3.3 united energy distribution - contestable works … · 25-11-2014 · cf2015054: united energy...

Council Meeting, 25 November 2014 Section 3.3 - Page 9

CF2015054: United Energy Contestable Works Contract for Sustainable Streetlights

3.3 UNITED ENERGY DISTRIBUTION - CONTESTABLE WORKS CONTRACT FOR SUSTAINABLE STREETLIGHTS (CF2015054:KH) Responsible Director: Ossie Martinz

RECOMMENDATION

That Council subject to the Chief Executive Officer negotiating satisfactory commercial terms: 1. Accepts the United Energy Distribution Pty Ltd Contestable Works Contract (UED-

COM-007160 – Rev 1.0) for the changeover of street lights to energy efficient street lights and approves the payment of the project costs and schedule of rates for written down value and avoided costs for an estimated $1,360,000 (incl GST).

2. Authorises the Chief Executive Officer to execute any resulting contractual

agreement.

INTRODUCTION

This report seeks Council’s consideration of the contestable works contract (UED-COM-007160-Rev 1.0) with United Energy Distribution Pty Ltd to replace the existing 80 Watt Mercury Vapour streetlights.

BACKGROUND

Council, at its meeting on 30 September 2014, resolved to engage a contractor for the installation of the sustainable streetlights. A contestable works contract is to enable the lights to be changed while working on United Energy’s assets, allows their records to be updated and will also detail written down value and avoided costs. This is normally not required to be paid until the completion of the changeover.

DISCUSSION

The contract is a standard agreement used for this type of works between Council’s and United Energy. There are three components to this contract, which is made up of their project fee, Written Down Value (WDV) and Avoided Cost contribution. Other than the project fee, the other cost are determined by the Australian Energy Regulator, priced per light and paid to the distributor for the existing lights.

The project fee is for the review of project management, health and safety requirements, GIS integration and all costs associated with integrating assets into the United Energy Network. Written Down Value is a regulated charge that cares for the United Energy’s investment and their remaining value if replaced earlier than their expected life. Avoided Costs are also a regulated price that is essentially avoided maintenance costs and is a credit in recognition of removing an asset that no longer requires maintenance.



This contract also enables the ownership of the lights to be transferred to United Energy Network for their on-going responsibility.

FINANCIAL IMPLICATIONS

As previously indicated, there are costs associated with the distributor business, although slightly higher than expected, they are within the available budget.

The Australian Energy Regulator approved charges for the written down value and avoided costs, with differing rates applying depending on the year the lights are changed over and are:

Per light 2014 2015 Written Down Value $141.65 $145.92 Avoided Costs $21.22 $21.68

The project expenditure is dependent on the actual number of lights converted, which is based on the distributor’s records. These records were acquired at the time of privatisation from the SECV and may not have been completely accurate, so the quantity of lights is estimated until substantiated via the conversion.

The following table has been based on 8,200 lights to be changed. For completeness, it also shows previously approved tasks:

Project component Expenditure

(excl GST) Expenditure (incl

GST)

Project Management (previously approved) $80,890 $88,979

Preparation of tender documents for installation of low energy streetlights (previously approved)

$22,450 $24,695

* Supply of Streetlights (estimated) $976,000 $1,073,600

* Installation of Streetlights (estimated) $675,000 $742,500

Sub-total (Works) $1,754,340 $1,929,774

United Energy Project Fee for updating their records (This report)

$25,010 $27,511

* United Energy written down value. (estimated) (This report)

$1,197,273 $1,317,000

* United Energy avoided cost contribution. (estimated) (This report)

-$178,182 -$196,000

Contingency for United Energy costs. $192,263 $211,489

Sub-total United Energy Costs $1,236,364 $1,360,000

Total $2,990,704 $3,289,774

Contingency for supply and installation. $307,646 $338,411

Project Total $3,298,350 $3,628,185



* Note that the estimated cost for written down value and avoided costs for the lights is based on the rate multiplied by the quantity of lights. It is also dependent upon which year the lights are transferred as different rates apply. Due to the uncertainty of the data mentioned above, the quantity estimated (9,760) around 20% more than the expected 8,200 lights, allows for this uncertainty as a contingency.

This component is higher than previously indicated and higher than the previously reported project cost of $3.3m although within the allocated budget of $3.5m ex GST.

SOCIAL IMPLICATIONS

Street lighting plays an important part of the street environment, supporting the wellbeing of the community through the availability of lighting for the footpaths and providing a benefit in enhancing the safety of the roads for vehicular traffic.

The sustainable street lighting, which results in less harmful carbon emissions, it demonstrates to the community that Monash is committed to minimising its effects on the environment which also plays a role in improving the health and wellbeing of the broader community. The T5 lights are a brighter white light than the existing 80 watt mercury vapour lights.

IMPLEMENTATION

This contestable works contract will need to be entered into with the Distributor, United Energy to enable the lights to be changed and allows their records to be updated.

Written down value and avoided costs are not required to be paid until the completion of the changeover.

The works are scheduled to be commenced in November 2014 and be completed in March/April 2015.

CONCLUSION

The contestable works contract (UED-COM-007160 – Rev 1.0) with United Energy Distribution Pty Ltd is the final component to enable the replacement of the existing 80 Watt Mercury Vapour streetlights, which includes their project costs, the written down value and avoided costs.

3.3 united energy distribution - contestable works … · 25-11-2014 · cf2015054: united energy...

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