A community member has posed the following question to local group, Sandy Point Community Power Inc.

Foster is serviced by two sources of incoming power one emanating via Fish Creek which also  feeds Waratah Bay /Sandy Point re “Line FRT 21” and the other power source re “LINE FRT  22” designed to service both Foster and properties which are situated down through Yanakie  onto Wilsons Prom. That line also deviates off and runs along Soldiers Road servicing  properties along that road and ends near Dividing Creek. I have taken a look at this and can  clearly see where that line stops along Soldiers Road which is approximately 2.5ks from the  Soldiers Road / Sandy Point road intersection. He estimates it would take the installation of  approximately a maximum of 20 – 30 power poles and associated infrastructure to continue  the line through to the intersection of Soldiers /Sandy Point Roads which could then be  connected up to the Sandy Point line resulting in a further power source which could be  switched across during times of outages.  

Has this ever come up in the dealings with Ausnet that you may be aware of ? 

Our community member is correct. There is a feeder running down Soldiers Road that could  be connected into the Sandy Point feeder. If this connection was made and the required  auto-switch gear installed so that the affected feeder can be isolated quickly, you would  expect that this would improve the reliability of electricity supply to Sandy Point.  

The direct answer to the question is that the possibility of installing this 'dual' feeder to  service Sandy Point has not come up during discussions with AusNet. 

To understand why, we need to wade into the regulations and rules that govern what the  'poles and wires' owner does and doesn't do. These rules were put in place when the SEC  was broken up and sold-off to the corporates back in Jeff Kennet's days as Premier. As a  forewarning, the rules get very complicated very quickly! 

The regulations dictate which costs the network owner can 'recover’ through our electricity  bills. Every 5-years the network owner must submit a costed works proposal to the  Australian Energy Regulator (AER). Once approved by the regulator, this sets the 'base'  amount that the network owner can recover. It's a bit like guaranteed revenue! The  regulations also describe penalties and incentive payments that apply within each 5 year  window. The actual amount that our network tariff moves each year is dependent on the  amount the network owner actually spends vs the 'base' plan, any incentive payments or  penalties that apply, and an adjustment for inflation.  

Network owners are very 'shy' when it comes to spending money which they can't recover  or claim an incentive payment. However, it does happen sometimes. An example of a non-recoverable service is that AusNet has a small team that provides advice and data to  communities such as Sandy Point on community energy projects. This service is not  recoverable in bills. AusNet takes the cost of the service straight out of their profits.  

With regard to the reliability of the electricity network, the rules state that the network  owner can recover costs for 'maintaining the average reliability across the network'. There  are a number of measures that are used to monitor the level of reliability. The regulations say that network owners will exclude major weather events from the 'average' reliability  numbers they report. The reliability impact of major weather events are reported  separately. 

Historically, if the owner has put forward project plans to improve the average reliability of  the network in their 5-year plan, that is to increase the reliability rather than just  maintaining the average, the Australian Energy Regulator would disallow these projects  from being part of the amount approved to be recovered in our electricity bills. The intent of  this rule is to contain electricity bill increases. So historically, in picking projects to include in  their reliability program, the network owner looks to feeders that either have poor  reliability or feeders at risk of declining reliability that will, in-turn, likely impact the average.  They run this case with lots of supporting analysis in their 5-year plan in order to justify the  work.  

In addition to projects that are pre-approved by the regulator to maintain the average  reliability (and thereby included in recoverable costs), there is an incentive scheme for  network owners for improving the average reliability across their network, and a penalty if  the average declines. They can choose to undertake projects with the objective of receiving  an incentive payment, but they must complete the project then demonstrate that, as a  direct result, the average reliability across their network has lifted, before making an  incentive scheme claim. As there is a risk that this may not occur, networks haven't been as  keen to undertake these incentive scheme projects to the extent we all would like.  

There is also a second rule that network owners need to comply with for any project, being  that the project must be 'cost-efficient'. This means that the benefits to customers must  outweigh the costs. Again, the intent of this rule is to limit electricity bill rises for projects  that don't make economic sense. The regulator keeps a close eye on this and disallows any  project that does not pass the cost-efficiency test from being recovered in our electricity  bills or subject of an incentive payment. 

To monetise 'reliability' improvement, the network owner uses a value called Value  Customer Reliability (VCR). This number is set by the regulator. The same number applies  irrespective of where the project is located on the network. The VCR is multiplied by the  amount of energy (kWh) equivalent to the increase in reliability that will result from the  project. Small communities are disadvantaged as the amount of energy coming down the  feeder line is relatively small. A small increase in reliability x a small amount of energy x VCR  = a relatively small $ benefit. So, projects of any meaningful size for small communities  usually don't pass the cost-benefit test.  

So all this takes us back to Sandy Point! 

In our energy study undertaken a couple of years ago, we obtained some information on the  reliability of the feeder to Sandy Point. Our feeder is shown in orange in comparison to the  other AusNet feeders is shown below.

As you can see, the reliability of our feeder using the System Average Interruption Duration  Index measure (SAIDI) is about average. The performance on a 'frequency of interruption'  measure and 'momentary interruption' measure are similar. (N.B. MEDS = major event days) 

Given that we are a small community, and therefore have a low level of calculated benefit  for any reliability improvement project, and our feeder has an average reliability  performance, up to now, AusNet hasn't been interested in improving the reliability of our  electricity supply. 

You might be asking, "What about justifying the project on the basis of minimising the  impact of a major weather event such as what we've just lived through?" Sadly, the current  regulations are silent on proactive investment with this aim. Again, historically, if network  owners put up a program of projects as part of their 5-year plan, the regulator would decree  that the cost of the program could not be recovered in our bills.  

Clearly AusNet do spend money responding to major weather events that impact the power  grid (noting that their performance has plenty of room for improvement). When this  happens they can, and do, make a claim to recover some of these 'reactive' costs. 

Fortunately the wheels of change are turning. 

AusNet are very aware that customers want and need improved reliability of electricity  supply. They have undertaken extensive customer preference research in order to build a  case for inclusion of both a reliability improvement program and a network resilience  program in their 2026-31 work plans. Through the customer panels that I have been on, I  and other regional representatives have been adamant that there needs to be a minimum  reliability standard that applies to all customers, no matter their location on the grid. The  outcome of an independent review into the impact of the February storms set up by the  State Government has reinforced our view.  

However, there are other voices on the customer representative panels that emphasis  affordability as a more important objective than improving reliability or resilience. They are  saying for example "Why should a pensioner in their rented council-owned unit who are  struggling to pay for life's essentials pay more for their electricity just so that people who chose to live in the bush, can enjoy small improvements in supply reliability?" .......They have  a point. 

Both the State Government and the AER are now encouraging network owners to include  improvement programs for 'worst-served' customers in their 5-year plans. In consultations  with AusNet we agreed to define 'worst-served' as customers experiencing periods of power  loss of duration greater than 4 x the average. Ten feeders fell into this category. The Sandy  Point feeder does not. AusNet then undertook a cause analysis of each of these ten feeders  and identified projects to improve the reliability of each. These projects were costed at  $37M. However, only one of the projects would satisfy the cost-benefit test stipulated in  regulations. While AusNet intends to include them all in their submission, it is conceivable  that the AER will say they can not include 9 of them in the 'recoverable' category.  

Recognising that there are other situations where customers are experiencing significant  reliability problems, AusNet are intending to include an additional $67M in a fund for  regional projects in their 5-year plan. The selection criteria for projects are yet to be  established, but it is possible that Sandy Point may qualify for funding under this fund.  However, given that there are no specifics in the proposal on which the AER can assess  merit, this fund is at risk of being excluded from 'recoverable' costs. 

The AusNet proposal to include $450M to build network resilience against major weather  events in their 5-year plan could also suffer the same fate. Whilst these projects do pass the  cost-benefit test if a major weather event occurs at the location of one of the projects, there  is a risk that this does not happen. The delivery of the benefit is therefore not guaranteed.  There are works identified in this program on the feeder line from Foster so Sandy Point  would benefit if the program is assessed as recoverable by the AER. 

The regional-based customers on the representative panels have been applauding AusNet's  intention to include the 'worst served' customers and resilience programs of work in their  plans. In doing so, it places the spotlight on the AER and State Government to come clean  on where they see the balance point between service improvement and affordability.

The Team 

Sandy Point Community Power Inc. Email: energy@sandypoint.vic.au

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