Presentation by AERs Consumer Challenge Panel (CCP) sub-panel 7 - - PowerPoint PPT Presentation

Presentation by AER’s Consumer Challenge Panel (CCP) sub-panel 7 David Prins and Robyn Robinson

 Role of the Consumer Challenge Panel (CCP)  AER overall view on CCP advice in the Draft Decision  Environmental considerations  Rate of return  Capital expenditure (capex)  Operating expenditure (opex)  Pipeline services  Tariffs  Consumer engagement

 Challenge the businesses and the AER  Reviewed documentation, met with the AER

and JGN, met with JGN’s Customer Council and with individual large customers, presented to a public forum organised by JGN, and toured JGN gas facilities

 Provided formal (published) advice to the AER

 The newly formed Consumer Challenge Panel

(CCP) played a significant role in our processes of assessing the proposal before us.

 The panel advised us on issues that are

important to consumers and provided consumer perspectives, particularly those of residential and small business consumers.

 Previous decision made during a period of Global Financial

Crisis (GFC) concerns

• Consumers expecting network prices to reduce

 Forecast increase in domestic wholesale gas prices  Overall demand falling / flat  Full implementation of the National Energy Customer

Framework (NECF) in New South Wales from 1 July 2013

 New AER Guidelines have been introduced as part of the

Better Regulation program

 Much greater involvement of consumers than ever before –

a new process for all parties

CCP advice ce AER Draft Decis ision Considered proposed rate of return too high at 8.67% Reduced rate of return to 6.8% There may be scope for further reduction CCP has provided ‘whole of CCP’ advice to AER on rate of return

CCP advice ce AER Draft Decis ision Concern about forecast 30% increase over approved capex for 2010-14 Total capex reduced by 18.7% from $1,130.4 million to $918.6 million ($2014–15) Examine higher delivery costs for market expansion capex 22% reduction in capex for new connections Driven by reduction in unit rates and a slight reduction in estimated new connections Capex reduced from $384.1 million to 299.6 million ($2014–15) Examine justification

• f reinforcement /

renewal projects 8 renewal and upgrade projects not ‘prudent and efficient’. Capex reduction $19.7 million. 11 augmentation projects not ‘prudent and efficient’. Capex reduction $8.1 million. Examine justification

• f IT projects

All $127.9 million is accepted

CCP advice ce AER Draft Decis ision Reasonably comfortable with proposed opex 1.2% reduction in opex from $789.3 million to $779.7 million ($2014–15) Conditional support for Efficiency Benefit Sharing Scheme (EBSS) Efficiency carryover mechanism accepted Consider Capital Expenditure Sharing Scheme (CESS) Not proposed by JGN or by AER We accept that a CESS is not necessary if AER is satisfied that JGN’s opex is efficient

CCP advice ce AER Draft Decis ision Bundling of meter data services will present a potential barrier to future contestability of meter data services The AER found no compelling reasons not to approve JGN’s Proposal The AER may review its draft decision in its final decision should stakeholder submissions provide compelling reasons not to merge metering data services into a single reference service* * We continue to hold concerns regarding barriers to future contestability of meter data services

 Restructuring of tariffs  Rebalancing of tariffs between residential,

commercial and industrial customer segments

 Tariff design to take into account affordability  Presentation of tariff information  New tariffs for energy intermediaries: ensure that

appropriate consumer protections are in place for customers of gas intermediaries, particularly users of energy supplied in the form of gas hot water

CCP overa rall ll advice ce on c consumer umer enga gagement gement JGN demonstrated a genuine commitment to customer engagement taking account of CE Guidelines and other sources Most consumer engagement was at the ‘inform’ level, with some attempts at ‘consult’ and ‘involve’ levels. (The next levels are ‘collaborate’ and ‘empower’) Commended JGN for new initiatives, including commitment to assist vulnerable customers

Opportunities tunities for improvement ment identi tifi fied by the CCP CCP Customer Council – Extend areas where the Customer Council can add value and fully participate at the ‘consult’ level and beyond Stakeholder workshops – improvement in design of ‘Willingness to Pay’ surveys More comprehensive engagement with large industrial customers and retailers Community engagement – has been largely centred on JGN’s website, and registration to receive email updates

Opportunities tunities for improvement ment - AER The AER might provide clearer explanation of how consumer engagement by the network business has influenced the outcome of the (draft) determination For example:

• $6.59m step change in opex for Marketing was supported by
• customers. What bearing did that have on the AER’s (draft) decision

to include that in total opex?

• Customers supported a proposal to ‘equalise service levels for all

existing customers’ for an additional cost of $0.60 per year for 5 years, and $0.90 per year for the following 15 years. How has this support been reflected in the draft determination?

THA HANK NK YO YOU