Energy for tomorrow

Annual Performance Report 2006–07

© Integral Energy 2007

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ISSN 1834‑0733

Providing energy for tomorrow is a team effort involving Integral Energy’s staff and stakeholders throughout our network franchise area and beyond.

Front cover:From our Katoomba Field Support Centre, Malcolm Fletcher (left) a Tree Management Officer, and Dale Moylan, an Electrical Fitter Mechanic, take pride in meeting the energy needs of the Blue Mountains community.

Above: Parramatta by night, supported by Integral Energy’s Parramatta Field Support Centre.

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Contents

Overview

Aboutus 2

Yearataglance 3

Year in review

ChairmanandCEO’sreport 4

Ourscorecardfor2006–07 7

Highlightsandlowlights 9

Economic performance

Didwemeetourobjectives? 11

Performanceindicators 12

Economicperformancein2006–07 12

Environmental performance

Didwemeetourobjectives? 27

Performanceindicators 28

Environmentalperformancein2006–07 29

Social performance

Didwemeetourobjectives? 37

Performanceindicators 38

Socialperformancein2006–07 39

Corporate governance

GovernanceandOperationalStructure 49

BoardofDirectors 50

Executiveteam 52

Management discussion and analysis 58

Financial Statements

Directors’Report 61

IndependentAuditReport 62

AuditedFinancialStatements 64

Appendices

Appendix1:Economic 96

Appendix2:Environment 104

Appendix3:Social 104

Appendix4:Governance 107

Glossary 119

Index 120

Annual Performance Report 2006–07

31October2007

TheHon.MichaelCostaMLC TheHon.JohnWatkinsMP

Treasurer,MinisterforInfrastructure, DeputyPremier,Ministerfor

MinisterfortheHunter Finance,MinisterforTransport

Level31,GovernorMacquarieTower Level30,GovernorMacquarieTower

1FarrerPlace 1FarrerPlace

SYDNEYNSW2000 SYDNEYNSW2000

DearMinisters

Report on performance for the year ended 30 June 2007

ThisreportcoversIntegralEnergy’sperformance,operationsandstatement

ofaccountsfortheyearended30June2007,inaccordancewiththe

provisionsoftheAnnual Reports (Statutory Bodies) Act 1984andthe

principlesoftheGlobalReportingInitiative,andissubmittedonbehalf

oftheBoardofIntegralEnergyfortablinginParliament.

CopiesarebeingsenttotheAuditor-General,theMinisterforEnergy,

MembersofParliamentandkeycustomerandstakeholdergroups.

Sincerely

Michael McLeod Richard PowisChairman ChiefExecutiveOfficer

AnnualPerformanceReport2006–07

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About usIntegralEnergyisaNewSouthWalesstate-ownedenergycorporationwithaproud50-yearhistoryservingsomeofAustralia’slargestandfastestgrowingregionaleconomies.

WeoperateintheNationalElectricityMarket,retailingenergyandprovidingmeteringanddataservicestoindustrialandcommercialcustomers.Wealsodistributeandprovidevalue-addedservicesto842,000customers,or2.1millionpeople,inhouseholdsandbusinessesacrossanetworkfranchisespanning24,500squarekilometresinGreaterWesternSydney,theIllawarra,BlueMountainsandtheSouthernHighlands.

IncorporatedundertheEnergy Services Act 1995,IntegralEnergyisafinanciallydisciplinedbusiness,committedtoachievingasustainablefutureforourstaff,ourcustomersandotherstakeholders.WeoperatewithinthetermsoftheElectricity Supply Act 1995onbehalfofourshareholder,theNSWGovernment.

Ourfocusisonprovidingasafeandreliablepowersupplytoourcustomersand,indoingso,deliveringongoingexcellenceincustomerservice.

Our vision

TobeAustralia’sleadingenergybusiness.

Our mission

Tobeasuccessfulenergycorporationwithalong-termfocusonbeingabestpracticeassetmanagerandcompetinginprofitableenergymarkets.

Our values

Safetyexcellence

Integrity

Managementbyfact

Enterprisingspirit

Customercommitment

Respectforpeople

Accountabilityandresponsibility

Sustainableoutcomes

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Integral Energy’s franchise area

IntegralEnergy’snetworkincludes28,000transmission,zoneanddistributionsubstations,305,000polesand33,000kilometresofoverheadandundergroundconductors.

Ourfieldsupportcentresarestrategicallylocatedwithinanhourofmostcustomerstomeettheenergyneedsofthecommunitiesweserve.

Transmission details

DrawingonarrangementswithgeneratorsinNSWandVictoria—

alongwithsupplygeneratedbyindependentsourcessuchascogeneration,coalbedmethaneextractionplants,windandwaterplants—IntegralEnergypurchaseswholesaleelectricityinbulkforcustomers.

SupplyistakenfromTransGrid’stransmissionnetworkateither132,000or66,000voltsandreducedto33,000,22,000or11,000voltsthroughanetworkoftransmissionandzonesubstations.Distributionsubstationsfurtherreducethesupplyto415/240voltstosuitcustomerrequirements.

Kandos

Bowenfels

Windsor

Katoomba

Penrith

Glendenning

Narellan

Bowral

CountryEnergy

EnergyAustralia

PacificOcean

Shellharbour

Nowra

Ulladulla

SpringhillConiston

Hoxton Park

Picton

Parramatta

Kings Park

Huntingwood

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Year at a glance

Items 2006–07 2005–06 % change

Economic

EBITDA(includingcapitalcontributions) $’000 466,7�9 416,851 12.0

Operatingprofitaftertax $’000 �5�,�09 138,588 10.5

Totalretailsalesofelectricity GWh 9,74� 9,439 3.2

Totalnetworkcustomerconnections 84�,��5 832,538 1.2

Reliability(unplannedinterruptionstosupply) Minuteslost/customer

94.� 95.9 (1.8)

CustomerServiceIndicator % 8�.4 81.1 2.8

Salesrevenue $’000 �,�68,075 1,259,831 8.6

Capitalexpenditure $’000 �8�,66� 336,474 13.4

Netassets* $’000 �,���,960 883,404 49.9

Returnonassets* % 9.5 9.8 (3.0)

Returnonequity* % ��.9 15.6 (11.2)

ReturnstoNSWGovernment

Dividend $’000 �07,0�� 103,866 3.0

Incometaxequivalents $’000 85,986 65,213 31.9

QualifiedcreditratingFitchRatings AA AA

Environmental

Energypurchasedfromalternativesources % �5.� 15.3 (1.5)

Transformeroilrecycled litres �6�,�8� 453,534 (19.9)

Greenhousegasemissions–Directemissions tonnesCO2e �7,�6� 27,493 (1.2)

Reportableenvironmentalincidents No. 0 3 100

Social

Socialprograms $’000 �9,7�7 20,624 (4.3)

Pensionerrebates $’000 �9,008 19,887 (4.4)

Lifesupportequipmentrebate $’000 7�9 737 (1.1)

EnergyAccountsPaymentAssistance(EAPA) $’000 �,�44 2,845 (17.6)

Totalemployees �,59� 2,457 5.5

Losttimeinjuryfrequencyrate 4.8 5.2 (7.7)

Abbreviation:EBITDA=earningsbeforeinterest,tax,depreciationandamortisation.*ImpactedbyfinancialderivativesinaccordancewithaccountingstandardAASB139.

AnnualPerformanceReport2006–07

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Chairman and CEO’s reportThe2006–07financialyearsawIntegralEnergydeliverstrongresultsagainstallitstargetsandkeyperformanceindicators,inlinewithourcorporatevisionandbusinessstrategy,whilelayingthefoundationstodeliverenergyfortomorrow.

Deliveringenergyfortomorrowmeansthatweneedtomeetthechallengesoftodaywhilebuildingcapabilitytomeettheneedsoffuturegenerations.

Inadditiontoitsnormalbusinessoperations,IntegralEnergyrespondedtoaseriesofchallengesfromchangestotheexternalenvironmentduring2006–07.Theyincluded:

theriseofclimatechangetotheforefrontofpublicdebateaboutthedeliveryofenergyforthefuture

theimpactofthedroughtontheavailabilityofgenerationcapacityintheNationalElectricityMarket,placingupwardpressureonwholesaleelectricityprices

theopeningupoftheQueenslandelectricitymarketandthesuccessfullaunchofouroperationsintothiscompetitivenewmarket

thecommencementoftheOwenInquiryintoelectricitysupplyinNSW,withpotentialchangestothecurrentownershipstructureofenergyretailing.

Ourpeoplehaverespondedtothesechallengeswithrenewedvigourandhavecapturedthisfocuswithanewcorporatevalueof‘enterprisingspirit’.Inpracticalterms,enterprisingspiritmeansweareopentofreshthinkingandnewideasandwillpursueopportunitiesforimprovementstotheperformanceofourbusinesswithrenewedvigouranda‘cando’attitude.

Thisnewvalueunderlinesourcommitmenttoactivelypursueopportunitieswhilemanagingidentifiedrisksandpursuingourjourneytobesustainableinallour

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practices.Ourpeoplearetobecongratulatedfortheiradoptionofthisvalue,whichhasdrivenyetanothersetofstrongresultsforthisyear.

Working safely

In2006–07,wecontinuedtointegratesafetyintoallaspectsofIntegralEnergy’sbusinessandmanagementprocessesandtoimprovesafetymanagement,workingtowardsthegoalofzerooccupationalincidents,injuriesandillnessesforouremployees,ourcontractorsandmembersofthepublic.

Ourcommitmentisthatwewillnottakeshortcutswhenitcomestosafety.Weaimtofosteraculturewhereweassessriskandtakepreventiveaction,andrequireallemployeesandcontractorstoendorseandpractisesafeandhealthybehaviours.

2006–07sawacontinuedfocusoninstillingasafetycultureacrossallouroperationsthatensuresallourpeoplegohomeeachdayfreefromharm.

In2005–06,weweresaddenedwhenahelicopteraccidentresultedininjuriestoseveralemployees,includingseriousinjuriestooneemployee.Learningfromthisexperience,wehaveimplementedrevisedprocessesandareusingnewtechnologytominimisefutureriskstoourpeople.

Thisyearwedeliveredourbesteversafetyresult.Whileaboveourtargetofzero,thelost-timeinjuryfrequencyratefor2006–07was4.8,animprovementonthe2005–06resultof5.2.Despitethis,werecognisewearestillsomewayfromachievingourtargetofzeroinjuriesandlosttimeincidents.

ExtensiveworkwasundertakenbyIntegralEnergyduring2006–07tohosttheseventeenthannualEnergySafetyandFieldExpo,titled‘e-safe’.‘E-safe’isthekeysafetyeventfortheenergyindustryofNSWandprovidesaninvaluableforumfortheindustrytohighlighttheimportanceofsafetyandshareideas,knowledgeandexperienceonimprovingworkplacesafetyperformance.

InitiallyplannedforJune,theeventwaspostponedtoJulyasourindustryfocusedoneffortstorepairtheextensivedamagecausedbyviolentstormsandfloodingintheHunterandCentralCoastregionsatthattime.Whileitwasdisappointingforsuchanimportanteventtobedelayed,thejointeffortsoftheindustrytoprovidegreatcustomerserviceinthefaceofadversityhasbeenoneofthemostpleasingaspectsoftheyear.

IntegralEnergyachievedexcellentresults,winningfourofninesafetychallenges—acredittoallstaffwhotookpart.

Strong financial performance

SuccessfulfinancialperformanceisessentialtoensurethatIntegralEnergysupportstheongoinggrowthandfutureprosperityofcustomers,communitiesandregionaleconomies.RigorousfinancialpracticeisahallmarkofIntegralEnergy’smanagementandthisdisciplinehasdeliveredanotherstrongfinancialresultin2006–07,markingasix-yearupwardtrendinprofitability.

In2006–07,IntegralEnergy’searningsbeforeinterest,tax,depreciationandamortisation(includingcapitalcontributions)increased12%to$466.7million,comparedtothepreviousyear’sresultof$416.9million.Thisincreasewasmorethandoublethepreviousyear-on-yearearningsgrowth,whileafter-taxprofitrose10.5%to$153.2million.

IntegralEnergyreturnedtoitsshareholder,theNSWGovernment,dividendsandtaxequivalentsof$193million,a14%increaseonthe2005–06return.Thisdividendprovidesfundstogovernmentthatwillimprovethequalityoflifeoffuturegenerationsandensurethelong-termsuccessofcommunitiesthroughexpenditureon,forexample,schools,hospitals,roadsandtheenvironment.

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Improving reliability

Wearecommittedtomanagingournetworkassetsinastructuredandsystematicmannertoensurethatwemeetourcustomers’expectations,fulfilourbusinessneedsandmeetourobligationstoourshareholder,regulatorsandthecommunity.

Networkreliabilitycontinuedtoimprovein2006–07,despitetheimpactofnumerousseverestormsonthenetwork.Themostseverestormoccurredon24September2006whenIntegralEnergy’sfranchisewasstruckbyaviolentwindstorm,resultinginsupplybeinginterruptedtoapproximately170,000customers.Despiteextensivedamageacrossthenetwork,ourresponsetothiseventledtothesuccessfulrestorationofenergytomostcustomersbytheeveningof26September2006.Wewouldliketopaytributetoallourstaff,andthecrewsofEnergyAustraliaandCountryEnergy,whoundertookthisincrediblerestorationeffort.

During2006–07,weachievedaresultof94unplannedminuteslostpercustomerperyearagainstatargetof101minutes,whichwebelievereinforcesIntegralEnergy’sstandingasoneofAustralia’sbestperformingEnergysuppliers.Thisresultwascalculatedusingamethodologydifferentfromthatusedinpreviousyears,makingdirectcomparisonwithpastresultsmoredifficult.Despitethis,theresultcontinuestheimprovingtrendinnetworkreliabilityofthepastthreeyears.Wewillcontinuetofocusstronglyonimprovingthatresultin2007–08andwilltarget,inparticular,areasofpoorperformancetobringthemclosertotheaverage.Atargetof100minuteshasbeensetfor2007–08.

Weinvestedarecord$316.6millioninnetworkcapitalexpenditure,anincreaseof26.9%onexpenditurelastyear.Thisincludeda$37millioninvestmentinthenewBellaVistazonesubstation,commissionedinearly2007,toprovideadditionalcapacitytoservicetheburgeoningNorwestBusinessParkandsurroundingcommercialandresidentialareas.Thesubstationutilisesnewgasinsulatedswitch

geartechnologywhichimprovesreliability,reducesmaintenancerequirementsandminimisestheoverallfootprintofthesubstation.

InApril2007,wecommissionedournewOutageManagementSystemtoimprovethecoordinationofourresponsetofaultsonourelectricitynetwork.TheOutageManagementSystemdeliversimprovedcustomerservicecapabilitiesbyprovidingcustomerswithanestimationtimetorestoresupplyduringinterruptions.Thesystemassistsusinrespondingtocustomersbyoptimisingthedispatchofrepaircrewsbasedontheiravailability,skillsandlocationandtheinformationprovidedbycustomers.

Movingforward,ournetworkbusinessisfocusedonimprovingreliabilitybygreaterintegrationofourassetmanagementframework,developingnewtacticalsystemsandimplementingamorestrategicapproachtomajorprojectapprovals.Wearealsoreviewingourlong-termvisionandstrategyforthenetworkbusinessasthefoundationofourapplicationtotheAustralianEnergyRegulatorforthe2009networkdetermination.

Competing successfully

TheNationalElectricityMarketremainshighlycompetitive,withmorethanamillioncustomersinNSWexercisingchoiceandmovingtonegotiatedagreementssincetheintroductionoffullretailcontestabilityinJanuary2002.Despitethetestingconditionsofthemarket,IntegralEnergycontinuedtoperformcompetitivelyandmaximisethelong-termvalueofitsretailbusinessbypositioningitforgrowthinprofitableenergymarkets.

OneofthehighlightsoftheyearwasthesuccessfullaunchofIntegralEnergyretailsalesinthenewlyopenedQueenslandcompetitivemarket.IntegralEnergyisproudtobeofferingQueenslandersourhigh-qualitycustomerservicesandrangeofcompetitivelypricedproducts.WehaveperformedstronglysinceenteringtheQueenslandmarket,withaninnovativebusinessmodeltailoredspecificallyforourpositioninthatmarket.

Withclimatechangegainingprominenceasanationalissue,webenchmarkedour‘green’

positioningagainstcompetitorsandrevisedourcorporatepolicyonsustainability.WealsoincreasedourrangeofinnovativeINgreenproductssuitedtotheneedsofourcustomers,withthenumberofcustomerspurchasingGreenPowerincreasingtomorethan24,000duringtheyear.Thesignificantadoptionofgreenenergyproductsbycustomerswillprovidelong-termsocialbenefitsandprotecttheenvironmentforfuturegenerations.GreenPowerproductsaresourcedfromarangeofaccreditedrenewablegenerators,includingwater,windandwavepower.

Inadditiontomeetingthechallengeofanincreasinglycompetitivemarket,duringthefirsthalfof2007wehadtodealwithsignificantreductionsintheavailabilityofelectricitygenerationinthemarket—reductionsthatresultedinsomeofthehighestwholesaleenergypricesseensincethestartoftheNationalElectricityMarketin1998.

FormanyregionsinsouthernandeasternAustralia,2006–07wasthedriestyearonrecord,andreductionsinwateravailabilityrestrictedelectricitygeneration

‘Weinvesteda record$316.6million innetworkcapital expenditure,an increaseof26.9% onexpenditure lastyear.’

IntegralEnergy’sChairman,MichaelMcLeod (left)andCEO,RichardPowis

AnnualPerformanceReport2006–07

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capacityintheNationalElectricityMarket.Thisreductionincapacitywasfurtherexacerbatedbyincreasesincustomerdemandoncoldwinterdaysandanumberofgeneratorsupplyissuesnotrelatedtothedrought.Collectively,thesereductionsingenerationcapacityputupwardpressureonspotandforwardmarketpricesofelectricityintheNationalElectricityMarket.Incommentingontheseoccurrences,theAustralianEnergyRegulatorindicatedthatpricesaveraged$274amegawatthourinNSWinJune2007,comparedtoanaveragepriceof$33amegawatthourinJune2006.

Thoseeventsledtothefirsteverretailer-of-last-resorteventintheNationalElectricityMarket,whenEnergyOnePtyLtdwithdrewfromtradinginlateJune2007.StafffromacrossthecompanyworkedtoensurethatEnergyOne’sformercustomershadtheiressentialelectricityservicestransferredseamlesslytoIntegralEnergy.

ChallengesofscaleandscopelieaheadforIntegralEnergy’sretailbusinessinthecomingyear.TheOwenInquiryintoelectricitysupplyinNSWhashighlightedtheneedtoreviewthecurrentownershipstructureofenergyretailingtosecuretheenergyfutureforthestate’sfamiliesandbusinesses.Throughoutthisprocess,IntegralEnergywillmaintainitsfocusonprovidingthehighestlevelsofservicetoallourcustomers.

Environment

ClimatechangeisamajorenvironmentalissuefortheenergyindustryinternationallyandinAustralia.IntegralEnergyisworkingwithourshareholderandtheindustrytoprogressthedevelopmentofanationalgreenhousepolicyframeworkthatestablishesasingle,long-termgreenhousegasemissionreductiontargetandcarbontradingscheme.

Ifwearetofulfilourcommitmenttofuturegenerations,wemustreducegreenhousegasemissionswhilesustainingourbusinessgrowth.Tomeetthisimportantobjective,in2006–07werevisedourenvironmentpositiontotakeaccountofchangingenvironmental

conditionsandtheneedsoffuturegenerations,particularlyinrelationtoclimatechange.

Asaresultoftherevision,IntegralEnergyhascommittedto:

publiclydefiningandachievingtargetstoreduceourgreenhousefootprintandmovebeyondcompliance

empoweringourcustomerstomakemoresustainablepowerchoicesbyprovidinginnovativeandattractiveproductsandservices,promotinggreaterawarenessofenergyefficiencyandbyprovidingpracticaladviceandtools

workingwithourshareholdertoshapeanddefinemarket-basedandpolicymechanismsforrespondingtoclimatechange.

Aspartofouroverallresponsetoclimatechange,IntegralEnergywasthedrivingforcebehindtheBlacktownSolarCityconsortium,thefirstNSWsolarcitylaunchedundera$75millioninitiativeoftheAustralianGovernment.AsaresultofIntegralEnergy’suniquepartnershipwithBPSolar,BlacktownCityCouncil,ANZBank,LandcomandBigSwitchProjects,theBlacktownSolarCityprojectwillshowcasearangeofsustainableenergyinitiativestoreduceenergydemandandconsumption.Theprojectisexpectedtoresultintheabatementof24,000tonnesofgreenhousegasemissionsandsavingsof$3milliontocustomersintheirelectricitybills.

Ournetworkoperationsalsodeliveredsoundenvironmentalperformancewithnoreportableincidentsduringtheyear.Thecompletionoftheacceleratedprogramtoinstallprotectivebundsaroundalltransformersintransmissionandzonesubstationsinourfranchiseareareinforcedourcommitmenttoenvironmentalperformance.

Building relationships

GoingfurtherforourcustomersencapsulatesIntegralEnergy’scustomerservicephilosophyandisthebasisonwhichwewillbuildstrongandsustainablerelationshipsinallaspectsofourbusiness.IntegralEnergyhasacomplexanddiversestakeholderbase,whichincludesgovernment,regulators,

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customers,communities,employees,suppliersandourshareholder.

Businesssustainabilitydependsonthedegreetowhichstakeholdersunderstandandsupportourstrategyandoperations.Tothisend,IntegralEnergymaintainsopenandproductiverelationshipswithstakeholders,ensuringthatweunderstandtheirexpectationsandthattheyunderstandourbusiness.

In2006–07,ourstakeholderstrategyfocusedonengaginglocalcouncils,developersandresidentsontheplanninganddeliveryofourinfrastructure.

Oneofourlargestinfrastructureprojects,theVineyardtoRouseHillelectricityupgrade,wasapprovedbytheMinisterforPlanninginSeptember2006.Publicconsultationhasbeenafeatureofthedevelopmentoftheproject.ACommunityAdvisoryGroupwithrepresentativesfromthelocalcommunity,BlacktownCityCouncilandcustomergroup,wasformedtoengagethecommunityandseekfeedbackonproposedoptionsfortheupgrade.

IntegralEnergywillcontribute$1milliontolocalcommunityinfrastructureand$500,000todemandmanagementinitiativesintheregionaspartoftheconditionsofapprovalfortheproject.

WealsocontinuedourpartnershipwiththeUrbanDevelopmentInstituteofAustralia,localcouncilsandplanningauthoritiestobetterunderstandtheneedsoflanddevelopers.Thesubdivisionofnewlandplaysasignificantroleinthefuturedevelopmentoftheelectricitynetworkandthesestakeholdersarelargelyresponsibleforthedeliveryofaffordablelandsupplythatwillhousethehomesandbusinessesoffuturecommunitieswithinournetwork.

Chairman and CEO’sReport

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Our scorecard for �006–07

Key performance indicator

Measure Target Result Comments

Staff safety Accidentfrequencyrate

0 4.8 Whilewedidnotmeetourtargetofzero,theresultof4.8wasbetterthanthe5.2achievedin2005–06.Wecontinuetofocusonsafety,forexample,safetyobservations,forongoingimprovementanddevelopedanewthree-prongedsafetystrategytodrivefurtherimprovement.

Profitability EBITDA$M(excludingcapitalcontributions)

$361.4million

$412.4million

Theresultwas14%abovetargetand$46.5millionabovethe2005–06result.

OPEX compliance

OPEX$M $328.3million

$317.2million

Theresultwas3%favourabletotarget.

Network reliability

Unplannedminuteslostpercustomer(SAIDI)

101 94 Theresultof94minuteswas7%betterthanthetargetof101minutes.

Trading breaches

Breaches 0 5 Therewerefivetechnicalbreachesreportedin2006–07.

Absenteeism Losttimeduetosickness

2.5 2.8 Theoverallresultof2.8wasslightlyoverthetargetof2.5.

Environment Numberofseriousenvironmentalincidents

0 0 Noseriousenvironmentalincidentswerereportedduring2006–07.

Customer satisfaction

Customersatisfaction

82% 83.4% Theresultwasbetterthantargetandanimprovementonthe2005–06resultof81%.

EBITDA=earningsbeforeinterest,tax,depreciationandamortisation;OPEX=operatingexpenditure;SAIDI=systemaverageinterruptiondurationindex.

Building organisational capability

ThededicationandhardworkofstaffacrossthebusinessunderpinnedoursuccessduringtheyearandtheBoardandExecutiveteamextendtheirsincerethanksandappreciationtothem.

IntegralEnergyemployedmorethan2,593staffin2006–07,anincreaseof5.5%onstaffnumbersin2005–06,andsuccessfullyretainedmostemployees,reducingstaffturnovertolessthan6%.

Thechallengeofrecruitingandretainingskilledstaffinanenvironmentoffullemploymentandongoingeconomicgrowthhasbeen,andwillremain,akeychallengeforIntegralEnergyovercomingyears.

Tomeetthelong-termneedsofournetworkcustomers,weemployed64apprenticesduringtheyear,thelargestintakeeverin

IntegralEnergy’shistory,bringingthetotalnumberofapprenticesto175.Theintakeofapprenticeswascomplementedbytheengagementof11electricalengineeringgraduatesandcadets.PlanninganddeliveryofanewtechnicaltrainingfacilitylocatedcentrallywithinourfranchiseatHoxtonParkisunderwaytocaterforthisupliftintechnicalstaffnumbers.

Weexpectthefacilitytobeoperationalinmid2008.

Wehavebeenimplementingastrategytolocatenetworkstaffinmodernfacilitieswithinlessthanonehour’straveltomostcustomerstoimproveservicedelivery.This$40millionstrategyculminatedin2006–07withtheofficialopeningofnewfieldservicecentresatGlendenning,KingsPark,HoxtonParkandPictonandacivilworkscentreatGlendenningforfacilitiesmanagementandcivil

transmissionteamswhomanagetheconstruction,maintenanceandupgradeoffieldservicecentresandmajorsubstations.ConstructionalsobeganonIntegralEnergy’snew$7millionfieldservicecentreintheSouthernHighlands,replacingtheexistingfacilityatBowral.

Significanteffortsweremadethroughouttheyeartodevelopahigh-performanceworkculturethatattractsandmotivatesstaff.In2006–07,forthefirsttime,IntegralEnergyundertooktheHewittAssociates’surveyofstaffengagementtobenchmarkourperformance.Theresultof60%placedIntegralEnergyinthehigh-performingcategory.Wewillcontinuetodevelopthisinitiativein2007–08tofurtherbuildonourperformance.

AnnualPerformanceReport2006–07

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Organisational changes

Opportunitiesweretakenthroughout2006–07toreviewthestructureofseveralIntegralEnergybusinessunitsfollowingchangestotheExecutiveteam.Thenetworkbusinesswasconsolidatedfromthreebusinessunitsintotwotoensurethatitsstructurecontinuedtodeliverthecapitalandmaintenanceprogramsinanefficientandeffectivemanner,aftertheretirementofJohnWallace,whosecareerspanned42yearsintheelectricityindustry.

RelevantpartsoftheTradingandMajorAccountsbusinessunitwerereintegratedintotheRetailandCustomerServices,FinanceandCompanySecretariatbusinessunitstobetteralignthemwithourbusinessstrategyfollowingtheresignationofStephenLoweasGeneralManager,TradinginMay2007.

Future vision

IntegralEnergyiswellpreparedtoaddressthechallengesofthefuture.

Weremaincommittedtoourcoregoalofprovidingsustainable,reliable,andaffordableenergyinafast-growingandhighlycompetitivemarketwhilecontinuingtoenhancethesafetyofourworkplaces.Weareconfidentofmeetingtheincreasedcapitalinvestmentinournetwork.Todeliverenergyfortomorrow,intheyearaheadIntegralEnergyplansto:

continueoursafetyjourneytowardsourgoalofzeroworkplaceaccidents

significantlyincreaseourcapitalinvestmentinournetworktoachieveourtargetof$362million.

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achievesustainablereturnstoourshareholder

maintainourefforttoimprovethereliabilityperformanceofournetwork

prepareforthe2009networkdetermination,ourfirstbeforetheAustralianEnergyRegulator

positionourretailbusinesstorealiseitslong-termvalue.

Thosegoalswillbeachievedwhileweincreaseourcontributionstothecommunitiesweproudlyserveandmaintainasustainableapproachtoallouroperations.

Michael McLeod Chairman

Richard PowisChiefExecutiveOfficer

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‘Weemployed64apprenticesduringtheyear,thelargest intakeeverinIntegralEnergy’shistory,bringingthetotal numberofapprenticesto175.’

Chairman and CEO’sReport

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Highlights and lowlights

Economic Environmental Social

¸ Earningsbeforeinterest,tax,depreciationandamortisation(includingcapitalcontributions)increased12%to$466.7million,comparedwith$416.9millionin2005–06.

¸ Returned$193.0millionindividendsandtaxequivalentstoourshareholder,theNSWGovernment.

¸ Exceededourtargetfornetworkreliabilityperformance,with94minuteslostpercustomer(unplanned)againstatargetof101minutes.

¸ Investedarecord$316.6millioninournetworkinfrastructure,comparedwith$249.4millionin2005–06,andexceededournetworkmaintenancetargetsfortheyear.

¸ Exceededourretailbusinessprofittargetfor2006–07,despitetestingconditionsintheNationalElectricityMarket.

¸ SuccessfullylaunchedretailoperationsinthecompetitiveQueenslandelectricitymarket.

¸ Adoptedaproactiveapproachtoclimatechangetodriveimprovementsinorganisationalperformanceandempowercustomerstomakesustainableenergychoices.

¸ WerethedrivingforcebehindtheBlacktownSolarCityconsortium,thefirstNSWSolarCitylaunchedundera$75millionAustralianGovernmentinitiative.

¸ Improvedenvironmentalperformanceacrossouroperations,withnoseriousenvironmentalincidentsreportedduring2006–07.

¸ Increasedenvironmentalexpenditureto$13.5millionin2006–07toachieveameasurablereductioninenvironmentalrisk.

¸ Completedouracceleratedprogramtoinstallprotectivebundsaroundallmajorpowertransformerstoimprovenetworkenvironmentalperformance.

˚ Continuedtoproactivelyremediatehistoricalcontaminationondepotandmajorsubstationsites.

¸ Deliveredourbesteversafetyresult,withalosttimeinjuryfrequencyrateof4.8,animprovementonthe2005–06resultof5.2.

¸ Achievedacustomersatisfactionlevelof83.4%,aboveourtargetof82%.

¸ Achievedastaffengagementscoreof60%fromHewittAssociates,ratingusinthehighperformancezoneandhigherthanourindustrybenchmarkof57%.

¸ Recruitedarecordintakeof64 apprentices.

¸Continuedtoinvestin partnershipswithlocal communitiesandinstitutions

˚ Struggledtosuccessfullyrecruitallvacanciesagainstabackdropoffullemployment.

ApprenticeGrantSmeets

AnnualPerformanceReport2006–07

Economic Performance

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Did we meet our objectives?

2006–07 objective Progress to date Status 2007–08 objective

Improvingournetworkoperatingperformance,includingincreasingreliabilityofsupply.

Exceededourtargetfornetworkreliabilityperformance,with94minuteslostpercustomer(unplanned)againstatargetof101minutes.

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Achievenetworkunplannedreliabilityoflessthan100minutespercustomer.

Continuingtobuildandmaintainvalueinournetwork.

Recordlevelofinvestmentinournetworkin2006–07of$316.6million. p

Achieveambitiouscapitalprogramtargetof$362.5millionandachieveplannedmaintenanceprogram.

Buildinguptheaccuracyandcompletenessofdataaboutassetsweownthroughthedevelopmentofacomprehensiveregisterforournetworkandnon-networkassets.

IdentifiedGeographicInformationSystem(GIS)anddataimprovementopportunitiesandagreedonanactionplanusingtheAssetInformationGovernanceCommitteetosetpriorities.

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FurtherimprovementstodatadescribedinCorporateGISConsultantsreportandIntegratedAssetInformationSystemStrategy.

Continuingtoaddressthemass-marketchallengesoffullretailcontestability,includingaddressingtheneedsofourcustomers.

EmployedanewbusinessandsystemsmodelforthelaunchofourretailbusinessinQueensland,whichsupportedouracquisitionofapproximately15,000Queenslandcustomersby1July2007.

SecuredalicensetoretailelectricityinTasmania.

p

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Continuetomaintainthelong-termvalueofourRetailbusiness.

Key

¸¸ objectiveexceeded

¸ objectiveachieved

˚ objectivenotachieved

p ongoingobjectivewithtargetsmettodateorpositiveprogressshown

q ongoingobjectivewithtargetsnotmettodate

ApprenticeDanielMyers(left)andLeadingHandCableJointer,MattLobsey,atworkinParramattaCBD.

Economic Performance AnnualPerformanceReport2006–07

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Performance indicators

Customers

Totalnetworkcustomerconnectionswere842,315attheendofJune2007,anincreaseof1.2%ontheresultfor2005–06.

Weprovidedcustomerswith$22.1millioninrebatesandpaymentassistanceunderthePensionerRebatesSchemeandtheEnergyAccountsPaymentAssistanceScheme,a5.9%decreasefromthepreviousyear.TheNSWGovernmentreimbursesthismoney.

Networkreliability(unplanneddisruptionstosupply)was94minuteslostpercustomer(excludingmajorevents)againstatargetof101minutespercustomer.Thiswasoursecondconsecutiveyearofimprovedreliabilityperformanceandmakesusastrongperformeragainstnationalbenchmarks.

Ourretailbusinesssold9,741GWhofelectricityandcontributedmorethan3.1%aboveitsprofittarget,inlinewitha3.2%increaseinthequantumofelectricitysoldin2005–06.

Supply chain

Withourcommitmenttoachievingahighlevelofcustomersatisfactionwithourservices,95%ofsupplierswerepaidontime.

Wecontinuedtoimplementinitiativestostreamlineitsprocurementprocesses;forexample,wewerethefirstNSWstate-ownedenergycorporationtointroduceanelectronictenderingsystem.

Morethan50%ofthe$400millionworthofgoodsandserviceswepurchasedduringtheyearwerecoveredbyIntegralEnergyorStateContractsControlBoardcontractsorsupplierpanels.

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Employees

Weachievedan‘engagement’scoreof60%intheHewittAssociates’staffengagementsurvey.Weratedinthe‘HighPerformer/BestEmployerZone’,andhigherthantheutilitiesbenchmarkof57%.

Providers of capital

Earningsbeforeinterest,tax,depreciationandamortisation(includingcapitalcontributions)were$466.7million,comparedwith$416.9millionin2005–06.Thisresultwas15.7%or$63.2millionfavourabletothebudgetof$403.5millionandwaspositivelyimpactedbysomeone-offunbudgeteditems.Thetargetfor2007–08is$439.7million.

Wereturnedanetprofitaftertaxof$153.2million,a10.5%increaseontheprofitfigurefor2005–06.

Wereturneda$107.0milliondividendtoourshareholder,a3%increaseonthedividendfor2005–06.

Interestondebtwas$107.2million.

Public sector

Incometaxequivalentswere$86.0million,anincreaseof31.9%onthe$65.2millionreportedin2005–06.

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Economic performance in �006–07AsoneofAustralia’sleadingenergycorporations,IntegralEnergyisadisciplinedbusinessfocusedoncreatingwealthforourshareholdersandsupportingdiverseandvibrantcommunities.

Inrecentyears,IntegralEnergyhasfocusedonachievingthreeoverarchingobjectives:

providinglong-termcustomerservicebydevelopingandoperatingasustainableandreliablenetwork

maximisingthecontributionfromtheretailbusiness

ensuringthatsupportsystemsareinplace.

ThissectionoutlinesIntegralEnergy’seconomicperformanceduring2006–07,discussingeachkeybusinessstrategyinturn.

Theorganisation’seconomicperformanceismeasuredacrossanumberofareas,includingshareholderreturns,reliabilityofsupplytocustomers,prudentinvestmentinnetworkinfrastructure,andtheabilitytomeetcustomerexpectationsandperformsuccessfullywithincompetitiveandprofitablemarkets.

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Figure � Network capital spend, �00�–0� to �006–07($million)

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Operating a sustainable and reliable network

IntegralEnergyiscommittedtomanagingitsnetworkassetsinastructuredandsystematicwaysothatwemeettheexpectationsofourstakeholders,theregulatorandthecommunity,andfulfilourorganisation’sbusinessneeds.

Thedrivetocontinuallyimprovethereliabilityofournetworkwhilecomplyingwithlicenceconditions,thehighgrowthinelectricitydemandduringpeakperiodsandtheneedtorenewourageingassetsarethemainchallengesfacingournetworkperformance.

IntegralEnergy’snetworkstrategyisdesignedtoaddressthisby:

improvingthepositionofcustomersnotcurrentlyreceivingaverageperformancestandardsforreliability

maintainingourcurrentsupplycapacityandreducingrisk

arrestingthedeterioratingtrendintheconditionofthenetworkassetbase

achievingcorporateobjectivesinsafetyperformance,environmentalmanagement,andoperationalefficiency.

ThisstrategyunderpinnedIntegralEnergy�ssubmissiontoIPART’s

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2004–09networkdeterminationandthecorporation’sapplicationforapassthroughofthecostsassociatedwiththenewlicenceconditionsforplanningandreliability.BasedonIPART’sfinaldeterminationinJune2004andthedecisiononthecostpassthroughapplication,IntegralEnergywillinvestcapitalinexcessof$1.6billionoverthe2004–09regulatoryperiod.

ThisisasubstantialinvestmentintheeconomicdevelopmentofGreaterWesternSydney,theIllawarra,theBlueMountainsandtheSouthernHighlands,positioningthoseregionstocontributetothenation’soveralleconomiccompetitiveness.

Reliability of supply

Thereliabilityoftheelectricitysupplyisanimportantcustomerservicemeasureforelectricitynetworkoperators.Acommonmeasurementofreliabilityisthesystemaverageinterruptiondurationindex(SAIDI),whichmeasuresthenumberofminutesthatcustomers,onaverage,arewithoutelectricityeachyear.

IntegralEnergy’snetworkreliabilityintermsofSAIDIshowedfurtherimprovementin2006–07,continuingtheupwardtrendsince2004–05.ThemethodforcalculatingSAIDIchangedfromtheSteeringCommitteeonNational

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Figure 4 Returns to shareholder—dividends and tax equivalents($million)

Figure � Network reliability, unplanned SAIDIa

(minuteslostpercustomer)

SAIDI=systemaverageinterruptiondurationindexacalculatedusing2.5Betamethodforfirsttimein2006-07

ProductionManager,TransformerWorkshop, JadrankaLandeka.

Economic Performance AnnualPerformanceReport2006–07

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RegulatoryReportingRequirementsmethodtothe2.5Betamethod,aninternationallyacceptedstandardforcalculatingelectricitynetworkreliabilitywhichexcludesextremeeventsthroughtheuseofastatisticallybasedmethod.

Althoughthisimprovementispartlyduetorelativelybenignweatherinthetraditionalsummerstormperiod,improvementinunderlyingreliabilityhasbeenachievedbyfocusingonpoorlyperformingfeeders,reinforcingnetworksecurityandaddressingtheweightedaverageremaininglifeofnetworkassets.

Manyfactorsthataffectnetworkreliabilityperformancearelargelyexternaltothenetworkitselfandbeyondmitigationthroughnetworkmanagementpractices.Supplyfailurecanresultfromadverseenvironmentalconditionssuchaswind,lightning,rainorbushfires,defectiveequipment,lossoftransmissionsupplyandcontactwithvegetationneartopowerlinesandotherassets.IntegralEnergyhaslongrecognisedtheneedtoidentifyandmanagethesefactors,particularlywheretheymaycontributetooverallpoorperformance.

Renewing ageing assets

Acrossthestate’selectricityindustry,assetscommissionedinthe1960sarenowatastagewheretheirreplacementneedstobeeitherplannedorimplemented.Anageingassetbasecontributestodecliningperformanceandincreasedoperatingexpenditure,andcanalsoleadtodetrimentalsafetyandenvironmentaloutcomes.

IntegralEnergyhastakenastrategicapproachtoassetrenewalplanningandin2006–07wecontinuedtorefineourStrategicAssetRenewalPlan.

AnalysisconductedaspartofthisstrategicplanningprocessshowsthatIntegralEnergywillneedtospendanaverageof$135millionperyearoverthenext20yearsto

renewtheexistingagedassetbaseappropriately.Whilethisaveragelevelofexpenditureishigherthanthecurrentshort–termexpenditureprojectionsforassetrenewal,planningprocessesareinplacetounderstandandimplementlongertermexpenditurerequirementsonarisk-balancedbasis.

Inadoptingthisapproach,IntegralEnergyisworkingtoensurethemaintenanceofcustomerservicestandardsbyrenewinginatimelyandstrategicmannerkeynetworkassetsthatareapproachingtheendoftheirlives.Arrestingtheageingtrendoftheexistingassetbasewillensureasustainablefutureforthenetwork.

Meeting demand

AsshowninFigure7below,thesummerpeakdemandforelectricityisforecasttogrowbyaround50%overthenext10years.

Beforeexpandingtheelectricitydistributionsystem,orthecapacityofthedistributionsystem,IntegralEnergyinvestigatesthecost-effectivenessofavoidingordeferringthisexpansionbyimplementingdemandsidemanagementstrategies.

Morethan10newprojectstomaintainreliablenetworkcapacityweredevelopedandapprovedduringtheyear(seehighlightsinTable1).

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Table 1 Highlights of projects approved in 2006–07

ProjectTotal estimated cost ($ million)

EstablishmentofMungerieParkzonesubstationtosupplythenewlyestablishedRouseHillRegionalCentre

39.1

EstablishmentofNorthEasternCreekzonesubstationtosupplynewindustriallandsatthejunctionoftheM4andM7motorways

19.2

UpgradeofDaptozonesubstationtomeetloadgrowth 14.9

UpgradeofEvansLaneswitchingstationtoenhancereliabilityofsupplytocustomersonthefarSouthCoast

7.5

RenewalofSherwoodzonesubstationtoimproveitsenvironmentalperformance 6.8

AugmentationofRussellValezonesubstationtomeetloadgrowthinnorthWollongong 6.7

UpgradeofWhalanzonesubstationtomeetloadgrowthintheMountDruittregion 6.4

UpgradeofGlossodiazonesubstationtomeetloadgrowthinGlossodia,WilberforceandEastKurrajong

3.7

ContinueddevelopmentoftheelectricitydistributionnetworkthroughoutwesternSydney,theSouthCoast,SouthernHighlandsandtheBlueMountains

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Capital program

ConsistentwithIntegralEnergy’snetworkvisionandstrategy,agreaterfocusoncapitaldeliveryhasagainseennetworkcapitalexpendituregrowfrom$102.9millionin2001–02toarecordlevelof$316.6millionin2006–07.Thissignificantlevelofcapitalexpenditurewillcontinuetogrowincomingyears,increasingin2007–08to$362.5millioninordertomeettheplansoutlinedinournetworkdeterminationandthenewplanningandreliabilitystandardsintroducedon1August2005.

Table 2 Major works in progress, 2006–07

Description Cost to date ($) Total cost ($)

Practical completion date

Comments

Before 2006–07

2006–07

LennoxZSaugmentation

2,806,388 60,437 2,866,825 Complete Thirdtransformerinstalledandtwotransformersreplaced.

33kVcircuit-breakerreplacementprogram

3,368,407 796,822 4,165,229 Ongoing Replaceageingunits.

WerringtonZSrebuild 6,380,619 585,436 6,966,055 October2007 Extendexistingbuilding,installindoor33kVandreplace11kVswitchboardandthreepowertransformers.

MtDruittTS132kVBusbar

5,721,750 (286,157) 5,435,593 Complete Installthirdtransformerandconstructnew132kVswitchyardtoimprovesystemflexibilityandreliability.

SouthWindsorZSaugmentation

3,917,042 845,516 4,762,558 Complete Installandcommissionthirdtransformer.

WetherillParkWestTS 5,769,934 4,286,163 10,056,097 June2008 Developnew132/33/11kVTS/ZS.

SeniorProductManager,HelenLaspatzis

Economic Performance AnnualPerformanceReport2006–07

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Description Cost to date ($) Total cost ($)

Practical completion date

Comments

Before 2006–07

2006–07

Tahmoorand

MaldonZSs

10,614,202 1,370,020 11,984,222 Complete Augmenttwopowertransformersandreplace11kVswitchgearatboth;rebuildthe33kVtransmissionlinebetweentheZS.

QuakersHillZSaugmentation

2,932,119 3,097,941 6,030,060 March2008 Installnew132/11kVtransformerandpreparesitetobeconvertedtofull132kVinthefuture.

HinchinbrookZS(formerlyaerodromeatHoxtonPark)

8,987,536 7,554,370 16,541,906 August2007 Developnew33/11kVZS.

GlenmoreParkZSaugmentation

2,648,572 2,294,153 4,942,725 Complete Replacetwo132/11kVtransformersandone132/33kVtransformer.

BellaVistaZSestablishment

12,913,169 16,166,956 29,080,125 Complete Constructa3x132/11kV45MVAtransformersubstationand2x132kVundergroundfeedersfromBaulkhamHillsTSandWestCastleHillZS.

BonnyriggZSaugmentation

3,837,788 2,246,870 6,084,658 November2007

Replacethree33/11kVtransformers;associated33kVbusbarwork,andinstallnew11kVfeeders.

Towerpaintingandanticlimbingguards

9,254,054 3,200,689 12,454,743 Ongoing Repaintandfitanticlimbingguardstoalltransmissiontowers.

MoorebankZSaugmentation

2,235,636 977,188 3,212,824 July2007 Replacethree33/11kV35MVAtransformers.

SpringwoodZSaugmentation

1,895,883 856,032 2,751,915 November2007

Buildanewcontrolbuildingandreplaceold11kVswitchboard.

Securityfencereplacementprogram

18,707,890 6,819,426 25,527,316 June2009 ReplaceallTS/ZSsecurityfenceswithnewhigh-securityconstruction.

Bundwallinstallationprogram

10,350,116 4,850,775 15,200,891 June2007 Constructoilcontainmentbundsaroundalltransformersintransmission/zonesubstations.

SpringhillTSrebuild 5,924,365 27,477,973 33,402,338 November2008

Constructnew132/33kVGISsubstationconsistingofeightpowertransformers,eight132kVfeedersand1433kVfeeders,andthreecapacitorbanks.

SmithfieldZSaugmentation

1,604,856 1,671,913 3,276,769 August2007 Extendcontrolbuilding,installthird33/11kVpowertransformerandassociatedswitchgear.

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Description Cost to date ($) Total cost ($)

Practical completion date

Comments

Before 2006–07

2006–07

KatoombaNorthTSaugment

1,683,320 849,985 2,533,305 August2007 Installasecond132/66/11kVpowertransformerandassociatedswitchgear.

PrestonsZSaugmentation

106,206 1,195,598 1,301,804 July2007 Installathird33/11kVpowertransformerandassociatedswitchgear.

NarellanZSaugment 938,605 4,182,277 5,120,882 May2008 Replacetwo66/11kVexistingpowertransformerswithhighercapacityunitsandinstallathirdpowertransformerandassociatedswitchgear.

Augment132kVfeeder98MShoalhaventoEvansLane

2,491,055 5,490,761 7,981,816 December2007

Rebuild132kVoverheadfeederwithnewconcrete/steelstructuresandhighercapacityconductors.

Augment132kVfeeder9JAVineyardBSPtofutureRouseHillSS

1,860,370 5,465,646 7,326,016 February2008 AugmentexistingfeederandconstructadditionalfeederwithnewsteelstructuresandhighcapacityINVARconductors.

MtOusleyZS 929,635 8,073,452 9,003,087 November2007

Developanew33/11kVZS.

EasternCreekZS 1,387,323 5,412,836 6,800,159 December2007

Developanew132/11kVZS.

LawsonTSredevelopment

843,115 3,582,481 4,425,596 December2008

Replaceexisting132/66/11kVsubstationandbuildnewcontrolbuilding,newindoor66kVGISand132kVoutdoorswitchgear.

WombarraZSredevelopment

327,350 951,287 1,278,637 September2007

Redevelopthe11kVpartofthe33/11kVZSandbuildanewcontrolbuildingand11kVindoorswitchgear.

CarlingfordTS66kVSwitchgearrenewal

671,421 39,432 710,853 December2007

Installnew66kVoutdoorswitchgear.

GuildfordTS132kVswitchgearrenewal

29,460 1,642,351 1,671,811 December2007

Installnew132kVoutdoorswitchgear.

JasperRdZSRedevelopment

28,434 1,576,765 1,605,199 June2008 Extendcontrolbuilding,installnew11kVindoorswitchboard.

PenrithTS4thtransformer

37,292 3,602,925 3,640,217 December2008

Buildanew132/33kVindoortypesubstationadjacenttotheexistingTS.

TS=transmissionsubstation;ZS=zonesubstation

Economic Performance AnnualPerformanceReport2006–07

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Maintenance program

IntegralEnergyrefineditsStrategicNetworkMaintenancePlanin2006–07.Theplan,initiatedin2005–06,analysesmaintenanceneedsagainstbusinessobjectives.

TheannualRegionalNetworkMaintenancePlansetsthetargetsforourbusinessregionbyregionandisderivedfromtheStrategicNetworkMaintenancePlan.

In2006–07,IntegralEnergyachievedarecordlevelofexpenditureonmaintenanceof$143million,comparedwithour2005–06expenditureof$130million.Duringtheyear,IntegralEnergylargelymetthecompliancelevelssetintheRegionalNetworkMaintenancePlan.Theoutcomesincluded:

100%ofpubliclightingbulklampreplacements

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113%ofdefectscorrectedacrossournetwork,exceedingourtarget.

OurmaintenanceperformancecontributedtoIntegralEnergy’scontinuedimprovementinsystemreliabilityshowninFigure3onpage13.

New connections

Workingwithaccreditedserviceprovidersandtheircustomers,IntegralEnergywasactiveinidentifyingimprovementsinthecontestableworksprocessestoensurethatourclientsareabletoworkefficientlywithusinmeetingtheirnetworkconnectionrequirements.

Duringtheyear,IntegralEnergycontinuedtoimproveitsperformanceintwoareasofimportancefornetworkconnections.Wecertified96%ofalldesigns

• within14days,aheadofourtargetof90%.Wealsoissued94%ofalldesignbriefswithin14days,againstourtargetof85%.

Thewebsite,specificallydesignedforusebyaccreditedserviceproviders,hasproventobeaveryusefultoolintheprovisionoftechnicaladvice,importantnotifications,safetyadviceandbulletins.ThefacilityisalsousedtonotifyaccreditedserviceprovidersaboutseminarsandtrainingopportunitiesofferedbyIntegralEnergy.

Duringtheyear,IntegralEnergyheldteninformationseminarsforlevels1,2and3accreditedserviceprovidersinvariouslocationsinournetworkarea.

Building substations for tomorrow—combining innovation and investment

Commissionedinearly2007,ourBellaVistazonesubstationinSydney’snorth-westisoneofthemostadvancedinAustralia.

The$37millionindoorsubstationdemonstrateshowweareplanningfortomorrow,investinginkeyinfrastructureandmaximisingnewtechnologytosupporteconomicgrowthinthearea.

North-westSydneyisexperiencingstrongresidentialandcommercialgrowth,asmanyenterprisesrelocateoperationsoutofSydney’sCBD.ThenewsubstationisakeypartofIntegralEnergy’sBaulkhamHillstoWindsornetwork,andwilldeliversafeandreliablepowerto420businessesandaround4,000homesinGlenwood,BellaVistaandKingsLangley.NorwestBusinessPark,Sydney’sfastestgrowingbusinesshub,isabeneficiaryofthecontemporarysubstation.

WeconsultedthelocalcommunityandtheRoadsandTrafficAuthoritytodevelopanoptimaldesignforthesubstation,includingthebestroutesforitspowerlines.Designedtoresembleanofficebuilding,thefacilityblendsintoitssurroundings.

Newtechnologyletsusmonitorournetworkmoreclosely,andanalyseandpredictnetworkperformanceproactively.Wecanrespondfastertosupplyinterruptionsthroughbetterdetection,isolationandswitchingaroundfaults.

BellaVistaZoneSubstationfeaturesgas-insulatedindoorswitchgearthatimprovesreliability,requireslessmaintenancethantraditionaltechnologyandminimisesthefacility’soverallfootprint.Mostoftheelectricalequipmentiswithinthebuilding,cablestoandfromthesubstationareundergroundandthetransformersarescreenedbysteellouvrestoimprovetheoverallappearance.Workonthesubstationwillcontinuein2007–08.

(Lefttoright)TechnologistsWarwickPrice,StephenAmeryandRomeoUbaldo, insideBellaVistazonesubstationwhichtheyhelpedtoconstruct.

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Tosupportourfocusonmeetingcustomerneeds,wehavedevelopedastrategytoprovideaframeworkforservicedeliverytoaccreditedserviceprovidersandtheircustomers.

Thisisbeingachievedby:

thedevelopmentandimplementationofaprojectmanagementframeworktoensuretheseamlessmovementofprojectsfromapplicationtodevelopment

betterinternalcoordinationtoensuretheeffectivemanagementofourinternalrelationshipsandsmoothprogressofourinternalinteractions

moreproactivemanagementofaccreditedserviceproviderissuesandmoreopencommunicationsothatIntegralEnergyanditsaccreditedserviceprovidersachievethebestoutcomesforourcustomers.

DuringtheyearIntegralEnergyworkedwithitsclientstoprocessmorethan3,334networkconnectionapplications.Examplesofmajorprojectsaresetoutbelow.

TRUenergy gas turbine

IntegralEnergycarriedoutthenegotiationsandreviewoftechnicalrequirementstoallowtheconnectionofa400MWcombinedcyclegenerationfacilitytoits132kVsystembetweenDaptoandSpringhill.Thenewgenerationfacility,adjacenttoLakeIllawarra,involvestheconstructionofa132kVswitchingstationand132kVlineworksaspartofthecontestableconnectionworks.

Schools

Tofacilitatetheconnectionofadditionalelectricalloadduetoairconditioninginstallationatpublicschools,IntegralEnergyappointedaprojectofficer.WorkingcloselywithschoolprincipalsandtheDepartmentofCommercetoprovidetechnicaladviceandsupport,theprojectofficerensuresthatappropriateconnectionrequirementsareidentifiedandprovided.ThesupportprovidedbyIntegralEnergyhasensuredthatallenquiriesareaddressedinatimelyandcompetentmanner.

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Sydney Water Plan

SydneyCatchmentAuthority,SydneyWaterandIntegralEnergyhavebeenworkingcloselytoaddresstherequirementsoftheSydneyWaterPlan.IntegralEnergyhasprovidedtechnicalrecommendationsandsolutionstoaddresstheelectricitysupplyneedsatthevarioussitesunderreview.ThecompletionoftheNorthWarragambazonesubstationhasprovidedthecriticalsupplytotheDeepWaterPumpingStationatWarragambaDam.InallcasestheearlyinvolvementofIntegralEnergyindeterminingarecommendedsupplyoptionhasallowedconstructionandinstallationobjectivestobeachieved.

Tullimbah Village

IntegralEnergyhasworkedcloselywiththedevelopertofacilitatetherelocationanddevelopmentofnew132kVtransmissionlinesthroughtheTullimbahVillageestate.The132kVtransmissionlinesprovideaconnectionbetweenDaptoBulkSupplyPointandMtTerrytransmissionsubstation.

Network standards

IntegralEnergyhascloseto300technicalstandardsthatgovernthedesign,constructionandmaintenanceofourelectricitydistributionnetwork.

InDecember2006,webeganareviewofmorethan180rivercrossingsinournetworkfranchisearea,two-thirdsofthemonnavigablewaterways,toensuretherewereconsistentconductorclearancesabovewaterlinesandsuitablewarningsignage.Theaimistomakerivercrossingsassafeaspossibleforthepublicwhilemaintainingareliableelectricitysupply.

Atsomelocations,considerationwasgiventoreplacingoverheadconductorswithundergroundcables,withthefirstreplacementprojectcompletedatBurrillLake,southofUlladulla.OtherlocationsforreplacementprojectsarebeingconsideredinconsultationwithNSWMaritime,environmentalauthorities,Aboriginaltraditionalownersandothergovernmentauthorities.

Maximising the contribution from our retail businessTheelectricitymarketremainshighlycompetitive,withmorethanamillioncustomersinNSWexercisingchoiceandmovingtonegotiatedagreementssincetheintroductionofretailcontestabilityforhouseholdsandsmallbusinessesinJanuary2002.

In2006–07,IntegralEnergy’sresidentialandbusinessmarketscontinuedtogrow,despitesignificantcompetitoractivityinourfranchisearea.Ourstrategyofmovingcustomersontonegotiatedagreementscontinued,withtheacquisitionandretentionofprofitablecustomersthroughdirectmarketing,outboundtelesalesanddoor-to-doorsales.

IntegralEnergycontinuedtoperformwellinthischallengingenvironment.Keyresultsforourretailareain2006–07included:

thelaunchofsalesactivityinQueensland,withIntegralEnergybeingoneofthefirstretailerstoparticipateinthenewlycontestablemarket

thesuccessfulpromotionofrenewableenergyoptions,whichresultedinasignificantlyincreaseduptakeofthoseproducts.

Inthebusinesssegmentoftheretailmarketweweresuccessfulinsecuringsignificantloadduring2006–07.Sincetheintroductionoffullretailcontestability(FRC),amajorfocusofthebusinesssalesteamhasbeentodevelopstrategiestoleverageourstrengthinthemarket.Aspartofthisapproach,IntegralEnergysecuredanumberofmajorcontractsthatwillprovidesignificantrevenueovercomingyears.

Door-to-doorsalesactivitycontinuedtobeourmosteffectivesaleschannel,withthemajorityofsalesin2006–07takingplaceintheCountryEnergyfranchisearea.IntheEnergyAustraliafranchisearea,wheredoor-to-doorsaleshadbeendeclining,wetrialledshoppingcentresalesactivity.Thissalesmethodprovedtobeextremelysuccessful,withclosetotargetnumbersofcustomerssigningonwithIntegralEnergyinshoppingcentresinthesecondhalfofthefinancialyear.

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Economic Performance AnnualPerformanceReport2006–07

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Principal marketing and sales activity

Ourmostnotablesuccessinresidentialcustomersaleswastheincreaseincustomerinterestinrenewableenergy.In2006–07,IntegralEnergy’srenewableenergycustomerbasequadrupled,increasingfrom4,389customerstomorethan24,000.ThemajorityofthosecustomerstookuptheINgreen Homeproductasaresultofourstrongdirectmarketingactivity.

Marketingcampaignslaunchedin2006–07resultedinhighcustomerresponserates.Thosecampaignsutiliseda5%SmartSaverdiscountonelectricityratesandtheINrewardsretaildiscountcard.OneofthecampaignssuccessfullytargetedIntegralEnergycustomerswhohadswitchedtootherelectricityretailers.

BusinesssalesactivityremainedhighthroughouttheyearinanincreasinglycompetitiveNSWmarket.IntegralEnergyacquiredandretainedprofitable

businesscustomersusingdirectmarketing,faxbacks,outboundtelesalesanddirectsalestechniques.

New products and services

InJanuary2007,IntegralEnergyintroducedtwonon-contract,renewableproductsforresidentialcustomersinourfranchisearea:

INgreen Power—10%GreenPoweraccreditedrenewableenergyand90%non-renewableenergy

INgreen Future—100% GreenPoweraccreditedrenewableenergy.

Weforgednewbusinessallianceswithassociationsrepresentingabroadrangeofindustriesinthesmallandmediumenterprise(SME)andlargebusinesssegmentsandbecameamajorpartneroftheNSWBusinessChamber(formerlyAustralianBusinessLimited).

Weinitiatedanumberofbusinessevents,includingtheinauguralIntegralEnergybusinessbreakfast,whereweupdated50ofourkeycustomersonbusinesstrends.OurrelationshipwiththeIllawarraBusinessChambercontinuedtobeextremelystrong,withIntegralEnergysponsoringanumberofbusinessnetworkingactivitiesintheIllawarra.

Weproducednewslettersandcompiledinformationforourcustomerstokeepthemuptodateontrendsintheelectricitymarket.

Compliance with Marketing Code of Conduct

Wereviewedallourtrainingandmarketingmaterialstoensuretheycontinuedtomeetourcustomers’needsandnewlegalandregulatoryrequirements.Regrettably,werecordedasmallnumberofMarketingCodeofConductbreachesduringtheyear.However,thosebreachesrepresentedlessthan0.4%ofallcustomercontractstakenupduringtheyear,andwereanimprovementonthe0.65%recordedin2005–06.Wethoroughlyinvestigatedandreviewedallbreachesforopportunitiestoimproveourprocesses.Weterminatedtheemploymentofdoor-to-dooragentswhereseriousbreachesofthecodewerefound.

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Retail green energy compliance

In2006–07,wemetourobligationtoreachmandatorytargetsforreducingoroffsettingtheemissionofgreenhousegasesfromtheproductionofelectricity,imposedundertheNSWandACTGreenhouseGasAbatementSchemes(GGAS).Ourcompliancewassupportedbyindependentauditsbyeachauthority.

WesuccessfullyrananenergyefficiencypromotionbetweenJulyandSeptember2006.Wegaveawayapproximately47,000energyefficientlightglobepacksacross35locationsinNSW,registeringabout113,000abatementcertificatesundertheprovisionsofNSWGGAS.Thepromotionwaswellreceivedinthecommunity,andalsohelpedraiseIntegralEnergy’sbrandawareness,particularlytoout-of-franchisecustomers.ThepromotionentitledIntegralEnergytoreceive$1.5millioninNSWgreenhouseabatementcertificates(NGACs)revenue.

Customer service improvements

IntegralEnergy’scustomerinteractioncentres(CICs)atHuntingwoodandConistonmanagetheretailandnetworkcallsfromourcustomers.In2006–07,theCICshandledmorethan1.2millioninboundcalls.

On30April2007,thenewOutageManagementSystem(OMS)wentlive.WeusetheOMStocoordinateourresponsetofaultsontheelectricitynetwork.TheOMShasimprovedourfeedbacktocustomersbyprovidingthemwithmoredetailedinformationaboutnetworkfaultsandrestorationtimes(seethecasestudyonpage25).

CICstaffattended2,884hoursoftrainingduring2006–07,60%morethanthetraininghoursattendedin2005–06.ThetrainingincludedmodulesonthenewOMSand INgreen.CICalsoassistedwithtrainingontheQueenslandmarketforIntegralEnergystaff.

IntegralEnergy’sstrongfocusonstaffdevelopmentandcommitmenttoqualitysawCICteamleaderscomplete1,308hoursofcoachingwiththeirstaff,representinganincreaseof40%onhourscompletedin2005–06.

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Switching on the Sunshine State

In2007,IntegralEnergyenteredtheQueenslandsmallretailenergymarket.

Aspartofourstrategyforstabilisingcustomernumbersandimprovingthefuturerealisablevalueofourbusiness,weassessedthefeasibilityofenteringtheQueenslandmarketatthestartoffullretailcontestabilityon1July2007.

IntegralEnergy’sobjectivesinenteringtheQueenslandmarketwerethreefold:

provideQueenslandcustomerswithchoice

growIntegralEnergy’soverallretailcustomerbaseby100,000customersoverthenextthreeyears

gainacompetitiveadvantagethroughimprovedcapabilitiesandmoreflexibleretailsolutions.

AconditionofentrytotheQueenslandmarketwasthattherewouldbenoadverseimpactonourcurrentbusinessactivities.

Innovative business model

AsweresearchedtheQueenslandmarketandplannedourentrystrategy,itbecamecleartousthatIntegralEnergy’sretailsystemscouldnotbemodifiedintimetomeetthe1July2007start-updateandthatitwouldbetoocostlytosetupoursystemstomeettheQueenslandmarketrequirements.

WeoptedforaninnovativebusinessmodelwhichseesIntegralEnergy’scoreretailingskillsunderpinningapartnershipwithaBrisbane-basedfirmprovidingbusinessprocessingsupport.

Thepartnershipgaveusthespeedandflexibilitytogetintothemarketatthestartofderegulation.Italsomeantwecouldbenefitfromourpartner’sretailsystems,whichweretailoredtoQueensland.Andournewcustomersinthestatewerebeingservicedbylocals—essentialforbusinesssuccessintheSunshineState.

Important growth opportunity

QueenslandrepresentsacriticalgrowthopportunityforIntegralEnergy’sretailarmaswedealwithintensecompetitionwithinourWesternSydney/IllawarrafranchiseandmarketsaturationinotherpartsoftheNSWmarket.

With1.3millionsmallcustomersandattractivecommercialmargins,theEnergexsupplyregioninsouth-eastQueenslandisourinitialtargetmarketinthestate.

Performance to date

Takingadvantageoftheauthorised‘pre-salesperiod’,wecommencedsalesactivityinQueenslandon14May2007.WeheldacarbonneutraleventinBrisbanetomarkourlaunchintoQueensland.OurfavourablewholesalepositionandanextremelypositiveresponsefromQueenslandcustomersmadethisaverysuccessfulsalesperiod.BytheendofJune2007,IntegralEnergyhadacquiredapproximately15,000Queenslandcustomers.

CompetitivepricingandbeingeasytodealwitharethekeystoIntegralEnergy’spropositiontoQueenslandcustomers.Thisisreflectedinseveralinitiatives,includinganonlineself-serviceportalwhichprovidesQueenslandcustomerswithaccesstonextscheduledreads,customerdetails,billingandbasiccreditcardpaymentfacilities,alongwiththeabilitytorequestservicesandlodgequeries.

AsanewentranttotheQueenslandmarket,wehaveadoptedafresh,light-heartedadvertisingcampaign.

ThesepositiveinitialresultshaveprovidedanextremelysolidplatformforIntegralEnergy’sQueenslandoperation.

In2007–08,weaimtoconsolidateourcustomerbaseinQueensland,whileusingtheflexiblebusinessmodelthatwehaveestablishedasabasisformakinginroadsintoothermarkets.

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ElectricalFitterMechanic,AmritPratap(left)andPlantOperator,StevenChand.

Our‘ShaveHeaps’campaignhasresonatedwithlocalcustomersandstronglysupportedoursalessuccessinQueensland.

‘Ourmostnotablesuccessinresidentialcustomersaleswas theincreaseincustomerinterestinrenewableenergy.’

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Thebenefitsofincreasedcoachingwereimmediatelyevidentinthe‘Retail&CustomerServices–CustomerSatisfactionIndex’resultsfor2006–07.Theoverallcustomersatisfactionrateincreasedto83.4%fromthepreviousyear’sresultof81.1%.

StaffintheCustomerCarebranchrespondedtocustomers’queriesonhowtoreduceenergyconsumptionandreducetheirbillsbyundertakingresidentialenergyaudits.Staffperformedmorethan760on-sitehomeenergyauditsand243energyassessmentsoverthephoneforIntegralEnergycustomers.

InSeptember2006,weimplementedanonlinebillfacility,whichallowsourcustomerstoreceivebillsviaemailandtostorebillinformationelectronically.Asattheendofthefinancialyear,morethan4,500customershadtakenuptheelectronicbilloption.Thenumberofpaperbillsgeneratedhasbeenreducedby18,000perannum,whichhashadapositiveenvironmentalimpact.

Retailer of last resort

AttheendofJune2007,IntegralEnergybecametheretaileroflastresortformorethan2,400customerswhenEnergyOnePtyLtdsuspendeditselffromtheNationalElectricityMarket.WewereabletoestablishongoingaccountsformostofEnergyOne’sresidentialandsmallbusinesscustomerswithinaweekofnotificationofitssuspension.AsmallnumberoflargeretailaccountsweretransferredfromEnergyOnetoIntegralEnergy,withmostofthoseretailcustomerssigningnegotiatedsupplyarrangementswithus.

Regulatory changes

Inlate2005,theMinisterforEnergyandUtilitiesestablishedaworkinggrouptorecommendadditionalmeasuresforreducingthenumberofcustomersdisconnectedbecausetheyhaddifficultypayingtheirbills.Asaresult,draftregulatorychangeswereannouncedinApril2007.ThosechangesincludedarequirementthatretailersprovideadditionalinformationondisconnectionactivitytotheDepartmentofWaterandEnergyandNSWIndependentPricingandRegulatoryTribunal,andthatthey

offerapaymentplantocustomerswhoareunabletopay.Thelegislationwaspassedandbecameeffectiveon1July2007.

Wemadeanumberofchangestoouroperationsinourretailbusinessin2006–07toensurethatwewerepreparedfortheimplementationoftheregulatorychanges.

InApril2007,draftregulatorychangestonegotiatedsupplyagreementswereannounced.Thosechangesmeanthatfrom1July2007customersareabletoacceptcontractswithoutsignature.Theretailbusinessiscurrentlyassessingtheimpactofthosechangesonexistingsalesandmarketingprocedures.

Trading

Throughout2006–07,thetradingdivision’sactivemanagementofIntegralEnergy’sportfoliominimisedourexposuretoahighlyvolatilemarket.

ThetradingareamaintainsouractivepresenceinthewholesaleNationalElectricityMarket,managingourorganisation’sexposuretospotelectricityprices.ThedroughtputpressureonIntegralEnergyandotherretailers,contributingtorecordhighwholesaleelectricitypricesacrosstheNationalElectricityMarket.Thespotpriceforelectricityusuallyaveragesbetween$30and$40perMWhandcanspikeashighas$10,000perMWh.However,althoughtheaveragepoolpriceforJulytoDecember2006was$30.60perMWh,thisrosedramaticallytoanaverageof$87.31perMWhintheJanuarytoJune2007period.

Thetradingareaalsosupportedourorganisation’sexpansionintonew,profitablemarkets.IntegralEnergywasabletowincustomersbaseduponthetradingarea’sstrategicpositioning.ForwardplanningandgoodcommunicationwithotherpartsofourorganisationenabledthetradingdivisiontoputIntegralEnergyintoastrongpositionforoursuccessfulentryintotheQueenslandretailenergymarket.

Duringthisparticularlydynamicperiodfortheenergysectortherewasalsoincreasedpublicdebateovercarbontradingandothernewenvironmentalschemes.Thisadded

totheotherchallengesalreadybeingmanagedwithinthetradingdivision.Fivetechnicaltradingbreacheswerereportedin2006–07.

ThetradingdivisioncontinuedtodirectIntegralEnergy’sobligationstotheemergingrenewableenergymarketsbyensuringcompliancewithmandatedschemes,suchastheNSWGreenhouseGasAbatementSchemeandtheAustralianGovernment’sMandatoryRenewableEnergyTarget.

Support systems

Finance

During2006–07,thefinancestructurewasalignedtothenewfinancevisionof‘pro-activelypartneringtoachievesustainablesuccess’.Proactivepartneringwillbeacriticalfactorintheongoingshiftofthefinancebusinessmodeltoensurecontinuedrelevanceasaresponsiveandproactivecontributortothecorporation’ssustainablesuccess.BestpracticefinanceteamsaresupportingtheirboardsandCEOsbydrivingcorporateperformanceaswellasperformingthetraditionalstewardshiprole.Thefinancebusinessfocuswillcontinuetobeondevelopingcapabilityinrespectofprocesses,structure,systemsandpeople.

Ourfinancialriskmanagementteamextendeditscapabilitiesduringtheyearwithadditionalresourcesandenhancedriskmetrics.TheMiddleOfficeRiskSystemcalculatescashflowatrisk,earningsatrisk,potentialcreditexposureandmark-to-market.Anin-housecreditmodelwasdesignedandbuilt,andisabletodelivertradingreportsdaily.IntegralEnergyhassolidfinancialriskinfrastructureandthetechnicalresourcestocontinuebuildingitsfinancialriskmanagementcapabilities.

TheEmailApprovalWorkflowProjectwasintroducedduring2006–07,withbenefitsofreducedpaperflow,increasedefficiency,abilitytotrackinvoicesandenhancedproceduralcompliance.Thesystemworksbysendingdailyemailalertstorelevantmanagersrequestingapprovalforpurchasesandisintegratedwiththeaccountingsystem.

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IntegralEnergychangeditsprimarybankingpartnerlatein2006,resultinginreducedbankcharges,increasedinformationavailableinthepaymentchannelusedbyourcustomers(reducingcollectioncosts)andelectronicinterfacingofadditionalcollectiondataensuringmoreefficientprocessingofcustomerpayments.

Information and communications technology

In2006–07,theinformationandcommunicationstechnology(ICT)investmentplanfocusedonsystemsandproceduresthatwoulddelivervalueandimprovementstoproductivityratherthan,asitdidinthepast,ontheautomaticrenewalofassetsandinfrastructureregardlessoftheirvaluetothebusiness.

TheOMSwascommissionedinApril2007withgreatsuccess:itquicklyproveditsabilitytohandletheoutagesresultingfromalargestorm,providingcustomerswithmoreaccuratepredictionsofsystemrecoverytimesandmanagementwithabetterunderstandingofoutageactivity(seepage25).

Improvementstotheworksmanagementsystem,enhancementoftheGISeditorandcontinuedworkonthequalityofassetdataandentryofthatdataintoourmaintenancesystemssupportedouroverallnetworkassetmanagementstrategiesanddecisionmakingprocessesduringtheyear.

ThelaunchofIntegralEnergyproductsinQueenslandinvolvedaninnovativeoutsourcedbusinessandsystemsmodel.Themodel,whichwasspeedilydeployed,provideduswiththecostflexibilitytomatchtherapidlychangingbusinessrequirementsofthenewQueenslandretailbusiness.Ournewwebsite,whichincludesanenergycalculatorandsimplifiednavigation,alsosupportedourentryintotheQueenslandmarket.

In2006–07,weinstalledatop-of-the-rangetelephonesystemandplasmascreensonthetradingfloortoensurethatallourtradersareabletoreceivemarketinformationinrealtime.

Wepreparedourtechnicalsystemsanddevelopedtacticalplansfordisasterrecoveryforawiderange

ofcriticalbusinessprocesses.Wesuccessfullytestedtradingandmeteringsystemsandincludedtheminourannualdisasterrecoverytestingprocesses.

Wefocusedonestablishingbestpracticeinformationsecurityprocessesandsystemsthatareinlinewithnationalstandards.Revisedsecuritypoliciesarenowinplaceandtheyaresupportedbyuserawarenessprogramsandenhancementstothesecuritytechnicalarchitecture.

2006–07wasthesecondyearoftheinitialfour-yearcontractwithLogicaandOptus.Ouroutsourcingrelationshipwiththosepartnerswasstabilised,andoperationalperformancewasgenerallyofahighstandard.Inthefinaltwoyearsofthecontractwewillestablishcontinuousimprovementprogramstoaddressfeedbackfromusersandtodrivedownthecostofstandardoperationalactivities,therebysupportingtheintroductionofnewtechnologies.

Supply chain

IntegralEnergyvaluesitsrelationshipwithsuppliers.Werecognisethatanefficientsupplychainisthecornerstoneofbusinessprosperityandofourabilitytodeliversafeandreliableenergytoallourcustomers.Ourapproachtoprocurementisunderpinnedbyacommitmenttopromoteopenandeffectivecompetitionandobtainthebestvalueformoney.Mostrequirementsforgoodsandservicesarecompetedforintheopenmarketviarequestsforexpressionsofinterestorrequestsfortenders.

Morethan50%ofthe$400millionwespentduringtheyearongoodsandserviceswascoveredbyIntegralEnergyorStateContracts

ControlBoard(NSWDepartmentofCommerce)contractsorsupplierpanels,thetypicaldurationofwhichisthreeyears.GoodsandservicesthatweresubjecttonewIntegralEnergycontractsorsupplierpanelsestablishedduringtheyearincludeddistributiontransformers,transmissioncable,switchgear,meters,substationbundconstruction,securityfencing,printingservices,marketresearch,debtrecovery,security,smashrepairs,anddoor-to-doorandtelesalesservices.

Weestablished94newcontractsorsupplierpanelsin2006–07.

InkeepingwithIntegralEnergy’splanstostreamlineitsprocurementprocessesandimprovethewayitinteractswithsuppliers,thefollowinginitiativeswereimplementedduringtheyear.

Weimplementedane-tenderingsolutiontostreamlinethetenderprocess,improvereportingandenhanceinformationsecurity.

WeredesignedandrelaunchedthesuppliersectionofourwebsitetocoincidewithIntegralEnergy’sentryintotheQueenslandretailenergymarket.Thesuppliersectionofthewebsitehasanewlookandfeel,easiernavigationandmoredetailedinformationforsuppliers,includingalistofkeycontacts.

OurStatement of Business Ethicswasupdatedandcanbedownloadedfromwww.integral.com.au

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IntegralEnergycontinueditscommitmenttoresearchand developmentin2006-07.MotorMechanicGaryEdmunds modifiedatrailerwinch.

Economic Performance AnnualPerformanceReport2006–07

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RegularsuppliernewslettersaresenttothesuppliercommunitytoupdatesuppliersoninitiativesunderwayatIntegralEnergy.

AnewmastersupplyagreementthatstreamlinestheengagementofkeyengineeringsupplierswasreleasedtoselectedsuppliersinJuneandwillbeprogressivelyimplementedtomajorsuppliers.

Property

Wehaveexperiencedgrowingcommercialpressuresfrommajorlandreleasesthatdemandthetransformationofourexistingruralnetworktoadenseurbanstyle.Thishasrequiredacontinuedinvestmentinadditionalengineeringandfieldstaff,alongwiththenecessaryfacilitiestoensurestaffareableto

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respondto90%ofournetworkcustomerswithinonehouroftravellingtime.

In2006–07,theGlendenningCivilWorksCentrewascompletedandnowprovidescentralisedengineeringresourcesforsubstationandfieldsupportcentres.AnewfieldsupportcentreatMossValeisunderconstructionandwillreplacetheBowraldepottoprovideimprovedcoveragetocustomersinthesouthernhighlands.Thisprojectalsoincludesadesignatedpowerpolestorageyard.Afurthertwopoleyardsarebeingcompletedin2007–08,toensureaneffectiveresponseduringstormsandbushfires.

OurnewtechnicaltrainingcentreadjacenttotherecentlycompletedHoxtonParkFieldServiceCentrewillbefinishedmid2008.Thiswillprovidecentralisedtrainingforourincreasingnumberofapprenticesandongoingtrainingforourfieldstaff.PlanningfortherefurbishmentofourexistingfieldsupportcentreatParramattaiscomplete.Constructionwillcommencein2007–08andwillallowadditionalfieldstafftobelocatedclosetotheexpandingParramattaCBD.

Strategicplanningofourpropertyportfoliohasbeenmaintainedtoensurethatcustomergrowthiscateredfor.Wehaveimplementedsustainablepracticesinournewfacilitiestoreduceourenvironmentalfootprint.Thisincludestheuseofrecycledpowerpolesforwoodenflooring,rainwaterharvestingforvehicle

washing,andpassiveandactiveenvironmentaldesign.Weareprogressivelyimplementingourenvironmentalinitiativeinexistingfacilities,forexampleintheenvironmentallysustainableupgradeofHuntingwoodoffice.

Security

IntegralEnergyhascontinuedtoupgradeitssecuritytoensurethesafetyofthecommunityandthesecurityofpowersuppliesandofourelectricalassets.

CoppertheftfromourworksitesandfacilitiesremainsanongoingchallengeforIntegralEnergyandtheelectricityindustry.Thievesriskseriousinjury,ifnotelectrocution.In2006–07,onememberofthepublicwashospitalisedwithseriousburnsafterheallegedlysawedthroughalivecableatasubstation.IntegralEnergyhasdevelopedanintegratedplantoaddressthisissue,whichincludesparticipationinautilitiestaskforce.

Figure8showstotalcostsforcoppertheftincidentsfortheperiod1July2006to30June2007.

Alarmsystemswereinstalledatseveralfieldsupportcentrestoprovideimprovedaccesscontrolandalarmstocoverbuildingsandyardareas.TheinstallationofintruderalarmsandCCTVatfourtransmissionsubstationshascommencedandplanningisunderwayformoresubstationstohavesuchsystemsinstalled.

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Figure 8Cost of copper theft �006–07

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Improving our response systems

On24September2006,awindstormstruckpartsofIntegralEnergy’snetwork,causingextensivedamageandinterruptingelectricitysuppliestomorethan170,000customers.TheworsthitareasweretheSouthernHighlandsandtheHawkesbury,whichwerelashedbywindgustsofupto120kilometresperhour.

Todealwiththeconsequences,wedrewonourexperienceofothermajorincidents,includinganevenworsewindstorminAugust2003.Thistime,IntegralEnergy’sresponseandrestorationofsupplieswerefasterandmoreefficient.

Therecoveryoperations,whichcostmorethan$2millionandrequiredresourcesfromacrosstheorganisation,werecompletedquickly,withelectricityrestoredtoallcustomerswithinthreedays.Ourcrewsreplacedmorethan40powerpoles,130cross-armsand22kilometresofconductors.IntegralEnergy’sincidentresponseteamledthework,andallstaffdisplayedcooperationandteamworktogetthejobdone.

Aftertheevent,ahigh-levelinternalreviewexaminedourresponseandidentifiedopportunitiesforfurtherimprovement,suchasgreateruseofourwebsitetokeepcustomersandotherstakeholdersinformed.

InApril2007,weintroducedthenewOutageManagementSystem(OMS)tocoordinateourresponsetofaultsonourelectricitynetwork.Stafffeedbackwasvitalintestingandrefiningthenewsystem,whichwedevelopedtoreplaceour14-year-oldEmergencyServicesResponseplatform.

TheOMShasalreadymaderestorationworkmoreefficientbygivingourcontrolroomandour‘stormcentres’abetteroverviewofoutagesandthecrewsavailabletoattend.ThesystemincorporatesmapsupdatedviaourGeographicInformationSystem(GIS),andinterfaceswiththeinformationsystemusedbyourcustomerinteractioncentres.

TheOMShasmadeitquickerandeasiertoshareinformationwithourstaffandkeyexternalstakeholders,includingthegovernment,regulatorsandthemedia.Wecannowgivecustomersanestimateofthetimeitwilltaketorestoretheirsupply,eitherthroughcustomerservicerepresentativesorthroughinteractivevoicerecordings.

Anaddedbenefitofthenewsystemhasbeenadropintheaveragecall-handlingtimefornetwork-relatedcalls.

‘IntegralEnergyhas continuedtoupgrade itssecuritytoensure thesafetyofthe communityandthe securityofpower suppliesandofour electricalassets.’

Future challenges

InMay2007,theNSWGovernmentestablishedaninquirytoseekadviceontheactionsthatarerequiredtodealwithclimatechangeandenergygenerationandsupply.IntegralEnergy’ssubmissiontotheOwenInquiryinJune2007focusedontheretailsideofitsbusinessandtheissuesandrisksassociatedwithitsretailtrade.

TheinquiryisduetoreporttotheNSWGovernmentattheendofAugust2007.Wewillassessthefindingsoftheinquirytobetterunderstandthelongertermimplicationsfortheretailbusiness.

Additionalprioritiesforusin2007–08willinclude:

reviewingIntegralEnergy’svisionandstrategicdirection

continuingtodeliversustainablereturnstoourshareholder

maintainingourefforttoimprovethereliabilityofournetwork

cateringforthegrowthneedsacrossthefranchise

exploringfurtheroptionstodeploynewtechnology

positioningourretailbusinesstorealiseitslong-termvalue,includingbuildingourQueenslandcustomerbaseandcontinuingtoidentifyopportunitiestoleverageourinnovativeretailbusinessmodelinothermarkets.

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ITPlanningandInfrastructureteammembersArtsCalub(left) andBobLintonwiththenewtradingfloortelephonesystem

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Environmental Performance

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Did we meet our objectives?

2006–07 objective Progress to date Status 2007–08 objective

Implementastrategicapproachtoenvironmentalmanagementthatalignswithenvironmentalpositionstatementsandprinciples.

Environmentstrategywasrevisedtoreflectincreasedfocusonclimatechange. ¸

Establishandimplementactionstoachieveourstrategicintent.

Translateourclimatechangecommitmentsintoaction.

BlacktownSolarCityannouncedinNovember2006andpricingtrialshavecommenced.

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Publiclydefineandachievetargetstoreduceourcarbonfootprint.

Enhanceriskmanagementpracticestominimiseenvironmentalharm.

Therisk-basedsubstationbundprogramwascompletedtogetherwiththefirstyearoftheNetworkContaminatedLandProgram.Environmentalriskassessmentcontinuestooccuronanannualbasis.

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Continuetoidentifyopportunitiestopredict,manageandpreventenvironmentalimpacts.

Achieveasustainedreductioninwastegeneration.

Althoughwastevolumesincreasedduetoimproveddatacapture,arangeofinitiativesresultedinincreasedvolumesofrecycledwaste.

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Developawasteminimisationplantodriveimprovementsinwasteminimisationandrecycling.

Driveculturalchangetoachieveperformanceimprovements.

Environmentalpositionstatementandprinciplesdevelopedinconsultationwithemployees.

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Provideemployeeswiththetoolsandknowledgetoachieveenvironmentalimprovements.

Proactivelyengagewithstakeholderstoshapeourenvironmentalresponse.

TogetherwiththeDepartmentofEnvironmentandClimateChange,apilotapproachwasdevelopedforworkinginnationalparksandreserves.

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Developaneffectiveissuesmanagementpracticetoproactivelyaddressstakeholderconcernsandopportunities.

Key

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¸ objectiveachieved

p ongoingobjectivewithtargetsmettodateorpositiveprogressshown

Manager,StrategicDevelopment,MareeZammit,withoneoftheenergy-savinglightglobes IntegralEnergyisprovidingforBlacktownCityresidentsaspartofBlacktownSolarCity.

Environmental PerformanceAnnualPerformanceReport2006–07

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Performance indicators

Compliance

TherewerenoenvironmentalincidentstobereportedundertheProtection of the Environment Operations Act 1997in2006–07—asignificantimprovementonthepreviousyear.

Expenditure

Environmentalexpenditureexceeded$13.5millionin2006–07,anincreaseofmorethan40%onthepreviousyear.Theincreasewasassociatedwiththecompletionofourmajorsubstationbundprogramandaproactivefocusontheinvestigationandremediationofcontaminatedland.

Greenhouse gas emissions

TotalgreenhousegasemissionsdirectlyattributedtoIntegralEnergyactivitiesdecreasedto27,162tonnesofCO2e,comparedto27,493tonnesofCO2ein2005–06.

Electricityconsumptiondecreasedfrom11,763MWhto10,482MWh,reflectingtherefurbishmentandreplacementofanumberofinefficientdepotfacilities.

Continuingonfromtheimprovementsmadelastyear,theIntegralEnergyFleetImprovement

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Planresultedina2%decreaseinoverallfuelconsumptionofitspetrolvehicles,savingmorethan37,000litresofpetrol.

Totalgreenhousegasemissionsrelatedtolossesfromournetworkdecreasedby9.3%in2006–07to599,538tonnesofCO2e.Thisdecreaseisduetocapitalinvestmentsresultinginarobustandsecurenetwork.

Oil regeneration

Atotalof844,904litresofoilwasremovedfromthenetworkin2006–07;43%wasrecycledforreuseandtheremainingoilwasrecycledthroughenergyrecovery.

Waste management and recycling

Totalwastedisposalincreasedconsiderablycomparedwithdisposalin2006–07,reflectingafocusontheremediationofcontaminatedlandandimproveddatacapturemethods.Weexpectthatreportedwastevolumeswillcontinuetoincrease,reflectingimprovementsindatacaptureandreporting.

Water consumption

Totalwaterconsumptiondecreasedfrom41,661kilolitresto33,944kilolitres.Since2002–03,waterconsumptionhasdecreasedbymorethan45%,despiteanetincreaseofmorethan500employees.

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DisposalAdministrator,CandiceHarris,withstocksof IntegralEnergyhardhatsrecycledinMay2007.

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Environmental performance in �006–07

Environment policy

AtIntegralEnergyweknowthatenvironmentalperformancemustcontinuetoevolveifwearetomeettheexpectationsofourstakeholdersandthewidercommunity.

In2006–07,ourenvironmentalperformancecontinuedtoimprove,reflectingthestrongcommitmentoftheorganisationandtheongoing

effortsofouremployees.Aspartofourcommitmenttoimprovingourenvironmentalperformance,werevisedbothourenvironmentalpolicyandourenvironmentalpositionduringtheyear.

Ourrevisedposition(seebox)describesourreasonforpursuingimprovementsinenvironmentalperformanceandreflectsourunderstandingthatourbusinesssuccessisintrinsicallylinkedwiththeenvironmentsandcommunitiesinwhichweoperate.Ourpositiondefinesthefuturewewillcreate

aswereflecttheneedsoffuturegenerationsinourday-to-dayoperations.

Thefollowingthreeprinciplesreflectourcoreenvironmentalbeliefs:

theenvironmentiseveryone’sresponsibility

dothingsrightthefirsttime

beproactive,notreactive.

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Figure �� Waste Reduction and Purchasing Policy (WRAPP)Majormaterialspurchased(tonnes)

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Environmental position statement

Wewillrespecttheenvironmentandcommunityinwhichweoperateandwillupholdtheneedsoffuturegenerations.

Principles

The environment is everyone’s responsibility

Inadditiontotherolethecompany’smanagementmustplay,itisincumbentuponeachemployeetosharetheresponsibilityofmanagingtheenvironmentalrisksassociatedwithouroperations.Asacompany,wewillsupportlearning,committoimprovingperformance,andworktocreateaculturewheremanagingenvironmentalissuesis‘businessasusual’.

Do things right the first time

Asanowneroflong-lifeassets,werecognisethatouractionstodaycanhaveanimpactonfuturegenerations.Wewillworktochallengeourassumptionsandgainafullerunderstandingofthelong-termimpactofourdecisions.

Be proactive, not reactive

Ouractionswillmovebeyondlegislativerequirements:wewillworkwithstakeholdersandourcustomerstoidentifyenterprisingsolutionstoexistingrisksandactprudentlywhenrisksareunclear.

Environmental PerformanceAnnualPerformanceReport2006–07

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Recycled 6,816

Landfill 5,295

Liquid/hazardous 1,267

Soil and construction landfill 25,218.02

Soil and construction recycled 4,735

Figure �� Waste, by type(tonnes)

Inrevisingourenvironmentpolicy,wetranslatedourenvironmentalpositionstatementandprinciplesintothefollowingactions:

respondingtoclimatechange

improvingourperformance

continuingtolearnanddrivingculturalchange

engagingwithstakeholders.

Responding to climate change

Asanenergycompany,webelievethatclimatechangeisoursinglegreatestenvironmentalchallengeifwearetofulfilourcommitmenttofuturegenerations.Human-inducedwarmingoftheclimatehasbeendescribedbytheIntergovernmentalPanelonClimateChangeas‘unequivocal’.Earlyaction,supportedbycleargovernmentpolicies,isimperativeifwearetoplayaroleinmanagingthisunprecedentedrisk.

Aswemoveintoafuturewherecarbonisappropriatelycosted,wewillneedtochangethewayinwhichweoperateandthestrategiesthatdirectouroperations.Whileourresponsewillcontinuetoevolveandstrengthen,ouractionstodatehavebeentargetedandproactive.Specifically,wecontinuetoworkwithourcustomerstoempowerthemtomakemoresustainablepowerchoices.

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On13November2006,BlacktownbecamethefirstSolarCityinNSW.SolarCitiesisa$75millioninitiativeannouncedinJune2004bythePrimeMinisterintheEnergyWhitePaper,Securing Australia’s Energy Future.AsaresultofIntegralEnergy’suniquepartnershipwithBPSolar,BlacktownCityCouncil,ANZBank,LandcomandBigSwitchProjects,theBlacktownSolarCityprojectwillresultintheabatementof24,000tonnesofgreenhousegasemissionsandsavingsof$3milliontocustomersintheirelectricitybills(seepage31forfurtherdetails).

Thispartnershipproject,thefunctionofwhichistoinfluencecustomerbehaviourandreduceenergydemand,willalsoenableinnovativeenergyefficiencytrialsandprogramstobeevaluated.

In2006–07wemadesignificantprogressinourdynamicpeakandseasonalpeakpricingtrials.Theaimofthetrialsistoobservechangingpatternsofenergy-usebehaviourbasedoncustomerresponsetopricingsignals.Morethan1,200customersareparticipatinginthetrials,includingacontrolgroupof340customers.Initialresultsofthedynamicpeakpricingtrialindicateapositivecustomerresponseintermsofpeakdemandreduction.Importantly,asdemonstratedbycomparisonswiththecontrolgroup,thedynamicpeakpricingtrialisalsodrivinganoveralldecreaseinenergyconsumption.

Inparallelwithourpricingtrials,weinitiatedanadvancedmeteringtrialinearly2007.Thetrial,incorporatingmorethan3,000customers,isdesignedtoreducemeteringcostsanddevelopaplatformfordemandmanagementandinnovativepricingsolutions.Thetrialwasinterruptedduetotheneedtoimprovethemeterdesign.WeexpecttheprojecttoresumeinNovember2007.

InJune2000,IntegralEnergyinitiatedanagreementwiththeNSWGovernmentandStateForeststodevelopagreenhouseforestinWesternSydney.LocatedinCecilPark,the5.8hectaresiteservestobothsequestercarbonandenhancetheCumberlandPlainsWoodlands,anendangeredforestcommunity.

ForestsNSWrecentlyestimatedthetotaltreebiomassofthesiteat90tonnesofCO2e.Overthecourseoftheproject,itisestimatedthattheforestwillsequester1,483tonnesofCO2e.

TheNSWGovernmentrequiresenergyretailerstoofferallnewcustomersandcustomersmovingaddressaminimum10%accreditedrenewableenergyproduct.In2006–07,wesuccessfullyretainedourGreenPowerretailaccreditationandexpandedourstableofGreenPowerproductstoensurethatallourcustomershaveaccesstoaGreenPowerproduct.Thecurrentproductlistincludes: INgreen Home, INgreen Pure, INgreen Business,

Oursmartmeteringtrialsareencouragingcustomers touseenergymoreefficiently.

BlacktownSolarCityisattractingstrong communityinterest.

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INgreen Power, INgreen Future andBusinessGreen.OurGreenPowercustomerbasecontinuedtogainstrength,withnumbersreachingmorethan24,000attheendofJune2007.

EnergyconsumptionassociatedwithIntegralEnergy’sactivitiesdecreasedin2006–07,reflectingourrefurbishmentandreplacementofanumberofinefficientdepotfacilities.

OurgoalofreducingourcarbonfootprintcontinuestobereportedthroughGreenhouseChallengePlus,avoluntaryagreementrunbytheAustralianGreenhouseOffice(AGO).

In2006–07,IntegralEnergyentereditseleventhyearasavoluntaryparticipantintheChallengePlus

ProgramrunbytheAGO.ThereportissuedbytheAGOprovidesuswithavaluabletoolformeasuringourprogressinreducingemissions.

IntegralEnergycontinuedtomeetitsobligationsunderthe Mandatory Renewable Energy Target Act 2000topurchaseaproportionofitsenergysupplyfromrenewableenergygenerators.Wealsoparticipatedintheconsultationprocessforthedevelopmentofstate-basedrenewableenergyschemesinNSWandVictoria.

Ourobligationsunderthenewlyestablished13%GasSchemetopurchase13%gas-firedgenerationinQueenslandwerealsometin2006–07.

Business energy efficiencyOurworkwithlargecustomerstoreducepeakdemandandincreaseefficienciescontinuedduringtheyear,withnewprogramscommencinginCampbelltownandtheUnanderraindustrialarea,andongoingprogramsinParramatta,Westmead,BlacktownandLiverpool.

LaunchedinFebruary2007,theINbusinessEnergySaversUnanderraprogramhadalreadyattracted17businessesbytheendofJune2007.IntegralEnergyandWollongongCityCouncilwanttorecruit30Unanderrabusinessestotheprogramandachievereductionsingreenhousegasemissionof21,000tonnesperyear,equivalenttotakingapproximately4,800carsofftheroad.

Blacktown Solar City—the power to change

AnnouncedinNovember2006,theBlacktownSolarCityprojectoffersnearly300,000Blacktownresidentsanopportunitytoreducegreenhousegasemissionsandsaveupto$3milliononelectricitybillseachyear.

AspartoftheAustralianGovernment’sSolarCitiesinitiative,IntegralEnergyanditsconsortiumpartners—BPSolar,BlacktownCityCouncil,ANZBank,LandcomandBigSwitchProjects—areaimingtodemonstratehowsmartmeters,solarpower,energyefficiencyandalternativepricingcanempowercustomerstomakesustainableenergychoices.

IntegralEnergy’srolefocusesonfourvoluntaryEnergySavertrials–airconditioningcycling,poolpumpcontrolandtwoalternativepricingtrials.Theseaimtoreducepowerusageduringpeakdemandperiodsbyprovidingcustomerswithsimpletoolsandincentives.Thetrialswillenableefficientuseofnetworkcapacity,ofwhich11%isusedforjust25hoursperyear,whenextremetemperaturesdriveexceptionallyhighdemand.

TheAirConditionerSavertrialinvolvesparticipants’airconditionersbeingcycledonfor40minutesandthenofffor20minuteseachhourduringselectedoccasionsofhighelectricitydemand.Apreviousstudyfoundthathouseholdtemperaturesrisebyanaverageofonly1-2ºCduringthistime,whileenergyconsumptionisreducedbyupto30%.

Similarly,participantsinPoolPumpSaverswillhavetheirpumpsturnedoffautomaticallyduringpeakdemandperiodsandturnedonlaterintheevenings.

Thepricingtrialsaimtoencourageenergyreductionandchangesinenergyusepatternsinresponsetopricesignals.AspartoftheDynamicPeakPricingtrial,apremiumtariffappliesduringalimitednumberofpeakdemandperiodswhileparticipantspayareducedtarifffortheremainderoftheyear.

IntheSeasonalSavertrial,participantsarechargedhighertariffsduringthewarmermonthswhendemandishigher,andareducedrateatothertimes.

Participationisvoluntaryandcustomersarepaid$100pertrial.

EligiblesuburbsforthetrialsincludeAcaciaGardens,Blacktown,Glenwood,KellyvilleRidge,KingsLangley,KingsPark,LalorPark,Marayong,Parklea,Prospect,QuakersHill,SevenHills,StanhopeGardensandToongabbie.

Togetherwithfreehomeenergyconsultations,energyefficiencypacks,discountedsolarproductoffersandbusinessprograms,theBlacktownSolarCityprojectisaninnovativeapproachtotacklingtheregion’senergychallenges.

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Theprograms,conductedinpartnershipwithexternalserviceprovidersandourcustomers,havereduceddemandbynearly8MVAtodate.

Improving our performance

IntegralEnergyiscommittedtotheongoingmeasurementandimprovementofourenvironmentalperformance.OurEnvironmentalManagementSystem,developedinaccordancewiththeISO4001internationalstandard,providesaframeworkfortheidentificationandmanagementofenvironmentalrisks.Aspartofthesystem,ouremployeesconsiderourenvironmentalrisksandhowwecanimproveourenvironmentalperformanceannually.Thesignificantenvironmentalrisksidentifiedbyourstaffmaybesummarisedasfollows:

greenhousegasemissions

regulatorycompliance

contaminationofland

networkcapitalprogramandpotentiallyadverseenvironmentalimpacts

managementofvegetationgrowinginproximitytonetworkassets

bushfire

resourceconsumption.

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ProgressonactionplansdevelopedtoaddressoursignificantenvironmentalrisksisreportedmonthlytotheExecutiveEnvironmentalSteeringCommittee,whichcomprisesmembersoftheExecutiveteamandischairedbytheChiefExecutiveOfficer.

Regulatory compliance

IntegralEnergy’sgoalofzeroseriousenvironmentalincidentsrequiredtobereportedundertheProtection of the Environment Operations Act 1997(NSW)wasachievedin2006–07.Ourachievementreflectsthestrongfocusandinvestmentoftheorganisationinenvironmentalcompliance.

Ourcompletionofthezoneandtransmissionsubstationbundprogramin2006–07hasnowsignificantlyreducedourriskprofile.Thislong-terminvestmentinpollutionpreventionwillminimisetheriskofoillossintheeventofatransformerfailure.Togetherwithourincidentresponseteamandextensiveemployeetrainingprogram,weremainfocusedoncontinualimprovement.

Site investigation and remediation

Recognisingthepotentialimpactsarisingfromhistoricaloperationsandactivities,ourapproachtocontaminatedlandremainsproactiveandriskbased.Inaccordancewithariskassessment

model,in2006–07webeganaprogramtoinvestigatehigh-riskzoneandtransmissionsubstations.Theprimaryobjectiveofthefive-yearprogramistoassessthepotentialforsoilandgroundwatercontaminationwithinsubstationsites.Theprogramwillallowustodetectcontaminationearlyandreduceoravoidenvironmentalharm.

Althoughdepotsiteshavebeenlargelyremediated,workcontinuedonthecleanupoftheformerMintoDepotsite.AsreportedinIntegralEnergy’s2005–06annualreport,extensiveworkswererequiredtoremoveundergroundstoragetanksandremediateaffectedsoil.Duringthepastyear,significantprogresswasachieved,withsoilremediationworkslargelycompleted.In2007–08,wewillcontinueremediatingthesiteinaccordancewithresidentiallandusecriteria,themoststringentstandard.

Waste management

Managingtheby-productsofouroperationsremainsahighpriorityfortheorganisation.Decommissionedtimber,lightglobesandusedvehicleoilsareallexamplesofby-productsthatwereonceconsideredwaste.

Inpartnershipwithoursuppliersandcontractors,weareworkingtominimisethegenerationofwasteandidentifynewopportunitiesto

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Figure �5 Environmental expenditure ($)

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reuseorrecycle.In2006–07,weconsolidatedourwastecontractsandproviders.Thisstephasstandardisedwasteservicesacrossourfranchise,andsimplifiedtheintroductionofwasteminimisationinitiatives.Inaddition,theprocesshasimprovedthecaptureofdataandperformancemonitoring.

Otherachievementsin2006–07aredescribedbelow:

Morethan1,000tonnesoftimberpoleswererecycled,with50polesreusedastimberflooringandwallpanellingintherefurbishedheadofficecafeteria(seepage34forfurtherdetails).

Inpartnershipwithoursuppliers,1,500mobilephonesand11tonnesofIThardwarewererecycled.

Thedefaultsettingonofficeprinterswaschangedtodouble-sidedprinting,withmorethan600,000sheetsofpapersavedinsixmonths.

Co-minglerecycling(plasticandmetal)wasextendedacrossthefranchise,andincludesthediversionofrecyclablematerialfromlandfill.

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Oil management

Responsiblemanagementofoilresourcesremainedapriority,withmorethan18millionlitresinserviceacrossthenetwork.

Theoilrecyclingprocess,developedin2005–06,allowsbothPCB-freeoilandPCB-contaminatedoiltoberecoveredfromequipmentandrecycled.Further,theprocessresultsinfullrecoveryofscrapmetalthroughadecontaminationprocess.In2006–07,atotalof844,904litresofoilwasremovedfromthenetwork,with43%recycledforreuse.Remainingoil,typicallyofalesserquality,isreusedforenergyrecovery.

Aspartofourrisk-basedapproachtothemanagementofoilresources,wedevelopedaprogramin2006–07tominimisetheriskofoilspillsinsensitiveenvironments.Biodegradableoilwillnowbeusedindistributiontransformersthatarelocatedadjacenttowaterstorageareas.Intheunfortunateeventofaleak,theimpactonthesurroundingenvironmentwillbeminimised.

Tree management

In2004,IntegralEnergybecamethefirstenergycompanytoendorsetheEnergySupplyAssociationofAustraliaCodeofSustainablePractice.Commitmenttothecodeisincludedinourvaluesandreflectedthroughtheoperationofasafeandreliableelectricitynetwork.Intranslatingthecodeintopractice,werecognisetheneedtoachieveabalancebetweenourobligationsasaserviceproviderandthevaluesofthecommunityandsurroundingenvironment.

Thisbalanceisakeyelementinourapproachtomanagingvegetationnearournetworkassets.Duringthepastyear,thisapproachwastranslatedintoourTreeManagementPlan.Theaimoftheplanistopubliclycommunicateourapproachtomanagingvegetationinproximitytopowerlines.Inaddition,theplandefinesourpolicyontreeremovalorreplacementandprovidesguidanceonplantingnearnetworkassets.Forexample,anewbrochuregivesourcustomersadviceonsafeplantingnearpowerlinesandrecommendssomeappropriatespecies,suchastheHarpinBanksiaandHoneyMyrtle,whichhavealowmatureheight.

Cinemaadvertisementsfromtheearlytomid1900’sareamongtheheritageitemsheldanddocumentedbyIntegralEnergy.

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‘Aswemoveintoafuturewherecarbonis appropriatelycosted,wewillneedtochange thewayinwhichweoperateandthestrategies thatdirectouroperations.’

Cutting down our largest waste stream

AsIntegralEnergycontinuestorenewandrefurbishitssupplynetwork,thedisposaloftimberpolesgeneratesasignificantwastemanagementchallenge.Byweight,itisthelargestofIntegralEnergy’swastestreams.Untilrecently,itwassenttolandfill.

Since2004,whenapartnershipwasestablishedwithalocaltimberrecycler,approximately4,500tonnesoftimberhasbeenharvestedfromdisposedpolesforreuseandrecycling.Withmorethan300,000timberpolesinserviceacrossournetwork,andnearly2,500decommissionedinanygivenyear,IntegralEnergyrecognisesasignificantopportunitytorealisethefullongoingvalueofthisassetbyadoptingamorecomprehensiveapproachtotimberpolerecycling.

In2006–07weconductedareviewtoidentifyopportunitiestoexpandtimberrecycling.Itfoundthatdecommissionedtimberfromsmall-scalepolereplacementprojectswasalmostalwayssenttolandfillbecausethelowvolumesmeantitwasnotfeasibletostore,collectandtransporttheresourcetodistantrecyclers.

Toaddressthosecostandlogisticalbarriers,apilotcollectionprogramhasbeenestablishedincollaborationwithourwastecontractorandAustralianArchitecturalHardwoods.BasedatourHoxtonParkFieldServiceCentre,theprogramisnowdeliveringtimberforrecyclingfromsmallerpolereplacementprojects.Itisestimatedthatthisprojectwillincreaseannualtimberrecoveryvolumesby25%to50%,withamatchingreductioninourdependenceonlandfilldisposal.

TherecentrefurbishmentofthecafeteriainIntegralEnergy’sheadofficeprovidedagoodopportunityforIntegralEnergyto‘closetheloop’bydirectlyreusingourtimberresources.Blackbutthardwoodtimberfrom50powerpolesremovedduringtherefurbishmentoftheNowratoEvansLanetransmissionlinewasrecycledtoprovidethecafeteria’snewflooringandwallpanelling.Inadditiontodivertingvaluableresourcesfromlandfill,theprojectreducedgreenhousegasemissionsby44tonnesCO

2e.

CorporateEnvironmentteammembersSelenaWaterford(left)andCarolynScornavacchi.

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Continuing to learn and driving cultural change

Throughsupportofformalandinformallearningopportunities,wecontinuedtoworkwithemployeestodriveculturalchangetoachieveourenvironmentalgoals.Ouremployeeinductionprogramcontinuedduring2006–07andfocusedonenvironmentalduediligenceandincidentpreventionandresponse.Trainingwillcontinuetostrengthenandevolvein2007–08,reflectinganychangestoourprocedures.

Engaging with stakeholders

Thecomplexityofouroperationsandthediverseenvironmentinwhichweoperatearereflectedinourbroadstakeholderbase.Addressingtheinterestsofourstakeholdersthroughmeaningfulengagementremainsanongoingchallengeforus.

In2006–07,IntegralEnergyapproachedtheParksandWildlifeDivisionoftheNSWDepartmentofEnvironmentandClimateChangetodevelopajointagreementoninspectionandmaintenanceworksinparks.Followingextensiveconsultation,anagreementwasimplementedonapilotbasiswithinIntegralEnergy’ssouthernregion.Theagreementestablishesclearprotocolsforconductingsuchworkandprovidesforongoingconsultationwiththedepartment.

Aspartofthenetworkcapitalprogram,environmentalassessmentscontinuedtobeconductedinconsultationwiththecommunityandkeystakeholders.Additionalinformationonthenetworkcapitalprogramisprovidedonpage15.

Heritage management

IntegralEnergy’sachievementsinheritagemanagementin2006–07includedsettingupourdraftHeritageandConservationRegister,inaccordancewiththeHeritage Act 1977.Theregisteridentifies18potentialheritagesites,mostofwhichareoflocalsignificance.

InJanuary2007,weprovidedanupdatedHeritageAssetManagementStrategytotheHeritageOffice.WealsosubmittedtwoconservationmanagementstrategiestotheHeritageOfficeforreview,foracottagesubstationinMossValeandacontrolbuildingatourFairfieldzonesubstation.IntegralEnergy’sprogressinheritagemanagementisdescribedinmoredetailinAppendix2.

Future challenges

Wewillcontinuetoworkhardtoachieveanumberofimportantenvironmentalchallenges,includingto:

achieveasustainedreductioningreenhousegasemissionsinaccordancewithpubliclydefinedtargetswhilegrowingasustainablebusiness

successfullyimplementtheBlacktownSolarCityprogramtogetherwithourconsortiumpartnersandtheBlacktowncommunity

continuetoworkwithourcustomersbyprovidinginnovativeandattractiveproductsandservices,promotinggreaterawarenessofenergyefficiencyandprovidingpracticaladviceandtools

driveperformanceimprovementsthroughstrengthenedenvironmentaltargets

developawasteminimisationplantodriveimprovementsinwasteminimisation,recyclingandperformance.

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DawninLeura,BlueMountains.

‘Throughsupportof formalandinformal learningopportunities, wecontinuedtowork withemployeestodrive culturalchangetoachieve ourenvironmentalgoals’

AnnualPerformanceReport2006–07

Social Performance

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Did we meet our objectives?

2006–07 objective Progress to date Status 2007–08 objective

ContinuingtointegratesafetyintoIntegralEnergy’sbusinessmanagementprocess,andcontinuouslyimprovesafetymanagement,workingtowardsthegoalofzeroaccidents,illnessesandinjuries.

Developedsafetystrategicplan.

ImplementedSafetyLeadershipandSafetyObservationtraining.

‘Nearmiss’reportingwasusedtounderstandtrendsandissuesintheworkplace.

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ImplementtheSafetyStrategicplantobuildoncurrentstrengths.

Focusonsafetybreakthroughsbyintegratingthesafetymessageintoourorganisation’sculture.

Continuingtocommunicatesafetymessagestostafftoraisesafetyawarenessintheworkplaceandensurethateveryoneunderstandshisorheraccountabilityandresponsibilityforsafety.

DepotSafetyDayscontinuedtopromotesafetyandeducatestaff.

Developedtargetedprogramssuchasslips,trips,fallscampaignandbackcareprogram.

WepromotedIntegralEnergy’scorevalueofsafetyexcellencebyhostingtheNSWindustrysafetyexpoforstaffandsuppliers.

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ReduceLTIsbytargetingawarenessprogramsbasedonleadingcontributorstoLTIs.

Reducesickleavebyimprovingengagementandpromotingwellbeingprograms.

Raisestaffawarenessofelectricalsafetybyhostinge-safe2008.

Beinganemployerofchoicebylisteningtotheconcernsofouremployeesandworkingconsistentlytoaddressthem.

Our2006staffattitudesurveydemonstratedstrongengagementlevelsamongstourstaffandhigherthanaverageresultswhenbenchmarkedagainstotherutilities.

p

PromoteIntegralEnergyasanemployerofchoice.

Improvecommunicationandengagementchannelsforstaff.

Buildingorganisationalcapabilitythroughourstaff,includingimprovingtheleadershipabilitiesofourfrontlinemanagersanddevelopingcareerdevelopmentplansforallstaff.

ContinuedtodevelopourManagementDevelopmentprogram.Weintroducedthe‘FieldLeadershipPlus’forfield-basedleadinghandsandteamleaders. p

ReviseIntegralEnergy’sleadershipcompetencies.

Reviserewardandrecognitionandperformanceappraisalsystems.

Developingaworkingenvironmentthatfostersahighperformanceculture.

Wecontinuedtotrainanddevelopstaffinlinewithourcompetency-basedprogressionsystemtoensuretheirskillsremainedcurrent.

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Designimprovedretentionstrategies.

Benchmarkourperformanceagainsthighperformingworkcultures.

Deliveringbetteroutcomesforcustomersexperiencingfinancialhardship.

Achieveda50%reductionindisconnectionofcustomersbyrevisingourapproachtovulnerablecustomers. p

Assessstrategicpartnershipwiththirdpartytoassistmanagementofhardshipcustomers.

Engenderingandfosteringacustomerserviceculturethroughouttheorganisation.

Achievedacustomersatisfactionratingof83.4%. ¸

Benchmarkourperformancenationally.

Engagingwithstakeholdersonmattersofmutualinterestandconcern.

Pilotedanimprovedengagementprogramforour10yearinvestmentplans.Consultedwithaffectedstakeholdersoneachmajorcapitalprogram.

Developedplanstoimproveengagementwithlocalgovernmentandplanningauthorities.

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Surveyofkeystakeholders.

Improveourstakeholderengagementbymovingfrominformingandconsultingmodeltoinvolvingandcollaborating.

Implementlocalgovernmentprogram.

Key

¸ objectiveachieved

p ongoingobjectivewithtargetsmettodateorpositiveprogressshown

q ongoingobjectivewithtargetsnotmettodate

CustomerConsultativeCommitteemember, BettyScott(left),andManager,Business Performance,DanielleManley.

Social Performance AnnualPerformanceReport2006–07

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Performance indicators

Employees

Employed2,593fulltimeequivalentstaff,anincreaseof5.5%on2005–06.

Employed64newapprenticesand11electricalengineeringgraduatesandcadets.

Maintainedalowemployeeturnoverof5.9%.

Health and safety

Thelosttimeinjuryfrequencyratewas4.8lost-timeaccidentspermillionhoursworked.Althoughthisdidnotmeetourtargetofzero,itmarksourfourthyearofimprovement.

122newworkerscompensationclaimsweresubmittedin2006–07.Theaveragecostforallopenclaimsonwhichpaymentsweremadewas$6,962.

Staff training and development

728staffundertookin-housetrainingincommunication,decisionmaking,timemanagement,interviewingtechniques,presentationandnegotiation.

155managersrefreshedandenhancedtheirskillsincommunication,mentoring,motivationandmanagingchange.

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86field-basedteamleadersundertooktrainingincommunication,conflictresolution,andleadingandmentoringapprentices.

285newstartersgainedagreaterunderstandingofourbusinessthroughtheirattendanceatOrientationDay.

Diversity and opportunity

ForthethirdconsecutiveyearweexceededtheNSWGovernmentbenchmarkof100fortheemploymentofpeoplewhosefirstlanguageisnotEnglish,achievinganindexof112.

OurWorkplaceDiversitypolicysawimprovementsintheemploymentlevelsofwomenandpeoplewithadisabilityalthoughwedidnotreachgovernmentbenchmarks.

Indigenous relations

1%ofemployeesareofAboriginalandTorresStraitIslanderdescent,includingfourapprentices.Weplantoincreasethisto2%withinthenextfiveyears.

Labour/management relations

Ourstaffendorsedanewtwo-yearIntegralEnergyConditionsofEmploymentAgreement.

Anewthree-yearworkplacearrangementforshiftworkersinourcustomerinteractioncentreswasnegotiated.Thisarrangementbrought

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consistencyinconditionsofemploymenttoallourshiftworkers.

Customers

Ouroverallcustomersatisfactionrateincreasedto83.4%fromthepreviousyear’sresultof81.1%.

Wemanaged13,829comments,complimentsandcomplaints,15%morethanin2005–06.Wealsoresolvedcomplaintsmorequicklythanin2005–06:60%within10days(56%in2005–06),73%within15days(69%in2005–06)and92%within30days(87%in2005–06).

5,166customersenrolledinourINpowerprogramin2006–07.InJune2007,3,682customerswereenrolled,comparedwith3,196inJune2006.

Weprocessed5,693disconnectionsin2006–07,comparedto11,401in2005–06,a50%reduction.

CompletedglobalbenchmarkingofIntegralEnergy’swebsiteinJuly2006.

Stakeholder engagement

Stakeholderengagementprogramswereimplementedforallmajorcapitalprograms.

Weconductedtwoengagementprogramswithlocalcouncils,developersandplanningauthorities.

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8,7747,439

7,931

13,06611,401

5,693

05–0

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06–0

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04–0

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04–0

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76.2

39.853.6

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42.9

7.87.2

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5.24.8

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Actual

Target

8,7747,439

7,931

13,06611,401

5,693

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Figure �9 Customer disconnection rates

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76.2

39.853.6

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42.9

Figure �8 Lost time injury severity rate(shiftslostperaccident)

7.87.2

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Figure �7 Lost time injury frequency rate(permillionhoursworked)

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Social performance in �006–07IntegralEnergyhasacomplexanddiversestakeholderbase,includingourshareholder(theNSWGovernment),energyandenvironmentregulators,employeesandunions,regionalchambersofcommerce,suppliers,businessandresidentialcustomers,developersandlocalcommunities.

Our2006–07stakeholderengagementstrategyplacedemphasisonimprovingstaffengagement;instillingacultureofsafetyexcellencethroughoutourworkforce;consultingwithdevelopers,residentsandlocalbusinessesabouttheimpactofouroperations;reviewingourenvironmentalpositioning;enhancingourrelationshipswithsuppliers;anddeliveringbetteroutcomesforcustomersexperiencingfinancialhardship.

Theseareasofemphasiswereunderpinnedbyextensivequalitativeandquantitativeresearchconductedasinputsintoourstrategicplanningprocess,combinedwithanalysisofspecificstakeholderfeedbackreceivedthroughouttheyear.

Eachprioritystakeholdergroupwasselectedduetoitsinfluenceandimportanceinachievingourstrategicbusinessobjectivesforsafety,reliability,networkgrowth,retailbusiness,andsocialandenvironmentaloutcomes.

Ourcorporatetagline,‘Thepowerisinyourhands’,conveysIntegralEnergy’sstrongsenseofsocialresponsibilityandongoingcommitmenttoempoweringlocalandregionalcommunitiesandpromotingeconomicgrowth.ThereispressureonIntegralEnergytorespondtothecommunity’schangingenergyneedsandexpectations.Thatiswhywemadearecordinvestmentinourcapitalprogramin2006–07.

Our people

Havingenergyfortomorrowstartswithinvestinginourpeople.Akeypartofourinvestmentinthefuturemeanssupportingthenextgenerationofelectricityworkers,whowillfillarangeoftradesandbebasedfromUlladullatowesternSydneytoLithgow.Recruiting,developingandretaininghighlyskilledstaffagainstabackdropoffullemploymentremainsoneofIntegralEnergy’sgreatestchallenges.

During2006–07,IntegralEnergyemployedmorethan2,593staff,anincreaseof5.5%on2005–06.Ouremployeeturnoverremainedlowat5.9%,largelyasaresultofretentionstrategiesthatincludedcompetitivewagesandsalaries,professionaldevelopmentprogramsandfamily-friendlyworkingconditions.

Ournewemployees,whocamefrommanycultures,wererecruitedtomeetgrowingdemandforourservices.

Tomeetthelong-termneedsofournetworkcustomers,weemployedarecord64newapprentices,agedbetween16and32years.Apprenticesinthe2007intakewillbetrainedinoneoffourtrades–systemelectrician,distributionpowerlinetechnician,instrumentfitterorheavyvehiclemechanic.Thisintakebroughtourtotalnumberofapprenticesin2006–07to175,withfurthergrowthexpectedinthenextfewyears.

Wealsoemployed11electricalengineeringgraduatesandcadetsduringtheyeartosupplementourengineeringexpertise.

Staff engagement

Weconductanemployeeopinionsurveyeverytwoyears.InOctober2006,weparticipatedintheHewittAssociatesEmployeeOpinionSurveyforthefirsttimetobenchmarkIntegralEnergy’sperformanceagainstthatofotherorganisations,toassesshowwellwearelivingourcorporatevalues,andtocollectmeasurablefeedbackonhowstafffeelaboutworkingforIntegralEnergy.

Weachievedanorganisation-wideresultof60%engagement,basedonaresponserateof73%.Thisplacedusinthe‘high-performance’zone,accordingtoHewitt’sBestEmployersinAustraliaandNewZealandratings.Italsocomparesfavourablywiththeutilitiesindustryaverageof57%andtheaverageof54%forallotherorganisations.

Employeeengagementisimportant,asresearchconductedbyHewitthasshownthatemployerswithhigherlevelsofengagementhavestrongergrowthinrevenueandprofitandtypicallyoutperformotherorganisations.Theresearchalsodemonstratesthatmaintaininghighlevelsofemployeeengagementcontributestolowerstaffturnover.

Wehaveidentifiedthreeareasofimprovementasaresult.Wewillreview:

thewaywerewardandrecogniseourpeople

ourpoliciesandbusinessdelegations

ourapproachtoperformanceappraisals.

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PictonFieldSupportCentrewasamongthosetohold safetydaysin2006-07.

Social Performance AnnualPerformanceReport2006–07

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Working safely

SafetyexcellenceisIntegralEnergy’stoppriority,andweareworkingtoachieveourtargetofzeroaccidentsintheworkplace.In2006–07,wefocusedoninstillingacultureofsafetyfirstthroughoursafetyleadershipprogram.Duringtheyear,160managersandsupervisorsweretrainedinsafetyobservationtechniques.Safetyobservationsarestructuredconversationsbetweenmanagementandstaffintendedtodriveandpromoteapositivesafetyculture.Wealsocontinuedtoimprovetheeffectivenessofsafetycommitteesinordertoensurehighlevelsoflocalstaffengagementandalocalcommitmenttosafety.

Weemphasised‘nearmiss’reportingtogiveusabetterunderstandingoftrendsandissuesintheworkplaceandtoreducethepotentialforinjuries.

In2006–07oursafetycommunicationprogramfocusedondepotsafetydays,whichcontinuedtopromotesafetyandeducatestaffonsafeworkpractices.Wedevelopedtargetedprogramstoaddressslips,tripsandfallsandmanualhandling—twoofthegreatestcausesoflost-timeincidents(LTIs)andinjuriestostaff.

Theslips,trips,fallscampaignachievedan80%awarenessratingwithstaff,andwasrefreshedin2007totargetbehavioursthatarethegreatestcontributorstoLTIs.

Safety performance

ThenumberofLTIsin2006–07was24.Safetyperformanceismeasuredprimarilythroughthelost-timeinjuryfrequencyrate,whichmeasuresthenumberofLTIsforeverymillionhoursworked.In2006–07,IntegralEnergydelivereditsbesteverresultof4.8LTIs,aheadofthepreviousyear’sresultof5.2.

Althoughthisfellshortofourtargetofzero,weremaincommittedtoachievingaworkplacewherenoharmcomestoanyemployee.

TheaveragenumberofdayslostforeachLTIin2006–07was9.0,comparedwith5.0in2005–06,duetoseverallong-terminjuriestostaffmembers.

IntegralEnergy’sBoard,managementandstaffweredeeplydistressedbyaseriousinjurysustainedbyanemployeeinahelicopteraccidentinApril2006.ThewelfareofthisemployeeandhisfamilyremainedaprimaryconcerntoIntegralEnergy,andsupportcontinuedin2006–07.

IntegralEnergyconductedanextensiveinvestigationintotheincidentandimplementedthereview’skeyrecommendationsin2006–07.Thisinvolvedimprovementstothegovernanceandmanagementofaviationcontractsandcontractors.WealsotookstepstoensurethatthisknowledgewassharedthroughouttheNSWelectricityindustry.

Implementation of outcomes from our strategic review of safety

FollowingastrategicreviewofsafetyinJuly2005toassessourcurrentsafetysystemsandsafetyculture,in2006–07wecontinuedtoimplementstrategiestoimproveoursafetyperformance.Thestrategiesincluded:

agreaterfocusbytheExecutiveOccupationalHealthandSafetyCommitteeonsafetymanagementleadership

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moredetailedconsiderationbytheOccupationalHealthandSafetyManagementCommitteeofincidentinvestigationsandthedevelopmentofsafetypolicyandprocedure.

Workers compensation

IntegralEnergyemploysspecialiststafftoworkwithinjuredemployeestoensureasmoothreturntoworkfollowinginjury.Atotalof122newworkerscompensationclaimsweresubmittedin2006–07.Theaveragecostforallopenclaimsonwhichpaymentsweremadewas$6,962.

Public electrical safety

IntegralEnergy’sannualpublicelectricalsafetyawarenessplanidentifiesthekeysafetyissues,thetargetmarketsandthecommunicationstrategywhichwillbeimplementedovera12-monthperiodtoincreasethepublic’sawarenessofsafetyhazardsassociatedwithelectricity.

In2006–07,asinpastyears,ourreviewoftheplanfocusedonfivecoreprograms:generalpublicsafety,emergencyservicessafety,workers’safety,assetmanagementsafety,andagriculturalsafety.

Ourkeymessagesinthe2006–07safetyawarenessplanwere:

‘Lookupandlive’

‘Dialbeforeyoudig’

Safetyinandaroundthehome

Safetyarounddamagedelectricalinfrastructure

Vandalismandunauthorisedentry

Electricalsafetyinvegetationmanagement.

Wecommunicatedthosemessagesinanumberofways,includinginbrochures,bydirectmail,inlocalandtrade-specificmedia,viaradioandnewspaperadvertisements,andbyin-housetrainingforemergencyservicespersonnel.

Moredetailedinformationontheplancanbeviewedonourwebsiteatwww.integral.com.au.

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Wearecommittedtohelpingourpeoplebalancetheirwork andfamilyresponsibilities.FionaPlace,BranchAdministrator, isamongourstaffassistedwiththeirreturntoworkfollowing maternityleavethroughaccesstoachildcarecentreon-siteat ourHuntingwoodoffice.

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Labour–management relations

Awards and salaries

Wenegotiatedthefollowingawardsandworkplacearrangementswithourstaffin2006–07:

anewtwo-yearIntegralEnergyconditionsofemploymentagreementcoveringmostofouremployeesandprovidingincreasedbenefits,suchas14weekspaidmaternityleaveandoneweekofpaidpaternityleave.

anewthree-yearcustomerinteractioncentreworkplacearrangementforcallcentrestaffwhoperformshiftwork.

360 degree surveys

Weundertook360degreesurveysforallcontractstaff.Thesurveysprovideanopportunityforcontractstafftoreceivefeedbackfromtheirmanagers,peersandthepeoplewhoreporttothemontheirperformanceagainstourleadershipcapabilities.

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Training, education and recruitment

IntegralEnergymustcontinuetorecruitskilledstaffandtrainanddevelopexistingstaffifitistoremainacompetitive,innovativeandresponsiveorganisation.Itremainsahighpriorityforustobuildorganisationalcapacitybyimprovingtheleadershipskillsofourmanagers,developingandupdatingtheskillsofourfront-lineandadministrativestaffandensuringthatourrecruitmentpoliciestakeintoaccountthediversityofthecommunityinwhichweoperate.

Apprentices

In2006–07,werecruited60apprenticesinthedistributionpowerlineandsystemselectriciantrades,threeheavyvehiclemechanicapprenticesandoneinstrumentfitterapprentice,bringingthetotalnumberofapprenticesintrainingto175.WetargetedAboriginalandTorresStraitIslanderapplicantsthroughadvertisinginindigenousmedia.

LongServiceAwardrecipientsin2007includedOperations ManagerDistribution,ColTyquin(left),CustomerSafety Officer,NeilRutledge,andLeadingHandElectricalFitter Mechanic,ColinHall.

Manager,CustomerCare,MerleneAdkins,wasinstrumental indevelopinganewonlineenergycalculator,launchedin2007.

Social Performance AnnualPerformanceReport2006–07

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Staffing statistics

Tables3,4and5describetrendsinourstaffestablishmentfrom2002–03to2006–07.

Table 3 Trends in the representation of equal employment opportunity groups (% of total staff, excluding casual staff)

EEO group Benchmark or targeta

2002–03 2003–04 2004–05 2005–06 2006–07

Women 50 32 33 22 22 ��

AboriginalpeopleandTorresStraitIslanders 2 1 1 0.9 1 0.9

PeoplewhosefirstlanguageisnotEnglish 20 8 8 7 8 8

Peoplewithadisability 12 2 2 5 5 4

Peoplewithadisabilityrequiringwork-relatedadjustments 7 1 1 0.6 0.5 0.5

Note:Staffnumbersareasat30Juneeachyear.aSetbytheNSWGovernment.

Table 4 Trends in the distribution of equal employment opportunity groups (distribution index)

EEO group Benchmark or targeta

2002–03 2003–04 2004–05 2005–06 2006–07

Women 100 60 55 97 98 �00

AboriginalpeopleandTorresStraitIslanders 100 26 14 91 96 96

PeoplewhosefirstlanguageisnotEnglish 100 63 76 109 110 ���

Peoplewithadisability 100 32 34 96 97 99

Peoplewithadisabilityrequiringwork-relatedadjustments 100 31 32 32 n/aa n/aa

Note:Adistributionindexof100indicatesthatthecentreofthedistributionoftheEEOgroupacrosssalarylevelsisequivalenttothatofotherstaff.Valueslessthan100meanthattheEEOgrouptendstobemoreconcentratedatlowersalarylevelsthanisthecaseforotherstaff.Themorepronouncedthistendencyis,thelowertheindexwillbe.Insomecasestheindexmaybemorethan100,indicatingthattheEEOgroupislessconcentratedatlowersalarylevels.

aThedistributionindexisnotcalculatedwheretheEEOornon-EEOgroupnumbersarelessthan20.

Table 5 Employee numbers

Employees 2002–03 2003–04 2004–05 2005–06 2006–07

Totalstaffa 2,049 2,176 2,298 2,457 �,59�

%increase 5.9 6.2 5.6 6.9 5.5

%cumulativereductionb 34.5 30.4 26.5 21.4 �7.�

Note:Severalamendmentsmadetofiguresreportedinpreviousannualreports,followingAuditOfficeadvice.

a Staffnumbersarebasedonfull-timeequivalents.Significantreductionsinstaffnumbersoccurredasaresultofvoluntaryexitprogramsin JuneandJuly1998.

b ThesefiguresrepresentthechangeinemployeenumberssincethecreationofIntegralEnergyin1995throughthemergerofProspect ElectricityandIllawarraElectricity.Atthetimeofthemerger,thetotalemployeenumberwas3,127.

CustomerInteractionCentreteammembersKirstyBrabin(left)andJasminFuimaono.

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Staff development programs

Toensurethatourmanagersarepreparedforthefuture,in2006–07weofferedtwomanagementdevelopmentprogramscoveringissuesrelevantinaconstantlychangingworkplace.Some155managersattendedtheseprograms,whichwillcontinueinto2007–08.

Field-basedteamleadershipcontinuestobeafocusinstaffdevelopment.Anewleadershipprogramcommencedin2006–07tosupplementtheprogramwhichbeganin2005.Atotalof86field-basedteamleadersattendedtheseprogramsin2006–07,ensuringthatourfieldstaffandourincreasingnumbersofapprenticesarecoachedandmentoredeffectively.

Wemadesignificantprogressonthemovetoprovideourmanagersand

leaderswithnationallyrecognisedqualificationsfortheirfrontlineleadershipcompetencies.EightoperationsmanagersbegantheCertificateIVinBusiness(FrontlineManagement)inpartnershipwithanexternalregisteredtrainingorganisation.Thiswillbeafocusofdevelopmentintothecomingyear.

Customers

Customer service philosophy

Wehaveenshrinedourcommitmenttocustomerserviceinoursetofeightcorporatevalues.OurvisiontobeAustralia’sbestperformingenergybusinessisbasedonourcommitmenttodeliveringsuperiorvaluetoourcustomersandourshareholdersnowandintothefuture.Weaimtoachievethisbytakingpersonalresponsibilityfor:

deliveringastandardofservicebeyondourcustomers’expectationsandabovethelevelofserviceprovidedbyourcompetitors

dealinginafair,openandhonestwaywithallourcustomers

reviewing,revisingandimprovingworkpracticesandprocesses

recognisingthatcustomerloyaltydependsonhowwe,asindividuals,relatetoourcustomers.

Thiscorporatevalueisbroughttolifebyourstaffthrougheachandeveryinteractionwithcustomers.Itisgivengreaterweightthroughourbrandpromise:‘Going further for you is what we do.’

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Managing hardship

IntegralEnergyrecognisesthatsomecustomersexperiencedifficultyinpayingtheirelectricityaccountfromtimetotime.In2006–07,wereducedourdisconnectionratesbymorethan50%from2005–06.Thisbetteroutcomeresultedfromourcontinuedfocusonimprovedmanagementofcustomersinfinancialhardship.

Weintroducedthefollowinginitiativesduringtheyeartoassistcustomersinhardship:

moreflexiblecriteriaforreferringcustomerstotheINpower program,allowingagreaternumberofcustomerstoaccesstheprogram

furthertrainingofallfrontlinestaff,includingdisconnectionofficers,inhowtoidentifyhardshipandbettermanagecustomersinhardship

changestoourprocessestohelpusidentifycustomersinfinancialhardshipearlier

handdeliveryofnoticestocustomerswhomwehavebeenunabletocontactaspartofthedebtfollow-upprocess(thisisinadditiontotheregulatedrequirements)

furthercustomisationofpaymentplanstosuittheindividualneedsofcustomers

establishmentofanagreementwithCentrelinktoenrolIntegralEnergycustomersinCentrepay,givingthemaccesstoafacilitytheycanusetomakeongoingpayments.

Inresponsetocustomerneeds,wealsotranslatedourINpowerbrochureintofourlanguages—Vietnamese,Chinese,ItalianandArabic.

TheINpowerprogramcontinuedtomeettheneedsofcustomersinfinancialhardship.Duringtheyear,morethan5,000newcustomerswereenrolled,bringingthetotalnumberofcustomerswhohavemovedthroughtheprogramtonearly10,500.AttheendofJune2007,3,682customerswereenrolledintheprogram.

TheINpowerteammadecommunityorganisationsawareoftheprogramthroughmorethan52visitstoindividualagencies.

WetrialledandimplementedanincentivearrangementforagroupofcustomersontheINpowerprograminSeptember2006.Underthearrangement,IntegralEnergyrewardscustomersformakingpaymentsontimebyapplyingamatchingpaymenttotheiraccounts.Thisreducesthetotalamountoutstandingforthecustomerandthedurationofthepaymentplan.

InJune2007,IntegralEnergyfundedano-interestloanschemeoperatedbyAnglicareatRootyHill.Theschemeoffersno-interestloanstocustomersinfinancialhardshipintheBlacktown,PenrithandHawkesburyareasforthepurchaseofessentialelectricalappliances.

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Social Performance AnnualPerformanceReport2006–07

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Listening and responding to customer comment

In2006–07,13,829comments,complimentsandcomplaintsweremanagedbyourCustomerCarebranchandrecordedinacentralisedsystem,anincreaseof15%fromthepreviousyear.Weattributetheincreasetotheintroductionoffullretailcontestabilityandthecomplexityitbringstothemarketplace.

Issuesthatattractedhighnumbersofcomplaintsincludedthoserelatedtothemanagementofcustomercontracts,thesizeofbills,anddoorknockingbysalespeople.Thenumberofcomplaintsrelatedtodebtrecoverydeclinedsignificantlyasaresultofourmoreeffectivemanagementofcustomersfacingfinancialhardship.

Wereceived371compliments,mainlyfortheserviceprovidedbycallcentrestaffandregionalstaffrespondingtonetwork-relatedissues.

Somecustomerslooktotheirelectedrepresentativesforassistancewithcomplexcustomerserviceissues.RepresentationsfromministersandmembersofparliamentcoverawiderangeofmattersrelevanttoIntegralEnergy,andallcasesaremanagedtoensuretimelyandappropriatecorrectiveandpreventiveaction.In2006–07,wemanaged94suchrepresentations,fourfewerthanthe98managedin2005–06.

CustomersalsohavetheoptionofreferringmatterstotheEnergyandWaterOmbudsmanNSW(EWON)foradvice.EWONisanindependentbody,establishedin1998,toinvestigateandresolvecomplaintsforcustomersofelectricity,gasandwaterproviders.

Duringtheyear,EWONhad589enquiriesand893complaintsfromIntegralEnergycustomers.Thisrepresented29%ofthetotalenquiriesand18%ofthetotalcomplaintsreceivedbyEWONfromitsmembers.IntegralEnergyisrepresentedontheBoardandCouncilofEWON.

Customer Consultative CommitteeIntegralEnergy’srepresentativeCustomerConsultativeCommitteeformsanotherimportantstakeholderengagementforum.Itsprimarypurposeistoenhancetheclimateoftrustbetweenmanagersandcustomersbyengaginginfrankdialogueonissuesofmutualconcern.Thecommittee’scontributionsinformIntegralEnergy’sbusinessplansandinitiatives.

Thecommitteemetfivetimesin2006–07andexaminedissuesrelatedtoclimatechange;demandmanagementinitiatives;greenproductsandservices;salestechniques;consumerprotectionandhardshipprograms;publicsafetyawarenessstrategies;customerservicepolicies;retailprices;communityengagementwithIntegral’scapitalprogram;businessperformance;andenvironmentalmanagement.

Theseissuesareidentifiedbycommitteemembersandcapturedinanannualworkplan.Wemakeavailableindustryexpertstodevelopthecommittee’sunderstandingandsupportitswork.

Stakeholder engagement

Prioritystakeholderprogramsarebasedonongoinganalysisofourexternaloperatingenvironment.Todeterminewhichgroupsreceiveparticularemphasis,weuseperformancebenchmarkingagainstcompetitors,corporatesocialresponsibilitybenchmarking,qualitativeresearchintoexternalstakeholderexpectationsaboutinfrastructure,andformalandinformalstakeholdersurveys.

Deeper engagement with external stakeholdersIntegralEnergyworkscloselywithlocalcommunitiestoplan,maintainandbuildvitalelectricityinfrastructure.Giventhedirectimpactofouroperationsonresidentsandbusinesses,welooktoconsulteffectivelywithdevelopers,localcouncils,planningauthorities,propertyassociationsandregulators.

Since2000,wehavehostedregionalplanningforumstooutlineour10-yearvisionandplanforthenetwork.Theplanalsoarticulatesourdemandmanagementstrategiesandforwardinvestmentplans.

In2006,wesoughttodeepenourengagementstrategytoconsultkeystakeholdersoncapital,maintenanceanddemandmanagementprojects.

Asaresult,twopilotforumswereheldinlate2006,attendedbykeyexternalstakeholderssuchasmembersofparliament,councils,developers,businesses,communityleadersandresidents.Feedbackfromtheforumswasacriticalpartofourqualitativeresearch,andwasincorporatedintothedevelopmentofournewannualplanningstatement,Network 2017.

Keyareasofinterestincludedourpositiononundergrounding,planstoaddressclimatechange,provisionofstreetlightingservices,designservices,staffingforthefuture,energyefficiencyandcommunitypartnerships.

WealsocontinuedourpartnershipwiththeUrbanDevelopmentInstituteofAustraliaNSWtoengagewithlanddevelopersonthedevelopmentoftheelectricitynetwork.DevelopersaresignificantstakeholdersinthedeliveryofaffordablelandsupplywithinIntegralEnergy’snetwork.

Community consultations and partnerships

OurcommitmenttocommunityconsultationsawstakeholderengagementprogramsdevelopedandimplementedfornewsubstationprojectsatBellaVista,EastLiverpool,Wilton,HoxtonPark,Hinchinbrook,Springhill,BaulkhamHillsandMtOusley.

CommunityconsultationontheVineyardtoRouseHilltransmissionlineupgradecontinued,withanindependentreviewcommissionedbytheMinisterforPlanning.ApprovalfortheprojectwasgrantedinSeptember2006subjectto70conditions,includinga$1millioninvestmentinacommunityenhancementprogramanda$0.5milliondemandmanagementfund.

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Table 6 Integral Energy’s community partnership program, 2006–07

Aim Examples

Economic Toencouragesustainableoutcomesinregionalbusinessinthefranchiseareathroughawardsandrecognition,andshowcasingworld’sbestpractice.

IllawarraBusinessAwards

NationalMulticulturalMarketingAwards

RegionalAchievementandCommunityAwards

WesternSydneyIndustryAwards

EnergyUsersAssociationofAustralia’sannualconference,QueenslandEnergyForum

PowerQualityandReliabilityCentreatWollongongUniversity

Environment Tofacilitateanddemonstratesoundenvironmentalpracticesbycreatingproactiveprogramsthatencourageandstimulatealternativeenergyusage.

AnnualSustainabilityConference

FutureworldEcoTechnologyCentre

SolarinSchools

SustainabilityStreetsinPenrith,BlacktownandHolroyd

WesternSydneyGreenhouseForest

Social Tosupportpositivefuturesbyprogramsthatdevelopskills,attitudesandactionsforyoungpeopleandfamiliesinIntegralEnergy’sfranchisearea.

AustraliaDaycelebrationsinParramatta,PenrithandWollongong

DepartmentofEducationandTraining’sARTEXPRESS,SchoolsSpectacular,SouthernStarsandSchoolSportFoundation

IntegralEnergyNSWRugbyLeagueDevelopmentWesternSydney

PowerhouseDiscoveryCentre:CollectionStoresatCastleHill

WestSydneyRazorbacksbasketballteam

Surflifesaving—SouthCoast

(Lefttoright):NationalRugbyLeagueChiefExecutive,DavidGallop,pupilsfromHolyFamilyCatholic School,IntegralEnergyCEO,RichardPowis,andNSWRugbyLeagueGeneralManager,GeoffCarr, atthelaunchoftheIntegralEnergyNSWRugbyLeagueDevelopmentWesternSydney.

Social Performance AnnualPerformanceReport2006–07

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‘SinceIntegralEnergy’sworkplacegivingprogram,I care! (Integral’s concerned and responsive employees), commencedinJuly2004,morethan$455,000hasbeen donatedtoourportfolioof12staff-selectedcharities.’

Safety wins at e‑safe 2007

HostedbyIntegralEnergyin2007,theannualEnergySafetyandFieldExpoisthepremiersafetyforumfortheNSWenergyindustryandoneofAustralia’spremiersafetyevents.Itsaimistohighlighttheimportanceofsafetyintheelectricalsectorandimprovesafetyperformance.

Thetwo-dayeventattractedaround2,300visitorsandparticipantsfromacrosstheenergy,infrastructureandutilitiessectors.

TheexpowasoriginallyplannedforJune,butwehadtopostponeituntilJulyafterthefloodsofthelongweekendchangedeveryone’splans.IntegralEnergyimmediatelyallocatedresourcestohelpEnergyAustraliarestorepowerto200,000peopleintheHunterandontheCentralCoast.Closeto80IntegralEnergystaffheadednorthtoworkalongsidetheircounterpartsinwhathasbeendubbed‘thebiggestpowerrestorationeventinrecentNSWhistory’.

Withplentyofcamaraderieandcompetition,wide-rangingexhibits,seminarsanddemonstrations,e-safe2007liveduptoitsbillingasoneofAustralia’spremiersafetyevents.

Thethemewas‘Developingourpeopleforasaferfuture’,aswesetouttoprovideavaluableforumforparticipantstoexchangetheirskillsandknowledgeonelectricalsafety.

TheeventwasattendedbyNSWenergydistributorsandgeneratorsandanumberofotherorganisationswithaffiliationstoourindustry,includingtheRTAandSydneyWaterandRail.Supplierstotheindustryshowcasedtheirlatestproducts,NSWenergydistributorscompetedinsafety-focusedcompetitions,andmembersoftheindustryhighlightedareasofimprovement.

Atotalof202competitorsfrom15utilitiespittedtheirskillsagainstoneanotherinfiremanagement,confinedspacerescue,firstaid,hazardandriskassessment.Othereventsincludedcompetitionsforexperiencedworkersandapprentices,alongwithpowerpoleclimbingandotherdemonstrations.

IntegralEnergytoppedthetrophytallywithfourwins,aheadofEnergyAustraliaandCountryEnergy,withtwovictoriesapiece.

Congratulationstoallofthecompetitors,notleastIntegralEnergy’s39-strongteam.

Forthefirsttime,theannualenergysafetyshowcasewascarbonneutral,asIntegralEnergyoffsettheemissionsfromstagingtheeventbypurchasingGreenPower.Indoingso,westoppedanestimated30tonnesofcarbondioxidebeingreleasedintotheatmosphere.

GeneralManager,NetworkAssetOperations,AlanFlett,presentedthirdplaceawardtoourHRA Apprenticesteam(lefttoright)KyleMalvern,KeironShort,MichaelWilliamsandSayedHasamMoussa.

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Table 7 e‑safe 2007 competition results

Event 1st 2nd 3rd

FirstAidevent1 EnergyAustralia MacquarieGeneration IntegralEnergy

FirstAidevent2 IntegralEnergy Transgrid DeltaElectricity

LineworkersHazardandRiskAssessment IntegralEnergy EnergyAustralia Energex

ApprenticesHazardandRiskAssessment CountryEnergy EnergyAustralia IntegralEnergy

FireManagementIntegralEnergy

EnergyAustralia(Apprentices) CountryEnergy

ConfinedSpaceRescueEnergyAustralia

EnergyAustralia(AssetAccess) CountryWater

Fitter/TechniciansHazardandRiskAssessment CountryEnergy RailCorp EnergyAustralia

ManualHandling IntegralEnergyteam2 IntegralEnergyteam1 RailCorp

WaterandEnergySafetyCompetition DubboCityCouncil SydneyWater HunterWaterCorporation

Thismajortransmissionlineupgrade,expectedtobecompletebyearly2008,willprovideasafeandsecureelectricitysupplytomorethan60,000newhomesinSydney’snorth-westatanestimatedcostof$23million.

Community partnershipsIntegralEnergyhasbuiltmanylong-termvaluablepartnershipswithlocalcommunitiesoverthepastdecade.Thesepartnershipspromoteandcelebratebusinesssuccess,contributetoenvironmentalandsocialinitiatives,andpromotestaffinvolvementwhereverpossible.

OurCommunityPartnershipandSponsorshipStrategysetsoutourpartnershipframework,incorporatingtriplebottomlineprinciplesforeconomic,environmentalandsocialoutcomes.

Table6showsourobjectivesineachareaandgivesexamplesofourcommunitypartnershipsin2006–07.AfuturechallengewillbeensuringthatourstrategysupportsIntegralEnergy’sexpansionintonewmarkets,suchasQueensland.

Thesocialcomponentofoursponsorshipframeworkconcentratesonthreekeyareas—charities,communityandsport—toreinforceIntegralEnergy’sresponsiblecorporatecitizenshipwithintheareaweserve.

During2006–07,IntegralEnergyintroducedtwoexcitingnewpartnerships:

The Powerhouse Discovery Centre: Collection Stores at Castle Hill.Wearetheprincipalsponsorofthecentre,astate-of-the-artstoragefacilityforaround50,000objects,designedtohonourandprotectAustralianhistorybymakingitaccessibletofuturegenerations.Thiscentreisdestinedtobecomeapopularvisitorattraction.

Integral Energy’s New South Wales Rugby League Development Western Sydney.WehavepartneredwithNSWRugbyLeagueandAustralianRugbyLeagueDevelopmenttodevelopgrassrootsRugbyLeagueandpromotehealthandfitnessamongyoungpeopleacrossGreaterWesternSydney.ThedevelopmentunitisprovidingpositiveRugbyLeagueexperiencestoboysandgirlsthroughprogramstailoredfordifferentagesandability.

IntegralEnergyhashadalong-termassociationwiththe1stRussellValeScoutsgroupintheIllawarraregionsince1974.Until2005,thegroup’sscouthallwaslocatedonlandownedbyIntegralEnergy.Afterthelandwassoldduring2006,wedonated$53,000fromtheproceedstoScoutsAustraliafortheupgradeoftheMtKeiraScoutCampandtheRussellValeScouts’homeinCorrimal.

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Wealsoworkwithlocalcouncilstomanagetheremovalofgraffitifromelectricityassetstoprotectthevisualamenityofcommunities.In2006–07,wedevelopedtargetedprogramsinPenrithandParramatta.

Staff workplace givingSinceIntegralEnergy’sworkplacegivingprogram,I care! (Integral’s concerned and responsive employees)commencedinJuly2004,morethan$455,000hasbeendonatedtoourportfolioof12staff-selectedcharities.StaffdonationsarematcheddollarfordollarbyIntegralEnergy,uptoatotalof$100,000peryear.Currently,10%ofourstaffparticipatein I care!

Future challenges

Maintainourfocusonsafetyandachievingazeroaccidentfrequencyrate

Furtherdevelopandimplementprogramstoretainanddevelopourpeople

Continuedfocusonprogramstorespondtotheneedsofvulnerablecustomers

Shiftingourlevelofstakeholderengagementfromaplatformof‘informingandconsulting’to‘involvingandcollaborating’.

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AnnualPerformanceReport2006–07

CorporateGovernance

48

49

Figure 20 Governance and Operational Structure

Parliament

Shareholding Ministers

Retail Risk Board Committee

Human Resources and Remuneration Board

Committee

Audit and Business Risk Board Committee

Chief Executive Officer

Richard PowisLeadsthemanagementteamandisresponsibleand

accountabletotheBoardfortheday-to-daymanagementandgovernanceoftheorganisation.

General Manager Network Development and Control

Rod HowardResponsibleforplanning,operatingandmonitoring

thenetwork,includingthedeliveryofitscapitalprogramtoensureitscapacity,sustainedintegrity

andlong-termvalue.

General Manager Network Asset Operations

Alan FlettResponsibleforbuildingandmaintainingnetwork

assetstoensureasafeandreliablenetwork,providingmeteringanddatamanagementservices,andmanagingnetworkconnectionsundertakenbyexternalproviders.

Chief Financial Officer

Daniel LucasResponsiblefortheorganisation’sfinancialand

procurementstrategies,financialdisciplineandcashflowmanagementandforreportingonitsfinancial

andbusinessperformancetokeystakeholders.

General Manager Regulatory and Corporate Affairs

Karen WaldmanCustodianoftheorganisation’spositioningfromabusinessstrategy,regulatoryandreputational

perspectiveandisresponsibleforIT&Tsupportservices.

General Manager Retail and Customer Services

Bruce RowleyResponsiblefordeveloping,marketingandselling

retailproductsthatmeetcustomerneedsandmaximisethevalueoftheorganisation’scustomerbase.

Board Code of Conduct

OutlinestheuniqueobligationsandresponsibilitiesfortheBoardand

expectationsastoDirectors’conduct.

Statement of Business Ethics

OutlinesIntegralEnergy’sexpectationsofprivatesectorserviceproviders

inconductingbusinesswithIntegralEnergy.

Code of Ethics

TheCodesetsouttheprinciplesandvaluesbywhichemployeesofIntegralEnergyareexpected

toact.

General Manager Human Resources

Irina White (Acting)Responsibleforensuringahealthyandsafe

environmentfortheorganisation’speopleandfordeveloping,attractingandretaininghigh-qualitystaff.

Company Secretary

Irina WhiteLeadstheSecretariat,whichsupportstheBoard

throughthereviewandimprovementoftheorganisation’scorporategovernanceframework.

Transaction Approval Committee

The Board of Directors is responsible for the overall corporate governance of Integral Energy and operates four committees.

Business UnitsTheheadofeachbusinessunitdirects,controlsandisheldtoaccountfortheorganisationalresourcesandprocessesfor

whichtheyareresponsible.Specificcommitteesbothintheexecutiveandinthebusinessunitsassisttheorganisationinitspursuitofasustainablefuture.

Portfolio Minister

Board of Directors

Integrated Suite of Ethical Principles

RegionalApprenticeCoordinator,DennisMuller

Corporate GovernanceAnnualPerformanceReport2006–07

50

Michael McLeod FAICD

MichaelMcLeodwasappointedanon-executivedirectorinMarch2000,andChairmaninMarch2002.MichaelistheChiefExecutiveOfficerofAustralianHealthManagement,Australia’sseventhlargestprivatehealthinsurancecompany.HewaspreviouslyChiefExecutiveOfficerofAustralia’slargestmedicalindemnityinsurancecompanyandtheChiefExecutiveOfficerofanAustralian-ownedriskmanagementconsultancywithoperationsinfivecountries.HeisaFellowoftheAustralianInstituteofCompanyDirectors,apastdirectoroftheNationalInsuranceBrokersAssociationofAustraliaandafoundingboardmemberoftheMedicalIndemnityInsurersAssociationofAustralia.Michaelwasre-appointedtotheBoardon1March2007.

Board of DirectorsInaccordancewiththeState Owned Corporations Act 1989,uptosevendirectorscanbeappointed,includingadirectornominatedbyUnionsNSW.Thenon-executivedirectorsaresubjecttoreappointmentbytheshareholders.

Terry Downing BComm, MMgmt, DipBusStudies (Insurance), FAICD

TerryDowningwasappointedanon-executivedirectorinMarch2000,andDeputyChairmaninMarch2002.TerryisaCertifiedPractisingAccountant,aFellowoftheAustralianInstituteofCompanyDirectors,andaconsultantwithextensiveexperienceinthefinancialservicessector.Previously,Terryheldanumberofseniorexecutivepositionsinthefinancialservicessector.

John Fahey AC DipL

JohnFaheywasappointedanon-executivedirectorinMarch2002.AformerPremierofNSWandmemberoftheNSWParliamentfor12years(1984–96),JohnwaselectedtotheCommonwealthParliamentin1996,servingasMinisterforFinanceandAdministrationintheHowardGovernmentfrom1996until2001.HebringsacommercialfocustotheBoardandacloseinsightintotheneedsandinterestsofIntegralEnergy’scustomers,gainedfromhisexperiencerepresentingresidentsinourfranchiseareaduringhisstateandfederalparliamentarycareer.JohnholdsthepositionsofChairmanandDirectoronanumberofcommercialBoards,aswellasbeinganadviserinthefinancialservicessector.JohnwasmadeaCompanionoftheOrderofAustraliainJanuary2002andwasawardedtheFederationMedalin2003.

5�

John Fletcher BSc, MBA, FAICD

JohnFletcherwasappointedanon-executivedirectorinMarch2006andisalsoanon-executivedirectorofBabcock&BrownPowerLimitedandBabcock&BrownPowerServicesLimitedasResponsibleEntityfortheBabcock&BrownPowerTrust.JohnhasheldanumberofseniorexecutivepositionsinthefinancialservicesandenergysectorsandhasworkedinSouthAfricaandEngland.JohnisaFellowoftheAustralianInstituteofCompanyDirectors.

Paul Sinclair DipIR, DipHRM

PaulSinclairwasinitiallyappointedanon-executivedirectorinJanuary1999.PaulistheAssistantSecretaryoftheElectricalTradesUnion(NSWBranch)andisalsoadirectorontheboardsoftheNationalElectricitySuperannuationScheme,ElectrotechSkillCentre,andElectroGroupTraining.PaulistheUnionsNSWnomineetotheTAFENSWConsultationCommittee.Paulwasre-appointedasanon-executivedirectorinAugust2006.

Emma Stein BSc (Hons), MBA, FAICD

EmmaSteinwasappointedanon-executivedirectorinOctober2004.Emmaisalsoanon-executivedirectorofDiversifiedEnergyandUtilityTrusts(anAMPCapitalGroupandMacquarieGroupjointventure),ArcEnergyandtheGrowthCentresCommission,amemberoftheUniversityofWesternSydneyStrategyandResourcesBoardCommitteeandtheNSWPresidentoftheNationalAssociationforPreventionofChildAbuseandNeglect.Previously,EmmahasheldthepositionofmanagingdirectorforanumberoflargemultinationalfirmsintheUnitedKingdom.EmmaisaFellowoftheAustralianInstituteofCompanyDirectors.

Richard Powis BEc, DipEd

RichardPowiswasappointedCEOandExecutiveDirectorinJanuary2000.Richard’sbiographicaldetailsaregivenintheExecutiveteamsectionoverleaf.

Corporate GovernanceAnnualPerformanceReport2006–07

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Executive team

Richard Powis BEc,DipEd

RichardPowiswasappointedCEOofIntegralEnergyinJanuary2000,beforewhichhehadworkedintheelectricitysupplyindustryinNSWformorethan15years.Hehasastrongtrackrecordinbusinessmanagementandstrategicdevelopmentacrossanumberofindustries.HewasacentralfigureinthedevelopmentoftheNationalElectricityMarket,whichincludedtheconnectionoftheQueenslandandNSWmarkets.RichardisaboardmemberoftheEnergyIndustriesSuperannuationSchemeandtheEnergyNetworksAssociation.

Alan Flett BEIndEng(Hons)

AlanFlettwasappointedGeneralManagerAssetManagementinJuly2000andGeneralManagerNetworkAssetOperationsinDecember2006.Duringhiscareer,AlanworkedwithABB,CablemakersAustraliaandCromptonParkinsoninAustralia,China,theUnitedKingdomandNewZealand.WhileworkingforABBandCablemakersAustralia,AlanmanagedmanufacturingorganisationsthatweremajorsuppliersofcriticalmaterialtotheAustralianpowerindustry.

Rod Howard BE(Hons),MEngSc,BBus,MBA,GAICD

RodHowardwasappointedGeneralManagerNetworkDevelopmentandControlinDecember2006.Rod’spreviousresponsibilitiesatIntegralEnergywerewideanddiverseandhaveincludedthegeneralmanagementrolesofCapitalSolutions,FullRetailContestability,CorporateDevelopment,CompanySecretary,BusinessDevelopmentandIntegralEnergyContracting.HeisalsoadirectorofEnergyandWaterOmbudsmanNSW(EWON).

Bruce Rowley BBus,AssDipLG

BruceRowleywasappointedGeneralManagerSalesandMarketinginFebruary2001,andGeneralManagerRetailandCustomerServicesinFebruary2004.BeforejoiningIntegralEnergy,BruceworkedforfiveyearswithAdvanceEnergy,wherehewasGeneralManagerEnergyServicesandGeneralManagerSalesandMarketing.Brucehasalsohadwideexperienceinanumberofseniormanagementrolesinmarketing,corporatecommunication,strategicplanningandcustomerservice.HeisadirectoroftheEnergyRetailersAssociationofAustraliaandisamemberoftheCouncilofEWON.

Karen Waldman BSc(Arch),BArch(Hons),MBA,GAICD

KarenWaldmanwasappointedGeneralManagerRegulatoryandCorporateAffairsinFebruary2004.Karen’spreviousresponsibilitieswithIntegralEnergyincludedGeneralManagerRegulatory,GeneralManagerCorporateDevelopment/CompanySecretary,andGeneralManagerIntegralEnergyContracting.BeforeworkingforIntegralEnergy,KarenwasemployedbySydneyWater,wheresheheldanumberofpositions,includingRegionalManagerCentralRegionandSeniorStrategicPlanner.BeforejoiningSydneyWater,shewasthemanagingdirectorofherarchitecturalandconstructioncompany,specialisinginprojectmanagement.KarenisamemberoftheAuditandRiskManagementCommitteeoftheUniversityofWesternSydney.

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Irina White DipT,GradDipCommMan,MAdmin,MAICD

IrinaWhitewasappointedCompanySecretaryinFebruary2006.BeforejoiningIntegralEnergy,Irinawasemployedinanumberofthestate’sbiggestandmostcomplexpublicutilities.Duringthattime,sheservedasCompanySecretarytotheboardsofRailServicesAustralia,RailInfrastructureCorporation,theStateRailAuthorityandRailCorp.Shewasresponsibleforoverseeingtheincorporation,mergerandamalgamationofsomeofthoseentities.AsGeneralManagerCorporateServicesinRailServicesAustraliaandRailInfrastructureCorporation,shewasresponsibleforareassuchaslegal,internalaudit,corruptionprevention,properties,riskmanagement,corporateaffairsandthebusinessmanagementsystem.HerpastexperiencehasalsoincludedseniorpolicyandmanagementpositionsintheNSWDepartmentofEducationandTraining.

Daniel Lucas BBus,CA

DanielLucaswasappointedChiefFinancialOfficerinDecember2006.Danielisacharteredaccountantwithmorethan25yearsexperienceasafinanceexecutivewithanumberofmajororganisations,includingWestpac,Deloitte,Foster’sBrewingGroup,Unilever,NationalFoodsandAustralianPharmaceuticalIndustries.HehasworkedinAustraliaandoverseasandhisseniormanagementcareerhascoveredabroadrangeofareassuchasfinancialmanagement,IT,supplychain,investorrelations,strategydevelopmentandmergersandacquisitions.

Changes to the Executive team in 2006–07JohnWallaceretiredasGeneralManagerEngineeringPerformanceinDecember2006afteracareerspanning42yearsintheelectricityindustry.Afteranextensivereview,thethreenetworkbusinessunitsweresubsequentlyrestructuredintotwo.

AlanPriestleyresignedasGeneralManagerHumanResourcesinAugust2006.Fromthistime,HumanResourcesreportedtotheCompanySecretary,IrinaWhite.HishamEl-AnsaryresignedasChiefFinancialOfficerinAugust2006.DanielLucaswasappointedChiefFinancialOfficerinDecember2006.

SteveLoweresignedasGeneralManagerTradingandMajorAccountsinMay2007.ThesefunctionsweresubsequentlytransferredtotheRetail,FinanceandCompanySecretariatbusinessunits.

Corporate governance

TheIntegralEnergyBoardandExecutivebelievethatgoodgovernanceisacriticalprerequisiteforahigh-performanceorganisationwithasustainablefuture.Goodgovernanceensuresthedeliveryofoutcomessoughtbyourshareholders;supportsourpeopleandbusinessoperations;andensuressoundfinancialandriskmanagementpracticesandeffectivecomplianceandauditingprograms.

IntegralEnergyrecognisesthatamoreholisticapproachtogovernance,riskandcomplianceminimisesduplicationandthatwhencombinedwithasoundethicalcultureenablesanincreaseinprofitability,efficiencyandeffectivenessthroughagreateralignmentofbusinessobjectives,valuesandbehaviourswiththesystemsofcontrol,supervisionandreporting.

(Lefttoright):IrinaWhite,AlanFlett, RodHoward,BruceRowley, KarenWaldman,RichardPowis, DanielLucas.

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54

Company Secretariat

2006–07wasthefirstfullyearofoperationoftheCompanySecretariat.CreatedinFebruary2006,theSecretariat,withitscombinationoflegal,compliance,ethical,andriskmanagementfunctions,demonstratesIntegralEnergy’scontinuingcommitmenttoanintegratedgovernance,riskmanagementandcomplianceapproach.

InternalauditisanotherimportantcomponentoftheSecretariat’sfunctionsbutretainsadirectreportinglinetotheAuditandBusinessRiskBoardCommitteeandtheChiefExecutiveOfficerforauditmatters.

Risk management

EffectivemanagementofriskateverylevelinIntegralEnergyisfundamentaltoachievingourbusinessobjectives.

IntegralEnergy’sstrategicriskswerereviewedbytheExecutiveteamandtheBoard.Thereviewexplicitlyconsideredtheinherentriskandtheexpectedresidualrisk.Thestrategicrisksincludepublicandworkplacesafety,networkreliability,theenvironment,programdelivery,thepositioningoftheretailbusiness,tradingactivities,stakeholders,customers,legislativecomplianceandbusinesscontinuity.

In2006–07,theAuditandBusinessRiskBoardCommitteecontinuedtoreceivebi-monthlyreportsontheprogressofmitigatingactionstomanagestrategicrisks.Tostrengthentheriskmanagementfocusoftheorganisation,theCorporatePlanwasstructuredtotakeaccountofthoserisks.

Operationalrisksatthebusinessunitlevelwerereviewedregularlythroughself-assessmentworkshopsfacilitatedbytheRiskManager,whousedprocessesbasedonAustralianStandardAS/NZS4360–RiskManagement.

IntegralEnergyrecognisesthat,astheproviderofanessentialservice,wehavearesponsibilitytothecommunityweservetohavecomprehensiveincidentmanagementandbusinesscontinuityplansinplace.Theseplanscontinuedtobereviewedandtestedregularly.

Insurance

IntegralEnergyreviewstheadequacyofitsinsurancepolicycoverageandlimitsannuallyandensuresthatallparticipatingmarketsmeetacceptableinsurersecurityrequirements.

Compliance management

IntegralEnergyiscommittedtothedevelopmentofafullyintegratedapproachtocompliancemanagementandusestheAustralianStandardAS3806–2006ComplianceProgramsasitsguide.In2006–07,we:

establishedaBusinessComplianceCommitteecomprisingrepresentativesofallbusinessunitsnominatedbythebusinessunitgeneralmanagers(thecommitteeischairedbytheCompanySecretaryandoperatesunderacharterendorsedbyexecutivemanagement)

improvedtheLegislativeObligationsListbyusingriskmanagementmethodologyinlinewiththeAustralianStandardAS4360–2004RiskManagementtoprioritisetheobligations

commencedbuildingnewintegratedrisk-basedcompliance

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plansacrossthebusinessbyengagingwithoperationalstaffandusingcurrentpractices,processesandcontrols

procuredasoftwaretooltohousecomplianceplansandriskmanagementplans,includingfraudandcorruptionrisks,inacentralrepositoryandtofacilitatereal-timeandhistoricalmonitoringandreporting

developedanewreportingregimefortheregularthree-yearreviewofpoliciesandprocedures

continuedtotrainemployeesintheirlegalobligations,includingunderprivacy,freedomofinformationandtradepracticeslegislation

becameacorporatememberoftheAustralasianComplianceInstitute.

Ethics and conduct

TheBoard’sCodeofConduct,theorganisation’sCodeofEthicsandtheStatementofBusinessEthicssendaconsistentmessageaboutappropriatebehaviourtomembersofourBoard,staff,customers,suppliersandthecommunity.

TheCodeofEthics,whichoutlinesourcorporatevaluesandprinciplesandguidesourday-to-daybehaviour,istheorganisation’sprimarydocumentonwhichallotherdocumentsandactivitiesarebased.Thecodewasrevisedin2006–07toincludeanewvalue,‘enterprisingspirit’.TheStatementofBusinessEthicsisprovidedtoallsuppliersandoutlinesourvaluesandbusinessprinciples.

TheCodeofEthicsandtheStatementofBusinessEthicsareavailableonourwebsite.Bothdocumentsprovideinformationonhowtoreportinappropriatebehaviour.

IntegralEnergyprovidesanumberofchannels,includingaconfidentialethicsline(1800ETHICS),tostaffandsuppliersforreportinginappropriatebehavioursuchasfraudorcorruption.Membersofthepubliccanuseourwebsitetoreportfraudorcorruptconduct.

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55

In2006–07weundertookthefollowingactivities:

conductedacorporate-widefraudriskassessment

draftedanewtwo-yearFraudandCorruptionControlPlantoreplacethepreviousplan,whichendedon30June2007.

Wealsoconductedourbi-annualemployeeopinionsurveyinwhichemployeeswereaskedtocommentonthestatement‘IamconfidentreportsofwrongdoingwouldbetreatedseriouslyatIntegralEnergy’.Some74%ofallemployeesmeasuredthisstatementas‘agreeorstronglyagree’.

Privacy

Asastate-ownedcorporation,IntegralEnergycomplieswiththeNationalPrivacyPrinciples.TheseprinciplesarecontainedinthePrivacy Act 1988.

Internal audit

TheBoardandtheExecutivearecommittedtosupportinganinternalauditfunctionthatoperatesasanindependent,objectiveassuranceprovider,addingvaluetotheorganisationandimprovingitsoperations.

Toensuretheindependenceoftheinternalauditfunction,theHeadofAuditandRiskhasdirectaccesstotheAuditandBusinessRiskBoardCommitteeandtheChiefExecutiveOfficer.

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TheinternalauditactivitysupportsmanagementinachievingIntegralEnergy’sstatutoryandbusinessobjectivesbybringingadisciplinedapproachtoevaluatingandimprovingtheeffectivenessofriskmanagement,controlandgovernanceprocesses.

Auditsarecarriedoutacrossarangeofoperationsandactivities,inlinewithaplanapprovedeachyearbytheAuditandBusinessRiskBoardCommittee.In2006–07,auditswerecompletedinaccordancewiththeapprovedplan.AnumberofspecialreviewsrequestedbymanagementandtheBoardwerealsocompleted.

Theannualclientsatisfactionsurveyandanexternalreviewfoundthattheinternalauditfunctionhaddischargeditsresponsibilityeffectively.

External audit

TheAuditor-GeneralofNSWprovidesindependentexternalauditservicesthroughtheAuditOfficeofNSW,andprovidesnootherservicestoIntegralEnergy.

Executive committees

IntegralEnergy’ssixexecutivecommitteesintegrateorganisationalinitiativesandprovidespecialistandindependentadvice.Theexecutivecommittees,whicharegenerallycomposedoftheExecutiveteam,operateaccordingtocharterssetdownbytheChiefExecutiveOfficer.ThecommitteesaretheOccupationalHealthandSafety

Committee,theContractReviewCommittee,theEnvironmentalSteeringCommittee,theInformationandCommunicationsTechnology(ICT)EnterprisePlanningCommittee,theCapitalGovernanceCommittee,andtheAuditandBusinessRiskCommittee.

Board committees

TheroleoftheBoardistoprovideoverallstrategicguidanceforthecompanyandeffectiveoversightofmanagement.Inundertakingthisrole,theBoardmaydelegateresponsibilitytocommitteestoconsiderissuesinfurtherdetailandtoreportbacktoit.ThedutiesandresponsibilitiesoftheboardcommitteesaredescribedinAppendix4.

TheBoardmayalsoestablishcommitteesfromtimetotimetoconsiderothermattersofspecialimportance.Nosuchcommitteeswereestablishedin2006–07.Fourboardcommitteesoperatedin2006–07.TheTransactionApprovalCommitteehasarotatingmembership.FurtherinformationaboutthedutiesofIntegralEnergy’sBoardcommitteesissetoutinAppendix4,beginningonpage107.

‘IntegralEnergyiscommittedtothedevelopmentofa fullyintegratedapproachtocompliancemanagement andusestheAustralianStandardAS3806–2006 ComplianceProgramsasitsguide.’

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Table 8 Directors’ meetings, 2006–07

Integral Energy Australia Board

Audit and Business Risk Board Committee1,2,3

Retail Risk Board Committee

Human Resources and emuneration Board Committee

Transaction Approval Committee4

Name Meetingsattended

Meetingseligibleto

attend

Meetingsattended

Meetingseligibleto

attend

Meetingsattended

Meetingseligibleto

attend

Meetingsattended

Meetingseligibleto

attend

Meetingsattended

Meetingseligibleto

attend

MichaelMcLeod5,6 12 12 9 9 11 11 6 6 4 4

TerryDowning 12 12 9 9 – – 6 6 4 4

JohnFahey 11 12 9 9 – – 5 6 1 1

JohnFletcher7 11 12 8 9 10 11 1 1 – –

PaulSinclair2,8,9 12 12 1 1 – – 6 6 – –

EmmaStein2,7 12 12 1 1 11 11 1 1 – –

RichardPowis10 12 12 8 9 11 11 6 6 4 4

Notes

1 Aspecialmeetingwasheldon6September2006fortheendorsementofthefinancialstatementsfortheyearended30June2006andtheInsuranceRenewalStrategy.

2 Aspecialmeetingwasheldon8November2006toreviewstrategicrisk.EmmaSteinandPaulSinclairattendedthemeetingasinvitees.

3 TheappointmentoftheHeadofAuditandRiskwasendorsedbycirculatingresolutionon2May2007.

4 TheTransactionApprovalCommitteemetformallyontwooccasionsin2006–07andmadetwoapprovalsbycirculatingresolution.

5 MichaelMcLeodwasre-appointedasChairmanon1March2007.

6 MichaelMcLeodattendedtheHumanResourcesandRemunerationBoardCommitteemeetingsasaninvitee.

7 JohnFletcherandEmmaSteinattendedpartoftheHumanResourcesandRemunerationBoardCommitteemeetingon7March2007asinvitees.

8 PaulSinclairattendedtheBoardmeetingsinJulyandAugust2006asaninviteependinghisre-appointmentasaDirectoron21August2006.MrSinclairwaspaidanhonorariumequivalenttotheDirectorremunerationfortheperiodasapprovedbytheBoardatthe10May2006Boardmeeting.

9 PaulSinclairattendedtheHumanResourcesandRemunerationBoardCommitteemeetinginJuly2006asaninviteependinghisre-appointmentasaDirectoron21August2006.

10RichardPowisattendedtheAuditandBusinessRiskBoardCommitteemeetingsasaninvitee.

‘OurCodeofEthicswasrevisedin2006-07 toincludeanewvalue-enterprisingspirit’

57

Term of office of Board members

AllmembersofIntegralEnergy’sBoardofDirectors,withtheexceptionoftheChiefExecutiveOfficer,areappointedbythevotingshareholdersforperiodsofuptofiveyears.Avacancyintheofficeofdirector(withtheexceptionoftheChiefExecutiveOfficerandUnionsNSWnominee)isfilledbyanomineeofthevotingshareholders.

Theremunerationofeachnon-executivedirectorispaidoutofIntegralEnergy’sfundsandisdeterminedbythevotingshareholders.TheChiefExecutiveOfficerisnotentitledtoanyadditionalremunerationforbeinganexecutivedirector.Seepage92forfurtherdetailsaboutremuneration.

ThecurrentdirectorsandtheirtermsaresetoutinTable9.

Table 9 Directors and terms of office

Name Term (including reappointments)

Position Comment

MichaelMcLeod

(Chairman)

1March2000–31August2010

Non-executivedirector

ChairmanoftheBoardfrom1March2002(reappointed1March2007)

MemberofAuditandBusinessRiskBoardCommittee

MemberofRetailRiskBoardCommittee

Invitee,HumanResourcesandRemunerationBoardCommittee

TerryDowning

(DeputyChairman)

1March2000–29February2008

Non-executivedirector

DeputyChairmanoftheBoardfrom1March2002

ChairmanofHumanResourcesandRemunerationBoardCommittee

MemberofAuditandBusinessRiskBoardCommittee

JohnFahey 1March2002–28February2009

Non-executivedirector

ChairmanofAuditandBusinessRiskBoardCommittee

MemberofHumanResourcesandRemunerationBoardCommittee

JohnFletcher 1March2006–28February2009

Non-executivedirector

MemberofRetailRiskBoardCommittee

MemberofAuditandBusinessRiskBoardCommittee

PaulSinclair 1January1999–20August2008

Non-executivedirector

Re-appointed21August2006

MemberofHumanResourcesandRemunerationBoardCommittee

EmmaStein 12October2004–11October2007

Non-executivedirector

ChairofRetailRiskBoardCommittee

RichardPowis Appointed17January2000

ChiefExecutiveOfficerandExecutiveDirector

MemberofRetailRiskBoardCommittee

MemberofHumanResourcesandRemunerationBoardCommittee

Invitee,AuditandBusinessRiskBoardCommittee

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Management discussion and analysis

Overview

IntegralEnergymaintaineditsstrongperformance,achievedthroughcontinuedfocusonbusinessfundamentals,appropriatedisciplineandcorporategovernance.

Eachfinancialyear,aspartofitsobligationsasastate-ownedcorporation,IntegralEnergyisrequiredtosubmitaStatementofCorporateIntent(SCI)toitstwovotingshareholders,theNSWTreasurerandtheMinisterforFinance.TheSCIsetsoutkeypolicies,performancetargetsandbusinessdirectionswhichhavebeenagreedtobytheBoardofIntegralEnergyanditsshareholders.

Summary

TheSCIstatesthenatureandscopeofthemaincommercialactivitiesofIntegralEnergyandthestrategicdirectionofthecorporation.Inaddition,theSCIincludesdetailsof:

theobjectivesofthecorporation

performancetargetsandprojections

socialprogramsandnon-commercialactivities

financialassetandliabilitymanagement(includingenergytradingriskmanagement)

commitmenttonetworkservicequality.

IntegralEnergy’sprofitbeforeincometaxexpensewas$239.2million,exceedingthe2006–07SCItargetof$163.1million.Totaldistribution,consistingofincometaxexpenseanddividendpayments,was$193.0million,whichwasalsohigherthanthetargetof$132.7million.

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Net profit

Operatingprofitaftertaxwas$153.2million,a10.5%increaseonthe2005–06resultof$138.6millionand51.1%higherthantheSCItarget.

Totalrevenueandotherincomeincreasedby$103.2millioncomparedtothepreviousyear.Theincreasewasduetoadditionalelectricitysalesandnetworkuseofsystemincome.Thishasbeenpartlyoffsetbyacurrentyearsuperannuationdefinedbenefitsactuariallosscomparedtoaprior-yeargain.

Expensesfromoperatingactivitiesincreasedby$57.1millioncomparedtothepreviousyear.Theincreasewasduetoadditionalretailinganddistributionofelectricitycosts,whichincreasedinlinewithrevenue,combinedwithincreaseddepreciation.

Shareholder return

IntegralEnergyiscommittedtodeliveringsustainableandattractivereturnstoitsshareholder,theNSWGovernment.

Thedirectorsdeclaredafirstandfinaldividendof$107.0million,representinganincreaseof$3.2millioncomparedtothepreviousyearandanincreaseof$36.1millioncomparedtothe2006–07SCItarget.

Dividenddistributionisbasedon70%ofprofitaftertax,adjustedfornon-cashAustralianEquivalentInternationalFinancialReportingStandards(AIFRS)adjustmentsrelatingtosuperannuationactuarialgains/lossesandfairvaluemovementsinfinancialinstruments.

Balance sheet

Workingcapitaldeficithasreducedby$324.3millionasat30June2007,primarilyduetoanetincreaseinthecurrentderivativefinancial

assetsof$236.0million,anincreaseincashheldof$44.2millionandareductionincurrentinterest-bearingloansof$37.3million.Anincreaseof$136.0millionintradeandotherreceivableswasoffsetbyanincreaseof$143.5millionintradeandotherpayables.

Non-currentassetsincreasedby$527.2millioncomparedtothepreviousyearduetoanincreaseof$322.5millioninthewritten-downvalueofproperty,plantandequipmentandanincreaseof$187.0millioninnon-currentderivativefinancialassets.

Non-currentliabilitiesincreasedby$410.9millioncomparedtothepreviousyearduetoanincreaseindeferredtaxliabilitiesof$214.5millionandanincreaseininterest-bearingloansandborrowingsof$187.1million.

Cash flows

Cashandcashequivalentsattheendofthefinancialyearincreasedby$44.2millionfrom2005–06.Netcashflowsprovidedbyoperatingactivitiesfortheyearwere$382.4million,anincreaseof$163.3millionon2005–06,duemainlytoreducedpaymentstosuppliersandemployeescombinedwithincreasedreceiptsfromcustomers.

Netcashflowsusedininvestingactivitiesfortheyearwere$374.1million,anincreaseof$44.8millionor13.6%.Thisresultisconsistentwithincreasedcapitalexpenditurelevels.

Netcashflowsprovidedbyfinancingactivitiesfortheyearwere$35.9million,adecreaseof$39.9millionor52.6%on2005–06results.Thisisduetoanetdecreaseinborrowingsandareductionindividendspaid.

Unusedcreditfacilitiesasat30June2007were$331.3million.

‘IntegralEnergyiscommittedtodelivering sustainableandattractivereturnstoits shareholder,theNSWGovernment.’

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Capital expenditure

The2006–07financialyearresultedinasignificantincreaseincapitalspend,withexpendituretotalling$381.7million,including$316.6millionspentonimprovingnetworkassets.

Thecapitalprogramcontinuestotargetassetrenewalsaswellasgrowth-relatedprojects.ThecapitalprogramisunderpinnedbyIntegralEnergy’sStrategicAssetManagementPlan(SAMP).TheSAMPreflectsplansandstrategieswhicharealignedtocustomerandtechnicaldrivers,improvelong-termnetworkassetvaluesandproduceoptimalreturnstoshareholders.Theplansetsprioritiesandsummarisestheinvestmentinthenetworkrequiredtomaintainongoingnetworkcapability,consistentwitha‘bestinclass’networkassetmanager.

Credit rating

FitchRatingshasaffirmedIntegralEnergy’slong-termforeigncurrencyIssuerDefaultRatingof‘AA’andshort-termforeigncurrencyratingof‘F1+’.

Definitionsoftheseratingsareasfollows:

AA: Veryhighcreditquality.AAratingsdenoteexpectationsofverylowcreditrisk.Theyindicateverystrongcapacityforpaymentoffinancialcommitments.Thiscapacityisnotsignificantlyvulnerabletoforeseeableevents.

F1+: Highestcreditquality.Indicatesthestrongestcapacityfortimelypaymentoffinancialcommitments;mayhaveanadded‘+’todenoteanyexceptionallystrongcreditfeature.

TheseratingsreflectNSWGovernmentownershipofIntegralEnergy.

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DistrictOperator,DanielMifsud(left),andapprenticeDanielMyers.

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Appendix1:Economic

Network regulatory determination 2009–2014 96

Retail regulatory determination 2007–2010 97

Form of regulation 97

Level of regulated price controls 97

Regulated retail prices 2007‑08 98

NightWatch 98

Five‑year statistical table 99

Consultants 101

Overseas travel table 101

Customer service guarantees 102

Executive management remuneration table 103

Appendix2:Environment

Heritage management 104

Appendix3:Social

Ethnic Affairs Priority Statement 104

Publications 105

Funds granted to non‑government organisations 106

Appendix4:Governance

Duties of Board committees 107

Summary of legislative changes and judicial decisions 109

Freedom of Information 113

Australian Financial Services Licence 115

Disclosure of approved exemptions 115

Code of Ethics and corporate values 117

Annual Performance Report 2006–07

Appendices

Appendices

Appendix1:Economic

NetworkRegulatoryDetermination2009–14

The current Independent Pricing and Regulatory Tribunal (IPART) Network Determination expires on 30 June 2009. A new five‑year determination, the 2009 Network Determination, takes effect from 1 July 2009.

The 2009 determination will be conducted by the Australian Energy Regulator (AER) and will be fundamental to Integral Energy’s ongoing ability to secure funding for its investment programs and achieve its commercial targets. The review will position the organisation for the five years 2009–14 and will determine the revenue/price path for the network business.

The 2009 determination will be undertaken at a time when the framework for the regulation of distribution network businesses is still being developed through the Ministerial Council on Energy and the Standing Committee of Officials. Continuing uncertainty regarding the framework will mean that transitional arrangements will be required and that the timeframe over which Integral Energy must develop its initial submission to the determination may be reduced.

The three NSW distribution network businesses and ActewAGL will be the first distribution businesses to be regulated by the AER.

The outcomes from the 2009 Network Determination are important to Integral Energy. In order to support and guide this project, governance and reporting arrangements have been established to facilitate and deliver the following:

Communication—All individuals involved in the project need to be aware of the breadth of the project, the status of work, the key issues and inter‑relationships between the various work areas.

Monitoring of project performance and outputs—Workstream leaders, the project manager, project director and the Executive must be able to monitor the project performance against the project plan, milestones, and so on.

Reviewing and developing strategy—The project sponsor, the project director and workstream leaders must have the opportunity to review and provide input on strategic issues, consider strategic options and responses, review strategic resourcing issues, and review the high‑level project plan and milestones.

Decision making—Decisions on assumptions, strategies and other matters need to be made at the appropriate level.

Three groups, with a number of supporting work groups, are responsible for the governance arrangements for the project. The three groups are the Project Steering Committee, the Project Strategy and Program Committee and the Project Team.

National Regulatory Framework

The Ministerial Council on Energy’s communiqué released on 25 May 2007 advised that the introduction of the economic regulatory package, comprising the National Electricity Law and the National Electricity Rules, will be delayed until December 2007. The introduction of the package will complete the transfer of responsibility for the economic regulation of transmission and distribution in the electricity and gas sectors to the new national governance arrangements.

Integral Energy supports the move to a national framework but notes that, as a national set of rules and guidelines will not be finalised in time for the 2009 Network Determination, a set of transitional arrangements that provide some regulatory certainty for the distribution network service providers and the AER will need to be developed.

The combination of an uncertain regulatory framework and timetable and the impending regulatory process means that the NSW distribution network service providers will need to prepare transitional arrangements for the next regulatory control period, bringing forward existing distribution arrangements, where appropriate, and adopting the new rules, where possible. A similar arrangement was successfully proposed by Powerlink in Queensland for its current regulatory process.

Integral Energy is actively participating in the development of these transitional arrangements.

Network prices 2007–08

In June 2007, IPART approved our 2007–08 pricing proposals as consistent with the regulatory requirements and other pricing principles and methodologies outlined in the 2004 determination. As part of the pricing for 2007–08, Integral Energy has introduced several important tariff reforms for non‑residential customers, as summarised below:

A seasonal peak period maximum demand price structure for all non‑residential customers on a demand tariff. Under this new structure, large non‑residential customers will pay a higher maximum demand charge during the summer and winter months of the year, when Integral’s network is more likely to be constrained

A new transitional network tariff as part of our strategy to move general supply customers consuming more than 160 MWh per annum to a more cost‑reflective tariff

A reduction in the annual consumption threshold under the general supply inclining block tariff structure from 15,000 kWh to 10,000 kWh to further encourage larger users on this tariff to reduce their consumption or to move to a time‑of‑use tariff.

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For customers on the domestic tariff, Integral Energy has maintained the current price differential between the first and second blocks of around 20% at the network level. As the network price accounts for about half of a customer’s overall bill, the 20% differential will translate to about a 10% difference between blocks at the retail level. While we remain committed to delivering a stronger price signal to those users who are placing the most strain on the network, we are also aware of the potential for reforms to create material adjustment costs for some customers. Therefore, when assessing future tariff reform options, we will consider both economic efficiency and equity outcomes.

Integral Energy is keen to pursue more innovative tariff reform, but is careful to ensure that the net economic benefits of potential reforms are understood. Understanding the price responsiveness of residential customers in our franchise area is essential when considering future tariff reform options.

To better understand customers’ price responsiveness, we are undertaking a two‑year pricing trial involving a representative sample of residential customers in western Sydney who elect to be placed on either of the following tariffs:

Dynamic peak time‑of‑use tariff —Customers on this tariff pay different prices for their energy consumption at different times of the day. They pay a significantly higher dynamic peak price for their energy consumption during a dynamic peak event. The number of dynamic peak events is limited to 12 a year.

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Seasonal peak time‑of‑use tariff —Customers on this tariff pay different prices for their energy consumption at different times of the day and year. They pay a higher price for their energy consumption during the peak periods in summer (November to March) and winter (June to August).

The pricing trial began on 1 August 2006, with around 1,000 residential customers in western Sydney agreeing to participate. While it is too early to draw definitive insights into customer behaviour from the preliminary data, the results so far indicate that customers, in particular those on the dynamic peak time‑of‑use tariff, may be willing to change their usage patterns when given an efficient pricing signal. Integral Energy eagerly awaits the results of the second year of the trial, particularly over the 2007–08 summer period, to enable more definitive conclusions to be drawn on the price responsiveness of residential customers.

RetailRegulatoryDetermination2007–10

IPART regulates the prices that Integral Energy can charge customers whose electricity is supplied under a standard form customer supply contract.

In 2006–07, the Minister for Energy asked IPART to set regulated retail tariffs and charges for small retail customers, so that from 1 July 2007 to 30 June 2010 their reliance on regulated prices would be reduced and retail competition would be facilitated. In undertaking its review and making its determination, IPART was guided by the terms of reference provided for the Minister for Energy.

The review covered the three years of the phase‑out of the Electricity Tariff Equalisation Fund, which will expire in June 2010.

• IPART released its final report and final determination on 14 June 2007. Overall, the final determination was a positive outcome for Integral Energy, providing significant price increases relative to the 2004 determination.

Formofregulation

In deciding on the appropriate form of regulation, IPART considered that while there was sufficient competition for small retail electricity customers in the metropolitan market for it to adopt a lighter form of regulation, the less competitive non‑metropolitan market (that is, the Country Energy market) required a different approach. IPART decided to:

add the weighted average price cap for the regulated retail price controls (R values) to actual network charges (N values)

allow standard retailers discretion in increasing prices

remove the limits on price movements for Integral Energy

maintain a prohibition on introducing new regulated tariffs (except with the agreement of the tribunal)

allow the removal of regulated tariffs.

Levelofregulatedpricecontrols

Energy cost allowance

IPART has allowed market‑based energy purchase costs. The energy cost allowance includes an allowance for volatility in energy costs based on a ‘cost of working capital’ approach.

IPART has also decided to introduce annual reviews of the market‑based electricity purchase cost component of the electricity cost allowance, which recognises the difficulty in forecasting wholesale electricity prices for three years. Those reviews will commence by 1 March 2008 and 1 March 2009, and final decisions will be released by 20 May each year.

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Appendices

Appendix1:Economic(continued)

The annual reviews will be limited to the market‑based electricity purchase cost component. In undertaking the reviews, IPART will adopt the same approach it used in making the 2007 Determination.

The reviews will not reconsider the long‑run marginal cost of electricity generation, the volatility allowance, green energy costs, National Electricity Market fees, energy losses, retail operating costs, customer acquisition costs or the retail margin.

Retail operating costs

IPART has allowed retail operating costs of $75 per customer, plus customer acquisition costs of $34 per residential customer and $42 per business customer per year. The weighted average of these costs is $35 per customer.

This means that the retail operating cost allowance, including customer acquisition costs, including adjustments for double counting, has been set at $105 per customer.

Retail margin

The tribunal allowed a retail margin of 5% (on an EBITDA basis) in its final determination.

Cost pass‑through

IPART has introduced a mechanism to allow retailers to pass through the costs of certain taxation events and regulatory change events. Regulatory events include:

meeting additional obligations related to green energy schemes (existing and future)

being a retailer of last resort

meeting additional obligations for government‑imposed energy hardship policies

meeting one‑off NEMMCO charges (such as reserve trader or direction events).

Regulatedretailprices2007–08

Based on the final retail determination, a set of regulated retail tariffs was developed and submitted to IPART on 15 June 2007. The tariffs were approved for implementation from 1 July 2007.

The annual regulated retail bill increase in nominal terms for the average residential customer using 6,000 kWh per annum is estimated to be approximately $69 (or 7.9%) in 2007–08. For the average general supply customer using 20,000 kWh per annum, the estimated increase will be $224 (or 9.2%).

Integral Energy’s regulated retail prices for residential and business customers will increase by an annual average of 8.1% in nominal terms for the next three years.

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NightWatch

The Integral Energy NightWatch service continued to grow at a steady rate this year, with the service now extending to more than 3,300 lights illuminating properties for 1,700 customers. The service installs and maintains lighting on existing Integral Energy assets (wooden poles and metal columns) to illuminate a wide range of customer premises from dusk to dawn at reasonable rates.

Our customers have used our service for a wide range of applications, including security lighting at factories, promotional and car‑park lighting at licensed clubs, and security lighting for small business premises across our franchise area.

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Table 10 Five year statistics

2002–03 2003–04 2004–05 2005–06 2006–07

EFFICIENCY

Employment (full‑time equivalent staff at 30 June) 2,050 2,176 2,298 2,457 2,593

Output/employee (GWh)GWh sold per average number of employees 7.6 7.4 7.6 7.2 6.9

Sales revenue ($’000)Includes total electricity sales and network use of system income only 1,077,964 1,166,695 1,185,429 1,259,831 1,368,075

Customer/employee ratioBefore 2004–05, average retail customers per average number of employees; from 2004–05, average network customers per average number of employees 400.3 385.3 364.2 348.1 331.7

Operating cost/unit sold ($/MWh)Operating expenditure including depreciation and amortisation but excluding borrowing expenses, divided by number of units sold 29.1 26.1 27.1 26.5 26.2

Operating cost/customerOperating expenditure including depreciation and amortisation but excluding borrowing expenses, divided by the average number of customers; to 2003–04, customer numbers based on retail customer numbers; from 2004–05, number of customers based on network customers 554.0 499.1 562.6 550.7 546.1

System loss index (%)Energy imported less energy sold, divided by energy imported 5.1 5.1 5.1 5.4 5.4

Days sick leave/employeeTotal sick leave days per average number of employees 6.4 6.1 6.3 6.7 5.8

Lost‑time injury frequency rateLost‑time accidents per million hours worked 8.0 7.2 6.3 5.2 4.8

EFFECTIVENESSOutput (GWh)To 2003–04, electricity sales exclude accruals and off peak bulk transfers; from 2004–05 onwards, sales exclude accruals but include off peak bulk transfers; output for 2002–03 adjusted slightly 15,212 15,570 16,903 17,204 17,483

Supply reliability (minutes)Average minutes per customer per year without supply for unplanned outages 119.8 116.7 86.3 95.9 94.1

Nominal average priceSales revenue divided by GWh output 70.9 74.9 70.1 73.2 78.3

Customer service indicatorFactors include number of issues with EWON, percentage of complaints closed within 30 days and percentage of customer service guarantee breaches

Target 56.0% 60.0% 80.0% 80.0% 82.0%

Result 55.1% 56.0% 78.0% 81.1% 83.4%

Appendices

2002–03 2003–04 2004–05 2005–06 2006–07

FINANCIAL INDICATORS

EBIT ($m)Profit before income tax expense plus finance costs 162.2 249.7 252.2 300.2 346.4

Operating profit after tax ($m)Profit from ordinary activities after income tax expense 43.0 102.3 132.7 138.6 153.2

Revenue ($m)Includes sales revenue and other income, including capital contributions 1,219.4 1,342.0 1,353.8 1,434.3 1,537.5

Return on assets (%)*EBIT divided by the average asset base 6.1 9.2 8.8 9.8 9.5

Return on equity (%)*Operating profit after tax, divided by average equity 4.2 9.8 13.6 15.6 13.9

Asset base ($m)*Includes all current and non current assets 2,674.4 2,781.4 2,978.5 3,179.4 4,147.0

Asset sales ($m)Total proceeds from asset sales 6.4 31.0 7.6 7.2 7.6

Financial distribution ($m)Includes tax equivalent, dividend payment and payment of capital from equity 77.0 164.1 148.3 169.1 193.0

Tax equivalent ($m)Defined as income tax expense in line with NSW Treasury’s definition of ‘total distribution’ 34.0 61.8 34.2 65.2 86.0

Dividend payment ($m)Includes special dividends 43.0 102.3 114.1 103.9 107.0

Payment of capital from equity ($m)Involves a special payment to the government 0.0 0.0 0.0 0.0 0.0

Gross external debt ($m) 1,078.6 1,091.0 1,196.7 1,381.6 1,531.5

Gearing ratio*Debt divided by the asset base 40.3 39.2 40.2 43.5 36.9

Times interest earnedCalculated by adding the net interest expense to the profit before income tax, and dividing by the net interest expense 2.0 2.9 3.0 3.1 3.2

Social programs ($m)Based on reimbursement of Community Service Obligations 19.4 21.2 20.7 20.6 19.7

Note: 2004–05 and 2005–06 numbers have been restated in accordance with Australian equivalents to International Financial Reporting Standards (AIFRS). All dollar amounts are reported in real dollars.

* Impacted by financial derivatives in accordance with accounting standard AASB 139.

Appendix1:Economic(continued)Table 10 Five year statistics (continued)

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Consultants

In 2006–07, consultancy projects cost a total of $2.42 million compared to $2.28 million in 2005–06. Major projects, costing a total of $2.40 million, are listed in Table 11.

Table 11 Major consultancy projects, 2006–07

Consultant Purpose

Retail and marketingFarrier Swier Consulting To provide advice on retail strategy projects.

Bush Atkins Pty Ltd To provide marketing services in support of Queensland market entry.

Deloitte Touche Tohmatsu To conduct a review of the credit management process and Queensland market entry.

National Economic Research Association To assist in the preparation of submission to IPART on the review of regulated retail tariffs.

Legg Limited To assist in the preparation of submission to IPART on the review of regulated retail tariffs.

Management services and organisational strategyGavin Anderson and Company To provide strategic management support for community relations and corporate affairs.

PricewaterhouseCoopers To conduct a review of the energy trading policies and assist with the establishment of an Electricity Risk Management Steering Committee.

Intergraph Corporation Pty Ltd To provide IT technical consulting services for the IAIMS program.

Langdale Consultants Pty Ltd To provide IT technical consulting services for the IAIMS program.

KPMG To conduct a review of the ICT governance and project framework.

Dupont Australia Ltd To implement a safety project.

Port Jackson Partners To review business initiatives and strategies.

The Allen Consulting Group To review the organisation’s greenhouse positioning.

Overseastravel

Table 12 Overseas travel, 2006–07

Names Dates Destination Purpose

Richard Powis 11–14 February 2007 New Zealand Overview of smart metering with Meridian Energy and Arc Innovations.

Rod Howard 1–17 September 2006 Switzerland, United States, United Kingdom

Consultation with industry and insurers.

Gary Brennan and Patrick Zhao

24–28 June 2007 Japan Witness and acceptance testing of INVAR high temperature conductors.

Gary Brennan 25 August to 1 September 2006

France Australian representative on overhead lines to the General Assembly of International Council on Large High Voltage Electric Systems (CIGRE). Travel funded by CIGRE.

Gary Brennan 21–23 March 2007 Czech Republic Australian representative at CIGRE Working Group Meeting of the Study Committee on Overhead Lines. Travel Funded by CIGRE.

Patrick Zhao and Robert Lewis

1–7 November 2006 China Type testing steel poles.

Patrick Zhao 27 May to 2 June 2007 China Type testing steel poles.

Andrew Tang 8–17 September 2006 Thailand Inspection and testing of transformers.

Andrew Tang 8–24 October 2006 Thailand Inspection and testing of transformers.

Andrew Tang 14–19 January 2007 Thailand Inspection and testing of transformers.

Andrew Tang 4–16 February 2007 Thailand Inspection and testing of transformers.

Andrew Tang 29 March to 3 April 2007 Thailand Inspection and testing of transformers.

Peter Norrie 22–29 August 2006 Thailand and Vietnam Inspection and testing of transformers.

Peter Norrie 3–13 December 2006 Thailand Inspection and testing of transformers.

Peter Norrie 25 January to 5 February 2007 Thailand Inspection and testing of transformers.

Peter Norrie 3–8 June 2007 Thailand Inspection and testing of transformers.

Appendices

Appendix1:Economic(continued)

Customerserviceguarantees

The Electricity Supply (General) Amendment Regulation, gazetted on 12 June 1998, required the standard form customer connection contracts of NSW network and/or retail electricity licence holders to contain guaranteed customer service standards. The standards included 24‑hour telephone hotlines, and introduced monetary penalties for failure to meet requirements for planned interruptions, connections and disconnections, faulty streetlights and lack of punctuality in keeping appointments.

The guarantees took effect from 12 September 1998 and were communicated to staff and customers in September and October 1998. They were included in standard form customer connection contracts from 12 December 1998.

A payment of $20 is made to a customer where:

• insufficient notice is provided to the customer of a planned outage, or

• the planned outage is for a longer period than that indicated in the notification.

During the year, customer service guarantee payments of $1,420 were made in response to complaints, mostly associated with planned outages. This compares with $3,940 paid in 2005–06.

There have been further changes in the regulatory requirements for reliability performance for all NSW distributors in the past two years. New network reliability performance licence conditions specify required performance levels at both organisation level and for individual distribution feeders in urban and rural situations. As part of the new licence conditions, new customer service guarantees for unplanned reliability were also introduced. Table 13 reports our guarantee payments for unplanned outages for the first time.

Table 13 Customer service guarantee payments for planned outages, 2006–07

No. of occasionsCustomers

affected Payments ($)

Late restoration 7 8 160

Early interruption 5 7 140

No notification 45 53 1,060

Late notification 3 3 60

Total 60 71 1,420

Table 14 Customer service guarantee payments for unplanned outages, 2006–07

Payments based on duration

Payments based on frequency Claims not paid

Metropolitan 1 0 9

Non‑metropolitan 0 0 5

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Executivemanagement

Performance pay is based on agreed objectives for each member of the Executive. These are aligned to Integral Energy’s Statement of Corporate Intent and Corporate Plan. Achievements against objectives are reviewed by the Board.

Table 15 Executive management remuneration, 2006–07

Name Performance summary

R Powis Improvement in reliability and overall financial performance above budget.

A Flett Improvement in staff engagement, reliability and maintenance.

R Howard An increased delivery in network capital from last year leading to an improvement in reliability.

K Waldman A successful bid in the Solar Cities program which would provide valuable information on energy efficiency programs.

B Rowley Successful leading Retail in difficult competitive times.

I White Ensuring Board compliance structures are in place to enable proper corporate governance.

D Lucasa Having joined the organisation in December 2006, successfully reviewing the Finance function.

M Tweddellb Having joined in April 2007, commenced a review of the Human Resources function.

S Lowec Supporting the Retail business to be successful in positioning for a net positive margin.

H El‑Ansaryd Having joined in March 2006 and left in August 2006 to join Myer, he managed some transitional issues in the Finance area.

J Wallacee Developing an overarching strategy which led to improvements in reliability.

A Priestleyf Having left in August 2006, he spent more than five years guiding a consistent approach to Human Resources issues.

a Mr Lucas commenced on 4 December 2006.

b Mr Tweddell commenced on 16 April 2007.

c Mr Lowe concluded employment on 11 May 2007. Mr Lowe received an additional payment to the above of $5,198.29 for annual leave entitlements and $32,121.91 for pay in lieu of notice on cessation of employment.

d Mr El‑Ansary concluded employment on 2 August 2006. Mr El‑Ansary received an additional payment to the above of $6,661.48 for annual leave entitlements on cessation of employment.

e Mr Wallace concluded employment on 26 June 2007. Note that Mr Wallace took four months of long service leave at half pay, which reduced his earnings compared with the previous year.

f Mr Priestley concluded employment on 4 August 2006. Mr Priestley received an additional payment to the above of $16,016.15 for annual leave entitlements on cessation of employment.

See also the Financial Statements section 27 (c) on page 93.

Table 16 Profile of Chief Executive Officer and senior executives

Positions Number atJune 2005

Number atJune 2006

Number atJune 2007

Chief Executive Officer 1 1 1

Executive officers 8 9 7

Number of executive officers with remuneration equal to or exceeding equivalent SES Level 1 at 30 June 2006

85 96 103

Number of these positions filled by women 14 16 21

Appendices

Appendix2:Environment

Heritagemanagement

Under section 170A of the Heritage Act 1977, Integral Energy is required to prepare a Heritage and Conservation Register (known as a ‘s 170 Register’) of heritage sites under its control and to report on compliance with guidelines issued by the Heritage Council of NSW.

We have produced a draft s 170 Register, which identifies 18 potential heritage sites from our asset base of around 400 freehold properties. Integral Energy holds many other sites under various other forms of tenure (easements, leases, etc.), so the completion of the draft register will take some time. Section 170 sites will be flagged in the asset register and maintenance system.

The s 170 Register is based on a version commissioned by Prospect Electricity in 1995 and on further work by consultants LFA (Pacific) Pty Ltd, whom we commissioned in 2004 to bring the register up to date.

We use conservation management strategies to manage heritage assets, and strategies will be prepared for each of the potential heritage sites to confirm their significance and make recommendations for their conservation. In 2006–07, we completed strategies for two sites. Each strategy provides a schedule of works for the site, with notes to ensure that conservation work will be done as part of normal building maintenance on the site.

In January 2007, we submitted an updated Heritage Asset Management Strategy to the Heritage Office. At the same time, we submitted the two conservation management strategies to the Heritage Office for review.

Integral Energy’s further progress in meeting the requirements of the Heritage Act is described below.

Heritage and Conservation Register

Integral Energy set up its draft s 170 Register in 2006–07. We plan to submit the register to the Heritage Office after we have developed conservation management strategies for all 18 identified potential heritage sites.

Heritage assets

In 2006–07, Integral Energy did not acquire, transfer, dispose of, relocate or rent any heritage assets.

Condition assessments

In January 2007, we submitted draft conservation management strategies, including recommended heritage management works, for the following:

a cottage substation in Argyle Street, Moss Vale

a control building at our Fairfield zone substation on the corner of Hedges and Loscoe streets, Fairfield.

The Moss Vale cottage dates from 1936; the Fairfield substation is believed to have been constructed in the 1920s.

Heritage training

Integral Energy staff attended s 170 Heritage and Conservation workshops organised by the Heritage Office. Our updated Heritage Asset Management Strategy includes a proposed training program for Integral Energy staff.

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Appendix3:Social

Ethnicaffairsprioritystatement

Integral Energy’s corporate values commit the organisation to acknowledging and valuing cultural diversity across our stakeholder base, in our delivery of customer service, in our management of employees and in our interactions with suppliers, communities and other stakeholder groups.

Customers

We strive to ensure that appropriate services are offered to our diverse multicultural customer base and that customers are not disadvantaged because of their cultural backgrounds. We aim to provide the same level of service to each of our more than 800,000 customers, who can contact the organisation 24 hours a day, seven days a week.

Data collected from the 2001 Census indicates that 30% of people living in Integral Energy’s franchise area – Sydney’s Greater West, the Blue Mountains, the Southern Highlands and the Illawarra—were born outside Australia. Approximately 27% of the population in our franchise area comes from non‑English speaking backgrounds. The three most common languages spoken in our franchise area, excluding English, are Chinese (13%), Arabic (12%) and Vietnamese (8%).

To meet the diverse needs of our customers, contracts for small retail customers are available in six community languages. Integral Energy also provides an interpreter service that allows customers to speak their own language when dealing with us. The interpreter service is supplied by the Commonwealth Department of Immigration and Multicultural Affairs. Contact numbers are printed on the back of customer bills and on the front page of the standard service contract.

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In 2006–07, for the third time, Integral Energy sponsored the Community Service Award at the National Multicultural Marketing Awards. The awards are designed to encourage and reward businesses and organisations that promote their products and services to people from culturally and linguistically diverse backgrounds. By supporting the awards, we help to recognise industries that provide services and support specific to our diverse communities.

Integral Energy’s Customer Consultative Committee considers the needs of customers of differing ethnic and cultural backgrounds. The committee provides valuable feedback and advice about the organisation’s policies and services, and helps us deliver a standard of service that meets customer expectations and exceeds the level of service provided by our competitors. Committee membership includes representatives of the Community Relations Commission and the Illawarra Aboriginal community.

All customers have access to our Customer Care unit, which deals with complaints and aims to resolve disputes as quickly as possible. Interpreter services are also available as part of the complaints handling process.

Customers who are dissatisfied with the outcome of their complaints have the right to contact the Energy and Water Ombudsman of NSW.

Employment practices

The cultural diversity and ethnic mix of our customer base are reflected in the make‑up of our staff, with employees or their families representing more than 30 overseas countries.

Integral Energy is committed to recruiting staff on the basis of merit, regardless of sex, race, religion, ethnicity or disability. This practice is intended to provide us with a highly competent, flexible and competitive workforce. We provide managers and employees with guidelines to follow for the recruitment, selection and appointment processes, so that equity and diversity are maintained.

In 2006–07, we continued the development of our Workplace Diversity Strategy to ensure that diversity is integrated into our everyday work practices. The purpose of the strategy is to provide a framework for diversity within Integral Energy that recognises and appreciates the value of our differences.

The strategy has four strategic planks:

Strategy 1—ensuring that human resource policies and procedures support a culturally and linguistically diverse workforce

Strategy 2—creating a work environment that engages, enables and empowers people to do their best at work

Strategy 3—adopting an approach to recruitment and retention that supports a sustained increase in diversity in the workforce

Strategy 4—providing appropriate support for staff throughout the work lifecycle.

Publications

In 2006–07, Integral Energy produced an extensive range of publications to keep our stakeholders informed about our ongoing operations and our new products and initiatives, such as Blacktown Solar City. We produced a suite of materials to support Integral Energy’s launch in the Queensland retail electricity market.

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Our publications are available by calling 131 002 or by visiting our website (www.integral.com.au).

Examples of recent publications are listed below.

For staff

Code of Ethics

Customer service standards

Employee assistance program

Equal employment opportunity

I care! (workplace giving brochure)

Incident response card

Inside Integral (staff newsletter)

Welcome to Integral Energy

For suppliers

Statement of Business Ethics

Supplier newsletter

For the public

Annual performance report

Assistance for users of life support machines

INhome (residential newsletter)

Appliance running costs brochure —Your guide to the operating costs of electrical appliances in the home

Customer Consultative Committee annual report

Customer Service Standards

Customer Service Charter

Customer welcome pack

Electricity concessions for pensioners

Electricity negotiated supply agreement: conditions

Energy efficiency products and services

Energy price guide

Environmental policy

Financial counselling

General terms and conditions for underground residential distribution of electricity

Appendices

Appendix3:Social(continued)

How to get your electricity connected (1 and 2)

How to keep your electricity connected

INbiz newsletter

Integral Energy easements

Keep your business in the spotlight

Making it easier to manage your electricity bill

Master billing information sheet

Network 2016 (annual planning statement)

NightWatch information sheet

Now you have the power to choose your electricity supplier (business brochure)

Queensland the power is in your hands

Safety brochures

Avoid the risk of reverse polarity

Electrical safety in vegetation management

Electrical safety for plumbers

Electrical safety for tradespeople

Electrical safety at home

Electrical safety around damaged electrical infrastructure

Safety from the ground up

Safety switches

Saving energy at home

Services and information guide

Solutions to heating problems

Standard form customer contract for electricity connection and supply

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Standard form contract: summary information

The energy efficient home

Vineyard to Rouse Hill community newsletter

Welcome to simple payment options

World of savings brochure – How to reduce your energy bill

Why you should switch to Integral Energy (residential brochure)

Blacktown Solar City

A change is in the air

Dive in and help Australia’s energy future

Save energy, money and the environment

You can help shape Australia’s energy future

Fact sheets

Cooling your home

Electric and magnetic fields

Heating your home

Hot water systems

Insulation, lighting

Solar energy systems

Fact sheets for business

Power factor correction

Downstream metering

Energy management

Pricing analysis

Quality of supply

Energy studies

Fundsgrantedtonon-governmentorganisations

Integral Energy does not grant funds to non‑government organisations. Rather, through a Board‑approved policy and annual program of community partnerships and donations, the corporation lends support to selected community organisations that meet a set of predetermined criteria outlined in our Community Partnership and Sponsorship Strategy.

Support falls into three key categories:

Economic—to encourage sustainable outcomes in regional business in the franchise area through awards and recognition, and showcasing world’s best practice

Environment—to facilitate and demonstrate sound environmental practices by creating proactive programs that encourage and stimulate alternative energy usage

Social—to support positive futures by programs that develop skills, attitudes and actions for young people and families in Integral Energy’s franchise area.

The organisation’s sponsorship criteria are available on the internet, with a self‑assessment tool for applicants to test how well their proposal fits with the requirements. This is a transparent process that treats all applications equally.

Examples of the organisations that met the criteria in 2006–07 are included in Table 6 on page 45.

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Appendix4:Governance

DutiesofBoardcommittees

The key responsibilities and objectives of Integral Energy’s board committees are outlined below.

Audit and Business Risk Board Committee

The Audit and Business Risk Board Committee ensures that audit and business risk matters are dealt with in an independent manner. The Head of Audit and Risk and the Manager Corporate Governance have responsibility for supporting the work of the committee. The committee’s responsibilities relate to the financial affairs and business risks of the company, and to internal and external audits. In addition, the committee examines any other matters referred to it by the Board.

External audit

External audit duties involve:

reviewing the client service plan and maintaining liaison with the Audit Office of NSW

reviewing key issues in external audit reports to ensure that management takes appropriate and prompt action

seeking the external auditor’s assessment of the quality and coverage of internal audit work and the competence of internal audit staff.

Internal audit

Internal audit duties involve:

reviewing and approving the Internal Audit Charter

monitoring the performance of the internal audit function

reviewing and endorsing the internal audit financial budget

approving the annual and three‑year consolidated audit plans

approving the strategic audit plan

ensuring that the internal audit function is adequately resourced and has appropriate standing

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ensuring the continued independence, objectivity and integrity of the internal audit function

monitoring progress against the consolidated audit plan

reviewing internal audit reports to ensure that management takes appropriate and prompt action to remedy identified major deficiencies or breakdowns in controls or procedures

overseeing effective coordination between the internal auditors and external auditors

initiating and supervising special investigations

receiving information and recommendations from the Head of Audit and Risk

ensuring that an independent peer review of the internal audit function is conducted at least every five years.

Financial affairs

Financial duties involve:

reviewing financial statements and other financial information distributed externally and to the Board

assessing the performance of financial management

monitoring the establishment of an appropriate internal control framework, including information systems and reports provided to the Board.

Risk

Duties in relation to risk include:

endorsing the risk management framework, strategy and policy

approving the Risk Management Charter and annual risk management plan

endorsing the outputs of the annual risk identification and assessment activity

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monitoring emerging business risk issues

monitoring progress under the annual risk management plan

reviewing risk management reports to ensure that management takes appropriate and prompt action to remedy identified major deficiencies or breakdowns in controls or procedures

reviewing management representation letters provided to the Audit Office

reviewing non‑financial management representation letters on significant risk areas (including safety and environment)

reviewing serious failures to comply with laws, regulations, industry standards or internal policy referred to its attention

reviewing results of biannual independent quality assurance audits of the risk management functions and monitoring implementation of agreed actions

endorsing the proposed insurance coverage.

Compliance

Compliance duties include:

ensuring that Integral Energy has an effective and efficient compliance management framework in place

monitoring significant transactions that are not a normal part of Integral Energy’s business

considering the processes in place to ensure compliance with laws, regulations, standards and best practice guidelines

monitoring any current or pending litigation that has a material financial risk exposure

considering Integral Energy’s corporate approach to compliance.

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Appendices

Appendix4:Governance(continued)

Probity

Probity duties involve:

fostering a culture of ethics in Integral Energy by setting a ‘tone at the top’ that contributes to a culture of healthy questioning, continuous improvement, strategic thinking and informed judgment

overseeing the level of compliance with Integral Energy’s Code of Ethics and the content of and communication strategy for the code

reviewing and approving Integral Energy’s Fraud and Corruption Control Plan and monitoring progress under the plan

reviewing reports on any major instances of misappropriation of funds, fraud and theft from Integral Energy and monitoring preventive procedures

considering reports on fraud and corruption and monitoring trends in, and the appropriateness of, preventive strategies.

Administration

Administration duties involve:

approving the nomination of the externally contracted internal auditors and ensuring that they are not used in any other consultancy without the committee’s consent

reviewing the schedules of delegations at least annually, or whenever there are major changes to the management structure

meeting in camera with the external auditor and the internal auditors at least once a year.

The committee undertook a review of its charter in 2006–07.

Details of members of the committee are provided on page 109.

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Retail Risk Board Committee

The Retail Risk Board Committee makes recommendations to the Board in relation to:

the annual retail strategy

board policies and strategies relating to the energy sales and marketing and energy portfolio management business activities

the level of risk facing retail in line with Integral Energy’s business plans and strategic objectives

reviewing the performance of retail risk activities

performance measures for energy trading and sales

counterparties and their exposure limits

the use of financial contracts and the limits associated with their use

dealer trading limits

delegation of payment limits for settlements

performance of trading‑related risk management activities

credit risk limit exposure of customers

market share targets

other risks, including retailer of last resort risks

all reports and other materials received from the Australian Financial Services Licence Governance Committee.

In addition, the committee examines any other matters referred to it by the Board.

The committee undertook a review of its charter in 2006–07.

Details of members of the committee are provided on page 109.

HumanResourcesandRemunerationBoardCommittee

The Human Resources and Remuneration Board Committee can consider and make decisions or recommendations to the Board in relation to the following areas:

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oversight of the implementation and effectiveness of the Human Resources Strategic Plan (incorporating Human Resources, Learning and Development, Remuneration, OHS, and Technical Training)

oversight of the external strategic human resources research initiatives and consideration of supporting reports from management on human resources market changes and emerging issues

review of the development, implementation and effectiveness of Board policy on human resources, including related remuneration policies, principles and guidelines

review and endorsement of changes to contract remuneration ranges in line with market data for submission to the Board

reports on the results of the annual contract remuneration review process

review and endorsement of general manager performance and remuneration reviews for submission to the Board

review of new initiatives and the impact of external influences on the need for discretionary payments in response to position volatility

review of the end‑of‑year Scorecard results and allocation of a performance rating to Integral Energy and each business unit as input to the At‑Risk Reward program

reports on the results of the annual At‑Risk Reward program

oversight of the effective operation of occupational health and safety management policies and practices, and monitoring of workers’ compensation statistics

oversight of the governance arrangements for the organisation’s remuneration and superannuation arrangements

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monitoring staff behaviour and organisational culture to ensure that they underpin effective Code of Ethics compliance

monitoring of the organisation’s compliance with awards, employment conditions and agreements.

In addition, the committee examines any other matters referred to it by the Board.

The committee undertook a review of its charter in 2006–07.

Details of members of the committee are provided below.

Transaction Approval Committee

The Transaction Approval Committee has rotating membership but requires membership of at least two, and not more than three, non‑executive directors and the Chief Executive Officer. The committee is authorised by the Board to approve urgent business expenditure or revenue up to $10 million that is required between meetings of the Board and that is outside the standing delegations to the Chief Executive Officer under Board policies.

If required, the Board may also authorise the committee to approve urgent business expenditure or revenue above $10 million.

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The minutes and papers of all committee meetings are circulated to all members of the Board.

The committee undertook a review of its charter in 2006–07.

Summaryoflegislativechangesandjudicialdecisions

Integral Energy Australia’s operations are subject to numerous state and federal laws. During the financial year ended 30 June 2007, new laws affecting Integral Energy Australia were introduced and a number of the existing laws affecting it were amended or repealed. Sections 1, 2 and 3 of this summary contain an outline of the material changes (if any) to the following Acts, their subordinate legislation and the commencement of new legislation:

Electricity (Consumer Safety) Act 2004 (NSW);

Electricity Supply Act 1995 (NSW);

Energy and Utilities Administration Act 1987 (NSW);

Energy Services Corporations Act 1995 (NSW);

Environmental Planning and Assessment Act 1979;

Financial Services Reform Act 2001 (Cth); and

Freedom of Information Act 1989 (NSW);

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Independent Commission Against Corruption Act 1988 (NSW);

Independent Pricing and Regulatory Tribunal Act 1992 (NSW);

National Electricity (South Australia) Act 1996 (SA).

Occupational Health & Safety Act 2000 (NSW);

Privacy Act 1988 (Cth);

Protection of the Environment Operations Act 1997 (NSW);

Public Authorities (Financial Arrangements) Act 1987 (NSW);

Renewable Energy (Electricity) Act 2000 (Cth);

State Owned Corporations Act 1989 (NSW);

Trade Practices Act 1974 (Cth);

Do Not Call Register Act 2006 (Cth);

Corporations Act 2001 (Cth); and

Public Finance and Audit Act 1983 (NSW).

Integral Energy Australia considers these to be amongst the principal Acts affecting it or the users or services provided by it. Section 4 of this summary concerns significant judicial decisions.

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Current Board committee membership

CommitteeMembership

AuditandBusinessRiskBoardCommittee

HumanResourcesandRemunerationBoardCommittee

RetailRiskBoardCommittee

Michael McLeod Member Attendee Member

John Fahey Chair Member

Terry Downing Member Chair

Emma Stein Chair

John Fletcher Member Member

Paul Sinclair Member

Richard Powis Invitee Member Member

Appendices

Appendix4:Governance(continued)

1.Amendmentsofcurrentacts

New South Wales

Energy and Utilities Administration Act 1987

The Energy and Utilities Administration Amendment (Climate Change Fund) Bill 2007 proposes to amend the Energy and Utilities Administration Act 1987. The Bill was introduced into the Legislative Assembly and received its second reading speech on 19 June 2007. The object of the Bill is to establish a Climate Change Fund, which would be a consolidation of the existing Energy Savings Fund and the Water Savings Fund and would have similar purposes, namely to provide funding for various activities intended to benefit the environment. Distribution network service providers would be required to make annual contributions to the existing funds.

Electricity Supply Act 1995

The Electricity Supply Amendment (Offences) Bill 2007 was introduced into the Legislative Assembly and received its second reading speech on 19 June 2007. The Bill proposes to amend the Electricity Supply Act by increasing the maximum prison term for theft of electricity from two to five years. The Bill also proposes to make theft of electricity an indictable offence if committed by an individual.

The Bill would make it an offence to enter, climb, or be on electricity works, with a maximum penalty of 10 penalty units or three months imprisonment.

Environmental Planning and Assessment Act 1979

The Environmental Planning and Assessment Act 1979 (EPA Act) was materially amended by the Environmental Planning Legislation Amendment Act 2006 (‘EPLAA’) which commenced on 4 December 2006. The purpose of the EPLAA is to clarify the amendments made previously to the EPA in relation to Part 3A Major

Infrastructure Projects, certification of development and development contributions.

Miscellaneous amendments to Part 3A Major Infrastructure Projects include extending the current power of the Minister for Planning to declare Part 3A projects by Ministerial order; potentially precluding the Minister from approving Part 3A projects that are subject to prohibitions in other environmental planning instruments by which the Minister is not currently bound and clarifying the conditions precedent to the determination of an application for approval by the Minister of the concept plan for a Part 3A project.

Further amendments to the EPA include the introduction of an objective test when determining whether to issue a construction certificate, and the time limit for ministerial consent for Crown development has been reduced to 21 days.

Commonwealth

Renewable Energy (Electricity) Act 2000

This Act was amended by the Renewable Energy (Electricity) Amendment Act 2006, which commenced on 11 September 2006.

The purpose of the Renewable Energy (Electricity) Amendment Act is to improve the administrative integrity, effectiveness and efficiency of the Renewable Energy (Electricity) Act, including by:

providing for the Regulator to grant provisional accreditation of proposed generation projects, establishing timeframes for determining the eligibility of proposed projects by the Renewable Energy Regulator and clarifying the components of a power station;

clarifying the provisions and definitions in the Act for Eligible Renewable Energy Sources and providing increased opportunities for bio‑energy;

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clarifying the provisions relating to certificates and electricity generation returns;

clarifying the provisions in relation to the eligibility of solar water heaters and expediting the process by which certificates can be claimed for new solar water heater models as they become commercially available;

allowing for recent reforms in the National Electricity Market and potential new market operators;

clarifying the provisions in relation to a relevant acquisition of electricity to ensure that only one entity is made liable in relation to the purchase of a particular quantum of electricity;

providing the Renewable Energy Regulator with the power to vary a number of assessments and determinations under the Act;

providing the Renewable Energy Regulator with information gathering powers; and

allowing for the suspension of an accredited power station under a number of circumstances.

Trade Practices Act 1974

The Trade Practices Legislation Amendment Act (No. 1) 2006 was passed in November 2006 and commenced in January 2007 and introduced some significant amendments to the Trade Practices Act 1974 (Cth) (‘TPA’) to implement some of the recommendations of the Dawson Committee in its Review of the Competition Provisions of the Trade Practices Act in January 2003. Key amendments include:

Penalties increased: Section 76 now provides for much higher penalties for contraventions of the TPA as a means of better deterring corporations or individuals from engaging in anti‑competitive behaviour. Maximum penalties for breaches of the competition law provisions (eg. boycotts, price fixing, misuse of market power) will be increased to the greatest of the following:

(a) $10 million;

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(b) if the court can determine the value of the benefit that the body corporate, and any related body corporate, have obtained directly or indirectly and that is reasonably attributable to the act or omission, the fine is three times the value of the benefit; or

(c) if the court cannot determine the value of that benefit, the maximum fine is 10% of the annual turnover of the body corporate during the 12 months ending at the end of the month in which the act or omission occurred.

Search powers of the ACCC: Part XID expands the search powers of the Australian Competition and Consumer Commission (‘ACCC’). The ACCC now has the ability to search premises and seize evidence and conduct dawn raids when backed by a warrant.

Indemnities and disqualifications for directors and officers: Section 77A extends the ban on indemnities for corporate officers under the Corporations Act. Companies will not be able to indemnify officers against liability to pay pecuniary penalties for breaches of Part IV of the TPA (i.e. the competition law provisions), or legal costs in defending or resisting proceedings in which they are found to have such a liability regardless of ‘good faith’. A corporation thus can only indemnify its officers when the officer wins the proceedings. (The TPA however allows corporations to indemnify lower level employees and agents that are not ‘officers’ for such liability and legal fees).

In addition, under section 86E, the courts are able to disqualify a person from managing a corporation if the person has contravened, attempted to contravene, or has been involved in a contravention of Part IV, and the court thinks that disqualification is justified. Relevant factors include, but are not limited to, the person’s

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conduct in relation to the management, business or property of any corporation.

Merger clearances and authorisations: Division 3 of Part VII provides for a new voluntary formal merger clearance system. Under that system, the ACCC must make a decision about whether to oppose a proposed merger or acquisition in respect of which a formal clearance has been sought, within 40 business days (although the ACCC can extend the time it has to consider applications by an additional 20 business days).

The ACCC’s decision can be reviewed by the Australian Competition Tribunal within 90 days, although this time frame can also be extended. The ACCC has standing to appear before the Australian Competition Tribunal, provide evidence, examine and cross‑examine witnesses and make submissions as determined by the ACCC.

Applications for authorisations of mergers on public benefit grounds can now go straight to the Australian Competition Tribunal.

Joint venture parties and exclusionary provisions: Joint venture parties which enter into non‑compete arrangements with the joint venture vehicle, or set uniform prices for products sold by the joint venture, now have a defence. Sections 76C and 76D provide that there is no contravention of the prohibitions on exclusionary provisions and price fixing if such arrangements are for the purposes of the joint venture, and do not have the purpose, effect or likely effect, of substantially lessening competition.

Collective bargaining for small businesses: Small businesses are able to bargain collectively, with immunity from the prohibitions on price fixing, exclusionary provisions (boycotts) and anti‑competitive arrangements, using a new notification process set out in sub‑division B of Division 2 of Part

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VII. This only applies where the total price of goods or services to be supplied to or from the ‘target’ of the collective bargaining is reasonably expected to be under $3 million in any 12 month period.

The Trade Practices Amendment (National Access Regime) Act 2006 was assented to on 18 August 2006 and introduces a range of amendments to the national access regime contained in Part IIIA of the TPA. These amendments came into effect on 1 October 2006.

2.NewLegislation

New South Wales

Renewable Energy (New South Wales) Bill 2007

The Renewable Energy (New South Wales) Bill 2007 was introduced into the Legislative Assembly and received its second reading speech on 27 June 2007.

The Bill proposes to establish a mandatory target for renewable energy in relation to all electricity consumed in New South Wales.

The Bill proposes to:

create a simplified procedure to apply to small generation units that use renewable energy;

provide for the accreditation of power stations;

prescribe procedures relating to renewable energy certificates and renewable energy certificate shortfall;

require a relevant entity that acquired electricity under a scheme during a year to lodge an audited energy acquisition statement on or before 30 April of the following year;

provide for the Scheme Administrator to maintain various registers, including registers of: registered persons, accredited power stations, renewable energy certificates and applications for accredited power stations;

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Appendices

Appendix4:Governance(continued)

specify the powers of authorised officers, including when the powers may be exercised, monitoring powers, powers to ask questions and seek production of documents and issuing of search warrants; and

create offences for the disclosure of confidential or commercially sensitive information or the use of such information to obtain a pecuniary advantage, with a maximum penalty of 120 penalty units.

Commonwealth

Do Not Call Register Act 2006 (Cth)

The object of this Act is to enable individuals to opt out of receiving unsolicited telemarketing calls, by regulating and minimising unsolicited telemarketing calls made to Australian telephone numbers that originate from overseas numbers or Australian numbers.

The main elements of the Act include:

a prohibition on making telemarketing calls to an Australian number registered on the Do Not Call Register, subject to certain exemptions;

a requirement that telemarketing agreements must require compliance with this Act;

a civil sanctions regime; and

a tiered enforcement regime of enforcement measures available to the ACMA.

3. New Subordinate Legislation, Codes and Determinations

National Electricity Rules

The National Electricity Rules (‘Rules’) govern the operation of the National Electricity Market, and are made under the National Electricity Law. The Rules took effect on 1 July 2005 replacing the National Electricity Code. The Australian Energy Market Commission is responsible for amending the Rules. Since their

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introduction the Rules have been amended by the following instruments:

In 2007:

National Electricity Amendment (Reallocations) Rule 2007 No.1

National Electricity Amendment (Technical Standards for Wind Generation and other Generator Connections) Rule 2007 No.2

National Electricity Amendment (Transmission Last Resort Planning) Rule 2007 No.3

In 2006:

National Electricity Amendment (Extension of Inter‑regional Settlements Agreement) Rule 2006 No.12

National Electricity Amendment (TransGrid Participant Derogation – Treatment of Contingent Projects (Interim Arrangements)) Rule 2006 No.13

National Electricity Amendment (Management of negative settlement residues in the Snowy Region) Rule 2006 No.14

National Electricity Amendment (Studland Bay Wind Farm)Participant Derogation (Frequency Ride Through)) Rule 2006 No.15

National Electricity Amendment (Studland Bay Wind Farm Participant Derogation (Voltage Ride Through)) Rule 2006 No.16

National Electricity Amendment (Metrology) Rule 2006 No.17

National Electricity Amendment (Economic Regulation of Transmission Services) Rule 2006 No.18

National Electricity Amendment (Reform of the Regulatory Test Principles) Rule 2006 No.19

National Electricity Amendment (NEMMCO Participant Derogation (Extension of Cost Recovery of Regulation Services in Tasmania)) Rule 2006 No.20

National Electricity Amendment (Resolution of existing generator performance standards) Rule 2006 No.21

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National Electricity Amendment (Pricing of Prescribed Transmission Services) Rule 2006 No.22.

More information about each amendment is available from the Australian Energy Market Commission website.

New South Wales

The Energy and Utilities Administration Regulation

The Energy and Utilities Administration Regulation 2006 commenced on 1 September 2006. Its main elements include:

provisions relating to the energy efficiency of electrical equipment, such as minimum standards, sale of certain electrical equipment, applications for registration of electrical equipment and requirements of registration;

the establishment of a register of electrical equipment to be maintained by the Energy Corporation of New South Wales;

energy efficiency labelling for electrical equipment; and

certain transitional provisions.

The Occupational Health and Safety Regulation 2001

The Electricity (Consumer Safety) Act 2004 has amended the Occupational Health and Safety Regulation 2001 for the purpose of defining ‘electrical article’, ‘electrical installation’, and ‘electrical supply authority’. The Occupational Health and Safety Amendment (Electrical Equipment) Regulation 2006 and the Occupational Health and Safety Amendment (Electrical Installations) Regulation 2006 further amended the Occupational Health and Safety Regulation 2001 to address risk control measures relating to electrical articles and installations.

4.Significantjudicialdecisions

Integral Energy is unaware of any significant judicial decisions during 2006–07 that may affect it in its capacity as an energy services corporation, or affect the users of its services in their capacity as customers of an energy services corporation.

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Freedomofinformation

In 2006–07, Integral Energy received 12 requests pursuant to the Freedom of Information Act 1989 (NSW) (FOI Act). The FOI requests were received from members of the public, media, members of parliament, lawyers and investigators. There were no internal reviews sought during the 2006–07 financial year. The Ombudsman was not involved in any matters involving requests under the FOI Act during the financial year. There were no appeals to the Administrative Decisions Tribunal in relation to any requests under the FOI Act. Table 17 provides a summary of the responses to requests pursuant to the FOI Act.

Table 17 Freedom of information requests

Section A—FOI Requests

2006–07 2005–06

Personal Other Total Personal Other Total

New (including transferred in) 2 10 12 – 10 10

Brought forward – 2 2 – – –

Total to be processed 2 12 14 – 10 10

Completed 1 10 11 – 6 6

Transferred out – – – – – –

Withdrawn – 1 1 – 2 2

Total processed 1 10 11 – 8 8

Unfinished (carried forward) 1 1 2 – 2 2

Section B—Result of FOI Requests

2006–07 2005–06

Personal Other Personal Other

Granted in full 1 8 – 2

Granted in part – 2 – 4

Refused – – – –

Deferred – – – –

Completed 1 10 – 6

Section C—Ministerial Certificates

Ministerial Certificates Issued – – – –

Section D—Formal Consultations

Requests requiring formal consultation – 4 – 3

Section E—Result of Amendment Request

Result of amendment—agreed – – – –

Result of amendment—refused – – – –

Totals – – – –

Section F—Notation of Personal Records

Number of requests for notation – – – –

Appendices

2006–07 2005–06

Personal Other Personal Other

Section 10, 19—Incomplete application, wrongly directed – – – –

Section 22—Deposit not paid, diversion of resources – 1 – –

Section 25—Exempt – 1 – 4

Section 25—Otherwise available – – – –

Section 28—Documents not held – – – –

Section 24—Deemed refused – over 21 days – – – –

Section 31—Released to medical practitioner – – – –

Totals – 2 – 4

Section H—Costs and Fees of Requests Processed

2006–07 2005–06

Completed Requests

FOI fees received $375.00 $290.00

Assessed costs – –

Section I—Discounts Allowed

2006–07 2005–06

Personal Other Personal Other

Public interest – – – –

Financial hardship—pensioner/child – 1 – –

Financial hardship—non‑profit organisation – – – –

Totals – 1 – –

Significant correction of personal records – – – –

Section J—Days to Process Requests

Days to Process

0—21 days 1 6 – 2

22—35 days – 4a – 3

Over 35 days – – – 1

Totals 1 10 – 6

a As Integral Energy was required to obtain the views of third parties it was necessary to extend the 21 day response period by a further period of 14 days pursuant to section 59B of the FOI Act.

Section K—Processing time

Processing Hours

0—10 hours 1 4 – 4

11—20 hours – 6 – 2

24—40 hours – – – –

Over 40 hours – – – –

Totals 1 10 – 6

Appendix4:Governance(continued)

Section G—Basis of disallowing or restricting access

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Section L – Reviews and Appeals

2006–07 2005–06

Received Finalised Received Finalised

Number of internal reviews finalised N/A N/A 2 2

Number of Ombudsman reviews finalised N/A N/A N/A N/A

Number of Administrative Decisions Tribunal appeals finalised N/A N/A N/A N/A

Grounds of Internal Review Results

Upheld Varied Upheld Varied

Access refused N/A N/A N/A 2

Deferred N/A N/A N/A N/A

Exempt matter N/A N/A N/A N/A

Unreasonable charges N/A N/A N/A N/A

Charges unreasonable incurred N/A N/A N/A N/A

Amendment refused N/A N/A N/A N/A

Totals N/A N/A N/A 2

Impact of the requirements of the Freedom of Information ActThe impact of the requirements of the FOI Act on Integral Energy’s activities was minor and no major issues arose in connection with Integral Energy’s compliance with the requirements of the FOI Act.

Access to documents under the Freedom of Information ActDocuments can be requested or examined by forwarding a request to Integral Energy together with the FOI fee of $30 to the Freedom of Information Officer, Integral Energy, PO Box 6366, Blacktown NSW 2148. Please note that in addition to the FOI fee, charges may be imposed for the time spent in searching for and retrieving relevant documents, making decisions, photocopying and postage. In certain cases, a 50% reduction in fees and charges may apply. Any request must clearly identify the applicant and a return address, must be in writing and must contain sufficient information to enable the requested document(s) to be located and identified.

Statement of AffairsSection 14 of the FOI Act requires a Statement of Affairs of an agency to be published every 12 months. Integral Energy’s Statement of Affairs is incorporated within this annual report, as is a description of the corporation’s structure and functions.

NotificationstotheIndependentCommissionagainstCorruption

In 2006–07 there were nine notifications to the Independent Commission Against Corruption in accordance with the provisions of the Independent Commission Against Corruption Act 1988. Integral Energy did not receive any notifications from the commission concerning allegations of corruption, and there was no direct involvement by the commission in any of these notifications.

AustralianFinancialServicesLicenceIntegral Energy obtained an Australian Financial Services Licence effective from 1 July 2005. The licence authorises Integral Energy to provide financial advice, deal and/or make a market in financial products and miscellaneous financial products to wholesale clients.

Integral Energy must comply with the licence conditions and report to the Australian Securities and Investment Commission any potential or actual breaches of the licence conditions within five working days. There were no potential or actual breaches of the licence conditions in 2006–07.

To monitor compliance and good governance, Integral Energy formed an Australian Financial Services Licence Governance Committee in 2005–06. The committee met 11

times in 2006–07 and reported to the Retail Risk Board Committee that the obligations under the licence had been complied with as far as was reasonably practical.

Several employees have been nominated as representatives for the purpose of the Australian Financial Services Licence and have been trained extensively on the workings of the licence during the period.

Compliance with the licence conditions was also subjected to satisfactory internal and external audits and reviews in 2006–07.

DisclosureofapprovedexemptionsAfter changes to legislation, approval was granted for reporting exemptions for this annual report. The expanded list of exemptions, some with conditions attached, in Table 18 was approved by the NSW Treasury to overcome concerns of statutory state‑owned corporations about the loss of commercial confidentiality in the increasingly competitive electricity market in NSW.

Appendices

Appendix4:Governance(continued)

Table 18 Integral Energy’s reporting exemptions, 2006–07

Reference Requirement Comment

s. 41B(c) PF&AA Financial statements Exemption from preparing manufacturing, trading, and profit and loss statements. Integral Energy is required to prepare a summarised Operating Statement, summarising major categories of revenues and expenses.

Schedule 1, Part 1: PF&AA (General)

Item 2 Notes: income and expenditure amounts set aside for renewal or replacement of fixed assets

Item 4 Amounts set aside to any provision for known commitments

Item 6 Amount appropriated for repayment of loans, advances, debentures or deposits

Item 13 Material items of income and expenditure on a program or activity basis

Integral Energy is required to summarise the items of revenue and expenses on a program or activity basis.

s. 7(1)(a)(iii) ARSBA Budgets: detailed budget for the year reported on; outline budget for next year

cl. 6 ARSBR Particulars of material adjustments to detailed budget for the year reported on

s. 7(1)(a)(iv) ARSBA Summary review of operations Exemption subject to the following condition: comments and information relating to the summary review of operations are to be disclosed in a summarised form.

Schedule 1 ARSBR Management and activities Exemption subject to the following condition: comments and information relating to ‘management and activities’ are to be disclosed in a summarised form.

Schedule 1 ARSBR Research and development

Schedule 1 ARSBR Human resources

Schedule 1 ARSBR Consultants Exemption subject to the following condition: the total amount spent on consultants is to be disclosed along with a summary of the main purposes of the engagements, together with a list of single consultancies with a value exceeding $30,000.

Schedule 1 ARSBR Land disposal

Schedule 1 ARSBR Consumer response Exemption subject to the following condition: comments and information relating to consumer response are to be disclosed in a summarised form.

Schedule 1 ARSBR Payment of accounts This exemption only applies to statutory state‑owned corporations as they are not subject to the payment of accounts provisions in s. 18 of the Public Finance and Audit Regulation.

Schedule 1 ARSBR Time for payment of accounts As above.

Schedule 1 ARSBR Report on risk management and insurance activities

Exemption subject to the following condition: comments and information are to be disclosed in a summarised form.

Schedule 1 ARSBR Disclosure of controlled entities Exemption subject to the following condition: the names of the controlled entities are to be disclosed along with a summarised disclosure of the controlled entities’ objectives, operations and activities, and measures of performance.

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117

Reference Requirement Comment

cl. 12 ARSBR Investment performance

cl. 13 ARSBR Liability management performance

s. 7(1)(a)(ia) ARSBA Financial statement of controlled entities Exemption from preparing manufacturing and trading statements. Integral Energy is required to prepare a summarised Operating Statement (i.e. summarising major categories of revenues and expenses).

PF&AA = Public Finance and Audit Act 1983; ARSBA = Annual Reports (Statutory Bodies) Act 1984; ARSBR = Annual Reports (Statutory Bodies) Regulation 2005

CodeofEthicsandcorporatevalues

The Integral Energy Code of Ethics provides a set of principles and values designed to guide staff behaviour and business operations. In pursuit of Integral Energy’s corporate objectives, the Board, management and staff have adopted eight key statements to describe our core values.

Integral Energy’s corporate values were reassessed during 2006–07, resulting in the inclusion of a new value, Enterprising spirit, and some refinement of the Integrity and Sustainable outcomes values.

The revised corporate values are as follows.

Safety excellence

Integral Energy’s safety commitment is to zero accidents, injuries and occupational illnesses. This commitment is supported by:

making safety our first priority

a belief that all accidents are preventable

working safely as a condition of employment

not taking shortcuts

not accepting unsafe behaviour

expecting personal accountability for safety from everyone.

•

•

•

•

•

•

We will live this value by learning how to work safely; maintaining awareness in all tasks; having an orderly work area; checking for and fixing hazards; coming to work free of drugs and alcohol that could impair performance; taking action to correct unsafe working practices; looking for opportunities to participate in and improve safety performance; and, immediately reporting all near misses, incidents, injuries and occupational illnesses.

Integrity

At all levels of the organisation and in all its business dealings, Integral Energy aims to act with honesty and to achieve the highest level of integrity. This means setting consistent policies, and maintaining soundness of moral principle and character.

We each have a responsibility to ensure that Integral Energy’s resources are used properly, and that our business dealings are free from conflicts of interest. We will take ownership and responsibility for our actions and we will demonstrate outstanding leadership as an example to others.

Management by fact

Management by fact forms the backbone of our approach to planning and decision making. It encompasses our use of all available information to make objective, impartial and confident business decisions and open and honest disclosure of relevant information to our shareholders and customers. We respect the confidentiality of certain business information and do not use this inappropriately.

Enterprising spirit

Integral Energy is committed to fostering an enterprising spirit within its people.

This pioneering ‘can do’ attitude is core to our business growth and success. It means we are open to fresh thinking and new ideas, and encourage effort and learning in our people in order to stimulate creativity. We will pursue opportunities for business change while managing risks.

In order to encourage our people to find solutions creatively, support will be provided from management for teamwork and collaborative frameworks, underpinned by the recognition of the contribution of our people and their value to the business.

Customer commitment

Integral Energy’s vision to be Australia’s best performing energy business by focusing on delivering superior value to our customers and our shareholders now and into the future. This means taking personal responsibility to deliver a standard of service that goes beyond our customers’ expectations and exceeds the service provided by our competitors.

In providing this service we have a responsibility to deal in a fair, open and honest way with all our customers; to review, challenge and improve work practices and processes which stand in the way of better standards of customer service; and to recognise that, in the end, customer loyalty depends on individual relationships with our customers.

Appendices

Appendix4:Governance(continued)

Respect for people

At Integral Energy we respect a ‘fair go for all’. This value is crucial to the personal and professional standards expected in our workplace. It means we:

respect the principles of equal employment opportunity

acknowledge and value diversity in culture and opinion

offer opportunities for promotion on merit

cultivate an environment of trust through open and honest communication

promote self‑improvement and skills development

encourage effective empowerment, teamwork and participative decision making

continually reviewing our safety standards to ensure a healthy and safe environment for our staff, our customers and the community.

•

•

•

•

•

•

•

Accountability and responsibility

Complementing the value of ‘Respect for people’, and the personal and professional workplace standards it demands, we take responsibility and accountability for our actions, and maintain the integrity of performance within our area of responsibility. In all our business dealings, we will promote trust, openness, teamwork, professionalism and pride in what we do.

Sustainable outcomes

Integral Energy recognises the significant corporate responsibilities we carry as a leading energy business.

As a responsible corporate citizen, we strive for sustainable outcomes by balancing the ‘triple bottom line’ interests of financial, environmental and social responsibilities in order to ensure long‑term business success. Our commercial success ensures a sustainable economic future for all stakeholders.

We operate in a way that meets the needs of the present without compromising the ability of future generations to meet their own needs.

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119

ACCC Australian Competition and Consumer Commission

ACMA Australian Communications and Media Authority

AGO Australian Greenhouse Office

AIFRS Australian equivalents to International Financial Reporting Standards

ARSBA Annual Reports (Statutory Bodies) Act 1984

ARSBR Annual Reports (Statutory Bodies) Regulation 1995

bund area protected by a low wall to prevent the spread of dangerous liquids being stored or processed

CBD central business district

CEO Chief Executive Officer

CIC Customer interaction centres

CO2e (carbon dioxide equivalent)

units used to describe global warming potential of all greenhouse gases, e.g. carbon dioxide, nitrous oxide, methane, carbon monoxide

Cth Commonwealth

EBITDA earnings before interest, tax, depreciation and amortisation

EEO equal employment opportunity

EPA Act Environmental Planning and Assessment Act 1979 (NSW)

EWON Energy and Water Ombudsman NSW

FOI Act Freedom of Information Act 1989 (NSW)

GGAS Greenhouse Gas Abatement Scheme

GIS Geographic Information System

GWh gigawatt hour

ICT information and communications technology

INgreen a range of GreenPower accredited products which provide customers with information on how to reduce their reliance on coal‑generated power and how they can help protect the environment for future generations; products include INgreen Pure and INgreen Business

INpower an Integral Energy program to assist customers facing financial hardship to pay for their electricity consumption

IPART Independent Pricing and Regulatory Tribunal

ISO International Organization for Standardization

kV kilovolt

kWh kilowatt hour

LTIs lost‑time incidents

MVA megavolt ampere

MWh megawatt hour

NEMMCO National Electricity Market Management Company Limited

NSW New South Wales

OMS Outage Management System

OPEX operating expenditure

PCBs polychlorinated biphenyls

PF&AA Public Finance and Audit Act 1983

SAIDI system average interruption duration index

SCI Statement of Corporate Intent

SME small and medium enterprise

TS transmission substation

WRAPP Waste Reduction and Purchasing Policy

ZS zone substation

Glossary

Index

Aadministration 108

apprentices 7, 38–39, 41

Audit and Business Risk Board Committee 56, 107–108

Australian Financial Services Licence 115

Bbalance sheet 58

Bella Vista zone substation 5, 18

Blacktown Solar City 6, 9, 31

Board committees 55, 107–109

Board of Directors 50–51, 56–57

Ccapital expenditure 59

capital program 15–17

cash flows 58, 67

Chairman and CEO’s report 4–8

climate change 4, 5, 6, 30

code of ethics and corporate values

117–118

see also ethics and conduct

community partnerships 44–45, 47

competition 5

compliance management 54, 107

consultants 101

corporate governance 48–59, 107–118

credit rating 59

customer service guarantees 102

customers 43–44

Ddisclosure of approved exemptions 116–117

drought 4

Eeconomic performance 10–25, 96–103

environment 6

environmental performance 26–35, 104

environment policy 29–35

e‑safe 4, 47

ethics and conduct 54–55

see also code of ethics and corporate values; probity

ethnic affairs priority statement 104–105

Executive committees 55

executive team 52–53

external audit 55, 107

Ffinance 22

financial affairs 107

financial performance 4

financial statements 61–94

five‑year statistical table 99–100

franchise area 2

freedom of information 113–115

Ggovernance and operational structure 49

glossary 119

Hhardship, management of 43

heritage management 35, 104

highlights and lowlights 9

Human Resources and Remuneration Board Committee 56, 108–109

Iinsurance 54

internal audit 55, 107

Llabour management 41

legislation 109–112

Mmaintenance program 18

management discussion and analysis 58–59

mission 2

Nnet profit 58

network regulatory determination 2009–2014 96–97

network reliability 5, 13–15

network standards 19

new connections 18‑19

NightWatch 98

Oobjectives 10 economic 11 environmental 27 social 37

occupational health and safety 4, 40

organisational capability 7

organisational changes 8

Outage Management System 5

overseas travel table 101

Owen Inquiry 4, 6, 25

Pperformance indicators economic 12 environmental 28 social 38

privacy 55

probity 108

see also ethics and conduct

publications 105–106

QQueensland electricity market 4, 5, 19, 21

Rrelationships 6

response systems 25

retail business 19–22

retail regulatory determination 2007–2010 97–98

Retail Risk Board Committee 56, 108

risk management 54, 107

Sscorecard 2006–07 7

shareholder return 58

social performance 36–47, 104–106

staff 7, 12, 39–43

stakeholders 6, 44–45

support systems 22–24

Ttrading 22

training, education and recruitment 41

Transaction Approval Committee 56, 109

transmission details 2

Vvalues 2, 25, 117–118

vision 2, 8, 25

Wwaste stream 34

Yyear at a glance 3

Annual Performance Report 2006–07

120

Main office

51 Huntingwood Drive Huntingwood NSW 2148

South Coast officeBridge Street, Coniston NSW 2500

Postal addressPO Box 6366, Blacktown NSW 2148

Telephone24-hour emergency service

131 003

Account inquiries, connections, disconnections

131 002 (24 hours)

General inquiries

02 9853 6666

Hot water hotline

131 003

To report streetlights out

131 003

Customer comments or complaints

1800 806 698

Ethics hotline

1800 ETHICS

1800 384 427

Interpreter service

131 450

Facsimile02 9853 6000

Emailintegral@integral.com.au

Websitewww.integral.com.au

Credit card payments

1300 361 104 (24 hours, cost of a local call)

Field support centres

Northern region

BowenfelsCooerwull Drive

GlendenningGlendenning Road

KatoombaCnr Camp and Whitton Streets

KandosCnr Davies Road and White Crescent

Kings ParkVardy’s Road

ParramattaCnr Fennell and Macarthur Streets

PenrithBlaikie Road, Jamisontown

Windsor SouthHam Street

Central Logistics Facility

GlendenningGlendenning Road

Civil Works Centre

GlendenningGlendenning Road

Central region

BowralBong Bong Street

Hoxton ParkHoxton Park Road

NarellanMcPherson Avenue, Smeaton Grange

PictonHenry Street

Southern region

NowraCnr Yalwa and Depot Roads

ShellharbourBuckley Road

SpringhillFive Islands Road

UlladullaDeering Street

Our locations

Above:From our Hoxton Park Field Support Centre, Project Manager Central, Steve Gurnett (left), and Project Officer Central Region, Frank Muscat, were part of Integral Energy’s winning Fire Management team at E‑safe 2007.

About this report

Integral Energy’s Annual Performance Report for 2006‑07 is a candid account of our organisation’s activities, highlights and challenges during the year. We printed 1,000 copies of the report on recycled paper. The report was produced at a total cost for external services of $75,000 (GST inclusive).

Integral Energy’s Annual Performance Reports are also available on our website at www.integral.com.au

Project management

Corporate and Government Affairs, Integral Energy

Design

Impress Design

Photography

Penny Clay Camilla Quiddington Neil Billington

Editing

WordsWorth Writing

Printing

Lilyfield Printing