The New Paradigmin Energy

Tony IannelloManaging DirectorManaging Director

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Today’s presentationClick to edit Master title styleToday s presentation

Drivers of new energy

New paradigm in - New market

N t kNetworks

GenerationGeneration

Retail

Regional

Ch ll i ld2

Challenging new world

Economic growth demands moreClick to edit Master title style

Economic growth demands more electricity infrastructure

STATE LOT APPROVALS ACTUALS AND ESTIMATED PROJECTION

30000

15812

18541

21053

26428

23700

20000

25000

ots a

ppro

vedGross State Product (%)

1040712443

5000

10000

15000

Num

ber o

f lo

8

60

00/01 01/02 02/03 03/04 04/05 05/06 06/07

6

4

2

0

300/01 01/02 02/03 03/04 04/05 05/06 06/07-2

Peak demand drivesClick to edit Master title style

Peak demand drives infrastructure growth

3000

Average Summer Peak Demand SWIS Summer Peak Load

2719MW

3004MW3059MW

2500

2174MW1900MW

2538MW 2473MW

2000MW

2080MW 2174MW1950MW1900MW1900MW

1500

10002000/01 2001/02 2002/03 2003/04 2004/05

Financial Year

4

Peak electricity demand is at historically high levels

Power surge – household Click to edit Master title style

gappliance use

Portion of homes with appliances

Dishwasher 1999

More than one fridge 2002

Air-conditioner

Computer

0 10 20 30 40 50 60 70 80 90

%

5

%

New energy paradigm – new Click to edit Master title style

gy p gmarket

State New market framework Government’s Objective:

to support new entrants into the market

More competitionMore competition

Better services/Better services/ lower prices

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Competitive market introduces Click to edit Master title style

pnew set of rules

Wholesale market mechanismWholesale market mechanism

(unique for WA)

Economic regulation of networks

Increased contestability

Consumer codes

Di ti f W t P7

Disaggregation of Western Power

Mil t fClick to edit Master title styleMilestones for success

NetworksNew wholesale

marketNew

generatorsRegulated

Regional

g

New

Disaggregation

Generation

Independent market operator

retailers

Competitive

Generation

Capacity

Optimal outcomes for consumers

1 A il 2006 1 J l 2006 2007 d b d

Retailp y

procurementconsumers and State

8

1 April 2006 1 July 2006 2007 and beyond

New Energy Paradigm -Click to edit Master title style

gy gNetworks

Current Statecost constrained self-regulated

Future Statecustomer-focused best-in-class regulated

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New Energy Paradigm -Click to edit Master title style

gy gNetworks

Capital Investment450 Actual Projected

Operating Expenditure

300

350

400

ure

$M250

300

350

M

Actual Projected

239.4257.0

373.7

423.2

150

200

250

Cap

ital E

xpen

ditu

299.3302.5

195.6177.8180.1100

150

200

Expe

nditu

re $

172.0

0

50

100

2002 2003 2004 2005 2006

Financial Year

0

50

2002 2003 2004 2005 2006

Financial Year Financial YearFinancial Year

10

New Energy Paradigm -Click to edit Master title styleNew Energy Paradigm

GenerationCurrent State

Supplier of last resort

Future StateFuture StateOptimal supplier of reliable low-of reliable, lowcost energy

11

New generation required to meet Click to edit Master title style

g qState’s electricity requirements

5000

5500 WPC Generation Other Generation

20104000

4500

240

370750 1190 1190

1530 1670

3000

3500MW

35183224 3224

3034 3000 3000 3000 3000

2000

2500

3000

1500

2000

2005/06 2006/07 2007/08 2008/09 2009/10 2010/11 2011/12 2012/13

Financial Year

12

Financial Year

Click to edit Master title styleRenewables an essentialan essential ingredient of energy infrastructureinfrastructure

Most diverse portfolio of rene able energrenewable energy

13

N E P di R t ilClick to edit Master title styleNew Energy Paradigm - Retail

Current StateMonopoly supplier of electricityelectricity

Future StateCompetitive retailer of multi-sourced energy

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A new battlefield in the Click to edit Master title styleelectricity market

Contestable customers(>5.7kw or 50Gwh/a)

Franchise customers

900 000

12 000

900,000

Real reduction12,000 Real reduction (27%) in unit prices

Market pricing Flat tariffs

Generation costs Uniform tariff

E b dd d

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are the battlefield Embedded cross subsidies

B ildi lt tiClick to edit Master title styleBuilding alternative revenuesDual Fuel Policy for Retail

Electricity GasWe

Contestability threshold 0.18TJ/pa (5.7kW)

Contestability threshold 1TJ/ pa

We would like to see

or

12 500 customers

or

600 customers

see these

aligned12,500 customers

(Customers with annual t f $8000)

600 customers

(Customers with an l t faccount of $8000) annual account of

$16,000)W t P h lift d k t h i t t bl k t t 15%

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Western Power has lifted market share in contestable gas market to > 15%

New Energy Paradigm -Click to edit Master title style

gy gRegional

Current StateInward focusedCost minimisation

Future StateCommercialEngagedSupportingFacilitating development

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Click to edit Master title styleSix newSix new

regionalregional

tcentres

dopened

18

Regional communities win Click to edit Master title style

gwith partnership investments

Marble BarBroomeExmouthCarnarvonGascoyne J tiJunctionFitzroy CrossingN ll i

New diesel or gas fired power stations in 14 towns Upgraded network in some towns

NullagineDerby Laverton

Upgraded network in some townsWind/diesel power systems in Bremer Bay, H t C l B

Halls CreekMenziesCamballin

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Hopetoun, Coral Bay Looma

Click to edit Master title style

It’s a challenging new worldIt s a challenging new world for Western Power,

its leaders andits leaders and all market participants,

but with plenty of opportunity.p y pp y

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