7 September 2012

Dear Sir/Madam

RE: CONSULTATION PAPER, REGULATORY ARRANGEMENTS TO SUPPORT THE POWER LINE BUSHFIRE SAFETY PROGRAM

Thank you for the opportunity to respond to your consultation paper seeking feedback from stakeholders concerning the 'Regulatory Arrangements to Support the Power Line Bushfire Safety Program'. Please find below SP AusNet's response to questions raised in the paper and general comments as requested.

CONSULATION PAPER QUESTIONS

1. Which of the three general options (regulatory change, ESV Directions, or nonregulatory) is preferable for:

a. the rollout of new generation ACRs?

b. the rollout of REFCLs following a successful trial?

c. requirements for new power lines in high bushfire risk areas?

Of the three options provided, SP AusNet prefers Energy Safe Victoria (ESV) Directions for items a) and b) and regulatory change for item c).

In practice, SP AusNet has a live application before the Australian Energy Regulator (AER) for a pass through for a range of activities associated with the Power Lines Bushfire Safety Program. Application for a pass through to the AER is based upon regulatory obligations imposed through SP AusNet's Electricity Safety Management Scheme (ESMS). These new ESMS regulatory obligations have been imposed through two processes, one being through ESV directions and the other through consultation.

SP AusNet recommends a consultative process, as required under Section 109 of the Electricity Safety Act 1998, provides a transparent framework for a timely and effective method to achieve outcome based regulatory change. As SP AusNet's current pass through application is before the AER, it is an assumption that this process will be accepted by the AER.

With respect to new power lines, SP AusNet recommends prescriptive regulatory change that clearly defines the areas within which new power lines must be constructed and the required minimum standards. As new lines are predominantly funded by new customers connecting to the network, customers and distribution businesses will require clarity of proposed technical standards to apply to power lines in specific geographical areas.

2. Has the mechanism and cost recovery approach for each technology been characterised correctly in Table 5.1?.

ACRs

Whilst SP AusNet received funding through the 2011-2015 electricity determination for Single Wire Earth Return (SWER) ACRs, ESV directives have required expansion of this technology into the three phase network. These additional works are the subject of a current pass through application before the AER.

REFCLs

A consultative process with ESV was undertaken to amend SP AusNet's ESMS to include a trial REFCL installation. SP AusNet has included this, together with additional power line bushfire safety program works, in the current pass through application before the AER.

The completion of the trial will be used to determine the cost benefits of installing REFCLs across the Victorian electricity distribution network. Results and subsequent recommendations from the REFCL trial/s will need to be completed approximately eighteen months prior to the 2016-2020 final price decision by the AER to allow inclusion in price proposals by distribution businesses. In the event recommendations are made at a later date, further implementation of REFCLs for the 2016-2020 period will require pass through applications that must currently meet a 'materiality' threshold for consideration by the AER.

Power Line Replacement (including New Power Lines)

Replacement of existing overhead power lines is awaiting confirmation by the Department of Primary Industries (DPI) of the areas to be targeted for power line replacement. These areas are recommended to be defined through prescriptive regulation. Within these areas, the minimum standards for power line design will then need to be prescribed.

Subsequent to confirmation of the above power line replacement requirements, SP AusNet anticipates it will seek the government allocated funding, offset by network operating cost savings, to complete any works identified through to December 2015.

Subsequent price review periods will provide an opportunity to seek required funding for identified works, offset by any remaining government commitments to this program.

With respect to new lines, the majority are financed by new customer connections and will therefore be predominantly funded by these customers in accordance with required design standards. For clarity to customers, it is recommended the imposition of new design standards for selected areas will require prescriptive regulation.

3. What impact (if any) will adoption of the non-regulatory approach for any of the technologies have on the ability of the businesses to seek cost recovery from the AER?

A non-regulatory approach will limit consideration of funding by the AER to each five year electricity distribution price review (EDPR). Consideration for funding network augmentation EDPR proposals that are not a regulatory obligation are subjected to an economic analysis by the AER. Past experience indicates this economic analysis does not have an established framework for consideration and determination of costs such as the risk of bushfire.

4. Is the BMP or the broader ESMS the best instrument to detail DNSP commitments in relation to the rollout of network assets and power line replacement?

The Bushfire Mitigation Plan (BMP) is a better instrument to detail power line bushfire safety program commitments.

5. Are there any other suitable options available for the regulation of PBST implementation with respect to network assets, or for any of the individual elements? If so, what mechanism could be used and how would cost recovery be provided for?

The responses provided to questions 1-4 inclusive, provide a transparent regulatory framework that is suitably responsive and effective for the individual elements of the bushfire safety program.

A further consideration for pass through applications is that of materiality. SP AusNet agrees with DPI that for cost recovery in future regulatory periods a derogation from clause 6.6.1 of the National Electricity Rules is required to provide greater certainty for the pass through of bushfire safety program related expenditure. This will be particularly relevant to REFCLs as recommendations for implementation will potentially occur after completion 2016-2020 Electricity Distribution Price Review and decision process.

6. What information should be captured from each of the program components to inform the annual review of progress to the Powerline Bushfire Safety Oversight Committee?

A process has been established by ESV for quarterly reporting by distribution businesses for implementation of individual bushfire safety programs against the accepted plans contained within their ESMSs. ESV also has an established reporting framework, detailed in their 'Distribution Business Electrical Safety Performance Reporting Guide', for monitoring network safety performance.

Yours Sincerely

Charles Popple
GROUP GENERAL MANAGERNETWORK STRATEGY & DEVELOPMENT

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