Trading off electricity investment and reliability in NSW

31 August 2012

AEMC review of electricity distribution reliability outcomes and standards: NSW workstream final report

 

The AEMC today published its final advice to the NSW Government on costs and benefits of possible changes to the State’s future level of distribution reliability.

Following extensive consultation on the draft advice released in June, the Commission today confirmed its initial findings:

  • AEMC modelling shows that over 15 years from 2014-15 to 2028-2029, modelled reductions in distribution investment in NSW could range from $275 million to $1.3 billion in today's dollars depending on the extent of changes in reliability standards.
  • By 2028-29, this reduction in distribution investment could lead to an increase in outages by two to fifteen minutes a year and savings of $3 to $15 a year for the average NSW residential electricity customer.
  • Current reliability standards in NSW were established in 2005. Investment to meet those standards has been approved and committed out to 30 June 2014. This fact limits the potential reduction in customer bills that could occur from reducing reliability outcomes in the short term.

AEMC Chairman, Mr John Pierce, said today that reductions in capital expenditure under all three of the review’s scenarios for lower distribution investment significantly outweighed the costs to customers of slightly lower levels of reliability.

“However it must be said that household bill impacts remain modest because investment to maintain existing reliability standards is just one of the drivers of network costs in this part of the supply chain. Distribution costs in turn, form just one component of electricity bills.

“To place this point in perspective the NSW distribution network businesses are forecast to spend $16 billion in capital expenditure over a five year period out to 2014-15, while $2.5 billion in capital expenditure savings is forecast over 15 years under our most substantial reduction in reliability scenario,” Mr Pierce said.

“The value of this review is the context it provides the NSW Government for decision making into the future.

“This work represents the first time NSW customers have been surveyed on the value they place on a reliable supply of electricity and the first time the trade off between costs and reliability performance in NSW has been publicly examined,” he said.

Any changes to distribution reliability requirements in NSW would be made by a decision of the State Government and would start on 1 July 2014 at the beginning of the next NSW distribution regulatory control period.

The NSW workstream was part of the AEMC’s wider review which is also considering the merits of a nationally consistent approach to distribution reliability. Submissions to the national distribution reliability review closed on 9 August 2012 and a draft report is due in November 2012.

For information contact:

AEMC Chairman, John Pierce (02) 8296 7800

Media: Communication Manager, Prudence Anderson 0404 821 935 or (02) 8296 7817

31 August 2012