presentation - consumer engagement - 30 september 2013

Consumer Forum September 2013 1

Consumer Representative Forum - September 2013


Introductions


Today’s Agenda

Introduction to TransGrid and our consumer engagement to date

Getting the best out of the proposed program– What we have in mind– Understanding your needs, interests and priorities

Network vision– What’s important to you?

Operating expenditure– What it is and a discussion of how we can work with you

to engage consumers


Why we are here

Revenue reset timing

External environment


Consumer program objectives

Our objectives for this phase are to:

Seek your advice about our approach to consumer engagement

Understand your priorities and interests

Ensure our business plans meet consumers needs and expectations

Test if we are striking the right balance for consumers in terms of investment and maintenance in our network while managing the impact on electricity prices


Introduction to TransGrid



TransGrid has a statutory duty to deliver high voltage electricity from power generators to the distribution network that supplies power to homes and businesses. TransGrid’s electricity transmission system includes:

Over 12,772km of overhead transmission line and underground cable

36,000 transmission line structures

More than 94 substations and switching stations

Consumer Forum September 2013 9*IPART Fact Sheet - Regulated Retail Prices

20% Electricity generators

8%Transmission network – transporting electricity from power stations at high voltage (the highway)

42%

15%

Distribution network – transporting it from the highway to your home or business (your local road network)

Retailers

15% The carbon price and State and Federal government green schemes

What makes up my bill?


Why are we essential?

Why are we essential infrastructure? Impact of failure

– India– Eastern seaboard of the USA– Auckland– Along with your homes and businesses electricity is

essential for traffic lights, sewerage works, water pumping, trains, hospitals……


What is in the revenue proposal?

Revenue =

Capital expenditure

Operating expenditure

Return on investments

To be discussed in October forum

Being discussed today

December forum


TransGrid’s Revenue Split

Return on Capital Depreciation Tax Operating Expenditure


What is the Revenue Reset Process?

TransGrid submits a Revenue Proposal to

the AER

The AER scrutinises this proposal and

undertakes its own investigation

The AER makes a draft revenue decision

TransGrid is able to submit a revised Revenue

Proposal addressing issues of concern with the

AER’s draft decision

The AER makes a final revenue decision


How does this affect consumers?

TransGrid applies its pricing methodology to translate this revenue to prices to be collected from customers

The AER determines the revenue TransGrid can earn each year

TransGrid’s customers are 4 NSW and ACT

electricity distributors

3 direct connect customers (very large electricity users)

These costs are paid for through

consumer electricity bills


The approach so far…

Defined audience

•Primary consumers

•Consumer representative groups and organisations

Approach

•Roundtable discussions

•Randomly selected participants

•Metropolitan and regional split

Inform, involve

engage

•Mix of presentations, facilitation tools and techniques

•Factsheets

•Discussed the ‘energy conversation’, TransGrid’s role and the impact to consumers

Collaborate

•Asked consumers what they want and need to know about the ‘energy conversation’ and TransGrid’s business activities specific to its revenue reset proposals


TransGrid’s Consumer Program

•Introduction to the program

•Operating Expenditure

September

•Capital Expenditure•Powering Sydney

October

•Demand Management

•Asset Tour

November

•Transitional Proposal

•Return on Investments

December


TransGrid’s Consumer Program•Treat

ment of confidential information

•Pricing methodology

February

•Full revenue proposal discussion

March


Are we on track?

Engaging with consumer representatives Holding discussions with a Consumer Advisory

Panel Listening to consumers views posted to the “Have

Your Say” section of our website Consumers emailing us or calling us directly Feedback from our newsletter Survey results


Group activity


Framing operating expenditure – The Network Vision


Network Vision

TransGrid’s network vision sets out the key characteristics of the future high voltage electricity transmission network in NSW

– These characteristics will provide a guiding direction for the long term development of this network

We are seeking your feedback on the objectives of the vision and to understand what’s important to you


Purpose

The purpose of the network vision is:– Guide the company and its stakeholders in making

longer term decisions about investments in the development and renewal of the network

– Demonstrate to stakeholders that network development, renewal and maintenance strategies and plans are sustainable for the long term

– Benchmark shorter term asset management strategies against the direction provided in the longer term network vision

– Facilitate a ‘line of sight’ from the corporate plan to the asset management strategies and plans


Factors Taken into Consideration

Real electricity price rises to be minimised Drive the asset base harder to deliver efficiencies

whilst balancing risk, performance and cost over the entire asset lifecycle

Respond to customer requests to connect to the network in a timely and cost effective way

Current reliability and quality of supply levels, as a minimum, to be maintained



Deliver increased levels of public safety and awareness

Minimise environmental impacts Promote and develop non-network solutions to

meet future load growth Undertake condition based asset replacement



Develop and augment the network to:– Meet future load and emerging constraints, where this

growth and constraints are more certain– Cater for connection of renewable generation sources– Leverage technology to drive efficiencies (eg access to

real time data, better monitoring and control systems)– Respond to changing consumer behaviours (eg use of

solar panels, smart meters)– Cater for increased volatility in load and energy flows

(eg arising from the intermittent and variable renewable generation output from wind and solar generation)



Develop and augment the network to:– Cater for growth in emerging distributed generation (eg

local energy storage devices connected to the network)


Proposed objectives

Proposed objectives for the network of the future1. Deliver electricity transmission services to meet

stakeholder requirements in a safe, secure, environmentally responsible and cost effective way

2. Maintain flexibility and responsiveness of the network in an uncertain future

3. Develop the network to meet future growth in demand and generation sources

4. Leverage technology and innovation to enhance the capability and capacity of the network to deliver long term benefits for consumers


Specific to operating expenditure…


Operating Expenditure

Operating expenditure is the ongoing expenditure required to provide transmission services

Asset management activities– Plan– Manage the assets– Maintain– Operate

Corporate activities– Finance, HR, IT, Health & Safety, Environment


TransGrid’s opex costs to consumers…

Indicative costs to residential consumers: TransGrid’s total revenue contributes approx $130 per year Operating expenditure accounts for approximately $30 of

this

Indicative costs to small business consumers: TransGrid’s total revenue contributes approx $170 per year Operating expenditure accounts for approximately $40 of

this


Operating Expenditure

Grid Planning

Maintenance Support & Asset Management

Maintenance

System Operations

Property Management

Health, Safety and Environmental

Information Technology

Business Management (Finance, HR, Payroll)

Corporate and Regulatory Management

Insurance, Rates and Statutory Taxes


Benchmarks

Maintenance expenditure – TransGrid participates in benchmarking studies and

industry forums with international peers

– TransGrid’s maintenance approach, intervals and costs are consistent with international best practice

Non-maintenace expenditure– For cost categories where benchmarks are available,

TransGrid compares its costs against other similar utilities

– TransGrid’s costs are generally in line with similar utilities


Maintenance Expenditure



Drivers– Manufacturers’ instructions– Industry experience– Safety & environmental standards– National Electricity Rules and jurisdictional

requirements– Technology developments



Principles– Maintenance to be minimised consistent with safety,

reliability and risk– Periodic maintenance focuses on diagnostic condition

measurement (with exceptions where appropriate)– Continuous online monitoring used where economic– Compliance with limits for acceptable service condition– Condition based maintenance in response to out of

tolerance condition



Principles– Work methods developed in consultation with

maintenance staff– New equipment to be of a proven safe, reliable and low

maintenance design


Non-Maintenance Expenditure

Principles– Cost control through continuous improvement (such as

process review)– Regular reviews of sourcing strategies for activities


Operating Expenditure Forecasting Method


Group activity

presentation - consumer engagement - 30 september 2013

Marketing