AER Public Forum Presentation by Tim Rourke Chief Executive Officer 22 June 2015 CitiPower and Powercor Regulatory Proposals 2016–2020
One business – two very different networks BRUNSWICK CitiPower Network statistics NORTHCOTE Network route line length: 3,186km Network area: 157sq km Customer numbers: 325,917 Customer density: 102.30c/km FITZROY Zone substation transformers: 106 CARLTON NORTH BALWYN Distribution transformers: 4,670 Poles: 58,276 KEW Underground lines: 42% COLLINGWOOD BALWYN NORTH MELBOURNE Network reliability: 99.99% (As at 31 December 2014) MELBOURNE CBD HAWTHORN RICHMOND DOCKLANDS CAMBERWELL SOUTH MELBOURNE MILDURA PORT MELBOURNE TOORAK PRAHRAN ARMADALE ST KILDA CAULFIELD ECHUCA HORSHAM SHEPPARTON BENDIGO KYNETON Powercor Network statistics Network route line length: 67,006km BALLARAT Network area: 145,651sq km MELBOURNE Customer numbers: 765,241 ARDEER Customer density: 11.42c/km WARRNAMBOOL Zone substation transformers: 141 GEELONG Distribution transformers: 83,359 COLAC Poles: 561,471 Underground lines: 12% Network reliability: 99.96% (As at 31 December 2014) CitiPower and Powercor Regulatory Proposals 2016–2020 2
We manage the most efficient urban and rural networks Operating expenditure productivity index Average number of minutes off supply Unplanned number of minutes off supply (2006–2013) per customer (2006–2013) per customer (average 2006–2013) CitiPower (VIC) CitiPower (VIC) Powercor (VIC) Powercor (VIC) SA Power Networks (SA) ActewAGL (ACT) AusNet Services (VIC) United Energy (VIC) AusNet Services (VIC) Jemena (VIC) SA Power Networks (SA) TasNetworks (TAS) Jemena (VIC) United Energy (VIC) TasNetworks (TAS) Energex (QLD) Endeavour (NSW) Ausgrid (NSW) Essential (NSW) Essential (NSW) Ergon (QLD) Energex (QLD) Ergon (QLD) Ausgrid (NSW) 0 100 200 300 400 ActewAGL (ACT) Endeavour (NSW) Source: AER, Electricity distribution network service providers, Annual benchmarking report, 0 0.25 0.50 0.75 1.00 November 2014, Figure 6 0 25 50 75 100 Source: Economic Insights, Economic Benchmarking Source: AER Economic Benchmarking RINs Assessment of Operating Expenditure for NSW and ACT electricity DNSPs, November 2014 CitiPower and Powercor Regulatory Proposals 2016–2020 3
Our customers pay amongst the lowest distribution network costs in Australia How we compare – Distribution charges How we compare – Bill composition across Australia across Australia (2015 dollars) % 100 $271 CitiPower (VIC) 90 ActewAGL (ACT) 80 United Energy (VIC) $398 Powercor (VIC) 70 61 .2% 66.2% Jemena (VIC) 60 AusNet Services (VIC) 50 Endeavour (NSW) 40 SA Power Networks (SA) 10.1% 30 10.5% Ausgrid (NSW) TasNetworks (TAS) 20 28.7% 23.3% Energex (QLD) 10 Essential (NSW) 0 Ausgrid Endeavour Essential Energex SA Power ActewAGL CitiPower Powercor Ergon (QLD) (NSW) (NSW) (NSW) (QLD) Networks (SA) (ACT) Other Network Components Distribution Component Wholesale and Retail Components $0 $200 $400 $600 $800 $1,000 $1,200 including Smart Metering Source: Oakley Greenwood, Causes of residential electricity bill changes in Victoria, Source: CitiPower and Powercor analysis 1995 to 2014. Based on a single-rate residential customer who uses 4,000kWh (inclusive of GST) – comparisons with DNSPs in other NEM states CitiPower and Powercor Regulatory Proposals 2016–2020 4
Our proposals strike the right balance between safety, reliability, growth and affordability 1. Delivering affordable pricing outcomes • We have delivered a robust proposal that provides customers with value for money outcomes 2. Safe, reliable and efficient management of our assets • AER Benchmarking demonstrates we are among the most efficient operators • This has not been achieved at the expense of safety or reliability • We take a responsible and considered approach to investment and maintenance 3. Adapting the network to meet the challenges of the future • We will continue to invest in technologies and solutions that build a smarter network and optimise our existing assets for our customers 4. We are committed to incentive-based regulation CitiPower and Powercor Regulatory Proposals 2016–2020 5
Proposal Overview ($, 2015) Rate of Net capex Opex return Revenue $850m $502m 7.2% $1,586m CitiPower $2,015m $1,334m 7.2% $3,380m Powercor CitiPower price movements Powercor price movements $28 reduction in the $43 reduction in the $ $ 400 540 average residential average residential customer’s annual customer’s annual 380 520 electricity bill in 2016 electricity bill in 2016 360 500 340 480 320 460 300 440 2015 2016 2017 2018 2019 2020 2015 2016 2017 2018 2019 2020 Source: CitiPower and Powercor analysis. Price movements include DUoS and metering charges CitiPower and Powercor Regulatory Proposals 2016–2020 6
Revenue requirement – standard control CitiPower 2016–2020 revenue requirement Powercor 2016–2020 revenue requirement ($m, 2015) ($m, 2015) Return on assets $121m Regulatory depreciation $227m 8% Operating expenditure 7% Incentive schemes $1,343m -$5m Corporate income tax $13m $694m 40% $502m 0% 0% 44% 31% $1,334m 39% $464m $274m 14% 17% Source: CitiPower and Powercor analysis CitiPower and Powercor Regulatory Proposals 2016–2020 7
Powering growth BRUNSWICK Top 5 growth 2011–31 NORTHCOTE Local Government Areas MERBEIN (Regional) MILDURA Largest (000’s) Fastest (% per annum) Gr. Geelong 73 Mitchell 4.8 Mitchell 54 Baw Baw 2.8 CARLTON Ballarat 47 Bass Coast 2.4 Gr. Bendigo 44 Moorabool 2.3 KEW Baw Baw 31 Surf Coast 2.1 COLLINGWOOD BALWYN NORTH MELBOURNE CBD ECHUCA HAWTHORN HORSHAM DOCKLANDS SOUTH CAMBERWELL SHEPPARTON MELBOURNE TOORAK BENDIGO PORT MELBOURNE BALLARAT PRAHRAN DEER PARK Top 5 growth 2011–31 Local Government Areas ST KILDA (Metropolitan) TRUGANINA CAULFIELD Largest (000’s) Fastest (% per annum) WARRNAMBOOL EAST Wyndham 201 Melton 4.2 GEELONG Casey 171 Wyndham 4.0 Whittlesea 160 Melbourne 4.0 Melton 142 Cardinia 3.9 TORQUAY Melbourne 118 Whittlesea 3.5 Peak demand area Upgrade zone substation Upgrade parts of network Peak demand area New transformer CBD Security of Supply project New zone substation Agricultural growth Decommission zone substation Population growth New terminal station Decommission parts of network CitiPower and Powercor Regulatory Proposals 2016–2020 8
Connecting customers BRUNSWICK NORTHCOTE FITZROY CARLTON NORTH BALWYN ARDEN MACCAULEY KEW COLLINGWOOD BALWYN NORTH MELBOURNE E-GATE MELBOURNE CBD HAWTHORN BATMAN’S HILL RICHMOND FISHERMANS BEND MONTAGUE CAMBERWELL PRECINCT PORT MELBOURNE SOUTH MELBOURNE TOORAK WEBB DOCK PRAHRAN ARMADALE ST KILDA CAULFIELD Urban renewal and development CitiPower and Powercor Regulatory Proposals 2016–2020 9
We take a risk-based approach to asset management Zone Substations – Load v Health Index (2016) (2021) Without augmentation (2021) With augmentation 10 NR 10 AP NR 10 9 AP 9 LS 9 CitiPower WB WB BC 8 8 8 7 7 7 Load Index (LI) Load Index (LI) Load Index (LI) 6 BC 6 6 5 MP 5 MP L 5 L AR/NC/Q/ AR/NC/Q/ 4 TK/L RD/B/LS/Q 4 WG RD B 4 WG JA/RD SK/TK SK/TK 3 WG NC/SK 3 JA DA C 3 MP B AR DA C SB DA/SB WB AP 2 2 2 CW/E/FB/ JA/J/PM/ CL/CW/FB/ FR/J/PM/ BQ/C/R/ BC/CL/CW/ E/LQ/MG/ BQ/SB CL/SO BK/F/TP BS/R/VM RP BQ E/LQ/MG BK F/TP BS/R RP/VM FR/PM/WA BK F 1 1 1 FR/LQ/MG PR/WA SO PR/WA TP/WP FB/SO/VM NR 1 2 3 4 5 6 7 8 9 10 1 2 3 4 5 6 7 8 9 10 1 2 3 4 5 6 7 8 9 10 Health Index (HI) Health Index (HI) Health Index (HI) 10 GLE 10 LV MBN WPD GLE 10 9 WPD 9 MLN WBE SA LVN22 WBL WIN 9 CHM KRT LVN11 CHM BMH LVN11 CHM LVN11 8 8 8 Powercor MBN MDA STL STL 7 7 7 Load Index (LI) Load Index (LI) Load Index (LI) 6 MLN EHK/MDA BMH LVN22 WBL TRG WIN 6 EHK TRG 6 WBL/TRG GCY MDA LVN22 WMN/ 5 MRO STL 5 GCY CDN/MRO DDL HSM 5 EHK/MRO HSM MBN/DDL BAS/BGO/ BAS/BGO/ LV/BAS/ ART/GL/ 4 ART GL SHL SU 4 WBE/ART GL/BMH SA GLE/WPD 4 GCY/LV/ CDN/DDL HSM/SA MNA BGO/MNA WBE MNA BAN/COB/ HTN/SSE/ ECA/NKA/ RVL/CLC/ CDN/BAN/ 3 CLC 3 HTN/SSE ECA/SHL NKA CME/COB/ ECA/NKA/ CRO/KRT WMN RVL SU COB/CRO/KRT 3 CHA SU WMN RVL/SHL SHN NHL/PLD CHA WIN/TNA MLN/SHN NHL/PLD CHA 2 2 2 SHN BAN CRO/SSE HTN CLC CME/CMN/ AL/FNS/ TQY/DLF/ CTN/AC/ CME/CMN/ AL/FNS/ DLF/GSB BBD/WND AC/OYN CTN/GB BBD/WND GB BBD/PLD/ AC/CMN/ AL/FNS/ 1 1 KYM/SHP STN GSB OYN KYM/SHP STN 1 DLF/GSB NHL/OYN CTN GB WND KYM/SHP STN 1 2 3 4 5 6 7 8 9 10 1 2 3 4 5 6 7 8 9 10 1 2 3 4 5 6 7 8 9 10 Health Index (HI) Health Index (HI) Health Index (HI) Source: CitiPower and Powercor analysis CitiPower and Powercor Regulatory Proposals 2016–2020 10
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