AER issues final decision on SA Power Networks' 2020-25 Regulatory Proposal

South Australian government initiatives to secure electricity supply

The SA Government has announced a number of actions aimed at ensuring secure electricity supply for South Australians amid continued growth in solar rooftop installations.

SA Power Networks welcomes these initiatives as they will have an important role in ensuring we can continue our State’s exciting energy transition in a co-ordinated, secure and managed way.

South Australia has some very specific challenges in managing our electricity system due to high levels of rooftop solar generation and comparatively low levels of energy demand.

The challenges impact all levels of the State’s energy system and ultimately put at risk the security, reliability and quality of supply experienced by customers.

The National Electricity Market operator (AEMO) has provided a technical analysis to the State Government examining the issues posed by continuing rapid growth in solar and its ability to manage security of supply. The two key areas of concern highlighted by the SA Government following the detailed AEMO modelling are:

• ensuring the continued operation of rooftop solar during system disturbances (many inverters currently in place switch off in response to disturbances, exacerbating the impact on the system) and
• managing minimum demand when we are separated from the National Energy Market (ie loss of the SA-Victoria interconnector).

To tackle this, the Government has announced a number of actions for urgent implementation while we wait for completion of a new SA – NSW interconnector (Electranet’s Project EnergyConnect).

These initiatives include:

1. working with SA Power Networks to bring forward $10 million in investment to enhance voltage management and provide emergency backstop capabilities if required by AEMO
2. accelerating new smart solar standards ahead of national changes so that solar supports the grid during disturbances
3. establishing constraints to manage the SA - Vic interconnector to reduce the risk to the State’s energy system until Project EnergyConnect is delivered
4. updating protection schemes and emergency protocols to make sure they are fit for purpose in low demand conditions
5. increasing fast frequency control through the Grid Scale Storage Fund and rollout of home batteries.

In welcoming the initiatives, SA Power Networks’ General Manager Network Management said “SA Power Networks has been engaging with customers, stakeholders, rule makers, industry and manufacturers to develop prudent, cost effective approaches to deal with emerging issues in the electricity distribution network due to rapidly increasing levels of solar generation in our system.”

“The measures being undertaken by SA Power Networks create the potential to double the amount of renewable energy the distribution network can accommodate over the next five years,” Mr Schmidt said.

These initiatives include Time of Use Tariffs available from 1 July 2020; encouraging customers to use appliances in the middle of the day to soak up energy from rooftop solar; investment in enhanced voltage management and monitoring and analytics in the low voltage network; and developing industry approaches and standards to support introduction of flexible export limits for rooftop solar to respond to what is happening in the network at any given time.

You can find out more here. Many of the issues are canvassed in the Future Networks section of our Regulatory Proposal 2020-25. You can also read a copy of the State Government’s AEMO’s statement.

Following consultation with stakeholders, the Australian Energy Regulator (AER) has decided to delay its final 2020-25 revenue determination for SA Power Networks to 29 May 2020.

The short delay is to allow the AER to use short-term forecasts of inflation from the Reserve Bank expected on 8 May 2020. This will allow the AER to include a more accurate reflection of the economic circumstances in its decision for the next regulatory control period.

Once the final determinations have been made, SA Power Networks and the AER will work together closely to enable new retail prices to be in places for 1 July 2020.

In the event the Reserve Bank does not publish new forecasts on 8 May 2020 the AER will publish its final decisions as soon as possible using the February short-term inflation forecasts to give certainty of prices over the five year regulatory period. A revised timeline will be published shortly in addition to submissions received during consultation on the proposed delay. You can read more here.

Energy Networks Australia has released a report highlighting how networks are adopting new and innovative approaches to support customers.

A compilation of entries to the 2019 Energy Networks Australia and Energy Consumers Australia Consumer Engagement Awards, the document provides a fascinating insight into projects that are helping deliver a smarter grid to support the energy transformation to benefit consumers.

CEO Andrew Dillon said while networks were not named on bills and customers did not pay them directly, they had significant face to face time with customers. You can read more here.

We submitted our 2020-25 Revised Proposal for managing the South Australian electricity distribution network with the Australian Energy Regulator (AER) on 10 December 2019.

The Revised Proposal followed an extensive engagement program with customers and stakeholders over three years. The Proposal included an average reduction of $62 for residential customers and $276 for small-to-medium sized businesses in 2020-21. In fact, our Proposal outlined the lowest distribution network charges in 2020/21 that we've seen in a decade.

Figure 1: Key outcomes for customers

Throughout conversations with customers and stakeholders there was a growing recognition that equity for customers is not just a matter of price. Equity also means not passing on today’s costs to future generations and doing something for customers who get a substantially worse service than others in South Australia. Our stakeholders also made it clear that it is not equitable for us to “kick the can down the road” by deferring expenditure on an ageing network today, in order to push additional costs onto future years and generations of customers.

As a result, our Revised Proposal included some important targeted enhancements to reliability for some of our worst-performing feeders, as well as plans to reduce the risks posed by our ageing assets.

Figure 2: Customers' key priorities and our Revised Proposal

In response to the AER’s Draft Decision on our Original Proposal, lodged back in January 2019, we provided additional evidence to support programs in areas such as replacement of ageing assets, investment in information technology and some much needed property improvements at various sites across the business.

You can read more about our Revised Proposal in our Overview .

Talking Engagement

Our engagement program over the past three years has been extensive and has covered a wide variety of topics and has seen us meet people from all across the State.

In its recent Draft Decision, the AER has proposed we spend 20% less in the next five years on replacing ageing assets than we did from 2015-2020.

We don’t believe this is sustainable for a network of the scale and age of South Australia’s and it will make it more difficult to maintain reliability and safety. It also will push increasing costs on to customers in the future. Let us know what you think today

We are in the process of reviewing the AER’s specific decisions in greater detail. We are also engaging further with our customer representatives and other stakeholders before submitting a revised proposal to the AER in December.

You can read the full Draft Decision on the AER’s website.