Tariff Structure Statement SA Power Networks AER public forum - - PowerPoint PPT Presentation

Tariff Structure Statement –SA Power Networks

AER public forum

Requirements, proposal &

• bservations
• cost reflectivity of tariffs
• customer impacts

Rules – defining & reflecting costs

National Electricity Objective

• “…promote efficient investment in, and

efficient operation and use of, electricity services for the long term interests of consumers with respect to…” Network Pricing Objective

• “…tariffs a distributor charges in respect of its

provision of direct control services should reflect the distributor’s efficient costs of providing those services to the retail customer” Distribution pricing rules –

efficiency

• Pricing principles
• Tariff classes
• Tariff assignment /

reassignment Distribution pricing rules

– customers &

compliance

• Customer impacts
• Understandability of tariffs
• Jurisdictional gov’nt obligations

Rules – Defining & reflecting costs

• Identify

forward looking costs (LRMC)

• Link costs to

customers – tariff classes & assignment / reassignment

Define costs & causation links

• LRMC –

time & location, but: rules silent on tariff design

Design of tariffs

• Minimise

distortions to forward looking tariff signal

Recover residual costs

• Revenue

between SA & AC to avoid cross subsidies

Stand- alone & avoidable cost

• Transition

approach

• Understandable

tariffs

• Gov obligations

Alter tariffs (customer impacts & compliance)

Rules – Defining & reflecting costs

 Cost reflectivity = means to achieve efficient usage

and investment (network & customer side)

 Spectrum of degrees of cost reflectivity:  Rules (NPO, LRMC) refer to prices reflecting costs of providing services to individuals  Cost = time & location specific  Technology, practicality, acceptability - determine degree / speed of cost reflectivity progress for each distributor  Rules encourage progress over time along cost reflectivity spectrum  Iterative process to compliance – over time and by business

Proposal - Defining & linking costs to customers

Forward costs Residuals Augex –capex & opex 10 yr forecast Total regulated revenue Demand component Fixed, demand & usage (consumption) Voltage connect LV - res Business LRMC (AIC method) HV - bus General customer Specific Residential LV - bus Major bus Solar DTF bus Social hardship Status Existing: < or > threshold usage New invest’ New invest’ Existing < or > threshold usage

Proposed residential & small bus’ tariffs

Existing customer

< 20 mWh (res) or <40 mWh (bus) per annum > 20 mWh (res) or >40 mWh (bus) per annum Advanced meter No advanced meter Mandated Demand tariff (transitional) Consumption Demand (min demand 1kw) simple $p windows & lower rate vs opt-in Current Fixed Consumption block Consumption

New or new investment

(physical supply alt’s; new inverter, appliances > 25amps) Demand (min demand 1kw) Mandated consumption tariff (transitional) Fixed Consumption Opt-in demand tariff Solar customer Social hardship Fixed Consumption block consumption

• r toU or

demand DTF business Existing tariffs (LV tariff class) Fixed

Proposed demand tariff – $p windows

Source: SAPN, TSS overview paper p.32

Time Day Month Opt in version Resi – peak & shoulder 4-9pm Calc’n Max demand - Highest 30mins per month, inc. min demand (1kW) Mandatory (transitional) version Bus – peak 12-9pm Shoulder 12-4pm Resi – One rate 4-9pm Bus – One rate 12-9pm Resi: Mon-Sun.Excl. Christmas day Bus: Workdays. Exl weekends Resi: Mon-Sun.Excl. Christmas day Bus: Workdays. Exl weekends Peak (Nov-Mar) Shoulder (Apr-Oct) No variance

 Link to cost drivers (network stress periods) but:

sufficiently linked?

 Different peak/shoulder windows for opt-in and

transition but: sends helpful message?

 Based on total network peak but: constraints

instead?

Proposed demand tariff – $p windows

Price & non-price alternatives

 Price signals > part of suite of network management

approaches

 Interactions in approaches > network costs driven by

asset condition at specific times & locations:

• Locational prices = theoretical best but complex – future?
• More averaged prices = more reliance on DM

 TSS needs more integrated considerations?  Offer range > more opt-in tariffs with more cost

reflectivity? Some might be willing; retailer innovation?

Constraints driven by peak demand Signal price to motivate response Build more network Procure demand management alternatives

 Moving to more cost reflective tariffs but cognisant

• f impacts on customers > transition

Rule requirements

Defining costs & causation Designing tariffs Recovering residual costs Standalone & avoidable costs Adjusting tariff approach for customer impacts &

• ther

compliance

Rule requirements

Consider impacts Need transition over time – may extend over multiple reg periods Extent customers can choose tariff Extent customers can mitigate impact through usage decisions Tariff structure

• reasonably

understandable Consider type & nature of customer Departures from cost reflectivity Consider info provided & consultation undertaken Jurisdictional

• bligations

SA – no locational pricing for small customers

Impacts & understandability

 Rules require distributors to consider impacts but

difficult exercise:

• Retailer has direct contract with customers:

 Will retailers be able to offer varied options (flat tariffs, peaky tariffs, critical peaks, mobile phone style cap plans?)  Varied retailer options in effect could manage impacts?  What constraints will retailers face in offering various options?

• If likely to be constrained – impacts of network tariffs more

identifiable

• Retailer incentive to make tariff info easy to

understand?

Impacts identified

Source: SAPN, Consultation paper

Residential without PV

Switching from existing to

• pt-in

demand tariff

Residential with PV

Impacts identified

Source: SAPN, Consultation paper

Business single rate

Switching from existing to

• pt-in

demand tariff

Business two rate

Identifying impacts

 Need to identify relatable quantitative impacts:

• Types of customers – characteristics (e.g. load ratios, size)
• Use of different appliances

 Helps retailers and customers > who worse or

better off and how to respond

• Stay on modified existing tariffs or opt-in to demand tariff?

Also, merit of opt in vs opt out.

• Benefit from opting into even greater levels of cost

reflectivity?

• Informs suitable length of transition > for changes to

existing tariffs?

Managing impacts – transition methods

Approach Proposal Observation

Cost ramp up > Mandated transition demand tariffs Demand component set at 40% of intended amount for TSS period. From 2020, 20% annual increase – 6 year transition

• Transition warranted, existing

customers most affected.

• 6 years too long > esp for new

customers / new investments? More relevant for threshold customers? Opt-in and opt-

• ut of cost

reflectivity

• Opt-in for existing

customers

• Mandated for new and

trigger/threshold customers

• Opt-in approach manages impacts on

existing customers – those most affected by changes.

• Distinction between existing and new

customers / new investments speeds up tariff reform but appropriate? Mandated demand tariffs (simple windows) Charging windows > no shoulder period, & don’t differ by month/season

• Helps understanding but correct

message? Opting into greater levels of cost reflectivity Optional full demand tariffs available for customers with appropriate metering

• Good idea but more such options?

Summary

 In short term >

• Metering constraints > continue with existing non-peak reflective tariffs

but close to new customers  Long term plan for moving to more cost reflectivity>

• Choices to protect most existing customers
• Triggers / thresholds to speed up reform implementation

 Demand tariffs = core to forward strategy >

• Questions on ideal design and implementation (existing vs new

customers / new investments; rationale for threshold assignment)

• More info on switching benefits > relate impacts to characteristics?

 Better integration of network spend vs DM vs price signals?

End

Key discussion topics

 Distinctions appropriate - existing vs new customers /

new investment customers?

 Mandated and opt-in demand tariffs:

• Benefits of switching clear? Who better or worse off?
• Charging windows – info sufficient to understand if

refinements required?

• More opt-in choices?

 Rationale for mandatory tariffs for threshold

customers (demand & consumption variants)

 Interactions clear > network spend vs DM vs pricing?  Other issues?

Key Dates  Submissions due

28 Apr 2016

 AER draft determination

1 Jul 2016

 SA Power Networks revised proposal 1 Sep 2016  AER final determination

30 Jan 2017

 SA Power Networks pricing proposal 31 Mar 2017  AER approval of pricing proposal

16 May 2017

 New tariffs introduced

1 Jul 2017

 Email submissions to SAtss2016@aer.gov.au

Managing impacts – transition methods

 Possible objectives > transition methods: 1. Managing price increases for end consumers 2. Minimise inequitable customer treatment during the transition 3. Allow time for retailers – business integration 4. Allow time for consumers – informing & considering response 5. Allow choice of greater level of cost reflectivity – choice & innovation

 Other / different objectives?