proposed consolidation of albury and victorian access arrangements 10 november 2015
DESCRIPTION
Overview 3 AGN proposes to consolidate two of its Access Arrangements into one – the Victorian and Albury Access Arrangement Consolidation is allowed under NGR 53(2) Consolidating these Access Arrangements is a logical step because: both networks are managed and operated in the same way they operate under the same Victorian market rules Albury is directly connected to AGN’s Victorian network they provide the same reference services the AA reviews are due at the same time (1 January 2017) the AER reviewed them together last time (2012), as did the ESCV five years earlier AGN expects that this will have no operational impacts on customers No change to the operation of the network No change to our regulatory obligations No change to the structure of tariffs No change to the ability for stakeholders to influence the regulatory review process Will lead to lower regulatory costs, and hence prices to consumers AGN wants to understand stakeholders’ views prior to making a formal submission to the AERTRANSCRIPT
Proposed Consolidation of Albury and Victorian Access Arrangements
10 November 2015
Overview
Victoria and Albury networks
Customers by zone
Reference Services
National Gas Rules
Impact
Benefits
Approach
Outline
Overview
3
AGN proposes to consolidate two of its Access Arrangements into one – the Victorian and Albury Access Arrangement
Consolidation is allowed under NGR 53(2) Consolidating these Access Arrangements is a logical step because:
both networks are managed and operated in the same way they operate under the same Victorian market rules Albury is directly connected to AGN’s Victorian network they provide the same reference services the AA reviews are due at the same time (1 January 2017) the AER reviewed them together last time (2012), as did the ESCV five years earlier
AGN expects that this will have no operational impacts on customers No change to the operation of the network No change to our regulatory obligations No change to the structure of tariffs No change to the ability for stakeholders to influence the regulatory review process
Will lead to lower regulatory costs, and hence prices to consumers
AGN wants to understand stakeholders’ views prior to making a formal submission to the AER
Area covered by AGN’s networks
Transmission pipelines
AlburyVIC
NSW
AGN distribution networks
Melbourne
Murray Valley
Northern
Melbourne
VIC network is split into 4 zones
VIC
NSW
VIC network zones
Albury
Central Bairnsdale
Albury
Albury is effectively a fifth zone
VIC
NSW
Central Bairnsdale
Covered under Victorian Access Arrangement
Covered under Albury Access Arrangement
Murray Valley
Northern
Consolidate access arrangements
All zones covered under Victorian and Albury Access Arrangement
VIC
NSW
Central Bairnsdale
AlburyMurray Valley
Northern
Customers by zone
8
Albury would be a larger zone than Murray Valley and Bairnsdale in the consolidated network
3%
83%
12%
2% 1%
Albury
Central
Northern
Murray Valley Vic
Bairnsdale(3,000)
(21,000)
(521,000)
(73,000)
(10,000)
Reference services
9
The same suite of reference services are provided in Albury as in the other zones under the same terms and conditions
Reference service Victoria zones Albury zone
Haulage services
Tariff D Haulage Reference Service a aTariff V Haulage Reference Service a a
Ancillary services
Meter and Gas Installation Test a aDisconnection a aReconnection a a
Meter Removal a aMeter Reinstallation a aSpecial Meter Read a a
National Gas Rules
10
AGN is proposing to consolidate under National Gas Rule 53
Under NGR 53, the AER may direct the service provider to submit a consolidated access arrangement proposal which can be initiated by either the service provider or the AER
The AER must consider the nature of the pipeline and pipeline services as well as any other matter
The AER must consult on the proposed terms of the direction with the service provider and any other persons it considers appropriate and may require certain conditions to be met
National gas objective:
To promote efficient investment in, and efficient operation and use of, natural gas services for the long term interests of consumers of natural gas with respect to price, quality, safety, reliability and security of supply of natural gas.
We want to understand and consider any issues or concerns of stakeholders
What is the impact of consolidation?
11
Albury operates under the same market rules as Victoria and as such retail market dynamics are dictated by Victorian market characteristics; and
The Albury network is managed and operated by the Victorian business
Therefore no change in the operation or services of the network
The AER reviewed the Access Arrangements together in its 2012 review (as did the ESCV five years earlier)
Therefore no change in stakeholders’ ability to influence the review of the Access Arrangement
Tariffs in Albury will be subject to the same review process as before
Therefore no change in the tariff setting process
Are there any other issues that might exist that would require Albury to retain a separate AA?
Why consolidate?
12
The benefits of consolidating the Albury AA into the Victorian AA are:
Reduced administrative burden and cost:
Avoid the costs associated with preparing and complying with two Access Arrangements
Cost savings are maximised if Albury can be treated the same as other zones in the Victorian Access Arrangement rather than requiring continued formal separate reporting through a Regulatory Information Notice (RIN)
Improved certainty to support efficient investment:
Both networks will be reviewed under one arrangement, assessed at the same time and operated under the same terms and conditions. This formalises the current approach but removes any doubt that the networks could be treated differently by the regulator. Greater certainty allows more efficient investment
If the AAs are consolidated:
13
AGN will submit one consolidated Access Arrangement Proposal on 1 January 2017
AGN will combine the Albury regulatory asset base (RAB) with the Victoria RAB
Tariffs in Albury will be subject to the same regulatory review process but will be considered and calculated in the same way as the reference tariffs for other zones of the Victorian Access Arrangement
Movements in tariffs for all zones will be considered together and costs will be allocated in line with the approved allocation method
Information for Albury will continue to be captured separately. However, only one regulatory information notice (RIN) will be prepared
Stakeholder Engagement
14
AGN has to date met with:
• NSW Energy Department;
• IPART; and
• AGN’s Retailer Reference Group for the Victorian and Albury AA reviews.
AGN intends to also meet with:
• Victorian Energy Department;
• ESCV; and
• PIAC
Feedback from stakeholders has been supportive, expressing understanding of AGN’s reasons for pursing consolidation
Next steps
15
AGN’s next steps are to:
• Conclude stakeholder engagement;
• Reflect feedback from engagement into application to the AER; and
• Finalise and submit consolidation application to the AER – aiming for this to be provided prior to 20 November 2015.
Feedback
16
Your Comments?
Supporting slides
17
Comparison of zones
18
Albury
Central
Northern
Murray V
alley V
ic
Bairnsd
ale$0
$20,000,000
$40,000,000
$60,000,000
$80,000,000
$100,000,000
$120,000,000
$140,000,000
$160,000,000
$180,000,000
Revenue
Albury Central Northern Murray Valley Vic Bairnsdale -
100,000
200,000
300,000
400,000
500,000
600,000
Customers
Comparison of zones
19
<10TJ Customers Revenue ($) Volumes (GJ) Customers
Albury 5,808,901 1,103,957 21,115
Central 167,534,005 29,289,705 520,799
Northern 20,143,340 3,847,198 73,381
Murray Valley Vic 1,860,109 1,004,318 10,289
Bairnsdale 1,446,829 167,527 3,423
Key metrics – Albury
20
The Albury network delivers gas to nearly 22,000 customers and accounts for around 1% (or $6 million) of AGN’s total revenue. AGN estimates a penetration rate of approximately 88%.
38.0
39.0
40.0
41.0
42.0
43.0
44.0
45.0
46.0
47.0
48.0
18,000
18,500
19,000
19,500
20,000
20,500
21,000
2010 2011 2012 2013 2014
Avg. ConsumptionConnectionsResidential Connections and Average Consumption
Connections Average Consumption (GJ p.a.)
260.0
270.0
280.0
290.0
300.0
310.0
320.0
330.0
340.0
860
870
880
890
900
910
920
930
940
2010 2011 2012 2013 2014
Avg. ConsumptionConnections Commercial Connections and Average Consumption
Connections Average Consumption (GJ p.a.)
Residential Connections have grown steadily by 1.8% on average over the past
five years.
Average (non-weather adjusted) consumption has declined by around 2.5% per annum on average over the past five years.
Commercial Connections have grown steadily by 1.0% on average over the past
five years.
Average (non-weather adjusted) consumption has been relatively flat, increasing by 0.7% per annum on average over the past five years.
Key metrics – Northern Victorian Zone
21
There are 74,000 customers in AGN’s Northern Victorian zone accounting for around 3% (or $20 million) of AGN’s total revenue
Residential Connections have grown steadily by 2.3% on average over the past
four years.
Average (non-weather adjusted) consumption has declined by around 2.7% per annum on average over the past four years.
Commercial Connections have grown steadily by 0.3% on average over the past
four years.
Average (non-weather adjusted) consumption has declined by 1.9% per annum on average over the past four years.
40.0
42.0
44.0
46.0
48.0
50.0
52.0
64,000
65,000
66,000
67,000
68,000
69,000
70,000
71,000
2011 2012 2013 2014
Avg. ConsumptionConnectionsResidential Connections and Average Consumption
Connections Average Consumption (GJ p.a.)
230.0
235.0
240.0
245.0
250.0
255.0
260.0
265.0
270.0
3,100
3,110
3,120
3,130
3,140
3,150
3,160
3,170
3,180
3,190
3,200
2011 2012 2013 2014
Avg. ConsumptionConnectionsCommercial Connections and Average Consumption
Connections Average Consumption (GJ p.a.)
Key metrics – Victoria
22
The Victoria network delivers gas to over 600,000 customers and accounts for around 35% (or $185 million) of AGN’s total revenue.
Residential Average consumption per residential customer in Victoria is around
46 GJ per annum
Connections have grown steadily by 2.5% on average over the past five years.
Average (non-weather adjusted) consumption has declined by around 4.0% per annum on average over the past five years.
Commercial Average consumption per commercial customer in Victoria is 300GJ
per annum
Connections have grown steadily by 0.4% on average over the past five years.
Average (non-weather adjusted) consumption has declined by around 0.2% per annum on average over the past five years.
40.0
42.0
44.0
46.0
48.0
50.0
52.0
54.0
56.0
520,000
530,000
540,000
550,000
560,000
570,000
580,000
590,000
2010 2011 2012 2013 2014
Avg. ConsumptionConnectionsResidential Connections and Average Consumption
Connections Average Consumption (GJ p.a.)
300.0
305.0
310.0
315.0
320.0
325.0
22,600
22,650
22,700
22,750
22,800
22,850
22,900
22,950
23,000
23,050
23,100
2010 2011 2012 2013 2014
Avg. ConsumptionConnections Commercial Connections and Average Consumption
Connections Average Consumption (GJ p.a.)