Consumer Engagement Program
Contents
Introduction
1
About the forum
2
Electricity pricing and our planning proposal
highlights
3
Participant feedback on our prices and
planning proposal
8
Appendix
- Presentation: Our five-year plans, Networks NSW CEO Vince
Graham
-
Presentation: Endeavour Energy’s electricity plans and prices,
Endeavour Energy General Manager, Network Development Ty
Christopher
Further information contact:
Network Regulation
Mike Martinson, Group Manager Network Regulation, Networks NSW Ph: 02 9249 3120
Email: mike.martinson@endeavourenergy.com.au
Stakeholder Feedback
Kylie Yates, Group Manager Corporate Communications, Networks NSW Phone: 0418 607 575
Email: kylie.yates@ausgrid.com.au
Kate McCue, Manager Corporate Affairs, Endeavour Energy Ph: 02 9853 6141
Email: kate.mccue@endeavourenergy.com.au
1
Introduction
Customer representatives from across NSW gathered on 11
March 2014 to explore the industry’s plans for the next five years
and to consider the impact our plans will have on our share of
customers’ electricity bills.
Ausgrid, Endeavour Energy and Essential Energy held the joint forum for consumer advocacy organisations to understand their views and priorities. The forum formed part of the industry’s consumer engagement program for developing its plans for regulator approval.
Each business recently submitted draft transitional proposals to the Australian Energy Regulator which cover the 2014-2015 year. Each business is required to submit its full five year proposal to the regulator on 31 May.
The forum provided the opportunity to seek consumer representatives’ feedback on:
• our proposed plans,
• the impact of the plans on the electricity network and prices, and • how we can improve our customer service, communication and
engagement.
Feedback from the forum will be considered in developing our final, full five year plan.
This report provides an outline of the forum with peak consumer advocacy groups.
The feedback from the forums with residential and small business customers is provided in the separate report: Endeavour Energy’s Consumer
Engagement Report April 2014.
Senior industry representatives met with peak consumer group
representatives, including Vince Graham Networks NSW CEO (centre back row)
2
About the forum
Customer groups welcomed the opportunity to discuss issues
with Networks NSW CEO Vince Graham and other industry
leaders including Endeavour Energy General Manager Ty
Christopher, Ausgrid Manager Asset and Network Planning Neil
Gordon and Essential Energy Manager Network Regulation
Natalie Lindsay.
What we discussed
The following presentations were discussed with forum participants. • Networks NSW CEO covered:
1. What is Networks NSW?
2. Our objectives
3. How we are managing costs and prices
4. How the AER proposal process works
5. How we’re consulting with customers
6. Highlights of our proposals
7. Our challenge: declining electricity use puts pressure on customer prices and possible response: look at different ways of charging for electricity use.
• A representative from each of Ausgrid, Endeavour Energy and Essential Energy presented their network investment strategies and proposed expenditure for the five years to 2019.
The Networks NSW and Endeavour Energy presentations are attached.
Organisations represented at the forum
Ballina Shire Council Physical Disability Council NSW Break Thru People Solutions, Greystanes
Disability Services, Mountains Youth Services Team, Syd-West Multicultural Services Inc
PIAC Public Interest Advocacy Centre
Council on the Ageing (COTA) Salvation Army Department of Ageing, Disability and Home
Care
Wiradjuri Council of Elders
Energy & Water Ombudsman NSW Australian Energy Regulator Parramatta Chamber of Commerce Energex
FEEDBACK ON THE FORUM
“It was no small thing to see the thought and effort invested by very senior people in the forum…the making of the effort spoke volumes in its own right. I thought it was very valuable.
“While networks might stumble with engagement approaches in the early stages, just to have made this effort is recognition of the preparedness of the industry to listen and to value customers.”
2
3ELECTRICITY
PRICING
AND OUR
PROPOSAL
HIGHLIGHTS
For the full proposal highlights presented at the forum,
refer to the presentations in the Appendix
4
17.48% 15.06% 16.22% 3.55% 0.01% -0.24% 1.22% -2% 0% 2% 4% 6% 8% 10% 12% 14% 16% 18% 20% 22% 2009-102010-112011-122012-132013-142014-152015-162016-172017-182018-19 YearThe proposed increase in our share of customers' electricity bills constrained to CPI (or less)
Movement in our share of electricity bills (nominal %)
Target:Our share of customers' electricity bills will increase by no more than CPI
ELECTRICITY PRICING AND PLANNING
Endeavour Energy has developed a proposal for the Australian
Energy Regulator which outlines how we plan to operate and
maintain the electricity distribution network now, and into the
future.
In developing our proposal to the industry regulator, our objectives place the customer first and promote the long term interests of customers with respect to safety, affordability and reliability.
Endeavour Energy’s costs are around 40% of a customer’s electricity bill.
The continuing decline in electricity use has been putting
pressure on customer prices.
Networks NSW has started a conversation with Peak Consumer
Advisory Groups about the need to rethink electricity tariffs and have
proposed introducing a declining block tariff rather than inclining block
tariffs.
5
SAFETY
By continuously
improving our safety
performance for
employees,
contractors and the
public
AFFORDABILITY
By striving to contain
average increases in
our share of
customers’ electricity
bills at or below CPI
RELIABILITY
By ensuring the
ongoing reliability,
security and
sustainability of our
network
EVERYTHING ENDEAVOUR ENERGY DOES IS DRIVEN BY
3 KEY PRIORITIES:
6
44%
5%
1.6%
OUR PROPOSAL FOR THE FUTURE
Our proposal focuses on keeping costs down and operating and maintaining an electricity network that is
safe, affordable and reliable for customers.
CAPITAL EXPENDITURE (CAPEX) - to build and renew the network and replace ageing equipment
Proposal highlights:
• Endeavour Energy will spend $1.7 billion on capex over the next five years. • We will spend $1.1 billion less than we did the last 5 years.
•
This is a reduction of 37% and is 44% below the forecast of inflation over the five year periodOPERATING EXPENDITURE (OPEX) - to maintain the existing electricity network
Proposal highlights:
• Endeavour Energy will spend $1.8 billion on opex over the next five years.
•
While this is an increase of 7%, this amount is still 5% below the expected level of inflation over the next five years.FORECAST AVERAGE CUSTOMER ELECTRICITY USE – which impacts pricing
Proposal highlights:
• Average customer electricity use is expected to fall by 1.6% a year over 5 years.
•
This is due to rooftop solar, the high Australian dollar affecting manufacturing and the ongoing impact of past price increases. This puts pressure on prices.7
BENEFITS AND RISKS
For transparency, below is a summary of the benefits and potential risks of our proposal to consumers.
Benefits to customers
• Stable prices – We propose to keep average price increases to our share of customers’ electricity bills at or below CPI for the next five years • Reliability – We propose to maintain or slightly improve reliability in some
areas.
• Safety – Our proposal aims to deliver programs that are safe and sustainable for the electricity network and the communities it serves. • Clarity of costs – We are giving customers greater transparency about
how much they pay for metering services.
• New growth areas – Electricity infrastructure for new growth centres will foster local economic development.
• Removing cost subsidies – Customers who do not use specific services (such as special meter test readings) will no longer subsidise those who do.
Potential risks to customers
• Price volatility – If energy use is lower than forecast, a revenue cap may result in customers paying more than we propose.
• Reduced reliability – If our capital program is not approved, we may need to postpone projects which could make the electricity supply less reliable in some areas.
• Future prices – If our forecasts for economic growth, asset condition and customer connections are wrong, we may need to spend more than our AER allowance to address unexpected issues. This could add to customer prices in the 2020-24 period.
• New rules – Customers who request a special service may now pay considerably more for that service as the AER now requires that those customers cannot be subsidised by our general customer base.
7
PARTICIPANT
FEEDBACK ON
OUR PRICES AND PLANNING
PROPOSAL
9
Themes from participant feedback
The main themes that dominated the discussion and participant
feedback were:
1. The biggest priority or concern for their members is affordability and stability of price, followed by maintaining the current level of reliability (without paying any more).
2. The most important issues for households with fixed incomes with
respect to electricity bills is keeping prices stable over the medium to long term, followed by the ability to reduce bills by using less electricity or efficient appliances.
3. They would be supportive of changing the way customers are charged for electricity if it meant prices would be more stable and predictable.
4. While many representatives recognised complex policy issues affect pricing, they also called for simplicity and clarity from the industry and its regulators to meet the longer term interests of customers.
5. Broadly, participants are pleased with the significance of safety, affordability and reliability as underpinning all Endeavour Energy’s operations.
10
Forum poll results
Which of the following issues is the biggest priority or concern for your members?
Response Percentage
Affordability and stability of prices 85.7% Maintaining current level of reliability (pay no more) 14.3% Paying more for better reliability 0% Paying less for reduced reliability 0% Safety of the electricity network 0% Better communication channels – i.e. mobile apps, online
info
0%
Other 0%
What would you say is the most important issues for households with fixed incomes with respect to electricity bills?
Response Percentage
Keeping prices stable over the medium to long term 50% Ability to reduce bills by using less electricity, efficient
appliances
25% Reducing cross-subsidies so they don’t pay for other
households’ technology (e.g. solar)
16.7% Better understanding of their electricity bill 8.3%
How supportive would you be of changing the way customers are charged for electricity if it meant prices would be more stable and predictable? (Noting that our share of bills won’t increase above CPI for the next 5 years.)
Response Percentage
Supportive 100% Neutral 0% Opposed 0%
Forum on electricity plans and prices
Welcome
2013Networks NSW
Consumer
Advocacy
Groups
11 MARCH
Networks NSW
2
Agenda
1. Introduction
- Safety Briefing
- Networks NSW video
- Explanation of polling
2. Discussion: 5 year plans, priorities & challenges – Vince Graham, CEO
Break
3. Overviews by Ausgrid, Endeavour Energy, Essential Energy
4. Q&A and discussion
5. Wrap up and close
Our five-year plans
2013Networks NSW
FORUM -
Consumer
Advocacy
Groups
Vince
Graham
11 MARCH
2014
Networks NSW
We will talk about
1.
What is Networks NSW?
2.
Our objectives
3.
How we are managing costs and prices
4.
How does the AER proposal process work?
5.
How we’re consulting with customers
6.
Highlights of our proposals
7.
Our challenge ahead
Networks NSW
8
What is Networks NSW?
NETWORKS NSW
(Umbrella Agreement)
AUSGRID
ENDEAVOUR
ESSENTIAL
Comprises Ausgrid, Endeavour Energy and Essential Energy (‘poles and wires in NSW”)
remain separate companies
joint Board
common CEO and senior management team
Why was it established?
Networks NSW was formed by the NSW Government on 1 July 2012 to:
Put downward pressure electricity prices and
save $400M
over 4 years, to help fund electricity rebates for low income households
What is Networks NSW?
?
Networks NSW
Our purpose and objectives
Our purpose:
Our objectives:
9
• Continuously improve safety performance
Safety
• Strive to contain our share of customers’
electricity bills to CPI or less
Affordability
• Ongoing reliability, security, sustainability of
the network
Reliability
To be of service to our communities by efficiently distributing electricity
to our customers in a way that is safe, reliable and sustainable.
Networks NSW
How we are managing costs (our share)
Households- Average network charges increased by 66% or $346
Small business - Average network charges 61% or >$1,000
We can only control electricity bills if we control our costs
Reform program - across the Ausgrid, Endeavour, Essential
•
$4.3billion in savings forecast over the 5 years to 2016:
- $1.4 billion savings over past 2 years
- another $2.9 billion savings identified over next 3 years
10
66%
61%
Past:
Electricity network bill increases of 60% (2009- 2014)
Networks NSW
Transitional proposal for 2014-15
Three objectives :
•
The next 5-year regulatory period starts in July 2014 and ends in June 2019.
•
We provided our draft transitional proposals to the AER on 31 January 2014.
Outlines our plans for the network and the effect on prices for 2014-15 only.
Our plans are funded by the network part of customers’ electricity bills
We also had to give an indication of our plans for the next 4 years of the period.
•
We submit our full, substantive proposals for the remaining 4 years on 31 May 2014
AER approves prices for 2014-15.
AER reviews that decision when considers substantive proposals (April 2015).
11
Affordability
-
CPI
Reliability
Networks NSW
Substantive (full) proposal for 4 years
•
We provide our substantive proposal to the AER in May 2014.
•
The AER will make a determination for the last four years of the 2015/16
to 2018/19 period in April 2015.
•
The AER will review our proposal, taking into account stakeholder submissions.
•
The AER will review whether the prices for the transitional year (2014-15) were efficient,
and if necessary make adjustments to the prices for the last 4 years.
•
The AER’s decision will also set cost reflective prices for metering and more than 50
ancillary services (non-routine services requested by the customer).
•
We want to inform you of our proposals and understand any concern
or priorities your members have
.
Networks NSW
Proposal Highlights
(combined totals over 5 yrs)
;
13
Capital program will reduce from $15.6 billion approved for last 5 year period to
a proposed $9.6 billion for the 2014-2019.
= a 38% reduction, which is 45% below forecast rate of inflation
Nominal
Real
15%
Will increase from $6.7 billion approved by the AER for last 5 year period to a
proposed $7.8 billion for the 2014-2019.
= a 15% increase, which is 2% above the forecast rate of inflation
Expected to fall by 1.6% a year over 5 years from 1 July 14.
Due to rooftop solar, high Aussie dollar affecting manufacturing and ongoing
impact of past price increases. This puts pressure on prices.
Average customer electricity use across NSW – down 1.6% p.a
Operating Program - up from $6.9 billion to $7.7 billion
Capital program - down from $15.6 billion to $9.7billion
1.6%
38%
45%
Networks NSW
Highlights - what it means for customers
Ausgrid
14
17.48% 15.06% 16.22% 3.55% 0.01% -0.24% 1.22% -2% 0% 2% 4% 6% 8% 10% 12% 14% 16% 18% 20% 22% YearMovement in our share of electricity bills (nominal %)
Now
Then
Endeavour Energy
Essential Energy
•
Our share of electricity bill increases will be held at or below CPI for the next 5 years
• Our share of customers’ electricity bills will fall in real terms
• Greater stability to help households and small businesses manage their budgets
22.99% 19.50% 21.43% 21.90% -0.90% 0.32% 2.09% 2.43% 1.03% 1.25% -3% -1% 1% 3% 5% 7% 9% 11% 13% 15% 17% 19% 21% 23% 25% 18.34% 20.05% 21.26% 18.64% -2.30% 2.49% -4% -2% 0% 2% 4% 6% 8% 10% 12% 14% 16% 18% 20% 22%
Movement in our share of electricity bills (nominal %)
Now
Then
Networks NSW
Highlights – our transitional proposals
Ausgrid
Endeavour
Essential
Impact on Customer Bills
July 2014 (our share)
+1.12%
-0.24%
+2.49%
Real change in capital spending
(09/14 v’s 15/19)
-48%
-44%
-42%
Real change in operational
spending
+2%
-5%
+8%
Assumed wage increase p.a.
2.5%
2.5%
2.5%
Electricity use forecast p.a.
-1.5%
-1.6%
-1.6%
Reliability of our network
steady
steady
steady
Opening Return on Asset Base
(RAB) – July 2014
$14.6bn
$5.6bn
$6.8bn
Networks NSW
Change to typical electricity bills (our share)
proposed from 1 July 2014
16
Typical Customers
Annual bill
2013/14
($ p.a)
Annual bill
2014/15
($ p.a )
Change ($)
Change (%)
Ausgrid
Household (5MWh)
$812.52
$821.65
$9.13
1.12%
Small business (15MWh) $2,612.73 $2,656.34
$43.61
1.67%
Endeavour
Household (6MWh)
$705.58
$703.87
- $1.71
-0.24%
Small business (26MWh) $2,375.35 $2,369.60
- $5.75
-0.24%
Essential
Household (7MWh)
$1,282.80 $1,314.72
$31.92
2.49%
Small business (23MWh) $4,435.03 $4,545.39 $110.36
2.49%
Table: Electricity bill impact from distribution network charges for typical household and small business customers
($nominal)
Networks NSW
Falling electricity use
1
17
Electricity use is expected to fall by 1.6% each year on average across
the NSW over the next 5 years (2014-19).
Due to take up of domestic solar panels, high Aussie dollar affecting
Australian manufacturing and the customer response to past price increases.
48000 50000 52000 54000 56000 58000 60000
FY10 FY11 FY12 FY13 FY14 FY15 FY16 FY17 FY18 FY19
Actual energy/ expected for FY2014
AER determination
Forecast (transitional proposal)
Networks NSW
Industry challenge ahead
18
Why?
1. Historic tariff structures
• Network costs mostly fixed
• Customer charges mostly variable - based on how much
electricity is used - on an inclining scale
• Price structures don’t reflect costs
2. Technology
•Customers who can afford technology can avoid variable
electricity charges (ie home owners with disposable income)
•Those that can’t afford technology bear the burden of
declining electricity consumption (renters, low & fixed incomes)
Declining electricity use puts pressure on customer prices
$
$
$
Networks NSW
35.00
10.89
14.58
0
2,000
4,000
6,000
8,000
10,000
12,000
14,000
16,000
18,000
20,000
0.00
20.00
40.00
60.00
80.00
100.00
120.00
Fixed (c/day)
1st Block
(c/kWh)
2nd Block
(c/kWh)
3rd Block
(c/kWh)
IB
T T
hre
sh
old
(k
W
h p
.a
.)
Co
mp
on
en
t P
ric
e
NSW Endeavour N70
Endeavour N70
Block Threshold (rhs)
Current tariff structure - inclining
19
Family uses
9,000 kWh pa
Fixed
$128
33c/day x 365
1
st
Block $762
10.89 c x
2
nd
Block $292
14.58c x
TOTAL $1,128
Example:
Networks NSW
20
Different ways of charging for electricity use
DGhjfg
Networks NSW
Discussion
Networks NSW
POLL
How supportive would you be if we changed the way we charged
for electricity so prices were more stable and predictable in the
long term?
(Noting that our prices will not increase by more than CPI for 5 years)
Extremely supportive
Supportive
Mildly supportive (sounds ok, need convincing)
Neutral
Mildly opposed (sceptical but open to more information)
Opposed
Strongly opposed
Networks NSW
23
Customer Engagement
•
Focus on improving our engagement long term
•
Engagement strategy follows best practice guidelines from AER based on IAPP
•
Engagement underway (Facebook, face-to-face meetings, research conducted,
analysis of existing engagement activities) to understand priorities and how
people want to engage with us in future
Customer
Research
-Key Themes
Affordability
Reliability
Information
Hardship
Demand
Management
Engagement
Safety
Networks NSW
Customer Engagement – new channel
•
Using new channels to engage with customers – mums and dads.
•
“Your Power, Your Say” - joint Facebook page
allows ongoing conversations with our customers
•
Topics include
–
Reliability
–
Streetlights
–
Solar
–
Pricing
–
Vegetation Management
–
Demand Management
–
Safety
–
Metering
24
Networks NSW
What customers told us
No more price shocks – want
affordable
, stable prices
Satisfied with
reliability
of network
don’t want to pay more for better reliability or less for reduced reliability
Improve customer
value
without affecting reliability
Ensure
safety
of network
Better
communications
channels: mobile apps, online
25
Affordability
Communications
Safety
Value
Reliability
Networks NSW
POLL
Which of the following customer issues is the biggest priority or concern
for your members?
Affordability and stability of network prices
Maintaining current level of reliability (without increasing prices)
Paying more for better reliability
Paying less for reduced reliability
Safety of electricity network
Better communications channels – ie mobile apps, online information
Other
Networks NSW
POLL
What would you say is the most important issue for households
with fixed incomes with respect to electricity bills?
Ability to reduce their bills by using less electricity, efficient appliances
Keeping prices stable and predictable over the medium to long term
Better understanding of their electricity bill
Reducing cross-subsidies so they don’t help pay for other households’
technology (eg solar)
Networks NSW
Thankyou
28
Endeavour Energy’s
electricity plans and
prices
Consumer Forum
11 March 2014
Ty Christopher
2
ENDEAVOUR ENERGY’S NETWORK
•
$5.3 billion electricity network
•
Serves 2.2 million people in
households and businesses
across Sydney’s Greater West,
Blue Mountains, the Illawarra,
Southern Highlands and South
Coast.
•
170 major substations, 315,000
power poles and 28,000 smaller
substations connected by 33,000
kilometres of underground and
overhead cables.
OUR OBJECTIVES
•
Safety – our number one
priority. We want to
continuously improve our
safety performance.
•
Affordability - contain our
share of network bill
increases to at or below CPI
for customers.
•
Reliability - ensure the
ongoing reliability, security
and sustainability of the
network.
OUR NETWORK
4
•
Peak temperatures typically higher and more sustained than
coastal areas - greater chance of temperatures being above
40ºC in any given year.
•
8 in 10 homes in Western Sydney have air conditioners.
•
8.5% of customers have solar generators on their homes. This
costs other customers $52M per year until end of 2016.
•
Our network covers Sydney’s North West and South West
Growth Centres. They will house more than 500,000 people in
more than 180,000 homes.
•
Two cities each the size of Canberra to be built within the
NORTH WEST GROWTH CENTRE
5• 16 Precincts
• 70,000 new
dwellings
• 200,000
people
ORAN PARK – SOUTH WEST GROWTH CENTRE
6• 18 Precincts
• 110,000 new
dwellings
• 300,000 people
7
8
TO THIS: KELLYVILLE 10 YEARS ON
CAPITAL EXPENDITURE 2014-19
•
Capital expenditure is the money used to expand and renew the network.
•
Capital will reduce by $1.1 billion in 2014-19 compared to 2009-14
•
This is a 37% reduction or 44% below the forecast of inflation over 2014-19.
CAPITAL EXPENDITURE 2014-19
•
Key challenges:
–
maintaining a safe, reliable and sustainable network
–
renewing ageing network assets
–
while there is falling demand across the broader network, we still
need to service substantial growth in demand in the key greenfield
growth areas of North West and South West Sydney
OPERATING EXPENDITURE 2014-19
•
Money used to employ workers and undertake network maintenance
•
Operating expenditure to increase from $1.7B in 2009-14 to a proposed
$1.8 billion over 2014-19
•
This is a 7% increase, but 5% below the forecast of inflation over 2009-14
$100 $150 $200 $250 $300 $350 $400 $450 2009-10 2010-11 2011-12 2012-13 2013-14 2014-15 2015-16 2016-17 2017-18 2018-19 O p ex ( $m , real 2013 -14)
ENDEAVOUR - Transitional proposal opex and "underlying
opex"
Actual / Fcast (2019-14) AER opex allowance (2009-14)
Transitional proposal opex (including ACS and ERW) Underlying Opex
OPERATING EXPENDITURE 2014-19
•
Network operating costs includes :
–
network inspection, maintenance and repair
–
vegetation management to keep trees a safe distance from
powerlines
–
fault and emergency repairs
–
customer service
–
operational switching and outage management
–
demand forecasting
–
procurement, logistics and stores
–
information technology that supports network operations
ENDEAVOUR ENERGY PRICES
•
Avoid price shocks
•
Our share of an average household electricity bill will decrease by 0.24%
next year, which is 2.68% below the forecast rate of inflation.
2013-14
2014-15
Change ($)
Change (%)
Residential customer
$705.58
$703.87
-$1.71
-0.24%
Small business customer
$2,375.35
$2,369.60
-$5.75
-0.24%
Typical bill impact ($, nominal)
QUESTIONS
Further information contact:
Network Regulation
Mike Martinson, Group Manager Network Regulation, Networks NSW Ph: 02 9249 3120
Email: mike.martinson@endeavourenergy.com.au
Stakeholder Feedback
Kylie Yates, Group Manager Corporate Communications, Networks NSW Phone: 0418 607 575
Email: kylie.yates@ausgrid.com.au
Kate McCue, Manager Corporate Affairs, Endeavour Energy Ph: 02 9853 6141
