A safe, reliable and efficient network
Endeavour Energy is committed to managing network assets in a manner that meets customers’ expectations, fulfils our business needs and satisfies our obligations to stakeholders, the regulator and the community.
Our objective is to deliver a 45% increase in network investment during the current regulatory period (2009–14) – for a total expenditure on the network of $2.7 billion approved by the Australian Energy Regulator (AER). We are now in the third year of the five-year plan, with a record capital program of $674.4 million to deliver in 2011–12.
Why do we need this investment? Because our business faces three significant challenges:
- Servicing growth in Endeavour Energy’s network area. To support the continued development of Sydney’s northwest and southwest residential growth centres, new network infrastructure must be built. At the same time existing customer take up of appliances such as air conditioners, swimming pool pump systems and televisions is increasing peak electricity load well above natural growth.
- Renewing ageing network assets. Many assets in our franchise area are reaching the end of their economic and operating life and must be replaced to maintain network reliability.
- Meeting the New South Wales Government’s initiatives to improve the security and reliability of electricity supply across the state.
We need to deliver this network capital program as efficiently as possible to minimise price impacts on customers.
In developing our network strategy, we took a range of regional, climatic, asset, customer and licence requirement issues into account.
Some of these considerations are:
- Our network contains some of Australia’s fastest growing communities. Maximum electricity demand has increased 16% over the past five years, well outstripping population growth.
- As land use continues to shift from rural and semi-rural to urban and light commercial, customers expect improved reliability performance.
- Peak temperatures across the network are typically higher and stay high for longer than those of central Sydney and other coastal areas.
- Eighty-one percent of households in Greater Western Sydney now have air conditioning units, compared with 51% in the Illawarra and 50% in the Blue Mountains. This has resulted in a ‘peakier’ load pattern in hot weather requiring more assets to service demand that only exists for a short time each year.
- The uptake of other appliances such as televisions, in-home computers and entertainment systems. This trend is also changing consumption patterns, resulting in heightened customer expectations and awareness about reliability and security of supply.
- Many network assets were built in the infrastructure boom of the 1960s and 1970s and are approaching the end of their useful lives.
Major projects approved by the Board during 2010–11
In response to growing demand and the need to renew ageing assets, 12 major projects for a total of $206.9 million were approved by the Board this year. Construction will commence in coming years.
Major works in progress 2010–11
In addition, works were undertaken for the construction of 55 major capital projects valued at $436.4 million, which are detailed in the following pages.
Note: Click image to view full table
Network maintenance
Our Strategic Network Maintenance Plan (SNMP), which is part of our Strategic Asset Management Plan, analyses maintenance needs against business objectives and details the strategies we require to ensure assets meet our network strategy. This work includes vegetation management, asset inspections and pre-summer bushfire inspections of our overhead electricity lines in bushfire-prone areas.
The plan is reviewed and updated annually to identify what network maintenance activities will be needed over the ensuing 12-months.
In 2010–11, Endeavour Energy achieved the delivery of a record maintenance program at a cost of $226.4 million, compared with our 2009–10 expenditure of $211.1 million, and 94% compliance with our maintenance target. Our maintenance performance contributed to our continued improvement in system reliability at 72 minutes lost per customer per year.
Maintenance activities and expenditure this year included:
- $21.3 million on vegetation management to maintain safety clearances, reduce outages, improve reliability and manage bushfire risk.
- $16.7 million on metering including the reading of meters and to provide information for billing purposes.
- $16.3 million for fault and emergency work following weather related events and third party incidents.
- $14.2 million on preventative maintenance and inspections on the transmission and distribution network.
- $14.2 million on condition based maintenance.
- $10.6 million for expenses related to the contestable customer connection works including transformers and switchgear paid by the customer.
- $6.8 million for the overhead line and pole inspection program, involving the inspection of 93,108 poles.
- $6.6 million on street lighting including replacing 62,033 lamps.
- $119.5 million largely on network operating overheads and other maintenance activities.
Solar feed in tariff scheme
On 1 January 2010 the NSW Government introduced the Solar Bonus Scheme to implement a 60 cent per kWh feed-in tariff for roof top photovoltaic (PV) systems and wind turbines up to a maximum
of 10 kW.
In creating the Solar Bonus Scheme the Government had a number of objectives including encouraging and supporting those who want to generate renewable energy as a response to climate change and to increase public exposure to renewable energy technology to encourage the whole community to respond to climate change.
The Scheme was limited to customers with an annual electricity usage of less than 160 MWh. For eligible small retail customers, this feed-in tariff was credited on a gross metered basis.
The credit is paid by distributor businesses to customers via their retailers. The recovery of the costs associated with the Solar Bonus Scheme commenced on 1 July 2011.
The Scheme rapidly gained interest from the public leading to higher than expected subscription to it and ultimately resulting in changes to the Scheme on 27 October 2010 following the outcomes of a review of the Scheme’s first six months of operation. Two of the primary changes to the Scheme were the cessation of the previous 60c per kWh rebate to be replaced by a 20c per kWh rebate, and the introduction of a target ‘cap’ for NSW of 300MW of small scale solar PV generation capacity. The revised Scheme provided for the Minister for Energy to close the Scheme to new entrants once the ’cap’ of 300MW of generation capacity was installed and connected to the energy grid.
On 1 July 2011, the Minister, by way of notice in the Gazette, closed the NSW Solar Bonus Scheme, citing that 300MW of small scale solar PV had been installed and connected in NSW.
The Government also provided transitional amendments to the Electricity Supply (General) Regulation that allowed customers who had made an application prior to 29 April 2011 to continue to connect a generator and receive the Solar Bonus Rebate notwithstanding the closure of the Scheme.
The Government has also asked the Independent Pricing and Regulatory Tribunal (IPART) to review certain actions to manage costs arising from the installation of small scale generators and their impact on electricity prices and taxpayers, while continuing to support a sustainable renewable energy industry in NSW.
Following the conclusion of this review, Endeavour Energy expects that minor administrative and implementation issues will need to be addressed.
Endeavour Energy has absorbed the substantial implementation and administration operating costs of the Scheme. As at 30 June 2011, these costs are estimated to approach $3.9 million over the life of the Scheme. These costs will be funded through efficiency initiatives so customers will not be impacted by the additional costs imposed on us for administering the scheme.
The table below shows the breakdown of customers currently connected and those predicted to connect as of 3 July 2011. If all customers enter the scheme as expected, a total of 47,362 customers will be involved, representing a solar generation capacity of 105.9MW.
In response to defects identified as a result of the Department of Fair Trading inspection regime on existing solar installations, Endeavour Energy has taken the lead in developing an agreed minimum inspection regime for new solar installations by NSW electricity distributors
Demand management
One way of reducing the cost of network management is to investigate demand management alternatives to network augmentation for specific capital expenditure projects.
Where feasible, Endeavour Energy investigates and implements projects that modify demand as an alternative to spending money to upgrade the network. Projects may include negotiating with high-use customers to move peak loads away from the network peak conditions or implementing projects to reduce overall usage in those peak times.
Endeavour Energy recognises there is an imperative to ensure electricity is delivered reliably, and in an energy efficient and environmentally responsible manner, which is why we evaluate demand-side as well as construction options in the network planning process.
The NSW Code of Practice – Demand Management for Electricity Distributors (the DM Code) requires distributors to facilitate input into the planning of major network upgrades to allow for the development of demand management and other system support options.
The DM Code calls for a ‘reasonableness test’ to be performed for all capital projects to determine if a public process is required for investigating non-network alternatives. Endeavour Energy performs this test and summarises the results in its annual Network Demand Management Plan (DM Plan).
The test helps determine whether a request for proposals (RFP) or similar process is to be issued. An RFP is a public process in which the distributor invites interested stakeholders to make submissions for system support options, to be evaluated against network options.
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