. Discussion (2) Are thereany different approaches to operating expense you would expect TransGrid to explore? In light of changing electricity consumer behaviour, to what extent do you expect TransGrid to engage with consumers? 51
- 52. Regulatory asset base Annual revenue allowance Tax,depreciation, rate of return on capital invested
- 53. The revenue formula Weighted Average Costof Capital Regulated Revenue = x Regulated Asset Base Value Return on Capital 53 + Depreciation Return of Capital + Operating & Maintenance expenditure + Tax
- 54. Weighted Average Costof Capital (WACC) (1) The WACC is a weighted average of the estimated future cost of debt (Rd) and cost of equity (Re). 54 The regulatory WACC is a forward-looking estimate of the cost of capital for a ‘benchmark’ network business. WACC = E x Re + D x Rd V V
- 55. Weighted Average Costof Capital (WACC) (2) Cost of debt – ‘trailing average’ or ‘spot rate’ Historic trailing average, or Trailing average with 7 or 10 year transition Cost of Equity – Sharpe-Lintner CAPM AER proposing no change but confirming where in the range with reference to other models and market information 55
- 56.
- 57. Residential bill components 38% Wholesale powerplus carbon price 8% 35% 13% Retail and retail margin 7% Green (FiTs, RET, o ther) 57 Pricing
- 58. Allocating transmission revenue betweenconsumers The pricing methodology must be submitted to the regulator at the time of the revenue application Transmission pricing should promote efficient outcomes across all consumers, and cover the total cost of transmission services 58 Pricing
- 59. Current pricing methodology: fromallowed revenue to charges Prescribed revenue requirement Entry and exit services Transmission use of system services 50% Common services 50% Locational Annual charge ($/day) 59 Pricing Contract or peak demand charge ($/MW) Non-locational Historical energy or contract based maximum demand ($/MWh or $/MW)
- 60. TransGrid is currentlyconsulting on its pricing methodology TransGrid is consulting publicly on its pricing methodology for 2014 to 2019 The paper is available at yoursaytransgrid.com.au Submissions close 5pm 13 December 2013 60 Pricing
- 61. Discussion 61 Are there timeswhen network users value the reliability of the transmission network more than other times? If so, when and why?
- 62.
- 63. For further informationon TransGrid or this presentation please contact TransGrid’s External Communication Manager on 02 9284 3016. Alternatively visit our consultation website – yoursaytransgrid.com.au
Editor's Notes
- #30 [Andrew K]A drop in electricity demand means TransGrid will apply for far less growth augmentation capex than last timeTransGrid has also been advocating for a new reliability standard (economically-derived, deterministically-expressed) to transparently balance cost of service against consumers’ value of reliability Use a shaded bar with labels, instead of the legend Augmentation principles: Meet transmission network reliability standard as set by NSW GovernmentOpen, responsive planning process including consideration of both network and non-network options to meet needsOnly build when necessary