Here's how our plans are shaping up - Regulatory Reset Draft Proposal 2021-2025 - Talking Electricity
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Here’s how our plans are shaping up Regulatory Reset Draft Proposal 2021–2025
We’ll deliver a safe, dependable
and flexible network while
reducing our prices
Thank you for reading our draft proposal outlining As well as facilitating technology and the change that comes
the value and services we’ll provide you in 2021–2025. with it, we’ll also provide you with the safe and dependable
We aim to deliver a safe, dependable and flexible supply service you expect. Your wellbeing, and that of our people,
of electricity, while keeping our prices among the lowest is our number one priority, and as such, we never
in the country. compromise on safety.
As a business, we take pride in delivering electricity to Being part of the United Energy community means you
over 1.45 million Victorians. We know how important our already receive among the lowest electricity network
performance is to you, so that every day your household charges in Australia. We deliver more services to you for
and business can go about their activities. each dollar we invest than most other electricity distributors.
As we look to the future, it’s important we keep delivering While our charges only make up 27% of the average
the services you want. That’s why we’re asking you to residential electricity bill, affordability has continued to
comment on our investment plans. Your feedback has, be front of our minds in developing this plan. To help,
and will continue to shape the services we provide. we’ll reduce our charges in 2021 by an average of $44
for residential customers and $117 for business customers.
While it’s an exciting time, as the electricity industry
presents you with more opportunities to take control We appreciate everyone who has already taken the time
of your electricity use (including solar and batteries), to share their views with us. We’ll keep listening so we
it’s also becoming more complex from our network's can best meet your needs.
perspective. In preparing our network to accommodate I look forward to hearing your comments.
this change, we'll be investing in systems that help you
make informed energy choices. This sees us leaning
more on technology and data than ever before in order
to provide you electricity through a smarter network.
Tim Rourke
Chief Executive Officer
We’re part of
your community
We own and manage the electricity distribution network that provides
power across east and south-east Melbourne and the Mornington
Peninsula. Our network includes more than 205,000 poles and
13,000 kilometres of powerlines.
+1,450,000 Victorians in our network
Generation Transmission
1,500 km2 distribution
area
53k
3.1k
small
businesses
big
92%
businesses
Distribution
residential
customers
Retailer
We serve customers like you, the small and large businesses in your
community, and essential services such as your hospitals and water
utilities. We support over 21% of Victoria's GDP, including the peninsula's
t his
We ma na ge process to
tourism industry and 27% of the state's manufacturing activity.
pa rt of t he el ect ri c it y
provid e you i l er
via your reta
United Energy Regulatory Reset Draft Proposal 2021–2025 2
Here’s what we’ve
been doing already
Our draft proposal builds on the work we’ve been doing in recent years. We’re proud of our strong reputation
for operating a safe and reliable network, while at the same time being one of the most cost-efficient distributors
in Australia. Our future investment plans are discussed in the remainder of this document.
Safe and dependable Flexible Affordable
e s e t h ree t h e m es
h
You’ l l see t ot in t his d ocument.
One of Australia’s most Delivered some of the
l
d iscussed aflect t he views a nd r
With the involvement
99.99% reliable networks – available lowest distribution
of our customers, used
T h e s e r e w e h e a r d f ro m o u
over 99.99% of the year, network charges in
demand management to
or less than 45 minutes Australia, at $316 per
pref erences ers t hroughout t he
avoid over $40m of capital
off supply per annum annum for average
investment since 2016
sta keho l d ement process.
on average for customers. residential customers.
27% reduction in ground
fire starts since 2013.
Supported over
One of the top two most
highly utilised networks
enga g
238MW of rooftop solar
This follows ongoing in the country – we get
and 2MW of battery
investment of over the most out of our
storage.
$10m per annum. assets, so you pay less.
We use ‘smart’ meters One of the top three most
71% reduction in public
to identify and respond cost-efficient distributors
safety incidents since
to safety risks before they in Australia based on AER
2013. Safety is our number
occur. We’re making the benchmarking. Providing
one priority always.
most of your investment. you value for money.
United Energy Regulatory Reset Draft Proposal 2021–2025 3
Victorian’s already benefit from the lowest network charges in Australia.
Based on analysis undertaken by the Australian Energy Market Commission, Victorian network charges will average
$342 per annum in 2019, compared to other states such as NSW where network charges may exceed $446.
Typical household electricity bill composition by state
$2,500
$2,244
(Total bill)
$391
$2,000
Most expensive retail offer
$1,687 $79
(Total bill) $1,632
$1,588 (Total bill) Cheapest retail offer
(Total bill) $156
$262 Environmental policy
$1,500
$294 Wholesale electricity price
$225 $537
$111 Metering
$855
$85 $84 Transmission
$1,000
$102
$90 Distribution
$465
$492
$31
$441
$45 $151
$28
$92
$500 $133
$66
$55 $43
$54
$513 $581
$446 $333
$342 $301
$0
QLD NSW SA VIC United Energy United Energy
2020 2021
Source: Based on typical customer consumption, ranging from 3,865-4,430kWh Based on typical customer consumption of 4,200kWh per annum
per annum, as set out in the Australian Energy Market Commission report,
Residential electricity price trends 2018
United Energy Regulatory Reset Draft Proposal 2021–2025 4
You can help shape
your energy future We want to hear
your f ee dback!
Visit:
Our revenues are regulated by the Australian Energy Regulator (AER), and every five years
they review our forecast revenue requirement for approval.
This draft proposal sets out the services we’ll deliver over the five-year period starting
1 January 2021. We’re publishing a draft to get your thoughts on our proposal early.
Your feedback will help shape our formal regulatory proposal due to the AER in July 2019. talkingelectricity.com.au/contact-us
The feedback you’ve provided so far has been reflected in our work plans and forecasts. to provide feedback to us.
We operate in an ever-changing energy sector, so it’s important we continue to plan for the
future while still meeting your current expectations. You can submit feedback on our
draft proposal and connections policy
In addition to the investments we’ll make to deliver your preferred services, our draft proposal through the contact form provided on
outlines the expected changes to your electricity bill. our Talking Electricity website.
We’re also updating our connections policy to ensure our charges remain fair and easy to We welcome all feedback or questions,
understand. This policy covers our proposed approach to charging new customers who want no matter how long or short.
to connect to our network. This influences our investment plans, so we’re asking for your
feedback on this with our draft proposal.
We encourage you, our customers and stakeholders, to review our draft proposal and
connections policy and give us your thoughts and feedback.
What’s next?
We’ll incorporate your feedback as we
continue to develop our regulatory proposal.
We’ll also work with key stakeholders through
a series of ‘deep dive’ workshops to discuss
our draft proposal in more detail. These
workshops will focus on our key investments,
and help ensure our proposal meets your needs.
United Energy Regulatory Reset Draft Proposal 2021–2025 5
SECTION: OVERVIEW: CONTENTS:
1 We want you to choose We’ve asked you what you want 8
You’ve told us your energy future 9
your energy future. What we’ve heard and what we’re doing 10
2
We’re committed to providing a safe environment
Every day we supply your for our customers and workers
We’re committed to providing a reliable supply
13
household and business with of electricity
We’re committed to providing a safe network that
14
electricity to power your activities. mitigates bushfire risks 15
3
We’re making it easier for you to export solar
We’re preparing the network and use batteries
We’re making it easier for you to connect
18
20
to be flexible to your energy needs. We’re making it easier for you to use your data
to make informed energy choices 22
4 We’re maintaining affordability
by reducing our prices.
Our prices are based on well-established
approaches
Our total investment forecast is prudent and efficient,
and will reduce our prices
28
30
5 We’re supporting your energy choices
We’ve designed our price structures to be fair
and easily understood 32
through fair and simple charges. We charge you for what you use 33
United Energy Regulatory Reset Draft Proposal 2021–2025 61 We want you to choose your energy future
We want you to choose your energy future
1
We’ve asked you We’ve bee n ta lking to
you about our regu latory
what you want proposal since ea rl y 2017
In today’s rapidly changing energy market there’s never been a more critical time for us Who we spoke with
to understand and respond to your needs. We want to move beyond simply telling you what
we’re doing, to ensuring our proposal delivers what you want. This will allow us to anticipate • Residential customers • Retailers
and respond to your changing preferences, support your energy choices, and provide better • Small and medium • Energy Consumers Australia
solutions. businesses
• Councils
We’ve been talking to you about the development of our 2021–2025 regulatory proposal • Commercial and industrial
customers • Universities
since early 2017. Over the last 18 months, we’ve spoken with 5,000 of our customers who
• Energy industry experts • Demand management proponents
provided valuable insights on their energy needs. We’ve also worked together with the other
Victorian distributors, particularly on reforms to our network charges. • Community opinion leaders
Throughout our engagement activities, we’ve shared your views with our longstanding
Consumer Consultative Committee. This Committee was first established over 10 years ago
to provide an independent voice in our decision making process. Similarly, we invited
members of the AER’s Consumer Challenge Panel, and our Energy Futures Consumer
Advisory Panel, to independently review our engagement approach and provide guidance.
You can read more about our stakeholder activities and customer insights on our
Talking Electricity website. How we engaged them What we discussed
• Interviews • Our shared energy future
• Focus groups • Energy values and preferences
• Deliberative forums • Role of the distributor
• Surveys • Our value propositions
• Talking Electricity website • Various business options
• Public workshops • Network tariffs
• Demand management opportunities
United Energy Regulatory Reset Draft Proposal 2021–2025 8We want you to choose your energy future
1
You’ve told us your energy future
Our discussions with you so far have focused on our shared energy future. This included your views on the likely take-up of new technologies,
the possible impacts of government policy, and expected customer behavioural responses. A snapshot of these views is shown below.
Around one third
1/3 of customers plan to The take-up of
Customers expect to see
install solar batteries
more renewables during 2021–2025, helped is expected to increase
in their homes or businesses by government subsidies as rooftop solar grows
Electric As the size of our network grows,
timely and
Customers want
access to
vehicles efficient real-time data
will eventually be part of our
transport and energy system connections are a must on their energy use
Everyone should have a Customers want us to
Customers
want energy to be reliable prioritise safety
affordable electricity supply when planning our asset replacements
Customers are finding Customers want
ways to use energy more Around half our customers are interested in
savings for
efficiently rebates for reducing shifting use
to save money electricity demand to off-peak
United Energy Regulatory Reset Draft Proposal 2021–2025 9We want you to choose your energy future
1
What we’ve heard and what we’re doing
We’ve heard three common themes in our discussions with you. You’ve told us you want flexibility to choose how you use
electricity, a dependable and safe network, and an affordable price. We’ve used these themes, which reflect your views and
preferences, to develop a set of outcomes that our draft proposal will deliver.
These outcomes represent how we’ll deliver value to you, and include ‘business-as-usual’ investment, as well as the
investment required to develop a more flexible network that supports your energy choices.
We’ve heard... We’re doing...
You want a
Providing a safe Providing Providing a safe
safe and environment for our a reliable supply network that
dependable customers and of electricity mitigates
network workers bushfire risks
You want a
flexible We’d like to know more
Making it easier for Making it easier Making it easier for you
you to export solar for you to make to use your data to make
about your pref erences...
network that
supports your and use batteries a new connection informed energy choices
choices
1. We’d like to test if we’ve heard you correctly.
You want an Reducing Making prudent Designing price Does a safe, dependable, flexible and
affordable supply of electricity reflect what
affordable our prices and efficient structures that are fair
you want? Have we missed any key themes
network investments and easily understood that are important to you?
Visit talkingelectricity.com.au/contact-us/
to have your say.
United Energy Regulatory Reset Draft Proposal 2021–2025 102 Every day we supply your household and business with electricity to power your activities
Every day we supply your household and business with electricity to power your activities
2
A safe and dependable supply of electricity is critical each and every day.
We all use electricity to keep our food fresh, and light, heat or cool our homes. We all need Our network reliability is measured by: Our network safety is measured by:
electricity to operate the plant and equipment at our offices or businesses to create jobs and
grow our economy. • Frequency and duration of outages across our network • Number of public and workplace
(minutes off supply per customer per annum) safety incidents
As your electricity distributor, we take great pride in the role we play in providing an essential
• Frequency and duration of outages in remote areas • Number of fire starts from our assets
service for our communities. How we manage our poles and wires impacts your lifestyle and (minutes off supply per customer per annum) • The condition and health of our assets
the economy, so we follow international best practice. This includes measuring outcomes you
• Network resilience in extreme weather (number of faults)
value, so you can be confident you’ll have electricity when you need it at an affordable price.
Our investment in the period from 2021–2025 to maintain a safe and dependable network
Our invest ment
represents a major part of our total works. This is because our network is complex and covers Forecast investment to replace existing assets
($ million, 2020 dollars)
is increa sing to
such a diverse area.
mainta in reliabil it y
An overview of our forecast investment to replace existing assets across our network in the 100
2021–2025 period is shown in the next column. These investments are further discussed
in this section.
as our network ages
80
Our investment decisions to replace assets in the next regulatory period are increasingly relying
on smart technology and data analytics. For example, we’re currently partnering with a number 60
of universities across Australia to identify better ways to manage our assets. This helps us to
make data-driven decisions to replace our poles, wires and major electrical plant inside our 40
zone substations, and to identify and resolve safety hazards before they occur.
We’ve also received funding from the Australian Renewable Energy Agency (ARENA) to 20
investigate innovative and affordable options to manage electricity use during times of peak
electricity demand. Ultimately, this lowers your bills. 0
2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023 2024 2025
To ensure we continue to supply your household and business with electricity to power your
activities, we commit to providing a:
• safe environment for our customers and workers
• safe network that mitigates bushfire risks
• reliable supply of electricity.
United Energy Regulatory Reset Draft Proposal 2021–2025 12Every day we supply your household and business with electricity to power your activities
2
We’re committed to providing
a safe environment for
our customers and workers
Your safety, and that of our workers, is our first priority
– we never compromise on safety.
Our workers are extremely well trained, and follow best One of the safety-driven investments included in our draft
practice safety management to protect us all. This includes proposal is $12 million to test and replace service cables Our work with universities
a strong culture of reporting all safety incidents (including connecting your home to our powerlines. A component of
near misses), no matter how small, so we all continue to these cables includes a protective covering that can degrade
helps to improve our network
learn and improve our processes. in certain conditions. However, instead of just replacing all
We’ve also embraced technology to provide better ways to service cables, we’re using data analytics to select particular In partnership with Swinburne University, we're testing the strength
of our pole cross-arms that carry our lines to understand when they
proactively ensure the safety of our workers and community. at-risk properties. may break. This research will allow safer and more affordable
decisions about when to replace assets.
This follows the increased availability of data about our Another safety program we discussed during our stakeholder
We're also working with Victoria University and the Department of
network since the introduction of smart meters in Victoria forums is relocating selected powerlines around traffic 'black Environment, Land, Water and Planning to remotely identify broken
in 2009. spots'. We haven’t included specific investments for this in our lines. This research will help us turn off power on broken lines
draft proposal, but instead, we’ll continue to assess the value quickly to mitigate safety and bushfire risks.
In particular, we’ve established a data analytics team within Our other research projects include:
our business to help further improve the safety of our of any relocations in our day-to-day works.
• research into early fault detection with RMIT to detect outages
network. Our innovative use of data analytics provides When developing our investment plans for major plant and before they occur
both a safer and more affordable network. equipment, we also place a value (or a benefit) on reducing • working with the University of Queensland to better manage
the life cycle of power transformers
Notwithstanding our preventative measures, some network safety and environmental risks. This approach embeds safe
•s
upporting Monash University's project for net zero emissions
assets will still fail on occasion (often due to extreme outcomes in all our investment decisions.
• customer recruitment study for demand management with
conditions) and may pose a safety threat. We undertake a Deakin University
range of activities to reduce the impact should an asset fail. • solar forecasting with the Australian National University to better
utilise our network.
This includes maintaining safe distances between our assets
Identifying and implementing new ways to solve network problems
and the community. leads to safer, more reliable and affordable networks.
United Energy Regulatory Reset Draft Proposal 2021–2025 13Every day we supply your household and business with electricity to power your activities
2
We’re committed to providing
a reliable supply of electricity
We know from talking to you that network reliability is important. Unplanned outages a typical customer experiences
Therefore, we regularly inspect and record the condition of all (minutes)
our assets: 350
• assets in high bushfire risk areas are inspected at least every 300
We’d like to know more
three years, and every five years in low bushfire risk areas 250
about your pref erences...
• for assets in declining condition, more frequent monitoring 200
is scheduled 150
• if the condition warrants, assets will be removed, repaired 100
or replaced. 50
We use a range of inspection techniques such as laser 0
2. Our planned investments are designed
2008 2009 2010 2011 2012 2013 2014 2015 2016 2017
technology and traditional field crew inspections. These to maintain reliability for the average
inspections drive our $195 million pole and line replacement customer. We will not receive funding
program over the 2021–2025 period. Unplanned outages a typical customer experiences to improve service levels for customers
(number of) who currently experience lower than
Overall, the investments outlined in this draft proposal are average reliability. Are there alternative
designed to maintain both affordability and the long-term health 2.0 ways to better support these customers,
of our electricity assets. This includes investments needed to rather than continuing to make
maintain current reliability levels on average across our network 1.5
compensation payments for frequent
or extended outages?
(we note that factors such as the weather will still drive variances
each year). 1.0
3. Our use of data analytics supports our
risk-based approach to resolving safety
In practice, however, we’ll work to improve reliability where you outcomes (e.g. only targeting selected
value the improvement more than the cost to deliver it. As shown, 0.5 assets to be replaced, so as to responsibly
we’ve been improving our reliability and will strive to maintain this balance risk and affordability). Do you
support the specific replacement
trend. Activities we’ve undertaken to improve reliability include 0.0
2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 investments we identified?
installing additional switches and monitoring devices. When there
is an electricity outage, this equipment helps us restore your
Visit talkingelectricity.com.au/contact-us/
supply more quickly by remotely identifying and segmenting fault to have your say.
locations for our field crews to attend.
United Energy Regulatory Reset Draft Proposal 2021–2025 14Every day we supply your household and business with electricity to power your activities
2
We’re committed to providing a safe
network that mitigates bushfire risks
Victoria is one of the most fire prone regions in the world, so mitigating bushfire risk is A further bushfire mitigation measure we investigated is installing rapid earth fault current
paramount. Fire starts can occur, for example, if bad weather blows vegetation onto our lines limiters (REFCLs) that can reduce the risk of a fallen line or vegetation contact causing
or animals make contact with our assets. a fire start. REFCLs operate like a giant safety switch, and when a powerline comes into
It’s impossible to eliminate fire starts completely, but as shown, the trend in ground fire starts contact with vegetation or the ground, they stop dangerous current levels almost
from our assets is decreasing. We’re confident our draft proposal includes projects to continue instantaneously.
to effectively reduce the risk of bushfires: We currently have two REFCLs on our network, with work underway on a third. Once that
• In high bushfire risk areas, we inspect our network assets more often – on a three-year cycle, is commissioned, we'll have coverage over almost 60% of our risk area. The cost of
rather than a five-year cycle used in other locations. Additionally, we inspect the clearances installing additional REFCLs hasn’t been included in our draft proposal, as our recent
between vegetation and all our lines every year prior to the fire season beginning. estimates suggest they would not provide sufficient customer benefits in the targeted
locations. This approach is consistent with the feedback you provided during our customer
• Some customers – typically those with rural properties – have privately owned lines on their engagement process – you said we should only install these devices if supported by robust
property. While it’s these customers’ responsibility to ensure their lines are safe, in high-risk economic reasoning.
areas we also inspect private lines every three years to make sure they’re in good operating
condition. Asset-related ground fire starts
• We’re undertaking a targeted inspection and replacement program for ‘double-staked’ poles (number of)
We're red ucing s
to further reduce the risk of failure. For example, for some older poles, we’ve installed 200
ground fire sta rt
support beams on either side to prolong their use.
186
• We’re investing $6 million to replace selected types of high voltage switches with enclosed
types. The original, uncovered switches have been installed up to 50 years ago, and our 150
157
replacement program will target these assets only. When uncovered switches operate, hot
pieces of metal could fall to the ground and start a fire – this investment will prevent this
100 114
occurring. 103 99
78
50
0
2012–2013 2013–2014 2014–2015 2015–2016 2016–2017 2017–2018
United Energy Regulatory Reset Draft Proposal 2021–2025 153 We’re preparing the network to be flexible to your energy needs
We’re preparing the network to be flexible to your energy needs
3
You’re changing the way you use, store and sell electricity.
Rooftop solar is already well established, and as the price of technology falls, the Forecast take-up of new technologies
take-up of batteries for your home is forecast to increase. Likewise, electric vehicles are Rooftop solar
expected to become increasingly affordable, meaning you may use more electricity in (number of rooftop systems)
the future. 116,000
Electric vehicles
Electricity demand during peak periods is a key driver of our investment requirements. (number of cars)
As part of our stakeholder engagement, we held a forum to explore future electricity
tt erie s
6,116
scenarios. We asked you about your current and future energy use, and the role of new
Use of so la r, ba hic les
a nd el ectric ve rise
technologies. 65,280
will continue to
Our forecasts for peak demand from 2021–2025 are shown below. These forecasts are
1 Batteries
(number of battery systems)
consistent with the scenario you considered most likely, where existing solar and battery
2,300
trends continue at a similar pace to today. These assumptions are consistent with
forecasts provided by the Australian Energy Market Operator (AEMO).2
743
You also told us we should be taking steps to prepare for a future driven by increased 260
solar, batteries and electric vehicles. These technologies provide you with opportunities
2018 2025 2018 2025 2018 2025
to minimise your spend on electricity, for example, by offsetting your usage or feeding
surplus electricity you generate back into the network for others to use – and be paid
and
We expect peak d em %
for this. Supporting this, CSIRO forecast that electricity customers will have access to
to increa se by 1 .0 5
demand response markets worth over $2.5 billion per annum by 2050.
Peak demand forecast
02
ea ch year in 2021 –2
Over the next regulatory period, we’ll invest to allow you to benefit from this (MW)
transformation. We propose to make it easier for you to:
2500
• make new connections to our network
2,058 2,076 2,103
2,004 2,021
• export solar and use batteries 2000
1,998
• use your data to make informed energy choices.
1500
1000
500
0
2020 2021 2022 2023 2024 2025
Source: National Institute of Economic and Industry Research
1 These forecasts may be updated for our regulatory proposal to include the most recent data.
2 AEMO is an independent body responsible for the administration and operation of the
wholesale national electricity market.
United Energy Regulatory Reset Draft Proposal 2021–2025 17We’re preparing the network to be flexible to your energy needs
3
We’re making it easier for you
to export solar and use batteries
When you use solar panels to generate electricity, you may want to export any surplus to Investing in our network to enable solar and batteries
your own needs back into the electricity network. This allows you to receive payments for
To give you more choice in how you use, store and sell electricity, we’ll invest $15 million on
any excess electricity you generate. You could also choose to sell your excess electricity
network improvements. This includes re-balancing the number of customers connected to
when the network is overloaded, or when the supply of electricity is tight, through the use
each network asset, installing devices to manage voltage rises, and installing new assets that
of batteries.
can accommodate more exports. This investment is underpinned by our data analytics team
When multiple customers in the same community or region export electricity at the same – using smart meters, we’ve been finding the ‘hotspots’ in our network and determining the
time, the amount of electricity pushed into our network may go beyond what it can handle. lowest cost solution to address them.
This is because our network was originally designed to transfer electricity only in a single
We’re also investing $20 million in ‘flexible grid’ technology. This technology will improve our
direction (i.e. from centralised generators to end-use customers). An overload may only
ability to monitor and control our network in real time so we can divert exported electricity away
occur at limited times during the year, but can cause costly network damage.
from points where our network is overloaded. Essentially, we’re redirecting traffic to stop jams
Solar and battery use may also result in varying voltage levels on our network. We supply before they occur. This means we can connect more solar and batteries without exceeding the
electricity to your home or business at around 230V. When solar and battery use increases network’s capacity or voltage limits. It will also enable the development of new markets that you
– for example, as more customers install these systems – we need to manage any can participate in.
corresponding voltage fluctuations, as these can cause wear and tear on your household
There may be occasions when we still need to limit exports to avoid network damage and
appliances or cause them to fail.
maintain the safety of our electricity supply, but our solar enablement investments will allow us
To avoid damaging our network, or your appliances, one option is to limit customers from to minimise the time of these export limits. In this way we may limit exports for minutes, rather
exporting their excess solar energy. We recently asked customers if they felt we should limit than permanently throughout the full peak period.
solar exports and they said ‘no’. We don’t believe this is the best solution either, because it
This combination of approaches is the most cost-effective way to accommodate your export
hampers your ability to take control of your electricity bill – we want you to get the most out
needs now and in the future. New standards for solar installations are also helping to reduce
of your solar and batteries.
the need for network investment.
United Energy Regulatory Reset Draft Proposal 2021–2025 18We’re preparing the network to be flexible to your energy needs
3
Everyone will benefit as a flexible network defers investment
A flexible grid will help everyone, not just those with solar and battery installations. Our Demand management on the Mornington Peninsula
business-as-usual investment in constructing the network to take electricity from centralised and our 'Summer Saver' program
generators to you is shown below. Once our flexible grid technologies are installed, a major
benefit will be the opportunity to delay or reduce investments we’d otherwise need to meet
We've been leading the industry in identifying and implementing opportunities to deliver savings
peak demand for electricity on our network, or to connect renewable generation. This deferred to you through demand management. In the period to 2021, our demand management initiatives
capital investment – equal to $142 million – is a subset of the overall benefits of a flexible grid. have already deferred over $40 million of investment.
For example, instead of investing $30 million to build 50 kilometres of new line on the Mornington
We’ll also continue to manage demand as an alternative to constructing more poles and wires. Peninsula, we worked with GreenSync to identify 11MW of demand response from the local
We’ll do this with targeted demand management programs, and by publishing details of all community. We hope to continue this program into the future, so you continue to benefit.
major investments in advance of any construction activity. This provides an opportunity for We've also been recognised within Australia and internationally for establishing our Summer Saver
program. This program engages with over 1,000 customers each year to manage their usage in
stakeholders across our network to propose alternative, lower-cost solutions. overloaded parts of our network, and provides funds directly to those participating in the program.
This is a cheaper alternative to investing in new infrastructure – so far it's avoided more than
$10 million of capital works.
Forecast investment to accommodate growth
($ million, 2020 dollars)
80
70
60
50
40
e t wo r k wi l l d ef e r
30
A flexibl e nest ment ot herwise
20
ca pita l inv n our network
10
0
nee d ed o
2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023 2024 2025 2026 2027 2028 2029 2030
Augmentation with flexible grid
Augmentation without flexible grid
United Energy Regulatory Reset Draft Proposal 2021–2025 19We’re preparing the network to be flexible to your energy needs
3
We’re making it easier
for you to connect $6m to upgrade
our Doncaster zone
substation and
nearby lines
Connecting to a network is the first step
that you take as an energy customer to $7m to upgrade
receive electricity. Every year, we connect $7m to upgrade Melbourne our Keysborough
our East Malvern zone substation
approximately 15,000 new households, zone substation
BURWOOD
and nearby lines
and nearby lines
businesses and generators. MOORABBIN
DANDENONG
We need to ensure our network can PORT PHILLIP BAY
accommodate this growth. That's why
we're upgrading our ageing depots. $8m to upgrade Demand management
our Mornington
FRANKSTON
to defer $30m
Our investments also support major zone substation of investment
and nearby lines
infrastructure projects that help grow
MORNINGTON
between Hastings
and Rosebud
the Victorian economy. HASTINGS
A selection of our key projects is
ROSEBUD
PORTSEA
shown opposite.
FLINDERS
WESTERN PORT
$59m to upgrade and
expand ageing depots
across our network
United Energy Regulatory Reset Draft Proposal 2021–2025 20We’re preparing the network to be flexible to your energy needs
3
Connection process and charges
We’ll continue to invest in our business processes so we can connect all new customers Forecast investment to connect new customers
ions
more easily and quicker than before. This includes introducing our online eConnect platform ($ million, 2020 dollars) Our connect c rea sing
is in
to remove the need for paper forms. Putting the connections process online allows us to easily
invest ment ’s economy,
wit h Victoriarl y in our
100
track the progress of your connection request, and ensure we provide accurate cost
pa rt icu l a h a rea s
estimates. Most importantly, it saves time and effort for you or your electrician.
urba n growt
80
You also asked us to ensure our connection charges remain fair. That’s why we’re consulting
with you on our connections policy as part of our draft proposal. Our connections policy
60
covers our proposed approach to charging new customers who want to connect to our
network. This may include requiring larger new customers to contribute some of the cost
40
of network upgrades needed to support their connection.
Our total forecast connections investment is shown opposite. This chart separately shows
20
the investment funded directly by those customers who make a connections request.
0
2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023 2024 2025
Net connections
Customer contributions
United Energy Regulatory Reset Draft Proposal 2021–2025 21We’re preparing the network to be flexible to your energy needs
3
We’re making it easier for you
to use your data to make
informed energy choices
The electricity industry is becoming more complicated. Enabling our customers More data, more often
You’re being asked to choose between hundreds of retail
To support you in making more informed energy choices, New regulations are coming into effect that require us
offers, whether to install solar and batteries and what time
or for you to choose whether you want third parties to use to remotely read your electricity meters every five minutes.
of day to use electricity to reduce your bill.
this data to tailor services to your needs, we’ll develop a single This will enable us to provide you with your own electricity
Now, more than ever, data on your energy usage can help system or one-stop-shop to access your electricity usage use on a five-minute basis so that you can better control
you make these decisions. You’ve told us you want better data and connection requests. This will remove the existing how much electricity you use.
access to this data, and you’d like us to help you make need for separate account details across multiple online Our required investment to meet these new regulations
better use of it. portals. is $35 million, and will start in 2021. This includes the need
Our new system will help you manage your bills – for example, for a six-fold increase in the capacity of our communications
it will: network. The Australian Energy Market Commission
• allow you to pre-populate your electricity usage data into determined that reading meters this frequently will reduce
the Victorian Government's retail price comparison website everyone’s electricity bills over the longer term.
• provide easy access to the status of your connection
requests, including through web-chat facilities
• show you if your rooftop solar system is under-performing
• show you if your appliances are using a lot of electricity
• notify you about electricity outages, and provide a simple
way for you to report network faults.
Implementing this system will require an investment of around
$4 million.
United Energy Regulatory Reset Draft Proposal 2021–2025 22We’re preparing the network to be flexible to your energy needs
3
We’d like to know more
about your pref erences...
Keeping your data secure Our IT investment provides the building
blocks for a flexible network 4. We’re investing in flexible-grid technology
Unlike in other states, Victorian customers’ electricity use
and data services to support your energy
is measured by smart meters. These meters have a number The above investments are all part of our information choices. How important are these services
of advantages over traditional meters, including: technology (IT) requirements. These are necessary to you?
• automatically notifying us of electricity outages so we can as we become an increasingly digital network that is 5. What other information about your
restore your power earlier better able to service your needs. electricity use or our network can we
provide to support your energy choices?
• enabling you to view your electricity use in 30-minute Our total IT investment is also driven by the need to
intervals (or in the future, five-minute intervals) – this can periodically upgrade existing business-as-usual systems –
help you select the best electricity retail offer or understand from 2023, for example, we’ll invest $21 million to modernise Visit talkingelectricity.com.au/contact-us/
and manage your household’s electricity use our SAP system that was originally installed in 1996. This to have your say.
• supporting fairer charges and enabling you to decide when system supports our entire business, including managing the
to export excess solar energy or to receive benefits for network programs and daily corporate functions.
saving electricity
• allowing us to monitor the quality of electricity supplied Forecast investment in IT
to you, which can impact the health of your household ($ million, 2020 dollars)
appliances and equipment 60
• providing us with more information about the performance
of our assets leading to improved safety outcomes and 50
better targeted asset replacements.
vest ment in w
40
With all this data, which will continue to grow over time,
c r e a s e d in
security is clearly important. As recognised by the Australian T he in 2 is d riven by
ne
30
a n d 2 02
2021 obl igat ions
Cyber Security Centre, malicious cyber activity against
Australian organisations and businesses is increasing in 20
compl ia nce
frequency, scale, sophistication and severity.
10
Our draft proposal includes $9 million to keep pace with
our data security needs. We’ll use this to put new security
0
measures in place to ensure we can respond quickly if there 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023 2024 2025
is a threat to our network.
United Energy Regulatory Reset Draft Proposal 2021–2025 234 We’re maintaining affordability by reducing our prices
We’re maintaining affordability by reducing our prices
4
We know energy affordability is a major concern for you.
You’ve told us you expect access to cheap and reliable electricity. As cost of Average United Energy household electricity bill composition
living pressures continue to challenge us all, we’ll keep delivering a safe and (2020 dollars)
dependable electricity supply while reducing our prices.
This proposal allows us to reduce our revenues in 2021. As shown in the table $174 Retail margin
below, this reduction is followed by four years of no real revenue increase. We’re
interested in your views on this revenue path – an alternative, for example, could
$163 Retail costs
be to smooth changes more evenly across the regulatory period.
$132 $99 Environmental policy
Our revenues are falling in 2021
Year 2021 2022 2023 2024 2025 $109
$9
Revenue change -8.7% 0% 0% 0% 0%
$511 Wholesale electricity price
Our revenue changes will contribute to a total reduction in average network $439
charges in 2021 of $44 for residential customers and $117 for business
customers. Network charges are the component of your electricity bill that we
control, and in total, also include the reduction in our metering charges and
$17 $62 Smart meters
expected growth in customer numbers. $84 $77 Transmission
Our prices have remained stable since 2007
Keeping our prices low continues our trend of real price stability over many $318 $316 Distribution
cont ribut ed
We ha ven’t l bil l rises.
years. For example, the Australian Competition and Consumer Commission’s
recent report on retail electricity prices showed that average network costs
in Victoria (excluding metering) have not increased in real terms for over a 2007–2008 2017–2018 to resid ent iaordabl e t ha n
ff
decade. In 2007–2008, our average network costs were $318 and have We're more a d eca d e ago.
a
Source: Chart adapted from ACCC analysis to reflect
declined in real terms in 2017–2018 to $316. our network circumstances on a per customer basis
we wer e
Our charges are also among the lowest in Australia.
United Energy Regulatory Reset Draft Proposal 2021–2025 25We’re maintaining affordability by reducing our prices
4
Our charges are among the lowest We benchmark better than other distributors
in Australia The evolution of new energy markets means we must remain
relevant with competitive services. The AER’s independent
How we compare – distribution charges benchmarks show we’re one of the most cost-efficient distributors.
across Australia (2020 dollars)
Operating expenditure productivity index (2006–2017)
f t h e m o st
$257 Evoenergy (ACT)
W e’r e o n e o
ist ributors
0.96 Powercor (VIC)
$291 CitiPower (VIC)
cost-eff icie nt dra l ia
0.92 CitiPower (VIC)
$316 United Energy (VIC)
$363 Powercor (VIC)
0.85 United Energy (VIC)
in Aust
0.78 SA Power Networks (SA)
$366 Ausgrid (NSW)
0.75 TasNetworks (TAS)
$378 Jemena (VIC)
0.73 AusNet Services (VIC)
$452 Endeavour (NSW)
0.69 Jemena (VIC)
$455 AusNet Services (VIC)
0.62 Energex (QLD)
$482 SA Power Networks (SA)
0.58 Endeavour (NSW)
$498 Energex (QLD)
0.57 Essential (NSW)
$506 TasNetworks (TAS)
0.51 Ergon (QLD)
$639 Essential (NSW)
0.46 Evoenergy (ACT)
$704 Ergon (QLD)
0.45 Ausgrid (NSW)
0 100 200 300 400 500 600 700 800
0 0.2 0.4 0.6 0.8 1.0
Note: Excludes metering costs
Source: AER data
United Energy Regulatory Reset Draft Proposal 2021–2025 26We’re maintaining affordability by reducing our prices
4
Our network is highly utilised Our high network utilisation reflects our strong capital We balance capital and operating
governance practices. This means you pay for investments investment decisions
Another way we deliver you value is by operating
only when they’re needed – we don’t waste your money by
our network closer to its full capacity than most other We pay close attention to the immediate price impact of all
building excess capacity too early.
distributors. That is, we get the most out of our assets. our investment decisions. Operating investments may have
immediate price impacts, but provide flexibility to respond
Network utilisation, 2017
We market-test contracts to get better rates
to the future state of electricity markets as they evolve.
(%) One of the key ways we deliver you value is through market
testing our works program. This includes our high-volume Alternatively, capital investments can balance affordability
73% Powercor (VIC) works (e.g. the routine replacement of common network concerns. Capital investments generally have only a small
assets), as well as major construction projects. impact on our prices because the investment is recovered
62% United Energy (VIC)
over the life of the assets, and our assets typically last for
58% Jemena (VIC)
For high-volume works, we have agreed rates with our a long time. For example, a $1 million capital investment
contractors. This ensures you benefit from the contractors' equates to less than eight cents per customer.
57% SA Power Networks (SA)
ability to undertake works at scale – because they're repeating
53% Ergon (QLD) similar jobs over and over, they can offer a lower price. Incentives
51% CitiPower (VIC) For larger jobs, we require quotes from a panel of accredited The regulatory framework we operate under provides
49% AusNet Services (VIC) businesses. This competitive process guarantees we receive incentives that allow us to earn extra benefits if we outperform
the best market rates. benchmarks the AER sets for us. These benchmarks are
48% Endeavour (NSW)
continually reviewed by the AER, so our performance must
a t ion
47% Evoenergy (ACT)
continually improve too.
43% Energex (QLD)
Our high ut il isud ency Ultimately, you benefit from these incentives through lower
supports t he prita l
36% Ausgrid (NSW)
prices – when we outperform our expenditure targets
of o u r ca p
34% TasNetworks (TAS) (i.e. if we come in under budget), you receive approximately
70% of the benefit. For the 2016–2020 period, we expect
invest ments
26% Power and Water (NT)
you’ll benefit from around $240 million in total realised savings.
20% Essential (NSW)
0 10 20 30 40 50 60 70 80
Source: AER RIN data
United Energy Regulatory Reset Draft Proposal 2021–2025 27We’re maintaining affordability by reducing our prices
4
Our prices are based on
well-established approaches
In developing our investment requirements for the period from Forecast operating expenditure Representative base year
2021–2025, we’ve tried not to reinvent the wheel. Instead, ($ million, 2020 dollars) The costs of running our daily operations for a recent
where practical, we’ve used well-established processes. 800
year are a reasonable starting point for forecasting our
This includes adopting the approaches already used by +38 710 future expenditure needs – particularly given we
700 +36
the AER when it assesses the efficiency of our forecasts. 635 benchmark among the best distribution networks from
600
an operating cost perspective. When we finalise our
Operating expenditure – consistent with 500 operating expenditure forecasts, 2019 will be our most
the AER approach 400
recent ‘base’ year with audited data.
We need to maintain our assets and run our business on 300 Forecast trends
a day-to-day basis. These costs, for example, cover our Our operating costs take account of expected trends,
200
ongoing maintenance programs, vegetation management, including likely increases in labour and contract prices.
100
fault response, our corporate staff and many vital customer These trends are based on independent benchmarks
support services. 0
or known price changes, which show the cost of these
Base Trend Step Total
Consistent with the AER’s longstanding practice, our services will increase at a rate greater than inflation.
operating expenditure forecasts for the 2021–2025 period Our operating forecasts are also scaled to reflect
have been developed using a 'base, trend and step' growth in the size of our network (e.g. as customer
approach. numbers increase, so will our work volumes).
United Energy Regulatory Reset Draft Proposal 2021–2025 28We’re maintaining affordability by reducing our prices
4
Step changes Proposed step changes Rate of return – consistent with the
We adjust our base year for significant changes we know will ($ million, 2020 dollars) AER approach
occur during the 2021–2025 period. These ‘step’ changes
Forecast Deferred We earn a return on the value of our assets. This return
may increase or decrease our operating costs. Often a step Proposed
operating capital is a large driver of the total revenue we receive – equal
change is needed so we can meet new legislation that step change
investment investment to approximately 33% – and accordingly, is subject to
changes our operational requirements – we must comply with
New regulatory obligations a rigorous review by the AER.
these obligations. We also include changes where we pay 28.9 N/A
related to market changes
third parties to reduce demand (instead of building a bigger The AER has recently completed its review of the rate of
network), or where we switch to using operating instead of New regulatory obligations return. We participated in this review process and have
capital expenditure (e.g. where we start leasing services). related to safety and 1.5 N/A accepted the AER’s final decision. At approximately 5.7%,
environment the AER’s rate of return is at an historically low level.
The list of step changes we expect to include in our regulatory
proposal is shown opposite. These changes are particularly Demand management 3.3 42.4
important for our business, given our lean operating structure
Depreciation – consistent with the
– as highlighted in the AER’s benchmarking analysis on Expenditure trade-offs 4.6 5.2 AER approach
page 26. That said, we haven’t sought to capture all likely When we build our network – for example, our poles and
cost increases, as we’ve heard your concerns regarding wires – these assets can last for up to 50 years. Therefore,
affordability. Instead, we’ll keep costs low by improving we only recover a portion of the costs of our assets in any
our everyday productivity. given year.
This approach is consistent with well-established accounting
practices. It is also consistent with the AER’s methods.
Tax – consistent with the AER approach
The AER provides an allowance for tax based on a
benchmark firm. This recognises that all distributors incur
tax liabilities as they operate their networks.
We have applied the AER’s taxation approach, as set out
in its final report in December 2018 on estimating
corporate tax costs for regulated energy networks.
United Energy Regulatory Reset Draft Proposal 2021–2025 29We’re maintaining affordability by reducing our prices
4
Our total investment forecast is prudent
and efficient, and will reduce our prices
Our total investment forecast discussed in this draft proposal is used to set the total revenue allowance
we propose to recover from our customers. A summary of this investment is provided below.
We’d like to know more
Forecast operating and capital investment for 2021–2025
about your pref erences...
($ million, 2020 dollars)
38
36 98
70 Replacement
6. We’ve heard from you that affordability
390 Augmentation (incl. network control) is a primary concern, and this has been
Base reflected in our capital and operating
$710m 171 $1,130m Connections (net)
Trend investment forecasts. Have we struck the
total total right balance between flexibility, safety,
opex Step capex IT
dependability and affordability?
Property, fleet and land
176 Overheads and equity raising costs Visit talkingelectricity.com.au/contact-us/
635 225 to have your say.
United Energy Regulatory Reset Draft Proposal 2021–2025 305
We’re supporting
your energy
choices through
fair and simple
chargesWe’re supporting your energy choices through fair and simple charges
5
We’ve designed our price structures
to be fair and easily understood
Our aim is to set simple and fair price structures for electricity, We believe these new price structures are fair because: Large business and industrial customers
so we’ve been working with the other Victorian networks to • you can make savings if you’re able to change the time you We'll continue to adopt a 12-month rolling kVA demand
design consistent price structures for residential, and small use electricity (e.g. by setting your dishwasher and washing charge structure for large businesses and industrial
and medium business customers throughout the state. We’ve machine timers to operate outside peak times, or even customers, where demand is measured in 30-minute intervals.
also held two separate customer forums, but we want to hear using a battery to store electricity for later) Our commercial and industrial customers have been charged
from more of you before settling on the final price structure for
• customers who use a lot of electricity at peak times pay based on their demand for a number of years, so most
our network.
for the costs they impose on the network – this is fairer than understand this pricing structure well.
Based on your feedback so far, we’ve narrowed the price charging other customers the same amount when their Following in-depth interviews with our larger customers,
structure options for residential, and small and medium electricity use has less impact on the network pricing options that reward customers for reducing demand
business customers to those set out below. • by encouraging you to change the time you use electricity, at network peak times are being considered. Options include
we can build in less capacity to the overall network and rebates or replacing the current fixed charge with a network
Our aim is to set simple and fair price structures lower everyone’s charges. peak pricing signal.
Price We’re also interested in your views on how quickly we should
Description
structure
move towards these pricing structures. Each of our customers
The price of the electricity changes throughout
is assigned a pricing structure by a retail electricity business.
Time of use the day. It is higher at peak times and lower at
other times. The sooner customers are assigned to a new pricing structure
that provides an incentive to move usage away from peak
The charge for your package would be the same
Peak usage
each month based on your level of electricity
times, the sooner network cost savings will be realised.
packages However, this may come at the expense of some individuals
use at peak times.
in the short term. The pace of change will depend on whether
Your monthly charge would be based on your
Demand maximum electricity demand at peak times for all customers are assigned to a new pricing structure by default
that month. (unless they opt out), or whether new structures only apply
Your price structure would not change. Most to customers who opt in.
customers are currently charged a fixed daily We’ve published a consultation paper with more detail
Status quo
rate plus a charge for electricity use that varies
on our price structure options. This paper is available
with how much you use each day.
on our Talking Electricity website.
United Energy Regulatory Reset Draft Proposal 2021–2025 32You can also read
