Contents

  • 1 Introduction
    • 1.1 Purpose
    • 1.2 Providing feedback
    • 1.3 Structure
  • 2 The Government response in context
    • 2.1 VBRC Recommendation 27
    • 2.2 PBST conclusions regarding Recommendation 27
    • 2.3 Government response to the PBST
    • 2.4 Cost recovery for DNSPs
    • 2.5 Constraints on rollout of each technology
  • 3 Existing regulatory structures
    • 3.1 Legislation and regulatory provisions for bushfire safety
    • 3.2 Approval of business' documentation
    • 3.3 Regulatory approach to other VBRC recommendations
  • 4 Regulatory objectives and principles
    • 4.1 Objectives of the Government's regulatory response
    • 4.2 Prescription versus outcomes-focussed regulation
    • 4.3 Principles to be applied in developing regulations
  • 5 Regulatory options
    • 5.1 Option 1 - Regulatory change
    • 5.2 Option 2 - ESV Directions
    • 5.3 Option 3 - Non-regulatory
    • 5.4 Indicative mechanisms and cost recovery
  • 6 Questions for stakeholder response

1 Introduction

1.1 Purpose

Over the next decade, the Victorian Government aims to reduce the risk of bushfire starts on Victorian electricity distribution networks by almost two-thirds. This goal will be reached through a combination of changes to network safety settings, the installation of new network safety technology, and replacement of the most dangerous power lines. The Victorian Government is investing up to $250 million to support these changes. Up to an additional $500 million will be invested by Victorian electricity distribution network service providers (DNSPs), which is over and above the expenditure on safety improvements already being undertaken by the DNSPs in response to the recommendations of the Victorian Bushfires Royal Commission (VBRC), as well as safety works previously approved as part of the approved works programs of the DNSPs for 2011-2015.

The purpose of this paper is to detail options for the regulation of the remaining components of the VBRC recommendations which have not yet been addressed, principally arising from Recommendation 27 (regarding installation of new and replacement network safety assets), as well as the subsequent recommendations of the Powerline Bushfire Safety Taskforce (PBST) (see Section 2 of this paper). The Government is seeking feedback on these options from interested stakeholders, in order to determine which additional regulatory controls may be needed to implement the Government's commitments. This paper does not address the $200 million contribution committed by the Victorian Government for power line replacement. The Government has established a separate process to allocate this funding.

There are five major DNSPs in Victoria - Powercor (western Victoria), SP Ausnet (eastern Victoria), Jemena (northern and western suburbs of Melbourne), United Energy Distribution (UED, southern and outer eastern suburbs, and the Mornington Peninsula), and Citipower (CBD and inner eastern suburbs).  Of these, Powercor, SP Ausnet, Jemena and UED provide network services in areas of high bushfire risk. These DNSPs are thus within scope for this program.

The new assets to be installed by the DNSPs in response to VBRC Recommendation 27 and the PBST recommendations will include:

  1. installation of rapid earth fault current limiters (REFCLs), to be installed at zone substations to reduce the fault energy very quickly when wire-to-earth faults occur on 22kV powerlines;
  2. installation of new generation automatic circuit reclosers (ACRs), to be installed on single wire earth return (SWER) lines to reduce the fault energy when faults occur; and
  3. new power lines built in the areas targeted for power line replacement to be built with underground or insulated overhead cable.

1.2 Providing feedback

Stakeholders are invited to make submissions on the regulatory options set out in this paper, in particular, those questions posed in Section 6. Submissions are preferred in electronic format and should be provided to the former Department of Primary Industries by Friday 7 September 2012.The Department encourages respondents to make their submissions available publicly. Unless certain sections of submissions are marked 'IN CONFIDENCE', all sections of the submissions will be treated as public documents and will be placed on the Department's website for public access. Formal requests for confidentiality will be honoured; however, Freedom of Information access requirements still apply to confidential submissions.

1.3 Structure

The remainder of this paper is structured as follows:

  • Section 2 provides the context for the Government's regulatory response for the rollout of new and replacement network safety assets by DNSPs;
  • Section 3 identifies the existing regulatory structure in place for electricity safety and bushfire protection, regulated by Energy Safe Victoria;
  • Section 4 outlines the regulatory objectives and principles to be followed in determining a regulatory response;
  • Section 5 details the high-level regulatory options available, including assessment of potential implementation mechanisms and cost recovery; and
  • Section 6 poses a series of questions for response by stakeholders.

2 The Government response in context

2.1 VBRC Recommendation 27

The Victorian Bushfires Royal Commission produced its final report in July 20101. The report made 67 recommendations. Eight of these recommendations relate specifically to electricity supply assets. Of these, two were of sufficient complexity that the Royal Commission recommended further analysis by an expert taskforce (the Powerline Bushfire Safety Taskforce).

This paper is concerned with one of these recommendations assessed by the taskforce - Recommendation 27 (see Box 2.1 below). The other recommendation assessed - Recommendation 32 - relates to the network safety settings of ACRs on total fire ban days and is being addressed separately from this process.

Box 2.1 - VBRC Recommendation 27

The State amend the Regulations under Victoria's Electricity Safety Act 1998 and otherwise take such steps as may be required to give effect to the following:

  • Progressive replacement of all single-wire earth return (SWER) power lines in Victoria with aerial bundled cable, underground cabling or other technology that delivers greatly reduced bushfire risk. The replacement program should be completed in the areas of highest bushfire risk within 10 years and should continue in areas of lower bushfire risk as the lines reach the end of their engineering lives.
  • Progressive replacement of all 22-kilovolt (kV) distribution feeders with aerial bundled cable, underground cabling or other technology that delivers greatly reduced bushfire risk as the feeders reach the end of their engineering lives. Priority should be given to distribution feeders in the areas of highest bushfire risk.

2.2 PBST conclusions regarding Recommendation 27

Consistent with the Royal Commission's suggestion, the Government established the Powerline Bushfire Safety Taskforce (PBST) in August 2010 with terms of reference to:

  • Investigate the technology and operational practices to reduce catastrophic bushfire risk with acceptable impacts on cost, supply reliability, landowners and the environment;
  • Employ analysis, trials, expert advice and community and stakeholder consultation;
  • Recommend a plan to reduce bushfire risk within the 10 year timeframes recommended by the Royal Commission that maximises value to the Victorian public; and
  • Advise on options for fairly and efficiently recovering the costs of implementing the plan.

The Taskforce final report2 concluded that the most cost-effective solution to reduce the likelihood of bushfires starting by powerlines (addressing Recommendation 27) is the widespread deployment of the following new network protection technologies:

  • Rapid earth fault current limiters (REFCLs), to be installed at zone substations to reduce the fault energy very quickly when wire-to-earth faults occur on 22kV powerlines; and
  • New generation automatic circuit reclosers (ACRs), to be installed on SWER lines to reduce the fault energy when faults occur, while minimising reliability impacts.

The Taskforce also recommended that any new power lines built in the areas targeted for power line replacement should be built with underground or insulated overhead cable.

2.3 Government response to the PBST

The Victorian Government published its response to the PBST findings in December 20113. Regarding rollout of new technologies (new generation ACRs and REFCLs), the Government committed to requiring DNSPs to install both of these devices across the State over the next 10 years, as recommended by the PBST. Under the approach detailed in the Government response, DNSPs will be required to specify the location and timing of asset rollout, with progress to be reviewed by Energy Safe Victoria (ESV, Victoria's energy safety regulator) on an annual basis. This paper outlines the regulatory options for implementing this commitment (see Section 5). Noting the works already committed to by DNSPs for 2011-2015 (see Section 2.5 of this paper) the incremental additional estimated cost of this commitment was estimated in the PBST final report to be approximately $500 million.

The Victorian Government also supports the PBST recommendation that any new power lines in areas targeted for power line replacement should be built with underground or insulated overhead cable. This represents a new requirement which is likely to require supporting regulatory controls, with options for doing so outlined in this paper (see Section 5).

In its December 2011 response, the Government also committed to funding of $200 million over 10 years for a program of power line conductor replacement, focussing on locations of highest fire loss consequence as recommended by the PBST. The Government has established a separate process involving Government departments, ESV and DNSPs to allocate this funding. As such, this commitment is not further addressed in this paper.

The Power Line Bushfire Safety Program (PLBSP) has been established within the former Department of Primary Industries (DPI) to oversee the implementation of the Government's commitments with respect to power line safety addressing bushfire risk. This includes developing the regulatory requirements for the rollout of new technology and Government-funded power line replacement by DNSPs. Progress against the overall goal will be tracked through an annual review process, overseen by the Powerline Bushfire Safety Oversight Committee, comprising senior Victorian Government officials.

2.4 Cost recovery for DNSPs

DNSPs may seek approval for cost recovery from the Australian Energy Regulator (AER, the national regulator responsible for economic regulation of energy distribution businesses) for the rollout of new generation ACRs and REFCLs, and to implement any new requirements regarding power lines in designated high bushfire risk areas (where this funding has not already been sought through a previous regulatory determination). Cost recovery could occur either via a "cost pass-through" application from the DNSPs to the AER during the current regulatory control period (2011-2015), or as part of the broader DNSP proposals for the next regulatory control period (2016-2020). In either case, regulatory arrangements will need to be put in place, and amended DNSP implementation plans approved by the ESV, before applications for cost recovery can be made to the AER.

Where possible, enabling businesses to include required bushfire mitigation works together with the full range of other planned expenditure within the normal five-year regulatory proposal to the AER provides the most transparent method through which the need for and efficiency of the proposed expenditure can be tested. This approach will allow the AER to interrogate the proposed works in more detail than allowed for by a pass-through application, including engaging independent experts to examine issues such as unit cost and performance of particular technologies, and assessing proposed work programs within the broader work program of each business. For these reasons, the initial Department position is that the normal five-year regulatory control process should be used for cost recovery purposes wherever possible.

While use of the five-year regulatory process is preferred in general, the Department recognises that a regulatory change pass-through mechanism may need to be used where the rollout of new technologies under the PLBSP needs to begin in the current regulatory control period (where not already approved), to ensure that urgent safety issues on the networks are not delayed.

Under the process detailed in clause 6.6.1 of the National Electricity Rules4, the AER has 60 business days to consider and approve (or reject) a pass-through application made by a DNSP. If the AER fails to make a decision in this timeframe the application is taken to be approved. This timeframe restricts the ability of the AER to interrogate the application to the same level of detail as allowed for by the normal five-year regulatory submission process. The AER is also limited by existing confidentiality arrangements in seeking advice from third parties (including ESV), particularly from a cost perspective.

Pass-through applications require a change to be made to distribution businesses obligations of sufficient extent as to justify AER consideration within a five-year regulatory cycle. This 'trigger' event could include a change in legislation, a Direction by ESV, or ESV mandating a requirement in the DNSP's Electricity Safety Management Scheme (ESMS) through amendment to regulations (see Section 3 for a description of these instruments). AER approval of a pass-through application usually requires the businesses to demonstrate that the total costs of the change are material. If a pass through mechanism is used, a specific derogation from clause 6.6.1 of the National Electricity Rules may be required to enable the businesses full cost recovery for required bushfire mitigation works. However, the Department considers that the use of such a mechanism must be balanced against the need to have appropriate checks and balances in place to ensure only efficient costs are being claimed by DNSPs.

2.5 Constraints on rollout of each technology

New generation ACRs

New generation, remotely controllable ACRs are a widely deployed, relatively low cost, and established technology. New generation ACRs produce an immediate benefit in terms of improving supply reliability, particularly in those areas where older-style (manually adjusted) ACRs are installed. The PBST estimated there are approximately 1,300 SWER ACRs to be replaced with new generation ACRs in the SP Ausnet and Powercor network areas. Jemena and UED have been funded to replace their remaining SWER lines during the current regulatory control period (2011-2015), meaning that ACRs will not be required in these network areas.

SP Ausnet has been approved to install new generation ACRs across the SP Ausnet network area as part of the approved works programs for 2011-2015 (approximately 500 units) and it will be important to ensure that this occurs. While Powercor did not propose a program of installation of new generation ACRs as part of their 2011-2015 works program, they have begun to install new generation ACRs in response to a Direction issued by the ESV in April 2012 (see Section 3 for a description of ESV's Directions powers). The Direction requires Powercor to replace the remaining stock of older-style ACRs in high bushfire risk areas (which require manual adjustment during the six weeks of highest bushfire risk) with approximately 200 new generation ACRs, prior to the 2012-13 fire season. This will leave a further 600 SWER ACRs to be replaced across the Powercor network area in subsequent years.

REFCLs

The PBST recommended the rollout of REFCLs at zone substations in the Powercor and SP Ausnet network areas, to control the fault energy on 22kV rural feeders. Jemena has already been approved to install REFCLs at three zone substations in high bushfire risk areas for 2011-2015, while UED has been approved to install REFCLs at seven zone substations.

Unlike ACRs, REFCLs are a relatively unproven technology in their ability to reduce fire starts in mixed rural networks and are subject to significant technology and price risk. To mitigate this risk, the Department considers it appropriate that the technology is trialled before a mandatory rollout is initiated. The trial will enable the DNSPs and Government to better understand the effectiveness and limitations of REFCLs in bushfire mitigation, particularly as applying to rural networks. The trial will determine where in the networks it is effective to mandate the use of REFCLs, and where other options may deliver the Government's objective more effectively.

On 29 June 2012, ESV approved SP AusNet's revision of their ESMS incorporating the new obligations arising from the VBRC. This revised ESMS includes a proposal to undertake a REFCL trial at Woori Yallock zone substation, beginning in January 2013 and concluding by December 2014. Results from the trial will be captured and shared by all parties, such that the viability of the REFCL in a rural setting can be accurately captured. Data from the installations in the Jemena and UED areas may also be used to inform the trial.

Based on the outcomes of the trial, rollout of REFCLs in the Powercor and SP Ausnet areas may take place in the next regulatory control period (2016-2020). To support this, regulations could be put in place in advance of the next round of regulatory proposals to be submitted to the AER, to allow those DNSPs to include the cost of the REFCL rollout within their proposals.

Power line replacement

The PBST recommended that any new power lines that are built in the areas targeted for power line replacement should be built with underground or insulated overhead cable. The Government supports this recommendation and recognises the need to ensure that DNSPs commit to this objective, which may require supporting regulations (see Section 5). The majority of the rollout of replacement power lines in the highest bushfire risk areas is expected to occur during the next regulatory control period (2016-2020).

3 Existing regulatory structures

3.1 Legislation and regulatory provisions for bushfire safety

Under existing arrangements in Victoria, electricity safety issues are regulated under the Electricity Safety Act 1998 by Energy Safe Victoria, Victoria's independent technical regulator responsible for electricity, gas and pipeline safety. ESV is itself constituted, and its role prescribed, under the Energy Safe Victoria Act 2005. Additional controls governing energy emergency arrangements, which include some responsibilities for ESV in the event of an energy emergency, are included in the Electricity Industry Act 2000.

The Electricity Safety Act 1998 (ESA) describes the requirements of DNSPs in relation to electricity safety, which includes bushfire mitigation. The Act also provides for ESV to make regulations which further prescribe requirements on DNSPs and others relevant to bushfire mitigation.

In the area of bushfire mitigation, three relevant regulations have been developed:

  • Electricity Safety (Bushfire Mitigation) Regulations 2003
  • Electricity Safety (Management) Regulations 2009
  • Electricity Safety (Electric Line Clearance) Regulations 2010

A description of each of these regulations is provided in Box 3.1 (below). These regulations provide further prescription to DNSPs (in addition to that provided by the ESA) in preparing a series of required documents for approval by ESV: Electricity Safety Management Schemes (ESMS), Bushfire Mitigation Plans (BMPs), and Electric Line Clearance Plans.

Note: ESV is currently undertaking a review of the regulations relating to bushfire risk mitigation from electricity infrastructure, including the Electricity Safety (Management) Regulations 2009, the Electricity Safety (Bushfire Mitigation) Regulations 2003 (lapsing in mid-2013) and the Electricity Safety (Electric Line Clearance) Regulations 2010 (lapsing in 2015), with a view to determining the future structure of these regulations. The regulatory arrangements adopted for the rollout of network assets under the PLBSP will be developed in close consultation with ESV to ensure that the arrangements align with the outcomes of the ESV review.

Box 3.1 - Description of regulatory instruments under the ESA and documents to be produced by DNSPs

Electricity Safety (Management) Regulations 2009

  • The Electricity Safety (Management) Regulations 2009 define the requirements, procedures and other matters relating to Electricity Safety Management Schemes. ESMS are compulsory for each DNSP, which ensures that safety procedures are built into all aspects of their processes. The ESMS are intended to be used and enforced within the business producing measurable results. ESMS are accepted by ESV, who then monitors their implementation.

Electricity Safety (Bushfire Mitigation) Regulations 2003

  • The Electricity Safety (Bushfire Mitigation) Regulations 2003 make provision for the preparation of Bushfire Mitigation Plans by DNSPs and to specify asset inspection frequency, the training qualification of asset inspectors, and standards for the inspection of private overhead electric lines. The bushfire mitigation plans must detail the businesses' plans for the mitigation of bushfires in relation to their supply networks in Hazardous Bushfire Risk Areas (as defined by ESV). Updated plans are submitted each year for approval by ESV and may be audited.

The Electricity Safety (Electric Line Clearance) Regulations 2010

  • The Electricity Safety (Electric Line Clearance) Regulations 2010 prescribe the Code of Practice for Electric Line Clearance and the management procedures for maintaining line clearance. The regulation requires DNSPs to prepare Electric Line Clearance Plans for approval by ESV. The electric line clearance plans detail DNSP plans for the maintenance of the clearance space around aerial electric lines.

In addition to approving plans and procedures prepared by DNSPs, Section 141 of the ESA allows the Director of Energy Safety at ESV to issue Directions to individuals, body corporates, corporations, or licensed businesses (including DNSPs) to take action to make an unsafe electrical situation safe, or prevent an unsafe electrical situation from arising. Directions have been used in relation to a number of other recommendations of the VBRC (see Section 3.3).

Figure 3.1 (below) provides a schematic outline of the structure of the regulatory arrangements which link with bushfire management.

This is a flow chart. At the top of the chart is the Electricity Safety Act 1998 (which details high level requirements on distribution businesses regarding electricty safety and information on 'heads of power' for electricity safety regulations).It is on the same level as the Electricity Industry Act 2000 (which details energy emergency arrangements); the Energy Safe Victoria Act 2005 (which constitutes and prescribes the role of ESV); and ESV Directions.These then flow down to the ESV Safety Regulations which contain the: Electricity Safety (Bushfire Mitigation) Regulations 2003; Electricity Safety (Management) Regulations 2009; Electricity Safety (Electric Line Clearance) Regulations 2010. This then flows down to DNSP obligations including: Electricity Safety Management Schemes; Bushfire Mitigation Plans; and Electric Line Clearance Plans.

3.2 Approval of business' documentation

Three provisions give ESV power to approve how DNSPs propose to meet their obligation to operate and maintain their networks safely:

  • Section 83BE of the ESA gives the ESV the power to 'accept' Bushfire Mitigation Plans, and it must do so 'if it is satisfied that the plan is appropriate for the at-risk electric lines to which it relates'.
  • Section 102(2) of the ESA gives ESV a power to accept ESMS submitted by DNSPs, and it must do so 'if it is satisfied that the scheme is appropriate for the supply network to which it applies and complies with this Act and the regulations relating to electricity safety management schemes'.
  • The Electricity Safety (Line Clearance) Regulations 2010 gives ESV the power to approve Electric Line Clearance Plans submitted by DNSPs.

3.3 Regulatory approach to other VBRC recommendations

The Victorian Government (including ESV) have already employed a number of regulatory responses to require actions by DNSPs in response to recommendations of the VBRC.

Recommendation 28 (asset inspection frequency), Recommendation 29 (training and auditing of inspectors): Amendments have been made to the ESA to provide regulation-making powers, allowing for the Governor in Council to make the Electricity Safety (Bushfire Mitigation) Amendment Interim Regulations 2010. These Regulations amended the previous regulations to specify minimum inspection periods for network safety assets and to require that only persons who have completed a training course approved by ESV could be licensed as inspectors. The DNSPs have since amended their Bushfire Mitigation Plans to adhere to these requirements.

Recommendation 30 (reducing risk of hazard trees): Amendments have been made to the ESA to require the identification of hazard trees. Amended Electricity Safety (Electric Line Clearance) Regulations were introduced in 2010, requiring distribution business to amend their Electric Line Clearance Plans to comply with the new hazard tree requirements, with amended plans submitted to ESV for approval.

Recommendation 32 (adjust reclose on ACRs): ESV issued Directions to all DNSPs in January 2012, instructing them to amend their Bushfire Mitigation Plans for 2011/12 to suppress the reclose settings on SWER ACRs in the highest 80% fire loss consequence areas, on total fire ban and code red days, for the 2011/12 bushfire season. The network settings for ACRs will be reviewed annually to ensure that the most appropriate settings are in place each bushfire season.

Recommendation 33 (fitting of spreaders and dampers): ESV issued Directions to all Victorian DNSPs in January 2011, instructing them to amend their ESMS to identify low voltage lines requiring the fitting of spreaders or vibration dampers and a program of works for their installation.

4 Regulatory objectives and principles

4.1 Objectives of the Government's regulatory response

The general objectives to apply to all three work programs (installation of ACRs, installation of REFCLs, and power line replacement) are:

  • Regulatory controls will be developed in consultation with interested stakeholders, including ESV, the AER and the DNSPs;
  • Works should be undertaken in the most timely method possible, noting restrictions placed by the need to test new technology and the need to ensure appropriate and transparent regulatory and approval processes are in place;
  • Expenditure should be efficient and deliver value for money for the State and for Victorian consumers;
  • Any works undertaken by DNSPs as part of the rollout will need to be auditable by the ESV;
  • The majority of works are to be completed by the end of the next regulatory control period (end of 2020); and
  • Regulatory controls will need to remain flexible enough to allow for iterative processes for determining the location and timing of power line replacement and installation of REFCLs.

The following additional objectives apply independently to the rollout of REFCLs and power line replacement works.

Installation of REFCLs:

  • Mandatory rollout should not occur until the technology is proven effective for bushfire mitigation purposes and the costs are shown to be reasonable (within the broad bounds of costs assumed by the PBST per unit). It may not be appropriate to install REFCLs in all areas of the State.

Power line replacement:

  • Priority works should be undertaken in areas of highest fire loss consequence as advised by the Fire Services Commissioner.

4.2 Prescription versus outcomes-focussed regulation

Having established the regulatory objectives, an important consideration then becomes the level of prescription which is required by any regulation developed to support the program. In other words, to what extent should the regulations be focussed on high-level outcomes and to what extent should they include detailed prescription.

Given the significant investment being made by the Government and by DNSPs in improving the safety of network assets in high bushfire risk areas, and the significant expectations of the community in terms of cost and reliability impacts, there is a need for a level of prescription in the regulatory arrangements. Certainly, any regulatory arrangements should ensure that detailed plans for the program of works to deliver regulated outcomes are developed by the businesses, and that these plans are made subject to close review by the ESV and/or the AER.

This requirement leads towards the use of the existing Bushfire Mitigation Plans or Electricity Safety Management Schemes of the businesses as the appropriate documentation to detail implementation, whether this is supported by legislation, regulation, or ESV directions.

4.3 Principles to be applied in developing regulations

The Victorian Government Guide to Regulation5 lists the following characteristics of good regulation:

  • Effective - focused on the problem and achieve its intended policy objectives with minimal side effects.
  • Proportional - proportional to the problem that they seek to address
  • Flexible - subject to regular review
  • Transparent - development and enforcement should be transparent to the community and the business sector
  • Consistent and predictable - consistent with other policies, laws and agreements affecting regulated parties
  • Cooperative - developed with the participation of the community and business
  • Accountable - explain decisions on regulation and be subject to public scrutiny
  • Subject to appeal - transparent and robust mechanisms in place to appeal regulatory decisions

Any regulatory response proposed for rollout of network assets to improve power line safety should conform to these general principles.

5 Regulatory options

Note: The options detailed below are not mutually exclusive and a combination of these approaches is likely to be required.

5.1 Option 1 - Regulatory change

This option would involve amending the Electricity Safety Act and/or subordinate regulatory instrument(s) to require the DNSPs to amend their ESMS or BMP to detail a plan for the rollout of new technology and commit to constructing any new power lines with underground or insulated overhead conductor in specified high bushfire risk areas. Additional obligations could also be placed on businesses through regulations. ESV would be required to approve the amendments. Once approved, the business could apply to the AER for cost recovery, either through a pass-through application (for the current regulatory control period), or by including the costs within the businesses' regulatory proposal to the AER for the next regulatory control period (2016-2020). As noted in Section 2.4 of this paper, a specific derogation from clause 6.6.1 of the National Electricity Rules may be required to allow full cost recovery for the businesses through a pass-through application.

In general, application of new legislative or regulatory requirements has the benefit of being transparent (developed in consultation and obligations on businesses made clear), accountable (subject to greater level of scrutiny in development) and are also subject to appeal. However, legislative or regulatory changes are likely to be more complex to develop in comparison with other options and have a longer approval timeframe. Changes to the Electricity Safety Act will require assessment by Parliament, while regulatory changes will require preparation of a Regulatory Impact Statement (6+ month timeframe).

5.2 Option 2 - ESV Directions

This option would see the ESV issue Directions to the businesses to amend their ESMS or BMS to detail a plan for the rollout new technology and commit to constructing any new power lines with underground or insulated overhead conductor in specified high bushfire risk areas. ESV would be required to approve the amendments. Cost recovery would be the same as for new legislative or regulatory requirements (pass-through or application as part of next five-year regulatory proposal to the AER).

ESV Directions have the benefit of being relatively easy to prepare (compared with legislative or regulatory changes) and issue to the businesses. Directions are a more transparent form of regulation than informal consultation. However, Directions have the drawback of not being developed and issued in a way that is open to Parliament or public scrutiny. Further, although informal consultation often occurs, there is no formal requirement on ESV to consult with the businesses or other stakeholders in the development of Directions, and no established mechanisms for review.

5.3 Option 3 - Non-regulatory

A third option is for the ESV and the DNSPs to consult on implementation requirements, with the businesses incorporating detailed plans in their ESMS or BMP, for ESV approval. Cost recovery mechanisms for this approach are unclear, since there would be no clear trigger for the businesses to lodge pass-through applications with the AER in the absence of new regulatory requirements or ESV Directions.

This informal approach has the benefit of enabling ESV and the businesses to come to a shared agreement on implementation requirements and a process for implementation, and also enables agreement to be made and plans for implementation finalised in a short time period. However, this option would not provide for Government or public scrutiny, and would be highly dependent on the co-operation of the businesses. There would also be few mechanisms available for oversight or review aside from ESV audit.

5.4 Indicative mechanisms and cost recovery

Table 5.1 - Indicative mechanism and cost recovery for each regulatory option
Technology Options Mechanism Cost recovery
ACRs Regulatory change Former DPI / ESV amend ESA and/or regulatory instrument(s) to require DNSPs to rollout new generation ACRs through amendment to the ESMS or BMP. Powercor to seek cost recovery for ACR rollout through additional pass-through in current regulatory control period, or through regulatory proposal for 2016-2020 period. SP AusNet sought initial funding for ACR replacement in its 2011-2015 distribution determination which was approved by the AER.
ESV Directions ESV issues Direction to DNSPs to amend ESMS/BMP to detail process for ACR rollout.
Non-regulatory ESV consults with businesses to commit to ACR replacements in the ESMS/BMP.
REFCL rollout (following demonstrated success of REFCL trial) Regulatory change Former DPI / ESV amend ESA and/or regulatory instrument(s) to require rollout of REFCLs, through amendment to the ESMS or BMP. DNSPs include REFCL rollout within regulatory proposal to the AER for 2016-2020.
ESV Directions ESV issues Directions to DNSPs to amend ESMS or BMP detailing plans for REFCL rollout 2016-2020.
Non-regulatory Former DPI / ESV consults with businesses to undertake full rollout of REFCLs in 2016-2020, detailed in ESMS/BMP.
Power line replacement Regulatory change Former DPI / ESV amend ESA and/or regulatory instrument(s) to require construction of new power lines in specified areas with underground or insulated overhead cable, through amendment to the ESMS or BMP. DNSPs to assess requirements against approved work program for 2011-2015, as well as extent of Government contribution, in determining need for pass-through. From 2016, DNSPs can include additional costs in regulatory proposals to the AER.
ESV Directions ESV issues Direction to DNSPs to amend ESMS or BMP to commit to construction of new power lines in specified areas with underground or insulated overhead cable.
Non-regulatory Former DPI / ESV engage with businesses to commit to construction of new power lines in specified areas with underground or insulated overhead cable.

6 Questions for stakeholder response

The Department would like to receive submissions which respond to the following questions:

  1. Which of the three general options (regulatory change, ESV Directions, or non-regulatory) is preferable for:
    1. the rollout of new generation ACRs?
    2. the rollout of REFCLs following a successful trial?
    3. requirements for new power lines in high bushfire risk areas?
  2. Has the mechanism and cost recovery approach for each technology been characterised correctly in Table 5.1?
  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?
  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?
  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?
  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?


1http://www.royalcommission.vic.gov.au/Commission-Reports/Final-Report

2 http://www.esv.vic.gov.au/Portals/0/About%20ESV/Files/RoyalCommission/PBST%20final%20report%20.pdf

3Response to pbst

4http://www.aemc.gov.au/Electricity/National-Electricity-Rules/Current-Rules.html

5 Department of Treasury and Finance, 2011, Victorian Guide to Regulation, Edition 2.1 (August 2011), p. 19, available at: http://www.dtf.vic.gov.au/CA25713E0002EF43/WebObj/VictorianGuidetoRegulationJuly2011/$File/VictorianGuidetoRegulationJuly2011.pdf