Transcript Slide 1

INFORMATION DISCLOSURE REQUIREMENTS FOR
ENERGY:
SECTOR BRIEFING ON EMERGING VIEWS
7 October 2011
SESSION 1: INTRODUCTION
This session will cover:
→ Purpose of this briefing
→ Revised timeline for ID requirements
→ Agenda
2
PURPOSE OF THIS BRIEFING
→ Update on our emerging views on ID requirements
→ Identify areas where more work is needed to ensure sufficient information is
disclosed, and in an appropriate format to assist interested persons:
•
•
To assess whether the purpose of Part 4 is being met; and
To understand the performance of regulated suppliers, their relative performance, and
changes in performance over time
→ Provide an overview of our thinking on assessing cost efficiency
→ Set out the next steps in developing draft information disclosure requirements
3
REVISED TIMELINE FOR INFORMATION DISCLOSURE
Step
Indicative Timing
Emerging views briefing
7 October
Technical reference groups on draft EDB/GPB ID
requirements
October – November
Transpower ID workshop (after revised capex IM released)
November
Draft determinations released (EDBs and GPBs)
Late December
Submissions / cross-submissions
February 2012
ID determinations finalised (EDBs and GPBS)
April 2012
Draft determination released (Transpower)
Qtr 2 2012
ID determination finalised (Transpower)
Qtr 3 2012
4
AGENDA
5
Session
Time
Presenter
Session 2: Emerging views on
ID
9:45am–10:30am
John Groot
Session 3: Asset related
information
10:45am–11:45am
Nick Russ / Clive Bull
Session 4: Approaches to
understanding cost efficiency
12:30pm–1:30pm
Isobel Oxley
Session 5: Next steps
1:30pm–2:00pm
Anna McKinlay
SESSION 2: EMERGING VIEWS ON ID
This session will cover:
→ The role of the Commission
→ Overview of feedback received from stakeholders
→ Our views on:
•
•
The role and purpose of ID
Our role in delivering on the purpose of ID, in particular through reporting on
supplier performance
→ Our emerging views on information disclosure requirements
→ 2011 Asset Management Plan Review
6
THE ROLE OF THE COMMISSION
7
As we outlined in our Statement of Intent, the Commission’s role is to
promote the long-term benefit of consumers in regulated markets
→ What tools do we have to deliver the outcomes we are
seeking?
•
•
•
•
•
•
Develop and amend regulatory rules (e.g. IMs, regulatory
instruments) to improve markets
Advise on and/or put in place the best form of regulation
Monitor how well markets are working
Publicise information about sector performance
Take enforcement action where businesses do not comply;
tailoring our approach to each issue
Engage with relevant regulated businesses and help them
understand regulatory rules
Information Disclosure
(and Summary &
Analysis)
STAKEHOLDER FEEDBACK (1)
We have met with a range of stakeholders to understand whether and how they use ID,
seek their views on key proposals (as discussed in workshops) and their thoughts on
usefulness of ID generally
→ Discussions with a wide range of parties:
•
•
•
Gen-tailers (e.g. Genesis, Contact, Meridian)
Consumers and their representatives (e.g. Federated Farmers, Domestic Energy Users
Network, NZ Defence Force, Fonterra)
Consultancies (e.g. Smartpower, Group Energy Purchase)
→ Generally, stakeholders welcomed these opportunities as many consider it difficult to
engage in our formal consultation processes due to time and resource constraints
→ We intend to continue talking to a range of stakeholders
•
Not just limited to consumers and suppliers but also other potential users of ID, e.g. equity
analysts, policy makers, investors
8
STAKEHOLDER FEEDBACK (2)
Key message from stakeholders:
→ Many stakeholders (even large ones) consider it is not their role to analyse all the
information disclosed for all regulated suppliers
•
Stakeholders do not currently do so, and do not have the resources for this type of analysis
→ Instead, they look to the Commission to analyse the information, and to comment on
outcomes, issues and/or performance
Implication:
→ We need to consider what information we need to do undertake informative analysis,
and tailor the ID requirements accordingly
9
STAKEHOLDER FEEDBACK (3)
Other feedback from stakeholders:
→ Significant use of pricing information. Therefore strong support for proposals to:
•
•
•
Require disclosure of capital contributions (as per workshop)
Require explanations of changes in prices and revenue requirements over time
Require an indication of medium term pricing strategy (if any)
→ Urgent need for transparency on gas pipeline capacity
→ Some support for more disaggregated reliability statistics – not just network averages
→ Support proposal to require AMPs every two years, subject to an update report in the
intervening year
→ In general, little support for requiring disclosure of non-standard contracts (a current
requirement)
10
ROLE OF INFORMATION DISCLOSURE (1)
11
s 53A — The purpose of information disclosure regulation is to ensure that sufficient
information is readily available to interested persons to assess whether the purpose of
Part 4 is being met
→ Among other things, interested persons need information to assess whether an EDB or
GPB is:
•
•
•
Managing the assets for the long term
Making cost/quality trade offs consistent with present and future customer requirements
Striving to achieve efficiencies in all aspects of their business, and sharing these with
consumers
ROLE OF INFORMATION DISCLOSURE (2)
12
→ In practice ID will:
•
•
•
Disclose information to inform an assessment of the relative performance of companies
Thus, incentivise suppliers to perform better by highlighting how well their peers are
performing
Potentially increase the total information available to suppliers about their own businesses
→ ID will help enable:
•
•
•
•
•
Suppliers to identify better ways of running their businesses from their peers
Consumers to be better informed about the price and quality they are receiving from their
supplier
Shareholders or consumer owners to be better informed about how well their business is being
managed and thereby improve their ability to govern the business effectively
The Commission to more effectively regulate price and quality
Current and potential investors better understand the businesses
APPROACH TO DETERMINING ID REQUIREMENTS
13
→ Our objective is that the ID requirements in the draft determination should be:
•
•
Sufficient to meet the purpose of ID, i.e. to assess whether the Part 4 purpose is being met,
While being cost-effective for suppliers to produce
→ In relation to the sufficiency of information, the requirements should ensure there is
sufficient information for us to assess the performance of suppliers over time, and
performance between suppliers
• This will help us to promote greater understanding of the performance of suppliers
• To be cost-effective, where possible, information requirements should align with the type of
information that suppliers need to run their business
INFORMATION REQUIRED UNDER ID
14
Financial
Information
ID
Pricing
Information
Asset
Management
Information
EMERGING VIEWS: INFORMATION DISCLOSURE
15
→ The next three slides summarise our thinking on the main topics discussed at the Information
Disclosure workshops held in May and June 2011
→ As we will set out the detailed draft requirements with comprehensive reasons in December
2011, we are not seeking submissions on these emerging views
EMERGING VIEWS: FINANCIAL INFORMATION
16
• A range of financial issues were discussed at the
Financial Workshop (10 June 2011).
• As a result of feedback from suppliers, we are
developing a less onerous draft requirement for
consolidated financial information, e.g. it is
proposed that the requirements would not require
the reconciliation of asset registers. This draft
requirement will be released for consultation in
the draft ID determinations.
Financial
Information
ID
Pricing
Information
Asset
Management
Information
• The treatment of related parties is still a concern.
The draft requirement are likely to provide for
disclosure on an arms-length basis, supported by
information as to why the related party values are
on an arms-length basis.
EMERGING VIEWS: PRICING INFORMATION
17
• Discussed at the pricing-related disclosures workshop (31
May 2011).
• Gas and electricity distribution sectors are to be treated
consistently where possible and appropriate.
• Support from stakeholders for the changes to pricing
methodology requirements as discussed at the workshop,
including a view that more explanations are required for
changes in prices.
Financial
Information
• We are not proposing to continue the requirement to disclose
terms and conditions of non-standard contracts.
• We propose that EDB and GPB pricing statistics align with
each supplier’s defined customer groups, not the “connection
point classes” specified in Schedule 11 of the 2008 EDB ID
requirements.
• The Electricity Authority is seeking submissions on criteria for
assessing alignment with its Information Disclosure
Guidelines and Pricing Principles (due 17 October). We will
factor this into our process, seeking alignment where
possible.
ID
Pricing
Information
Asset
Management
Information
EMERGING VIEWS: ASSET MANAGEMENT
INFORMATION
18
• We held a workshop on GPB AMP requirements (20
May 2011) and a workshop on proposed Asset Maturity
Assessment Tool (AMMAT, 10 June 2011).
• Stakeholders support biennial AMPs and AMMAT
disclosure.
Financial
Information
• We are likely to include a new requirement to disclose
AMMAT self-assessments.
• Review of 2011 EDB AMPs to be released shortly
(next slides).
• We will outline further thinking on asset related
information, and the format in which this information is
required, in Session 3 of this briefing. We will also
discuss this topic with technical reference groups.
ID
Pricing
Information
Asset
Management
Information
• Our proposals for changes to ID requirements relating
to asset information will be incorporated into the draft
ID requirements.
2011 ASSET MANAGEMENT PLAN REVIEW (1)
→ Parsons Brinkerhoff (PB) report to be released next week
→ Review included a site visit to two EDBs
→ Review was targeted. Assessed the three disclosure areas identified in 2009
with relatively weak compliance:
•
•
•
Service levels
Network development planning
Expenditure forecasts, reconciliations and assumptions
→ Results were very positive. Of 28 EDBs reviewed, 21 EDBs achieved a higher
average rating (across the three assessment areas) than they did in 2009
→ The highest average rating (across the three assessment areas) achieved by
an EDB in 2009 was exceeded by 10 EDBs in 2011
→ Concludes that in regard to compliance with the current requirements, no
major changes to the requirements are required
19
2011 ASSET MANAGEMENT PLAN REVIEW (2)
2009
Service levels
2011
2009
Network
development
planning
2011
Expenditure
forecasts,
reconciliations
& assumptions
2009
20
→ Service levels: No EDB received a ‘noncompliant’ rating. 52% of ratings were
assessed as ‘compliant’.
→ Network development planning: <2%
assessed as ‘non-compliant’. 63% of ratings
assessed as ‘compliant’.
→ Expenditure forecasts, reconciliations and
assumptions: 12% assessed as ‘noncompliant’. 61% of ratings assessed as
‘compliant’.
Non - Compliant
2011
Partially Compliant
Compliant
10% 20% 30% 40% 50% 60% 70% 80% 90% 100%
SESSION 3: ASSET MANAGEMENT
INFORMATION
This session will cover:
→
→
→
→
→
→
What we mean by asset management information
Overview of proposed approach to asset management information
Interaction with the CPP requirements
History and evolution of information requirements
Discussion of specific asset management information requirements
Way forward for AMP requirements
21
WHAT WE MEAN BY ASSET MANAGEMENT
INFORMATION (1)
Consumers
Service
requirements
22
Network
→ Asset management information covers
information on:
•
•
•
•
The physical network (Network)
Expenditure on the network (Expenditure)
Drivers of expenditure (Drivers)
Performance of the network (Performance)
→ Asset management information is needed for
interested parties to assess whether:
•
•
•
Assets are being managed for the long term
The required level of performance is being delivered
Costs are efficient and efficiencies are being achieved
Expenditure
Drivers
Performance
WHAT WE MEAN BY ASSET MANAGEMENT
INFORMATION (2)
23
→ Network data:
•
•
•
Data on the physical network
Quantity of assets that make a up the network
e.g. topology, age, redundancy
Consumer
Requirements
→ Expenditure:
•
•
•
Reason why a company spends money
Gap between consumer requirements and
actual performance of the network
→ Performance:
•
•
Asset
Management
Plan
Expenditure on the network (actuals and forecasts)
Both opex and capex
→ Drivers:
•
Asset
management
tools and
processes
How the network performs
Measures of service delivered to consumers
Network
Data
Expenditure
Drivers
Performance
Asset Management information
•
Required by the companies internally to produce
asset manage plans and run the business
OVERVIEW OF PROPOSED APPROACH TO
ASSET MANAGEMENT INFORMATION (1)
24
→ Suppliers already provide much of this type of information through ID and in existing AMPs
•
Proposed approach is not a fundamental change from what is required to produce the AMP
→ However, the format of existing disclosures makes it difficult for interested persons to assess
whether the Part 4 purpose is being met, or for us to undertake summary and analysis
→ More standardisation and a consistent format will make the information more useable — in
particular in understanding the link between the network, expenditure, drivers and
performance (taking account of customer service requirements)
•
This will also benefit companies as it will allow companies to make better comparisons of relative
performance
→ Proposed approach is to require disclosure of:
•
•
•
An AMP (based on a refinement to the current requirements)
A set of standardised data templates covering network data, expenditure, drivers and performance
A narrative setting out the assumptions used in populating the data templates
→ Technical reference groups to resolve practical issues, e.g.:
•
Should the templates be included in the AMP or as an appendix
OVERVIEW OF PROPOSED APPROACH TO ASSET
MANAGEMENT INFORMATION (2)
→ To be cost-effective, where practical, information disclosure requirements should be
consistent with the type of information that suppliers need to run their business:
•
Where possible we would like to align the information requirements with existing data, and
readily available data formats, if this can provide information sufficient to meet the purpose
of ID
•
In specific areas, where businesses do not already hold the information, we propose
including a ‘unknown’ category—so that businesses are not required to provide information
they do not currently collect , e.g. detailed asset condition information for high volume low
value asset
•
We recognise that for some areas there will be a transition period while the quality and
completeness of the information provided will be improved
→ We will work with the technical reference groups to help ensure the ID requirements
meet the needs of the Commission, regulated businesses and other interested
parties
25
INTERACTION WITH CPP REQUIREMENTS
It is important that the ID requirements are consistent where possible
with the existing CPP requirements (i.e. Schedule D and E of the IM)
→ While aspects of the proposed ID requirements will differ from to the
current CPP information requirements:
•
•
ID development will build on CPP information requirements
Different objectives:
•
ID focus is on actuals with higher level forecasts
• CPP focus is on history & forecasts by project/programme
•
External verifier is not required (IM 5.5.2 Verification)
→ We propose to develop consistent definitions and assumptions for ID
and CPP requirements:
•
•
Avoid creating inconsistent new sets of data mappings by businesses
Where possible, ID requirements would simplify preparation of a CPP
application to a greater degree than is currently possible
26
EVOLUTION OF ID REQUIREMENTS
Gas
Gas
(Information
Disclosure)
Regulations
1997
27
The current electricity & gas IDRs have informed the
CPP IM. This, in turn, will inform the IDRs under Part 4
Plus input
from:
Requirements
for summary
and analysis
Inform
Electricity
Inform
Electricity
Distribution
(Information
Disclosure)
Requirements
2008
Input
Methodology
for
Customised
Price Paths
(2010)
Inform
Development
of Information
Disclosure
Requirements
(2011 – 12)
Non-exempt
EDBs only
‘Inform’ used here means that earlier information
requirements provide a starting reference point for later
developments
Briefing and
technical
reference
groups
Views of
interested
parties
EXPENDITURE (1)
28
→ Current ID requirements disaggregate expenditure into the following categories
→
→
→
→
Capex categories
Opex Categories
Customer Connection
General Management, Administration and Overheads
System Growth
System Management and Operations
Asset Replacement and Renewal
Routine and Preventative Maintenance
Reliability, Safety and Environment
Refurbishment and Renewal Maintenance
Asset Relocations
Fault and Emergency Maintenance
Non-System Fixed Assets
Other
Are the definitions clear and being applied consistently?
Can all categories be forecast and over what time horizon?
How are categories with multiple drivers allocated (apportioned or by primary driver)?
Is further disaggregation required and cost effective? (see next slide)
EXPENDITURE (2)
29
→ Are the current categories consistent and detailed enough to make the link between drivers, expenditure and
performance?
→ What are the options for capex?
•
•
•
•
•
Currently focus on why money is spent, i.e. the activity or driver (connections, system growth, asset replacement, etc.)
Expenditure could be further disaggregated based on what the expenditure is spent on (i.e. type of asset)
Type of asset could simply be line/pipe or substation/pressure reducing stations or more detailed, for example overhead
line, underground cable, transformer, switchgear, regulators, values , SCADA and other secondary equipment
Types of asset could be split by voltage/pressure or voltage/pressure range e.g. LV, HV, LP, MP, etc.
Or any combination of the above
→ What are the options for opex?
•
•
•
Further split into sub drivers or activities, for example routine and preventative maintenance includes fault rectification,
routine inspection, testing, vegetation management activities
Cost could be further disaggregated into these areas
Similar to capex, some areas (for example routine and preventative maintenance) could be split by asset type and/or
voltage/pressure
→ Options to be discussed and developed with the technical reference groups before releasing draft ID
requirements - important to ensure IDR meet the needs and are cost effective
DRIVERS OF EXPENDITURE
→ What are the key drivers of expenditure?
•
•
•
•
Customer Connection – a customer wanting to connect to the network
System growth – a part of network where demand is forecast to exceed capacity
Asset Replacement and Renewal – asset in in poor condition that need replacing
Fault and Emergency Maintenance – the number of faults
→ Identifying the key drivers of expenditure already set out in the current
AMP guidance
→ Is it possible to develop templates which tabulate the key drivers in some
consistent way that can be linked to levels of expenditure?
→ For example:
•
•
Schedule of asset conditions by asset (consistent with the asset data and
expenditure schedules)
Schedule of zone substation demand relative to capacity
(taking account of future demand growth)
30
NETWORK DATA
→ Currently EDB AMPs require for each asset category:
•
•
•
Description and quantity of assets
Description of voltage levels
Age profiles
→ Could this data be standardised into a consistent spreadsheet format common to all
businesses?
•
•
•
•
A standard schedule of asset types and voltages would need to be developed
Much simpler than ODV — may be only 15–30 asset categories
Ideally aligned with the way expenditure is disaggregated
Could also be used to capture volume of activity (i.e. number of asset replaced)
→ What information could be provided on topology to understand how the network is
configured to supply customers, acknowledging differences in:
•
•
•
Customer density and demand density
Different terrain (urban, rural, remote, rugged ,etc.)
Understanding the 11 kV network key - backbone of the network
31
PERFORMANCE
→ Current ID and/or AMP requirements required reporting of:
• Consumer oriented performance targets (SAIDI, SAIFI, CAIDI, etc.)
• Asset performance information, e.g. fault rates
→ Is there enough information to:
•
•
•
Link performance to service requirements and in turn to the drivers of investment?
Understand the impact of expenditure on performance?
Make fair performance comparisons between companies
→ Consumer oriented performance targets based on system average:
•
•
Possible Average measures provide very limited information on the drivers of good
or poor performance
development of feeder performance measures (FAIDI and FAIFI)
→ Can reporting of asset performance measure (fault rates, etc.) be
standardised?
32
ASSET MANAGEMENT PLANS
→ Maintain requirements to disclose an asset management plan
→ Start point for AMP requirements will be existing requirements, modified where
required:
•
•
Some requirements superseded by annual disclosure of standardised template information
(i.e. the asset management information)
Align planning year to company balance date
→ Requirements updated to include:
•
•
•
•
•
Assessment of asset management maturity (AMMAT)
Reporting of innovation
Resilience/HILP
Energy efficiency improvements
Possible move to biennial disclosure
→ Key question how is the AMP and the template information are integrated
•
•
Included in the AMP (appendix)
Standalone
33
SESSION 4: ASSESSING RELATIVE EFFICIENCY
This session will cover:
→
→
→
→
→
→
Introduction
What we mean by ‘cost efficiency’
Assessing operating expenditure
Assessing capital expenditure
Assessing total expenditure
Case study
34
ASSESSING COST EFFICIENCY: INTRODUCTION
35
→ Examining supplier performance has a number of benefits, e.g.:
•
•
•
Suppliers may identify better ways of running their businesses from their peers
Shareholders or consumer owners better informed about how well their business is being managed,
thereby improving their ability to govern the business effectively
The Commission can assess whether suppliers are operating efficiently
→ We have a duty under Part 4 to publish a summary and analysis of disclosed information. An
assessment of cost efficiency will form one component of the summary and analysis
•
We are also considering how to assess other components of performance, and will seek input from
interested parties on these in due course
→ This presentation and accompanying paper set out our thinking to date on approaches for
assessing supplier cost efficiency
•
The views presented are preliminary and do not provide a definitive view on our approach
→ The approaches and likely data requirements will be discussed in the technical reference
groups
WHAT DO WE MEAN BY COST EFFICIENCY?
36
→ Can a supplier reduce its expenditure while maintaining the same outputs (and
quality) in the longer term?
→ In regulated sectors, assessments of cost efficiency often use other suppliers in the
sector as a benchmark (i.e. comparative efficiency assessments)
•
This approach requires network characteristics that impact on costs (e.g. geography,
climate, size of network) to be taken into account so as not to confuse inefficiency with
differences in operating circumstances outside management control
→ Comparisons with other sectors and approaches based on engineering theory and
network insight (i.e. indirect comparisons) provide an alternative approach to
assessing cost efficiency
•
These approaches may be appropriate in the absence of a sufficient number of
comparable suppliers with robust data
ASSESSING OPERATING EXPENDITURE (1)
37
→ Based on our preliminary assessment, we propose that where possible,
assessments of EDB or GPB opex are made relative to other EDBs or GPBs
→ There are a sufficient number of New Zealand EDBs to allow an assessment of EDB
opex using comparative efficiency techniques
→ The limited number of GDBs and GTBs means that data from international
comparators or sub-company data is likely to be required
•
•
Insights from comparing domestic GPBs may be limited and assessments of relative
performance using statistical techniques may not be valid
International comparator data is potentially available from the US Federal Energy
Regulator and from the Australian Energy Regulator
ASSESSING OPERATING EXPENDITURE (2)
→ A comparative efficiency approach will require the identification of the drivers of
costs across the industry, as well as any supplier-specific factors
→ Different components of opex have different drivers. A high level aggregation
could make it difficult to identify the drivers
•
More disaggregated analysis may be better able to explain differences in costs across
suppliers
38
ASSESSING CAPITAL EXPENDITURE
39
→ Direct comparisons of capex between suppliers of limited usefulness
•
Capex driven by network needs, which are likely to be unique to each supplier and thus incomparable
across the industry
→ Furthermore, where possible, we are keen to avoid an assessment of capex based on historic
expenditure
•
•
•
Capex is driven by needs of network at the time and an assessment based on one or several years’ of
data may not be representative
Historic capex may bear little relationship to future expenditure (e.g. due to historic
underinvestment)
We do not consider it appropriate to revisit sunk costs with the benefit of hindsight
→ Our proposed approach uses an engineering-based assessment of the level of activity
proposed combined with comparisons of forecast unit capex (see next slide)
→ Much of the data required to apply the proposed approach is already provided in EDB AMPs
(and will be provided in GPB AMPs). However the data is currently
not standardised or provided in a user-friendly format
What are the key assets/activities for review in
the capex forecast?
What drives this activity?
(e.g. capacity, asset condition)
What is the forecast level of these
drivers? (e.g. demand forecast)
What is the forecast unit cost of each
activity? (i.e. forecast expenditure:forecast volume of work)
Assess level/quantity proposed given
these forecasts
Benchmark unit costs
(intra- and inter- operator)
Efficient expenditure
What is the likely effectiveness of this expenditure? (e.g.
increased capacity)
ASSESSING TOTAL EXPENDITURE
→ Up to this point, discussion focused on assessing opex and capex separately using different
approaches
→ However, this may not provide an accurate assessment of supplier efficiency if there are
significant opex-capex trade-offs
→ To mitigate this issue, costs may be aggregated prior to assessment:
•
•
Assess total expenditure
Assess combined components of opex and capex where significant trade-offs are identified
→ Potential approaches for assessing aggregated costs:
•
•
•
•
Comparative efficiency approach
Engineering assessment of the level of activity proposed combined with unit cost comparisons
Nature-of-work comparisons
Reference model
41
CASE STUDY: COMPARING EDBS
DATA AND APPROACH
→ Comparisons of total opex less pass-through costs across EDBs using
information disclosure data for the period 2008-2010 and pass-through cost
data from EDB compliance statements
→ Analysis uses unit costs, scatter plots and simple regression analysis
→ Intended as an illustration of the techniques we think are appropriate for
assessing opex efficiency, and to highlight where additional information is
required
→ This analysis is not intended as an assessment of EDB cost efficiency
43
OPEX PER KM OF CIRCUIT (AVERAGE 2008-2010)
44
High unit costs for EDBs 10,
26, 28 and 29 appear to be
driven to some degree by
high ICPs per km of network
(see next slide)
EDBs have high unit costs given
ICPs per km of circuit
EDBs with the highest unit
costs also have the most
densely connected networks
OPEX PER ICP (AVERAGE 2008-2010)
46
Relatively high opex per ICP
at EDBs 4, 15 and 25
EDBs 4 and 5
EDB 25 appears to be unique in terms of
network topology
EDB 25
High unit costs for EDBs 4 and 15 driven
by operating a higher voltage network?
Or is this a proxy for some other costly
network characteristic?
EDBs 4 and 15
Line of best fit and high
voltages observed at
EDBs 8 and 18 suggest
unit costs could be
lower?
EDBs 8 and 18
OPEX PER GWH SUPPLIED
High unit cost at EDB
21 due to low energy
consumption per ICP?
49
EDB 21is ranked third lowest
in terms of energy
consumed per ICP, behind
EDBs 15 and 16
However, unlike EDBs 15
and 21, EDB 16 does not
appear to have a particularly
high unit cost
OPEX REGRESSION ANALYSIS
ln OPEX = 1.87
+ 0.56 ln(km of circuit)
+ 0.37 ln(GWh distributed)
+ 0.02 ICPs per km of circuit
→ Simple model similar to those used by other regulators
→ Model explains 92% of the variation in opex between EDBs and years
→ However does not account for company-specific factors which may affect costs
(e.g. topology)
50
USING REGRESSION ANALYSIS TO ASSESS RELATIVE
COST EFFICIENCY
51
A
Cost
Line of best fit = average benchmark
Inefficiency?
B Most efficient EDB?
Output
Highly variable unit costs at
EDB 15
Unit costs appear to have increased
for many of the EDBs since 2008
SESSION 5: NEXT STEPS
This session will cover:
→ Process and topics for submissions
→ Reference groups
54
NEXT STEPS: POST BRIEFING SUBMISSIONS
→ We invite post briefing submissions, specifically focussing on the
questions set out in the paper “Approaches for Understanding
EDB and GPB Cost Efficiency”
→ Section 6 of that paper sets out requirements for submissions
→ We should receive:
• Submissions no later than 5pm on Friday 4 November 2011
and
• Cross-submissions no later than 5pm on Friday 18 November
2011
→ Submissions should be sent to:
[email protected]
or
Anna McKinlay
Chief Advisor
Regulation Branch
Commerce Commission
P.O. Box 2351
Wellington
55
NEXT STEPS: REFERENCE GROUP (1)
→ The purpose of the reference groups is to provide
technical input to help us develop specific information
requirements that are sufficient and cost-effective
→ We are looking for technical input from individuals with
working knowledge of the sector, who can advise on the
workability of information requirements
→ All parties will have an opportunity to submit on all
proposed ID requirements, including those covered by
the reference groups, when we release the draft ID
determinations in December
56
NEXT STEPS: REFERENCE GROUP (2)
Function of the groups:
→ Provide technical comment / advice / suggestions to assist
us in developing information requirements as an input to
the draft ID determinations
→ Topics we will seek reference group input on include:
•
•
•
•
•
Required asset management information (see slide 21), and
standardised templates and definitions
Key drivers of opex and capex for EDBs, GDBs, GTBs
Optimal level of detail for information disclosure requirements
(how disaggregated should the information be?)
How AMP requirements should interface with information
disclosure templates, and implications for timing and frequency
of AMPs
Current availability of information, and business impacts where
proposed information is not readily available
57
NEXT STEPS: REFERENCE GROUP (3)
Form of reference groups:
→ Small and informal
→ Individuals with operational knowledge of EDBs and GPBs
respectively, in particular:
•
•
Engineering / asset management knowledge
Financial management / accounting
→ We propose to have a single reference group across EDBs
and GPBs
•
On some topics, we may seek input from subsets of the group
by sector or topic (e.g. quality measures)
58
NEXT STEPS: REFERENCE GROUP (4)
We have established the reference group with input from the
industry
Indicative reference group membership:
→ Graeme Wilson (Orion)
→ Lynne Taylor / Aaron Webb (PwC, on behalf of the ENA)
→ Ryno Verster (Vector)
→ Karen Frew (Powerco)
→ Brent Norris (The Lines Company)
→ Greg Buzzard (PowerNet)
→ Geoff Evans (GasNet)
→ Jelle Sjoerdsma (MDL)
59