The businesses submit that the current network is ageing. Our general expectation is that repex levels should remain relatively constant over time. This is because the application of financial and asset management techniques can even out fluctuations in replacement rates of aging assets. We consider an important factor in controlling asset maintenance costs is the use of condition based assessment techniques when managing deteriorating assets. We note that a particular driver of replacement expenditure in Victoria is initiatives being undertaken to implement the findings of the Victorian Bushfire Royal Commission, which examined the safety of electricity networks following the bushfires in 2009. The Royal Commission made a number of recommendations that affect the design and construction of the Victorian electricity distribution networks, particularly in areas of high bushfire risk. As a consequence, there have been a number of network design changes mandated by the Victorian Government which are unique to Victoria and which directly affect replacement expenditure costs. Steps are also underway for Victoria to complete the implementation of further recommendations, which would also impact future network design and replacement costs. Do stakeholders consider the cost of improving the fire safety of the Victorian electricity distribution network is reasonable, given it is expected to be a significant factor in the increase in replacement expenditure? Table 4.2 summarises the total replacement expenditure (repex) forecast proposed by each of the distributors for the 2016–20 period. Table .2 Victorian distributor replacement capital expenditure proposals Distributor 2016–20 repex Proportion of total Change from ($million, 2015) capex (per cent) actual repex in 2011–15 period AusNet Services 901 46 214 CitiPower 260 26 107 Jemena 224 27 61 Powercor 722 33 279 United Energy 585 49 179 Source: Distributor regulatory proposals and RINs. Responding to growth The distributors have to augment the shared network to ensure that there is sufficient capacity to meet forecast future demand from new and existing customers. As shown in section 3, maximum demand has been relatively flat over the 2011–15 regulatory period, and is not expected to grow significantly across Victoria over the 2016-20
The businesses submit that the current network is ageing. Our general expectation is that repex levels should remain relatively constant over time. This is because the application of financial and asset management techniques can even out fluctuations in replacement rates of aging assets. We consider an important factor in controlling asset maintenance costs is the use of condition based assessment techniques when managing deteriorating assets. We note that a particular driver of replacement expenditure in Victoria is initiatives being undertaken to implement the findings of the Victorian Bushfire Royal Commission, which examined the safety of electricity networks following the bushfires in 2009. The Royal Commission made a number of recommendations that affect the design and construction of the Victorian electricity distribution networks, particularly in areas of high bushfire risk. As a consequence, there have been a number of network design changes mandated by the Victorian Government which are unique to Victoria and which directly affect replacement expenditure costs. Steps are also underway for Victoria to complete the implementation of further recommendations, which would also impact future network design and replacement costs. Do stakeholders consider the cost of improving the fire safety of the Victorian electricity distribution network is reasonable, given it is expected to be a significant factor in the increase in replacement expenditure? Table 4.2 summarises the total replacement expenditure (repex) forecast proposed by each of the distributors for the 2016–20 period. Table .2 Victorian distributor replacement capital expenditure proposals Distributor 2016–20 repex ($million, 2015) Proportion of total capex (per cent) Change from actual repex in 2011–15 period AusNet Services 901 46 214 CitiPower 260 26 107 Jemena 224 27 61 Powercor 722 33 279 United Energy 585 49 179 Source: Distributor regulatory proposals and RINs. Responding to growth The distributors have to augment the shared network to ensure that there is sufficient capacity to meet forecast future demand from new and existing customers. As shown in section 3, maximum demand has been relatively flat over the 2011–15 regulatory period, and is not expected to grow significantly across Victoria over the 2016-20
AER%20-%20Issues%20paper%20Victorian%20electricity%20distribution%20pricing%20review%202016%20to%202020%20-%2009%20June%202015_5.DOCX