planning and economic committee 3 · the cost of electricity in fnq is due to a number of...

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Agenda Planning and Economic Committee 11 September 2013 - #4100704

PLANNING AND ECONOMIC COMMITTEE

11 SEPTEMBER 2013 3

SUBMISSION TO ERGON ENERGY NETWORK TARIFF STRATEGY CONSULTATION

M. Grenfell : 8/26/32-01 : #4087709

RECOMMENDATION:

That Council endorses the attached submission to Ergon Energy as part of the network tariff strategy consultation

EXECUTIVE SUMMARY: Ergon Energy has recently released a consultation paper on proposed changes to electricity network tariffs and is seeking customer feedback. Any changes that may be made to network tariffs as a result of this review would be progressively implemented and not commence any earlier than 2014-15. The cost of electricity in FNQ is due to a number of components that includes, the cost of generation, transmission via Powerlink, distribution via Ergon and retail charges via Ergon. Ergon Energy is currently reviewing how they charge for the use of the electricity distribution network. Their aim is to spread the electricity load more evenly to improve network utilisation, manage growth in peak demand, and avoid spending millions of dollars in asset augmentation which would ultimately be paid for by their customers through their bills. The changes under consideration include options to align tariffs with the high cost of supplying electricity to meet peak demand, while rewarding customers who shift consumption to times of low usage. Council’s submission provides Ergon with feedback that Council is aligned with the sentiment of the proposed changes however expresses the importance of a lengthy transition time for Council to (where possible and necessary) adjust facility operations.

BACKGROUND:

With around 600 Ergon electricity accounts, Council is a key stakeholder in Ergon’s network tariff strategy consultation. The top 20 energy consuming accounts use about 75% of Council’s total electricity. Council has undertaken various tariff reviews to ascertain the most beneficial tariff for Council facilities from a financial perspective while maintaining level of service.

COMMENT: Generating enough electricity to supply peak usage times is of significant concern to electricity providers in Australia.

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The overall aim of this strategy is to improve the utilisation of the existing electricity network and reduce network infrastructure cost increases. This should benefit all network users by reducing the costs passed on to customers from future network infrastructure costs. This is likely to be of particular benefit to large customers such as Council. Tariff structure changes may require a change in operations and electricity consumption patterns in order to shift usage away from peak network times. These are generally changes that Council has the resources and expertise to implement. Generally the proposed Ergon strategy aligns with Council policies to be financially responsible and consider sustainability in its operations. The key comments for Ergon in the submission on Council’s behalf include: 1. In consultation with Ergon, Council supports the removal of cross subsidies

between network customers hence rewarding energy consumption in off peak periods.

2. Council supports the re-introduction of off-peak tariffs. 3. Council supports greater customer choice and transparency of supply costs. 4. Council would need significant prior warning of tariff change impacts to prepare for

investment in alternative supply options, to avoid inappropriate investment decisions.

5. Council would prefer consistency and simplicity of metering and billing data and charges. A single unit of kW or kVA would be preferred.

6. The benefits of changing electricity usage patterns must outweigh additional metering costs for it to be of benefit to Council (especially in small sites).

7. Council requires more information from Ergon regarding the predicted time of peak periods and potential impact on Council operations to determine how to respond.

8. In the event of tariff structure change, Council would appreciate support from Ergon to implement load shifting actions at larger sites where there are operational constraints.

CONSULTATION:

The following Council Officers have been consulted in formulating the attached submission: - Water and Waste Operations - Finance, Purchasing and Stores - Infrastructure Services, Buildings and Facilities

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CONSIDERATIONS: Risk Management (including financials): Given Council’s annual electricity spend (approximately $10 million) any changes in Ergon’s pricing structure will either increase or decrease Council’s operational expenditure. Without understanding the proposed peak periods discussed in the proposal or the specific impact, it is difficult to quantify cost vs benefit for Council. Understanding the operational opportunities or constraints to reduce peak electricity usage (especially in large consuming sites) plus ongoing engagement with Ergon on load shifting options will be an advantage to Council moving forward. Corporate and Operational Plans: The attached submission is aligned with the following strategic goals of Council: Goal 2 – Economy Infrastructure and utilities that facilitate and enhance sustainable growth. Goal 2 – Environment The provision of quality infrastructure that meets the region’s current and future needs. Goal 3 – Governance Responsible financial management and efficient operations.

Statutory: There are no statutory implications at this stage. Policy: n/a

Sustainability: Resources: The submission encourages the reduction of peak electricity demand which reduces the need for Ergon Energy to generate more electricity. The net benefit is a reduction in greenhouse emissions from a reduction in fossil fuel based electricity generation. Environment: The submission response has no impact on natural environment criteria including water quality, habitat or environmental biodiversity. Community: The submission has no impact on community programs or community wellbeing. Governance and economic management: Providing a submission to Ergon on this matter demonstrates good governance of being proactive on financial sustainability and participating in discussions about reducing the operational costs to Council while reducing environmental impact of electricity generation.

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Options 1. That Council endorses sending the attached submission to the Ergon Energy as

part of the network tariff strategy consultation. Or 2. That council does not endorse sending the attached submission to Ergon Energy.

ATTACHMENTS: Attachment 1 – Draft submission to the Ergon network tariff strategy consultation Maree Grenfell Coordinator Sustainability Paul Cohen Acting Manager Strategic Planning

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