AER Pre-determination conference 13 November 2018 About us 4 m 20 % - PowerPoint PPT Presentation

AER Pre-determination conference 13 November 2018

About us 4 m 20 % Australians of Australia’s GDP 1.5 m 200 k Homes Businesses 105 1,238 Hospitals Schools This image cannot currently be displayed. 2

Ausgrid’s contribution to residential bills STATE AND AUSGRID FEDERAL GENERA TION TRANSMISSION RET AILER NETWORK GOVERNMENT COSTS COSTS COSTS COSTS ENVIRONMENTAL POLICIES Distribution and dual function assets 48 % 5 % 33 % 9 % 5 % 3

What customers told us prior to submission of our proposal AFFORDABLE SUSTAINABLE RELIABLE • Customers are • Customers value • Customers support challenged by rising reliability and investment in renewables prices security and want to feed their electricity back to the grid • Most customers are • Many customers happy with current experience bill shock • Customers expect energy levels of reliability companies to support the transition to a lower • Customers want us carbon economy to better utilise existing capacity WE CONTINUE TO FOCUS ON AFFORDABILITY Reduction in More efficient Lower prices Network charge $ 100 m reduction per average household Operating cost $237 34% customer since 2014 network charges savings (pa) since 2014 between 2014 and With more savings $ 76 pa 2019 Benefit per customer to come 4

What have we been doing since April 2018? Engaging with the Meeting with Reviewing customer AER and its consumer groups and submissions consultants their consultants Changing our Engaging with the approach to pricing AER on our 2015-19 with the Pricing remittal Working Group Considering the Participating in the impact of the AER’s Engaging with the AER review of its draft decision on the AER on its corporate approach to binding rate of return tax review productivity guideline Key: Feedback on our proposal Processes external to our regulatory determination 5

Average residential revenue per customer Ausgrid residential revenue per customer ($ FY19) $1,000 $900 $800 34% reduction since 2014 $700 $600 Initial proposal (incl. remittal) $500 Draft decision $400 38% reduction since 2014 $300 $200 $100 $0 FY8 FY9 FY10FY11FY12FY13FY14FY15FY16FY17FY18FY19FY20FY21FY22FY23FY24 6

What customers and the AER said about our proposal Customers Prudency and Cost benefit The prudency and efficiency of Ausgrid’s proposal The AER sought more evidence of project need and efficiency analysis needs to be better justified quantitative cost benefit analysis of our capex program Benefits clarity on Stakeholders want to better understand the benefits The AER and its technical consultant raised concerns Governance past investments from past investment about our governance framework. Demand Demand Greater consideration of demand management and Considered that some of Ausgrid’s proposed demand management new technology is needed management management projects need to be better justified Recognised that our proposed distribution management Customers consider an opex productivity forecast is Opex productivity Network innovation system upgrade and network innovation projects are needed likely to have economic benefits Ausgrid’s tariff structure statement (TSS) was not The AER expressed concern about the lack of demand Demand tariffs Demand tariffs supported, with submissions advocating for demand tariffs in Ausgrid’s TSS tariffs 7

How we are responding to feedback We have listened to consumers and AER • Working through feedback about our capex proposal feedback on our proposal. Prudency and • Considering our approach to replacement capex efficiency of capex • Subjecting a large portion of our capex proposal to quantitative risk We will continue to engage with customers prior assessment and cost benefit analysis to lodging our Revised Proposal on 8 Jan 2019 This will include both formal and informal • We have made changes and continue to review our governance Governance framework to strengthen the role of internal challenge processes engagement • Accepted feedback on our tariff design step change • Providing further information in relation to emergency recoverable Opex Upcoming engagements: works and reviewing our demand management programs • Considering our approach to productivity • 15 November - Pricing Working Group • 23 November - Network of the Future Forum • Based on feedback, we are working with customers to incorporate Demand tariffs demand tariffs in our revised Tariff Structure Statement • 30 November - Revised Regulatory Proposal Working Group • 11 December - Final Consumer Consultative Continued • We will continue to engage with our customers prior to lodging our consumer Committee meeting for 2018 Revised Proposal with a view to securing customer support for our engagement Revised Proposal 8

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