Pricing approach for
Alternative Control
Services
Anton Murashev
EDPR Project Director
2 October 2014
Objective
The objective of this presentation is to inform
forum members of JEN’s approach to pricing
Alternative Control Services (ACS)
At the next pricing workshop, JEN will present
draft charges for ACS
2
Context
Distribution
services
Direct
control
services
Standard
control
services
Alternative
control
services
DUoS charges
User-pays fees
Negotiated
services
Unclassified
services
The AER approves a
framework for us to
negotiate prices with
customers
Prices not regulated
under NER
Focus of presentation
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What are ACS services?
• Standard Control Services are controlled by the AER using its
standard method:
– building blocks regulation to set network tariffs, combined with
– incentive schemes
• ACS are services controlled by a different control method,
including:
– fee-based: individual user-pays price caps per service
– quoted: combination of caps on labour and material rates, with
quantities set on a case-by-case basis (price is quoted up front)
– simplified building blocks: used to set individual price caps or
revenue caps (no incentive schemes)
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Why are ACS services different?
• Two key reasons why some services are treated as ACS
either
• Service is isolated to a particular customer, rather than shared:
– costs are caused by the requesting customer
– costs are readily identifiable
– the service only benefits the requesting customer
• In this case, AER aims to separate the costs and revenues from
SCS to avoid cross-subsidies
or
• Service is subject to (or likely to be come subject to) competition
• In this case the AER aims to separate costs and revenues to help
encourage competition & prevent potential anti-competitive conduct
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ACS services types
ACS
Simplified
Building Blocks
•
•
regulated meter
provision and meter
data provision
public lighting
Quoted
•
•
•
•
•
•
•
•
•
•
•
routine connections >100
amps
supply enhancement at
customer request
supply abolishment
rearrangement of network
assets at customer request
audit design and construction
specification and design
enquiry fees
elective undergrounding
damage to service cables by
high load vehicles
covering of low voltage mains
after hours truck by
appointment
emergency recoverable works
Fee-based
•
•
•
•
•
•
•
•
•
•
•
•
routine connections <100
amps
service truck visits
re-/de- energisations
temp dis- and re- connect
special meter read (free if AMI)
AMI refusal surcharge
PV installation
meter investigation
re-test type 5 and 6 meter
reserve feeder
fault response—not DNSP
fault
wasted attendance
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Fee-based ACS—base pricing approach
• Example: 2008 build-up of single-phase connection, business hours
Cost/task item
Quantity
Unit rate
Cost
New connections team
45 mins
$51.01 ph
$38.26
Preliminary inspection
5 mins
$95.00 ph
$7.92
Testing and energisation
10 mins
$95.00 ph
$15.83
Service truck officers
2x60 mins
$71.41 ph
$142.82
New connections team
15 mins
$51.01 ph
$12.75
Motor vehicles (EPV)
60 mins
$36.05 ph
$36.05
Materials (service line, brackets, etc)
1 set (estimated)
$66.02 per job
$66.02
Labour
Total direct costs
$319.65
Capex overheads
6% of direct costs
N/A
$19.18
Tax liability recovery
6.86% of total costs
N/A
$23.26
Total base charge (round to nearest 5 cents)
$362.10
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Reserve feeder (O&M)—a special case
• Where a customer requests reserved capacity, JEN will maintain
that reserve capacity
• Charge set by estimating:
1. Total costs of providing operations and maintenance (O&M)
on the shared network
2. Proportion of those O&M costs that relate to HV feeders—
where reserve capacity is usually provided
3. Forecast total annual kW consumption on HV feeders
4. Dividing amount in 2. by amount in 3.
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Quoted ACS—base pricing approach
• Similar to fee-based, except quantities are estimated on a case-bycase basis
– and quoted to the customer, hence “quoted” service
• AER determines appropriate labour and overhead rates to use
– usually same as rates used for fee-based
• AER requires materials costs to be passed through with no profit
margin
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Fee-based and quoted ACS—setting X factors
• Individual X-factors set for each service to reflect forecast real
movements in the cost of inputs (labour and materials)
• Uses same underlying real escalators as those AER applies to
SCS opex and capex forecasts
• X-factors unique to each service, as weighting of labour and
material inputs for each service is unique
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ACS to which Simplified Building Blocks apply
• Simplified building blocks are similar to how AER regulates SCS:
– similar model structure
– consistent WACC used
but
– stand-alone model to keep costs and revenues separate
– no incentive schemes apply
– less detail in the underlying inputs and assumptions
– can be used to set individual price caps by different asset type
(public lighting) or to set revenue caps (metering)
• Applies to existing Public Lighting services (individual price caps)
• Likely will apply to regulated meter provision and meter data
provision (revenue cap)
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