Networks NSW NSW Public Forum NSW DNSP Regulatory Proposals NSW DNSP Regulatory Proposals 10 JULY 2014 2013 Vince Graham, Chief Executive Officer ,
AGENDA 1. Who we are 1 2 2. Customer engagement Customer engagement 2 3. What we are doing to minimise network price increases 3 4. 4. Headline outcomes for NSW distribution businesses Headline outcomes for NSW distribution businesses 4 4 5. Tariff reform 5 Generation Transmission Distribution 2 Networks NSW
Networks NSW Who we are Section 1
Who we are 1 Comprises Ausgrid , Endeavour Energy and Essential Energy (‘poles and wires in NSW”) and wires in NSW ) remain separate companies joint Board j common CEO and senior management team Why was it established? y Networks NSW was formed by the NSW Government on 1 July 2012 to: put downward pressure on electricity prices and save $400M over 4 years, to help fund electricity rebates for low income households NETWORKS NSW (Umbrella Agreement) NETWORKS NSW (Umbrella Agreement) AUSGRID ENDEAVOUR ESSENTIAL 4 Networks NSW
Our purpose and objective p p j T b To be of service to our communities by efficiently distributing electricity f i t iti b ffi i tl di t ib ti l t i it to our customers in a way that is safe, reliable and sustainable. • Continuously improve safety performance Safety Safety • Strive to contain our share of customers’ Aff Affordability d bilit electricity bills to CPI or less • Ongoing reliability security sustainability of • Ongoing reliability, security, sustainability of Reliability the network 5 Networks NSW
Network Reform Program g 1 • • The centrepiece of the reforms has been the Network Reform The centrepiece of the reforms has been the Network Reform Program. • The Network Reform Program commenced in 2011/12 and will The Network Reform Program commenced in 2011/12 and will deliver ongoing cost reductions over a period of 5 years. • The first 3 years of this program has delivered $2.67 billion of savings, including $2.26 billion of capital savings. 6 Networks NSW
The Impact of Potential Change of Ownership p g p 1 • • On 10 June 2014 the NSW Premier Mike Baird announced that the On 10 June 2014, the NSW Premier Mike Baird announced that the Government at the March 2015 election would seek a mandate to undertake a long term lease of 49% of the ‘poles and wires’ network businesses. t k b i • Essential Energy would be excluded. • A scoping study is being undertaken to assess the structure of any sale and is due for completion by November 2014 . 7 Networks NSW
Customer engagement Networks NSW 2 Section 2 i S
Customer Engagement g g 2 • • A key focus for us is to enhance engagement with our customers A key focus for us is to enhance engagement with our customers • We’ve commenced a detailed engagement program with customers, welfare groups, retailers and other stakeholders that will be ongoing. 9 Networks NSW
Customer Engagement g g 2 Customer priorities Customer research research 1 Pricing & affordability 1. Pricing & affordability 2. Reliability 3. Safety Face-to- face 4. Implementing energy efficiency programs meetings 5. Reliability Use of i innovative ti channels (incl. social media) 10 Networks NSW
What customers told us 2 Affordability Affordability No more price shocks No more price shocks – want affordable, stable prices want affordable stable prices Satisfied with reliability of network Reliability y don’t want to pay more for better reliability or less for reduced reliability Value Improve customer value without affecting reliability p g y Safety Ensure safety of network Better communications channels: mobile apps, online Communications 11 Networks NSW
Networks NSW Section 3 Section 3 What we are doing to What we are doing to minimise network price p increases
Prioritising Capital Investment g p 3 • The overall investment portfolio was ranked using a risk prioritisation model model. • Resulted in significant capex deferral for the 2014-19 period of close to $2 billion compared to initial planning estimates. Forecast capex for 2014-19 is $6 billion lower than the AER’s approved capex for 2009-14. 2014 19 i $6 billi l h h AER’ d f 2009 14 13 Networks NSW
Productivity 3 In addition to cost savings arising from capex reductions, we have also: Placed pressure on our operating expenditures to reduce costs in all areas Cost saving initiatives Cost saving initiatives • Strategic procurement • Rationalising organisational structures & road fleets g g • Removing TSA dis-synergy costs • Eliminating stranded labour costs • Customer aligned enterprise agreements 14 Networks NSW
Outcomes for customers 3 $5.4 billion in savings from Network Reform are resulting in: Lower costs from a lower Regulatory Asset Base (RAB) arising from lower than capex forecast in 2009-14 Distribution price increases below inflation for the entire 2014-19 period (that is, real price reductions) Maintained reliability and improved safety performance 15 Networks NSW
Headlines for NSW DNSPs Networks NSW Section 4 Section 4
Household Network Bill Increases 4 Ausgrid Endeavour Energy Essential Energy 22.5% 22.5% 30.0% 20.0% 20.0% 25.0% 17.5% 17.5% 15 0% 15.0% 1 15.0% 0% 20.0% 12.5% 12.5% 2.3% 1.2% 15.0% Ave 2.4% 10.0% 10.0% 7.5% 7.5% 10.0% 5.0% 5.0% 5 0% CPI CPI CPI CPI CPI 5.0% 2.5% 2.5% 0.0% 0.0% 0.0% -2.5% -2.5% 09-10 10-11 11-12 12-13 13-14 14-15 15-16 16-17 17-18 18-19 9-10 0-11 1-12 2-13 3-14 4-15 5-16 6-17 7-18 8-19 9-10 0-11 1-12 2-13 3-14 4-15 5-16 6-17 7-18 8-19 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 20 20 20 20 20 20 20 20 20 20 • Network charges make up about 50% of a household’s electricity bill (Distribution 40%, Transmission 10%) • Our share of electricity bill increases will be held at or below CPI for the next 5 years • Our share of customers’ electricity bills will fall in real terms • Greater stability to help households and small businesses manage their budgets 17 Networks NSW
Annual Smoothed Revenues 4 Ausgrid, Endeavour Energy and Essential Energy have collectively proposed smoothed annual revenues of $24 2 billion for standard control services smoothed annual revenues of $24.2 billion for standard control services (SCS) for the five year regulatory period commencing 1 July 2014 NSW DNSPs’ proposed smoothed Standard Control Service revenues ($ million, nominal) Proposed Proposed Proposed Proposed Proposed Total 2014/15 2015/16 2016/17 2017/18 2018/19 2014-19 Ausgrid Ausgrid $2 314 $2,314 $2,372 $2 372 $2 425 $2,425 $2 499 $2,499 $2 580 $2,580 $12 189 $12,189 Endeavour $1,022 $1,022 $1,046 $1,068 $1,101 $5,258 Essential $1,353 $1,352 $1,348 $1,347 $1,357 $6,757 TOTAL $4,688 $4,746 $4,819 $4,914 $5,038 $24,205 ^ Includes metering and ancillary network services Networks NSW 18
Capex – Significant reductions p g 4 Proposed consolidated capex during 2014-19 is 45% below the forecast rate of inflation over the 5 year period of inflation over the 5 year period. Real reduction in NNSW Capex from FY10 to FY19 ($m, 2013-14) NNSW Capex from FY10 to FY19 ($m 2013-14) capital program it l AUSGRID 4,000 3,500 A Real 2013-14 3,000 2,500 VOUR 2 000 2,000 ENDEAV $m, R 1,500 1,000 L ESSENTIAL AER Determination (2009-14) ( ) Actual / Fcast (2009-14) ( ) Forecast (2014-19) FY14 Real ( ) Networks NSW 19
Drivers impacting opex p g p 4 Productivity improvements that are delivering savings in opex, are being largely offset by changes in our operating environment requiring l l ff t b h i ti i t i i increased expenditure in some areas. 1. Increased vegetation costs for bushfire mitigation g g 2. Retail dis-synergy costs (Ausgrid) 3. Costs resulting from changes to regulatory obligations (i.e. private mains) 4. Costs of implementing network reforms (i.e. exit costs) 5 5. Real cost escalation Real cost escalation 20 Networks NSW
Vegetation management g g 4 Costs to manage vegetation increased in the current period due to increased C t t t ti i d i th t i d d t i d compliance obligations particularly with regard to bush fire and reliability risk. Allowance for this period was based on a lower cost structure from the 2004-09 regulatory period. 250 Real 13/14 200 150 100 100 $m, R 50 0 04/05 05/06 06/07 07/08 08/09 09/10 10/11 11/12 12/13 13/14 14/15 15/16 16/17 17/18 18/19 Essential Energy Vegetation Management Opex ($million, 2013-14) 21 Networks NSW
Operating cost 4 Consolidated opex during 2014-19 is expected to be 4% above the forecast of inflation over the 5 year period. Real change in NNSW Opex from FY10 to FY19 ($m 2013 14) NNSW Opex from FY10 to FY19 ($m, 2013-14) operating program ti AUSGRID 1,700 1,600 4 real 2013-14 A 1,500 1 500 1,400 1,300 VOUR 1,200 4% 4% ENDEAV $m, 1,100 1,000 900 AL ESSENTIA AER Determination (2009-14) Actual / Fcast (2009-14) FY14 (Real) Incl ACS Networks NSW 22
Recommend
More recommend
