2009/11 REES Summary Report Card

SA Power Networks Jurisdictional Service Standards for the 2015-2020 Regulatory Period Final Decision - May 2014

SA Power Networks Jurisdictional Service Standards for the 2015-2020 Regulatory Period - Final Decision - May 2014

The Commission has released it’s Final Decision on the jurisdictional service standards to apply to SA Power Networks for the next regulatory period 2015-2020.

The Commission has developed two sets of standards to apply to SA Power Networks for the 2015-2020 regulatory period: network reliability standards and customer service standards.

The standards set by the Commission are taken into account by the Australian Energy Regulator (AER) when it establishes the pricing regime for SA Power Networks. The AER will make a new pricing determination for SA Power Networks to take effect from 1 July 2015.

The Commission consulted with the South Australian community to develop the jurisdictional service standards. The Commission has been assisted by the submissions it has received through this review and thanks all stakeholders for their contributions.

THE COMMISSION’S FINAL DECISIONS

Consistency between the AER’s Service Target Performance Incentive Scheme (which provides financial rewards or penalties to SA Power Networks) and the jurisdictional service standards is of primary importance for the next regulatory period 2015-2020, as this will:

• minimise the potential for conflicting incentives betweenthe elements of the service standard framework and the AER’s pricing regime, thus minimising the potentialfor unwarranted costs being borne by South Australianconsumers; and

• ensure appropriate incentives are provided to SA PowerNetworks to maintain current service levels and only improveservice levels where the value to customers exceeds the costof those improvements.

CONSULTING WITH CUSTOMERS TO DETERMINE SERVICE STANDARDS

There is an inherent trade-off between prices and service levels; higher service levels may provide extra benefits to customers, but also raise costs and prices.

Coupled with price (or revenue) regulation, service standard regulation seeks to determine efficient service levels for distribution services, given the absence of a competitive market.

Service standards are set by reference to customers’ needs, expectations and willingness to pay for distribution services (i.e. customers need to be in a position to assess whether their preference would be for a lower/higher level of service in return for a stated reduction/increase in bills).

The National Electricity Rules require SA Power Networks to engage with its customers directly and demonstrate how customer concerns have been taken into account in developing its revenue proposal for the AER. SA Power Networks undertook a customer survey as part of its broader customer engagement program. The Commission observed several of SA Power Networks’ stakeholder forums and provided input into the service standard-related elements of the online customer questionnaire.

THE SERVICE STANDARDS

Network reliability

Measures of network reliability

The reliability of SA Power Networks’ distribution network will be measured by the frequency and the duration of unplanned interruptions. Network reliability service standards and targets will be set using the Unplanned System Average Interruption Duration Index (USAIDI) and Unplanned System Average Interruption Duration Index (USAIFI) reliability indices. This is consistent with the reliability indices used in the AER’s Service Target Performance Incentive Scheme.

Should average reliability standards vary across the State?

Electricity distribution networks are sometimes depicted as if they are a single, homogeneous unit; as if all customers connected to the network receive the same level of service. In reality, network reliability will vary feeder by feeder (with SA Power Networks’ distribution system comprised of some 1,400 feeders in total).

Supply interruptions occur when network elements fail. However, if there are redundant elements in a network, a failure will not lead to a supply interruption if the electricity can be delivered through another path.

In sparsely populated areas networks are typically ‘radial’: they radiate out from a central point with few, if any, redundant elements. These parts of the network are generally Short Rural and Long Rural feeders (refer table). In these areas it is more likely that a failure will lead to a supply interruption, making reliability poor relative to other areas.

FACT SHEET

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PAGE 2SA Power Networks Jurisdictional Service Standards for the 2015-2020 Regulatory Period Final Decision - May 2014

By contrast, in more densely populated areas networks are typically ‘meshed’ and comprise multiple redundant elements. These parts of the network are generally CBD and Urban feeders (refer table). The reliability experienced by customers in areas where the network is meshed is generally better than that experienced by customers supplied by radial feeders.

The network performance targets have been set to reflect differences in the levels of interconnection and redundancy in SA Power Networks’ physical network across the state. SA Power Networks’ feeders will be divided into four broad categories for the purposes of monitoring network reliability.

Network Type Definition % of

Customers

CBD feeder

A feeder supplying predominantly commercial, high-rise buildings, supplied by a predominantly underground distribution network containing significant interconnection and redundancy when compared to urban areas.

0.3%

Urban feeder

A feeder, which is not a CBD feeder, with actual maximum demand over the reporting period per total feeder route length greater than 0.3 MVA/km.

69.3%

Short Rural feeder

A feeder which is not a CBD or urban feeder with a total feeder route length less than 200 km. Short Rural feeders may include feeders in urban areas with low load densities.

14.1%

Long Rural feeder

A feeder which is not a CBD or urban feeder with a total feeder route length greater than 200 km.

16.3%

Regionally-based public reporting

Recognising that the shift to setting reliability service standards on the basis of network feeder types is less meaningful for customers seeking to understand the levels of reliability they receive, SA Power Networks will be required to continue to report on reliability performance outcomes in the seven current geographic regions and explain departures from longer term average performance outcomes. This will also allow the Commission to monitor whether the shift to feeder types results in any degradation of average historical performance at a regional level.

Reliability targets: maintain, improve or decrease average historical performance?

To answer the threshold question as to whether customers require reliability service levels to be maintained at averagehistorical levels, improved or decreased, a series of customer preference surveys have been conducted over the past ten years. Survey respondents have reported consistently high levels of satisfaction with their current levels of electricity

supply reliability, across customer types (residential and business) and geographic locations. The level of general satisfaction with current reliability levels is further supported by the low levels of complaints received by SA Power Networks.

SA Power Networks will be required to maintain network reliability in line with the average historical performance of its network in the period 2009/10 to 2013/14. The reliability targets for the 2015-2020 regulatory period will be set based on the most recent five years of reliability performance data to reflect the impacts of recent investment decisions by SA Power Networks.

Reliability targets: statistical exclusion of Major Event Days fom reliability targets

SA Power Networks’ distribution network must be built to perform consistently within normal weather conditions. However, it would be very difficult (and prohibitively expensive) to design an electricity distribution network to withstand all severe weather events. Network reliability measurements and improvement efforts should focus on performance during the normal course of events and efficient restoration practices when the network is under unusual stress.

SA Power Networks’ performance during Major Event Days (such as storms/heatwaves) will not be included in the reliability targets. Rather, SA Power Networks’ restoration performance during Major Event Days will be studied separately from daily operations. This will enable identification and analysis of the impact of abnormal weather conditions on reliability performance, as opposed to the impact of more mild weather (and other factors) on underlying reliability performance.

Finalising the reliability service standard targets

The final network reliability targets will be established once data for 2013/14 are available, with final targets set in late 2014. Public consultation will occur on the consequential amendments to relevant regulatory instruments (e.g. SA Power Networks licence; Electricity Distribution Code; and Electricity Guideline 1).

Customer service

Customer service standards and targets will remain the same as those for 2010-2015. SA Power Networks will be required to use its best endeavours to:

• answer 85 per cent of telephone calls within 30 seconds; and• respond to 95 per cent of written enquiries within 5 business

days.

Guaranteed Service Level Scheme

The average network reliability and customer service standards set by the Commission and the AER’s STPIS are based on SA Power Networks’ performance as experienced by groups of customers (e.g. performance averaged across customers connected to CBD, Urban, Rural Short or Rural Long feeders). In contrast, the Guaranteed Service Level (GSL) Scheme established by the Commission relates directly to the service experienced by individual customers.

SA Power Networks’ Network Segments

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PAGE 3SA Power Networks Jurisdictional Service Standards for the 2015-2020 Regulatory Period Final Decision - May 2014

SA Power Networks will be required to continue to make GSL payments to customers experiencing service below the pre-determined thresholds, as first established for the 2005-2010 regulatory period.While SA Power Networks’ reliability targets exclude performance during severe or abnormal weather events that qualify as Major Event Days, GSL payments will continue to be made to customers that experience interruptions during Major Event Day excluded events.A new long duration supply interruption GSL payment of $605 for single interruptions in excess of 48 hours has been introduced for the 2015-2020 regulatory period.

GSL Scheme Categories and Payment Amounts

GSL Category AMOUNT

(GST INC.)

Timeliness of appointments - No more than 15 minutes late

$25

Promptness of new connections - Within 6 business days

$65 Per day to a maximum of $325

Timeliness of street light repairs – CBD, Metropolitan Adelaide, Whyalla, Mount Gambier, Mount Barker, Gawler, Stirling, Murray Bridge, Port Augusta, Willunga, Port Pirie and Port Lincoln - Within 5 business days

$25 per 5 business day period

Timeliness of street light repairs – Country (all other areas) - Within 10 business days

$25 per 10 business day period

Frequency of supply >9 and ≤12 interruptions $100

Frequency of supply >12 and ≤15 interruptions $150

Frequency of supply >15 interruptions $200

Duration of supply interruption >12 and ≤15h $100

Duration of supply interruption >15 and ≤18h $150

Duration of supply interruption >18 and ≤24h $200

Duration of supply interruption >24h and ≤48 hours

$405

Duration of supply interruption >48h $605

To maintain the value of the original GSL payments, the GSL payment amounts for the 2015-2020 regulatory period will be increased to reflect movements in CPI from June 2005 to December 2013, rounded to the nearest $5.00.

The Commission notes that GSL payments are made in recognition of the inconvenience caused to customers, rather than attempting to reflect the full (and different) costs incurred by individual customers in response to a long interruption. SA Power Networks’ will continue to administer its separate customer compensation scheme for damage or losses resulting from an incident associated with SA Power Networks’ electricity distribution network.

FURTHER INFORMATION

If you have any questions or would like to discuss any matter relating to the Final Decision, please contact:

• Amber Miller, Senior Policy OfficerIf you would like to keep up to date with our electricity industry activities and the release of papers for consultation, subscribe at http://www.escosa.sa.gov.au/subscribe.aspx.

The Essential Services Commission of South Australia is an independent economic regulator of electricity, gas, ports, rail and water industries in South Australia. The Commission’s primary objective is the protection of the long- term interests of South Australian consumers with respect to the price, quality and reliability of essential services.

THE ESSENTIAL SERVICES COMMISSION OF SOUTH AUSTRALIALevel 1, 151 Pirie Street Adelaide SA 5000 | GPO Box 2605 Adelaide SA 5001T 08 8463 4444 | F 08 8463 4449 | E escosa@escosa.sa.gov.au | W www.escosa.sa.gov.au

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