CitiPower and Powercor Regulatory Proposals 20162020 One business - - PowerPoint PPT Presentation

AER Public Forum Presentation by Tim Rourke Chief Executive Officer

22 June 2015

CitiPower and Powercor Regulatory Proposals 2016–2020

2 CitiPower and Powercor Regulatory Proposals 2016–2020

One business – two very different networks

MILDURA BENDIGO ECHUCA KYNETON SHEPPARTON BALLARAT HORSHAM ARDEER COLAC WARRNAMBOOL GEELONG DOCKLANDS PORT MELBOURNE SOUTH MELBOURNE PRAHRAN TOORAK ARMADALE ST KILDA CAULFIELD HAWTHORN RICHMOND BRUNSWICK NORTHCOTE FITZROY CARLTON NORTH MELBOURNE MELBOURNE CBD COLLINGWOOD KEW NORTH BALWYN BALWYN CAMBERWELL MELBOURNE

CitiPower Network statistics

Network route line length: 3,186km Network area: 157sq km Customer numbers: 325,917 Customer density: 102.30c/km Zone substation transformers: 106 Distribution transformers: 4,670 Poles: 58,276 Underground lines: 42% Network reliability: 99.99%

(As at 31 December 2014)

Powercor Network statistics

Network route line length: 67,006km Network area: 145,651sq km Customer numbers: 765,241 Customer density: 11.42c/km Zone substation transformers: 141 Distribution transformers: 83,359 Poles: 561,471 Underground lines: 12% Network reliability: 99.96%

(As at 31 December 2014)

3 CitiPower and Powercor Regulatory Proposals 2016–2020

We manage the most efficient urban and rural networks

Source: AER Economic Benchmarking RINs

Average number of minutes off supply per customer (2006–2013)

CitiPower (VIC)

Jemena (VIC) ActewAGL (ACT) Endeavour (NSW) Ausgrid (NSW) Energex (QLD) United Energy (VIC) 25 50 75 100

Powercor (VIC)

Source: AER, Electricity distribution network service providers, Annual benchmarking report, November 2014, Figure 6

Unplanned number of minutes off supply per customer (average 2006–2013)

100 200 300 400 SA Power Networks (SA) AusNet Services (VIC) Essential (NSW) Ergon (QLD) TasNetworks (TAS)

CitiPower (VIC) Powercor (VIC)

SA Power Networks (SA) United Energy (VIC) AusNet Services (VIC) TasNetworks (TAS) Jemena (VIC) Energex (QLD) Endeavour (NSW) Essential (NSW) Ergon (QLD) Ausgrid (NSW) ActewAGL (ACT)

Source: Economic Insights, Economic Benchmarking Assessment of Operating Expenditure for NSW and ACT electricity DNSPs, November 2014

Operating expenditure productivity index (2006–2013)

0.25 0.50 0.75 1.00

4 CitiPower and Powercor Regulatory Proposals 2016–2020

Our customers pay amongst the lowest distribution network costs in Australia

How we compare – Distribution charges across Australia (2015 dollars)

CitiPower (VIC)

$271 $398

ActewAGL (ACT) United Energy (VIC)

Powercor (VIC)

Jemena (VIC) AusNet Services (VIC) Endeavour (NSW) SA Power Networks (SA) Ausgrid (NSW) TasNetworks (TAS) Energex (QLD) Essential (NSW) Ergon (QLD) $0 $200 $400 $600 $800 $1,000 $1,200

Source: CitiPower and Powercor analysis

Powercor CitiPower

Source: Oakley Greenwood, Causes of residential electricity bill changes in Victoria, 1995 to 2014. Based on a single-rate residential customer who uses 4,000kWh (inclusive of GST) – comparisons with DNSPs in other NEM states

10 20 30 40 50 60 70 80 90 % 100

How we compare – Bill composition across Australia

61 .2% 28.7% 10.1% 66.2% 23.3% 10.5%

Endeavour (NSW) Essential (NSW) Energex (QLD) SA Power Networks (SA) ActewAGL (ACT) Other Network Components including Smart Metering Distribution Component Wholesale and Retail Components Ausgrid (NSW)

5 CitiPower and Powercor Regulatory Proposals 2016–2020

Our proposals strike the right balance between safety, reliability, growth and affordability

• 1. Delivering affordable pricing outcomes
• ฀ We have delivered a robust proposal that provides customers with

value for money outcomes

• 2. Safe, reliable and efficient management of our assets
• ฀ AER Benchmarking demonstrates we are among the most efficient operators
• ฀ This has not been achieved at the expense of safety or reliability
• ฀ We take a responsible and considered approach to investment and maintenance
• 3. Adapting the network to meet the challenges of the future
• ฀ We will continue to invest in technologies and solutions that build

a smarter network and optimise our existing assets for our customers

• 4. We are committed to incentive-based regulation

6 CitiPower and Powercor Regulatory Proposals 2016–2020

Proposal Overview ($, 2015)

Net capex Opex Rate of return Revenue CitiPower $850m $502m 7.2% $1,586m Powercor $2,015m $1,334m 7.2% $3,380m

CitiPower price movements

300 320 340 360 380 $ 400 2015 2016 2017 2018 2019 2020

$28 reduction in the average residential customer’s annual electricity bill in 2016 Powercor price movements

440 460 480 500 520 $ 540 2015 2016 2017 2018 2019 2020

$43 reduction in the average residential customer’s annual electricity bill in 2016

Source: CitiPower and Powercor analysis. Price movements include DUoS and metering charges

7 CitiPower and Powercor Regulatory Proposals 2016–2020

Revenue requirement – standard control

CitiPower 2016–2020 revenue requirement ($m, 2015)

Regulatory depreciation Return on assets Operating expenditure Incentive schemes Corporate income tax

$694m 44% $274m 17% $502m 31% $121m 8%

• $5m

0%

Powercor 2016–2020 revenue requirement ($m, 2015)

$1,343m 40% $464m 14% $1,334m 39% $227m 7% $13m 0%

Source: CitiPower and Powercor analysis

8 CitiPower and Powercor Regulatory Proposals 2016–2020

Powering growth

MILDURA BENDIGO ECHUCA BALLARAT HORSHAM TRUGANINA MERBEIN DEER PARK SHEPPARTON WARRNAMBOOL EAST GEELONG TORQUAY DOCKLANDS PORT MELBOURNE SOUTH MELBOURNE PRAHRAN TOORAK ST KILDA CAULFIELD HAWTHORN BRUNSWICK NORTHCOTE CARLTON NORTH MELBOURNE CBD COLLINGWOOD KEW BALWYN CAMBERWELL

Peak demand area Agricultural growth Population growth Upgrade zone substation New transformer New terminal station Upgrade parts of network Peak demand area CBD Security of Supply project Decommission parts of network Decommission zone substation New zone substation

Top 5 growth 2011–31 Local Government Areas (Metropolitan)

Largest (000’s) Fastest (% per annum) Wyndham 201 Melton 4.2 Casey 171 Wyndham 4.0 Whittlesea 160 Melbourne 4.0 Melton 142 Cardinia 3.9 Melbourne 118 Whittlesea 3.5

Top 5 growth 2011–31 Local Government Areas (Regional)

Largest (000’s) Fastest (% per annum)

• Gr. Geelong

73 Mitchell 4.8 Mitchell 54 Baw Baw 2.8 Ballarat 47 Bass Coast 2.4

• Gr. Bendigo

44 Moorabool 2.3 Baw Baw 31 Surf Coast 2.1

9 CitiPower and Powercor Regulatory Proposals 2016–2020

Connecting customers

PORT MELBOURNE PRAHRAN TOORAK ARMADALE ST KILDA CAULFIELD HAWTHORN RICHMOND SOUTH MELBOURNE BRUNSWICK NORTHCOTE FITZROY CARLTON NORTH MELBOURNE

MELBOURNE CBD

COLLINGWOOD KEW NORTH BALWYN BALWYN CAMBERWELL

Urban renewal and development

E-GATE MONTAGUE PRECINCT ARDEN MACCAULEY WEBB DOCK BATMAN’S HILL FISHERMANS BEND

10 CitiPower and Powercor Regulatory Proposals 2016–2020

We take a risk-based approach to asset management

CitiPower Powercor

(2016) Zone Substations – Load v Health Index (2021) Without augmentation (2021) With augmentation

Source: CitiPower and Powercor analysis

11 CitiPower and Powercor Regulatory Proposals 2016–2020

• 1. Rural Victoria is one of the most bushfire prone

places in the world

• 2. We will double our investment in the Powercor

network to ensure we meet our Victorian Government

• bligations for bushfire mitigation
• 3. For the first time, CitiPower has obligations which

will see armour rods and vibration dampers installed across the network Investments include:

• ฀ Armour rods and vibration dampers installed across the networks
• ฀ New generation Automatic Circuit Reclosers on SWER lines
• ฀ Trial of earth-fault limiting equipment in our Woodend and

Gisborne zone substations

• ฀ Survey of conductor clearances
• ฀ Installation of spreaders or rebuild of lines

Reducing bushfire risk

CitiPower and Powercor Regulatory Proposals 2016–2020 11

12 CitiPower and Powercor Regulatory Proposals 2016–2020

Adapting the network to meet the challenges of the future

The smart grid

Battery storage Automation Demand response Solar power generation Wind power generation Coal power generation (traditional ) Cogeneration and trigeneration Smart metering Customers

13 CitiPower and Powercor Regulatory Proposals 2016–2020

Adapting the network to meet the challenges of the future

Extending

฀ 2020฀onwards฀• ฀ Smart฀customer฀consumption฀• ฀ Smart฀storage฀• ฀ Opportunities฀to฀extend฀technology฀• ฀ Improve฀network฀capabilities฀• Offer฀customers฀streamlined฀processes฀and฀practices฀• Opportunities฀to฀extend฀value฀to฀customers฀• ฀ Improved฀data฀and฀network฀• management opportunities ฀ Safely฀manage฀• an increasingly complex network ฀ Good฀industry฀practice฀• ฀Integrating฀network฀management฀systems฀• ฀ Real฀time฀network฀communications฀• ฀ Understanding฀full฀network฀loading฀• ฀฀Governance฀over฀the฀low฀voltage฀network฀• ฀ Improved฀customer฀service฀• ฀฀ Voltage฀variation฀monitoring฀• ฀ Knowledge฀of฀customer฀usage฀• ฀ Time฀of฀use฀signals฀to฀customers฀• ฀ Government฀mandate฀•

• ฀Fully฀automated฀
• ฀Self-healing฀network
• ฀Improved฀response฀to฀customer฀connections฀
• ฀Accurate฀view฀of฀asset฀location฀data฀
• ฀Proactive฀management฀of฀vegetation฀
• ฀Predicting฀demand฀response฀to฀tariffs
• ฀Improved฀voltage฀quality฀of฀supply฀

during peak demand periods

• ฀Better฀understanding฀of฀asset฀failures
• ฀Improved฀planned฀outage฀notification฀for฀customers
• ฀Greater฀availability฀of฀customer’s฀generation
• ฀Increased฀safety฀of฀the฀network
• ฀Network฀model฀integration฀with฀meter฀data
• ฀Streamlined฀solar฀PV฀connections
• ฀Improved฀visibility฀and฀understanding฀
• f customer outages
• ฀Reduced฀outage฀times
• ฀Improved฀voltage฀compliance
• ฀Quality฀of฀supply฀information
• ฀Remote฀capability฀
• ฀Daily฀interval฀meter฀data

Realising a smarter grid Basis for a smart grid Building capability FDIR฀/฀Voltage฀profiling฀/฀ Customer phase identification Leveraging AMI DMS฀/฀SAP฀Hana฀/฀Meter฀outage฀notification฀/฀ Load shedding Foundation Deployment฀of฀smart฀meters Future direction

BENEFITS 2021+ 2016–2020 2009–2015 DRIVERS

• 1. Clear customer service direction:
• ฀ Responsive service
• ฀ Choice in how customers interact with us
• ฀ Low effort, self-service and mobility
• ฀ Improved end-to-end processes
• ฀ New billing system to provide innovative,

cost-reflective tariff options

• ฀ Introduce itemised electricity bills
• 2. Better access to accurate,

timely information

• 3. More educational and advisory

information to help customers make the right energy choices

Making it easy for customers to get the information they need

14 CitiPower and Powercor Regulatory Proposals 2016–2020

15 CitiPower and Powercor Regulatory Proposals 2016–2020

Summary

Striking the right balance between safety, reliability, growth and affordability

• ฀ Continuing our commitment to deliver affordable pricing outcomes
• ฀ Safe, reliable and efficient management of our networks
• ฀ Adapting our network to meet the challenges of the future
• ฀ Supporting our customers’ changing energy choices and making

it easy for them to get the information they need

16 CitiPower and Powercor Regulatory Proposals 2016–2020

Thank you