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VENCorp Revenue Proposal 1 July 2008 to 30 June 2014

This presentation provides an overview of VENCorp's roles, transmission planning approach, and revenue setting arrangements in the National Electricity Rules (NER). It covers key elements of the revenue proposal for the period from July 2008 to June 2014.

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VENCorp Revenue Proposal 1 July 2008 to 30 June 2014

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  1. VENCorp Revenue Proposal1 July 2008 to 30 June 2014 Initial Public Forum Presentation

  2. Overview of presentation • VENCorp’s roles and functions • Approach to transmission planning • Revenue setting arrangements in the NER • Key elements of revenue proposal

  3. Who we are • Statutory, not-for-profit, independent transmission network service provider • In electricity we are responsible for: • Providing network services; • Transmission network planning and investment; • Managing connections to the transmission network; • Emergency Management

  4. TransGrid (NSW) Powerlink (QLD) VENCorp and SP AusNet (VIC) ESIPC and ElectraNet (SA) Transend (TAS) Network planning Investment Asset Ownership Network planning Investment Asset Ownership Network planning Investment Network planning Network planning Investment Asset Ownership Investment Asset Ownership Asset Ownership Not for Profit Entity For Profit Entity Comparison of TNSP functions across the NEM VENCorp’s functions Source: Firecone

  5. Service provision and financial flows Transmission Use of System Services Transmission Customers Prescribed Services Network Services Non-Contestable contracts Contestable contracts Direct Connect Customers services Rowville Transmission Facility payments

  6. VENCorp approach to planning • Based on requirements in the National Electricity Rules, VENCorp’s Transmission Licence and the Victorian Electricity System Code. • Captured in three documents • Electricity Planning Criteria • Regulatory Test • Connection Augmentation Guidelines

  7. Electricity Planning Criteria • Investments decisions based on market benefits limb of the AER’s regulatory test and considers: • Probability-weighted impact on supply reliability • Value that customers place on reliability • Cost of additional capacity • Decision to invest • benefits > costs – proceed with investment • benefits < costs – do not proceed with investment

  8. Connection Augmentation Guidelines • Where an augmentation is required to comply with a NER specified access standard • the connection applicant will be required to fund that augmentation • Where an augmentation is required to increase the power transfer capability of the network • VENCorp will consider applying the regulatory test • If the augmentation does not satisfy the regulatory test the connection applicant can elect to fund that augmentation

  9. Overview of Chapter 9 • Chapter 6A outlines the economic regulation of transmission services. • Part A of Chapter 9 sets out the jurisdictional derogations that apply to Victoria and VENCorp in particular • Clauses 9.8.4B to 9.8.4F modify Chapter 6A with respect to the transmission revenue regulatory regime for the Victorian Transmission Network.

  10. VENCorp’s revenue setting regime • The transmission revenue regulatory regime that applies to VENCorp must comply with the following principles: • the amount of VENCorp’s maximum allowable aggregate revenue for a relevant regulatory period must not exceed VENCorp’s statutory electricity transmission-related costs; and • VENCorp's maximum allowable aggregate revenue must be determined on a full cost recovery but no operating surplus basis.

  11. Terminology in the revenue proposal • Committed Augmentations • identical to historic capex • Planned Augmentations • identical to forecast capex • Operating and Planning Expenditure • similar to opex • Prescribed Services • Recovering costs of other TNSPs (SP AusNet, Murraylink)

  12. Committed augmentations • $150 million worth of committed augmentations commissioned during regulatory period • Derived from • Contestable Projects (e.g Rowville and Moorabool Transformers) • Non-Contestable Projects (e.g. interface works) • Projects not rolled into SP AusNet’s asset base

  13. Planned Augmentations • Forecasting around $350 million (real) over six year period driven by • Increase in regulatory period (from 5 to 6 years) • Cost estimates based on upper end of reasonable range • Increase in load growth • Location of new generation and potential new interconnection upgrades to meet load growth

  14. Amendments to planned augmentation program Planned Augmentation Program Prepared Planned Augmentation Program Amended June 2006 September 2006 December 2006 March 2007 June 2007 September 2007 Revenue Proposal Submitted Draft Determination Released Annual PlanningReport Released Annual PlanningReport Released

  15. Operating and planning expenditure • Predominantly made up of • Labour costs • Consultancies • Corporate costs

  16. Other matters • Negotiating Framework • Pricing Methodology • Will be submitted by 31 May 2007

  17. Forecast Revenue Requirement * - Total Revenue Requirement has been reduced by $1 million per annum to account for interest income earned by VENCorp **- The energy value is on a generator sent out basis.

  18. Relationship between the revenue cap and transmission charges

  19. Relationship between the revenue cap and transmission charges

  20. Relationship between the revenue cap and transmission charges

  21. Questions?

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