United Energy Distribution Pty Limited
ABN 70 064 651 029
07 November 2016
Department of Land Environment Water and Planning
Powerline Bushfire Safety Program
GPO Box 527
Melbourne VIC 3001
United Energy
6 Nexus Court
Mulgrave VIC3170
PO Box 449
Mt Waverley VIC 3149
T 03 8846 9900
F 03 8846 9999
www.ue.com.au
Email: [email protected]
RE: Regulatory Impact Statement for the Proposed f-factor Incentive Scheme
United Energy (UE) appreciates the opportunity to comment on the Regulatory Impact Statement for the
Proposed f-factor Incentive Scheme. We accept most of the Department of Environment, Land, Water
and Property’s (DELWP) preferred f-factor design.
The features of the preferred design include:
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it applies penalty weightings based on the timing and location of powerline ignitions; and
it is based on an averaged historical four-year benchmark of distribution business network
ignitions performance, making it cost neutral over the long term if network ignitions remain
constant1
UE does not agree that a specific design feature is required to reduce the benchmarks already paid for
by customers. This feature is already dealt with it in the historic data.
UE is committed to the safe and reliable operations of the distribution assets within our region. In the
course of achieving this objective, we continue to and have spent a substantial amount of capital in the
most efficient manner to not only meet our requirements under the Electricity Safety Act 1998, the
recommendations from the VBRC and the Electricity Safety (Bushfire Mitigation) Regulations 2016 but
also ensure the safety of customers on our network. UE objects to the following comments made in the
RIS. They are:
1. “The current f-factor also does little to encourage targeted investment of discretionary capital.
This is because, as noted, the current f-factor encourages the distribution businesses to manage
all fires equally, regardless of whether they occur in high risk areas during high bushfire-risk
weather, or in low-risk fire areas in low bushfire-risk weather. To maintain or improve their total
ignitions reduction performance, the businesses must spread their network operations and
maintenance expenditure over their entire asset base. This effectively incentivises them to make
low cost investment in areas where fires are most concentrated regardless of the inherent risk of
these fires.” Page 10,para.2
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It is incorrect to assume that executives within a distribution business do not take bushfire risk
more seriously than the government. UE’s representatives are happy to discuss with DELWP
our Bushfire Risk Mitigation plans and prioritisation within our Risk Management Framework.
Due to the limited data currently available we accept the use of 4 years in this case. For future periods a longer
time series is preferable. 5 years would align with standard regulatory practices.
2. “As all fires are treated equally, what an efficient and prudent business will do to reduce f-factor
liability does not necessarily equate to what it should do to reduce bushfire risk. There is no price
information to guide the businesses as to where to invest limited capital to achieve maximum
public benefit.” Page10. Para 3
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The above comment, in particular the reference to “what we do” versus “what we should do”
and a “price guide” as a basis to invest capital, is incorrect and ignore the high priority that UE
places on Bushfire Mitigation. Our corporate objectives specifically make reference to the
safety of our customer and commands the same level of review and importance in our
internal risk framework.
An example of our approach to meeting this objective is the annual voluntary cyclic asset
inspection program of all assets and vegetation within the HBRA leading up to “fire season”.
These inspections are further detailed in our Fire Prevention Plan and used to inform our
corporate risk register.
The UE Fire Prevention Committee monitors and reports on the progress of the UE asset
inspection and maintenance programs and the Fire Performance Index leading to and over
the “fire season”.
UE, ESV and CFA do not treat fires equally. The terms HBRA, LBRA and bushfires are
industry accepted terminology that provides the distinction.
Additionally, UE would like to address the DELWP’s proposed retrospective application of the new ffactor scheme from 1st July 2016. The DELWP makes it clear on a number of occasions in the document
that cost neutrality for the businesses and consumer is a driver for the implementation of the re-designed
scheme. However cost neutrality is omitted in the transitional arrangements for the period in which this
re-designed scheme is first applied. UE would like to bring to the department’s attention that if UE’s
reward or penalty for the calendar year (as is the case under the existing scheme) falls short of the
outcomes of the re-designed scheme during the transitional period (based on financial years), then from
the outset this scheme cannot be considered neutral for both UE and its customer base.
UE is currently operating, and incentivised, under the current existing f-factor scheme. In supporting the
proposed f-factor scheme, UE would like to suggest that the revised scheme commence from the 1st
January 2017 onward.
If you have any queries regarding this submission, please contact Mathew Abraham on (03) 8846-9758.
Kind Regards,
Mathew Abraham
Regulatory Analyst
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