Tariff Structure Statement – SA Power Networks AER public forum
Requirements, proposal & observations - cost reflectivity of tariffs - customer impacts
Rules – defining & reflecting costs • “…promote efficient investment in , and National efficient operation and use of , Electricity electricity services for the long term Objective interests of consumers with respect to…” • “…tariffs a distributor charges in respect of its Network provision of direct control services should Pricing reflect the distributor’s efficient costs of Objective providing those services to the retail customer” • Pricing principles Distribution • Tariff classes pricing rules – • Tariff assignment / efficiency reassignment Distribution • Customer impacts pricing rules • Understandability of tariffs – customers & • Jurisdictional gov’nt obligations compliance
Rules – Defining & reflecting costs • Identify forward looking • Transition • Minimise costs (LRMC) approach Stand- distortions • Link costs to Design of alone & • Understandable to forward customers – tariffs tariffs avoidable looking tariff classes & cost • Gov obligations tariff signal assignment / • Revenue reassignment • LRMC – between time & Alter tariffs Recover SA & AC location, (customer Define costs & residual to avoid but: impacts & causation links costs cross rules compliance) subsidies silent on tariff design
Rules – Defining & reflecting costs Cost reflectivity = means to achieve efficient usage and investment (network & customer side) Spectrum of degrees of cost reflectivity: Rules (NPO, LRMC) refer to prices reflecting costs of providing services to individuals Cost = time & location specific Technology, practicality, acceptability - determine degree / speed of cost reflectivity progress for each distributor Rules encourage progress over time along cost reflectivity spectrum Iterative process to compliance – over time and by business
Proposal - Defining & linking costs to customers Total regulated revenue LRMC Augex – capex Demand (AIC & opex Forward costs component method) 10 yr forecast Fixed, demand Residuals & usage (consumption) General Business Residential customer DTF HV - Major Voltage LV - LV - bus bus bus connect res bus New Existing: Existing New Status invest’ < or > < or > invest’ threshold threshold usage usage Social Specific Solar hardship
Proposed residential & small bus’ tariffs New or new investment Existing customer (physical supply alt’s; new inverter, appliances > < 20 mWh (res) or <40 > 20 mWh (res) or >40 25amps) mWh (bus) per annum mWh (bus) per annum No advanced Advanced meter meter Mandated Opt-in Mandated Demand Current consumption tariff demand tariff (transitional) (transitional) tariff Fixed Fixed Consumption Consumption consumption Demand (min demand 1kw) Demand (min Consumption or toU or simple $p windows & demand 1kw) demand lower rate vs opt-in Solar customer Fixed Consumption block Fixed Social hardship Consumption block Existing tariffs (LV tariff class) DTF business
Proposed demand tariff – $p windows Opt in version Mandatory (transitional) version Calc’n Max demand - Highest 30mins per month, inc. min demand (1kW) Time Resi – peak & shoulder 4-9pm Resi – One rate 4-9pm Bus – peak 12-9pm Shoulder 12-4pm Bus – One rate 12-9pm Resi: Mon-Sun.Excl. Christmas day Resi: Mon-Sun.Excl. Christmas day Day Bus: Workdays. Exl weekends Bus: Workdays. Exl weekends Month Peak (Nov-Mar) Shoulder (Apr-Oct) No variance Source: SAPN, TSS overview paper p.32
Proposed demand tariff – $p windows Link to cost drivers (network stress periods) but: sufficiently linked? Different peak/shoulder windows for opt-in and transition but: sends helpful message? Based on total network peak but: constraints instead?
Price & non-price alternatives Price signals > part of suite of network management approaches Constraints driven by peak demand Signal price to Build more Procure demand motivate response network management alternatives Interactions in approaches > network costs driven by asset condition at specific times & locations: ◦ Locational prices = theoretical best but complex – future? ◦ More averaged prices = more reliance on DM TSS needs more integrated considerations? Offer range > more opt-in tariffs with more cost reflectivity? Some might be willing; retailer innovation?
Rule requirements Standalone Designing & Adjusting tariffs avoidable tariff costs approach for Defining Recovering customer costs & residual impacts & causation costs other compliance Moving to more cost reflective tariffs but cognisant of impacts on customers > transition
Rule requirements Consider Need transition over time – may Departures impacts extend over multiple reg periods from cost reflectivity Extent customers can choose tariff Extent customers can mitigate impact through usage decisions Consider type & Tariff structure nature of customer - reasonably understandable Consider info provided & consultation undertaken Jurisdictional SA – no locational pricing for small obligations customers
Impacts & understandability Rules require distributors to consider impacts but difficult exercise: ◦ Retailer has direct contract with customers: Will retailers be able to offer varied options (flat tariffs, peaky tariffs, critical peaks, mobile phone style cap plans?) Varied retailer options in effect could manage impacts? What constraints will retailers face in offering various options? ◦ If likely to be constrained – impacts of network tariffs more identifiable ◦ Retailer incentive to make tariff info easy to understand?
Impacts Residential without PV identified Switching from existing to opt-in demand Residential with PV tariff Source: SAPN, Consultation paper
Impacts Business single rate identified Switching from existing to opt-in Business two rate demand tariff Source: SAPN, Consultation paper
Identifying impacts Need to identify relatable quantitative impacts: ◦ Types of customers – characteristics (e.g. load ratios, size) ◦ Use of different appliances Helps retailers and customers > who worse or better off and how to respond ◦ Stay on modified existing tariffs or opt-in to demand tariff? Also, merit of opt in vs opt out. ◦ Benefit from opting into even greater levels of cost reflectivity? ◦ Informs suitable length of transition > for changes to existing tariffs?
Managing impacts – transition methods Approach Proposal Observation Cost ramp up > Demand component set at • Transition warranted, existing Mandated 40% of intended amount for customers most affected. transition TSS period. From 2020, • 6 years too long > esp for new demand tariffs 20% annual increase – 6 customers / new investments? More year transition relevant for threshold customers? Opt-in and opt- • Opt-in for existing • Opt-in approach manages impacts on out of cost customers existing customers – those most reflectivity • Mandated for new and affected by changes. trigger/threshold • Distinction between existing and new customers customers / new investments speeds up tariff reform but appropriate? Mandated Charging windows > no • Helps understanding but correct demand tariffs shoulder period, & don’t message? (simple differ by month/season windows) Opting into Optional full demand tariffs Good idea but more such options? • greater levels of available for customers with cost reflectivity appropriate metering
Summary In short term > ◦ Metering constraints > continue with existing non-peak reflective tariffs but close to new customers Long term plan for moving to more cost reflectivity> ◦ Choices to protect most existing customers ◦ Triggers / thresholds to speed up reform implementation Demand tariffs = core to forward strategy > ◦ Questions on ideal design and implementation (existing vs new customers / new investments; rationale for threshold assignment) ◦ More info on switching benefits > relate impacts to characteristics? Better integration of network spend vs DM vs price signals?
End
Key discussion topics Distinctions appropriate - existing vs new customers / new investment customers? Mandated and opt-in demand tariffs: ◦ Benefits of switching clear? Who better or worse off? ◦ Charging windows – info sufficient to understand if refinements required? ◦ More opt-in choices? Rationale for mandatory tariffs for threshold customers (demand & consumption variants) Interactions clear > network spend vs DM vs pricing? Other issues?
Key Dates Submissions due 28 Apr 2016 AER draft determination 1 Jul 2016 SA Power Networks revised proposal 1 Sep 2016 AER final determination 30 Jan 2017 SA Power Networks pricing proposal 31 Mar 2017 AER approval of pricing proposal 16 May 2017 New tariffs introduced 1 Jul 2017 Email submissions to SAtss2016@aer.gov.au
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