1 25 January 2007 January 25 Connection Applications Connection

Energy Solutions Australia Pty Ltd Pty Australia Solutions Obligations of Network Service Providers Service Network of Obligations 2 Overview

Energy Solutions Australia Pty Ltd Pty Australia Solutions Energy Background Connection and Rules The   The proposed Rule proposed The responses and submissions in raised Issues Discussion Conclusions     3 ransmission line ransmission ting facilities of the the of ting facilities n of new facilities e.g. facilities n of new of portfolio a set up ) include both ) both include Background The Proposed Rule Proposed The Connection assets for a generator might include a t a include might generator for a assets Connection and associated substation assets substation and associated  Energy Solutions Australia Pty Ltd Pty Australia Solutions Energy Local Network Service Provider (LNSP) Provider Service Local Network Monopoly services include modifications to the exis the to modifications include services Monopoly provisio the include generally services Contestable to attempting entrants new facing issues addresses services contestable to only applies connection assets connection     monopoly and contestable services and contestable monopoly The services required by Connection Applicants (CAs Applicants Connection by required The services Rule: The proposed   4 SP and a CA a and SP LNSP CA The Proposed Rule Proposed The The Rules & & Connection Rules The

Energy Solutions Australia Pty Ltd Pty Australia Solutions Energy Connection enquiry by CA to LNSP to CA by enquiry Connection CA to LNSP by Response LNSP to CA by application Connection CA to LNSP by connect to Offer     The Rules provide for a 2 way dialogue between a LN a between dialogue 2 way a for provide Rules The  5 New entrant the LNSP with a with a LNSP the the market as market the a whole rmation it isit rmation late too (cont) oney to obtain this this oneyto obtain LNSP CA The Proposed Rule Proposed The The Rules & & Connection Rules The

Energy Solutions Australia Pty Ltd Pty Australia Solutions Energy commercial opportunities not likely to be known to toknown be likely not opportunities commercial customers potential identity of the info the obtains entrant the new time the Often, by LNSP the with an agreement signed has and CA the    information The 2 way dialogue between the LNSP and CA provides and CA LNSP the between dialogue way The 2 regarding: has information LNSP The m and time spend to entrant has new the In contrast competitive advantage over a new entrant new a over advantage competitive    6 (cont) ture ture LNSP New entrant The Proposed Rule Proposed The CA The Rules & & ConnectionRules The

Energy Solutions Australia Pty Ltd Pty Australia Solutions Energy The proposed Rule puts the new entrant into the pic the entrant into new the puts Rule The proposed  7 Victorian Victorian arrangements to apply Qld for contestable provides contestable for provides SA Providers of contestable of Providers services NSW arrangements The beto need the owners focus Only • contestable augmentations (as connections) to opposed • services • services • and owners both include contractors • on only focus DEUS) by (overseen – contractors are owners not considered • Rule to proposed (refer the of Pty SolutionsLtd Australia Energy 2006) October 13 dated submission Agreed Agreed Response EnergyAustralia AGL Water Energy & Networks Energy Energy Country Powerlink AGL • • • NSW Ombudsman • Association • • • Raised by Raised Issues Raised in Submissions in Raised Issues

Energy Solutions Australia Pty Ltd Pty Australia Solutions Energy The proposed Rule has Rule not proposed adequately The the of scope considered existing Victorian, jurisdictional SouthAustralian and Queensland arrangements The proposed Rule has Rule not proposed adequately The the of scope considered existingNSW The proposed Rule places Rule proposed obligation on The new a LNSPs Issue jurisdictional arrangements # Issue Issue 3 2 1 8 (cont) have obligations have the under Accreditationfor contractors is accreditation new schemeA for be involved thein be connection The The appropriatepartyneeds to: • that that criterion • Details of connection Detailsof applicants with provided only theirare consent • already by provided adequately for the jurisdictional existing arrangements • requiredisas not that owners duplicate would the need obtain to licences, proper the registrations, etc process – process the meets only LNSP National National Rules: EnergyAustralia AGL Electricity Transmission Energy Networks Networks Energy EnergyAustralia EnergyAustralia • • • • Association Network Owners Network

Issues Raised in Submissions in Raised Issues Ltd Pty Australia Solutions Energy The The LNSPs the partiesnot appropriate are to maintainthe registers The proposed Rule does Rule the proposed address not The NSPs theobligation implications proposed of of details provide to of connection applicants The proposed Rule has Rule not proposed adequately The whether there considered be to needs an appropriate accreditation underpin to scheme the registers 6 5 4 9 (cont) This suggestion does not insert suggestion This needs The register be to The proposed Rule Rule proposed facilitatesThe the competitiveof provision contestableservices • entrantnew the intothe connection • maintained by partywith a the under Rules obligations The maintainingin The effort the is incremental register to existing on obligations LNSPs process EnergyAustralia Networks Energy Integral Energy EnergyAustralia EnergyAustralia Electricity Transmission Energy & Water Energy & Networks Energy VENCorp Energy Country • • Association • • • • • NSW Ombudsman • Association • • Network Owners Network

Issues Raised in Submissions in Raised Issues Ltd Pty Australia Solutions Energy Is this a this a mattermake can which Is on AEMC the a Rule? The issue should be addressed outside the beNSP outside should addressed issue The mostimportantly Rules outside and the For each maintainto separate For LNSP a register is inefficientsingle a central& register isrequired 9 8 7 10 (cont) The Rules already The requirethat obligations proposed only The are - The proposed Rule Rule proposed isa minor The to obligations change existing The The substantivereal and issues impede the Rules with existing entrants new Agreed The proposed Rule only Rule proposed The requires LNSPsinformation disseminate to –obligation is no to there facilitate a competitivemarket • LNSPsCAs advise services which are contestable. • incrementalto obligations existing AGL Hydro AGL Energy Origin Bovis Ltd TPCPty Hydro AGL Metropolis AGL Hydro AGL AGL Hydro AGL • • • • • EnergyAustralia EnergyAustralia

Issues Raised in Submissions in Raised Issues Ltd Pty Australia Solutions Energy A fuller review of this issue should be be should carried this issue review fuller of A at laterout a date The proposed Rule should Rule place not proposed major The the on obligations LNSPs There service There otherthan are the providers few LNSPs be to need encouraged entrants new and The issues identified in the proposed Rule identified issues thein proposed The are i.e.substantivereal and an information asymmetry LNSPsprovides existswhich a with competitive advantage The proposed Rule places Rule proposed The obligation formal on a facilitateto the LNSP competitive a market The proposed Rule places Rule proposed obligations The on undue the LNSP 15 14 13 12 11 10 11 (cont) Requiring Requiring LNSPs maintain to The requirementsthe proposed of no There are accreditation issues Incorrect – Incorrect rather,the proposed encourages the Rule market in contestableservices • of connection registers contractors duplicatesjurisdictional existing arrangements • only are Rule incremental to obligations existing • for LNSPs There no There are accreditation issues for LNSPsarrangements other as are placealreadyin owners for Electricity Transmission Energy Networks Networks Energy AGL Networks Energy AGL Networks Energy Energy Country • • Association • • Association • • Association • Network Owners Network

Issues Raised in Submissions in Raised Issues Ltd Pty Australia Solutions Energy The proposed Rule Rule proposed isan attemptThe to regulatethe in market contestableservices The proposed Rule would require would Rule require proposed LNSPsThe to maintaining for systems and processes develop for connection registers applications,connection contractors, etc The cost of the proposed of will The Rule cost the exceed benefits (because of (because benefits of accreditationissues) 18 17 16 12 (cont) - - Possibly – Possibly it’s but improvement an the present situation over The proposed Rule overcomes Rule proposed The impedimentsdeliveringto the on objectives market AGL Hydro has Hydro already AGL that highlighted there arefew alternative providers, suggesting An appropriate disclaimer appropriate An is required barriers to entry to barriers Electricity Networks Integral Energy Electricity Transmission Energy Networks Networks Energy VENCorp Integral Energy EnergyAustralia Origin Origin Energy Origin Integral Integral Energy • Association • Electricity Transmission • • Association • • • Network Owners Network Network Owners Network

Issues Raised in Submissions in Raised Issues Ltd Pty Australia Solutions Energy CAssided negotiation one face a process Difficulties reaching in agreementprice on and commercial termssingle a only with arise LNSP The information the registersprovided The will by The proposed Rule Rule proposed isthe inconsistent with The objective market Connection applicants Connection be should ablesource to service procure providers themselves and There legal There are regarding issues of endorsement registers the on names be imperfect be its benefits and doubtful 24 23 22 21 20 19 13 ndent Power Power ndent Ltd & The Electric Electric The & Ltd ng factor which the the which ng factor ion ntered the ‘new build’ ‘new the ntered NSP few alternatives to the the to few alternatives ) ) assets is consistent with is consistent assets www.ofgem.gov.uk Discussion

Energy Solutions Australia Pty Ltd Pty Australia Solutions Energy market for both gas and electricity gas and market for both Information asymmetry is one significant contributi significant is one asymmetry Information e have providers infrastructure utility Independent Indepe Ltd, Energy O’Rourke Laing include Licensees Not ideal but an improvement on the existing situat existing the on improvement an ideal Not but Network Company Ltd Company Network proposed Rule addresses Rule proposed (Electric) Connections Utility Ltd, Global Networks     LNSPs The submissions highlight that there are presently are presently there that highlight The submissions will’‘good the on relies Rule The proposed L the of of connection a set portfolio up to initiative The overseas trends e.g. the UK ( e.g. UK the trends overseas    14 ditions ess theess Rules are table table services wer by the LNSPs by wer the through: ve service providers – ve providers service is this he NEM objectives he NEM ormation asymmetry ormation Conclusions Conclusions greater variety in the scope of services offered of services scope the in greater variety and con terms commercial the in greater flexibility

  Ltd Pty Australia Solutions Energy reduces the potential for the exercise of market po market exercise of the for the reduces potential unl achieved be not will the Rules of intention The modified providing greater scope for the provision of contes of provision the scope for greater providing efficiency investment greater promoting     considered to be a direct result of the present inf the present of result a direct to be considered The proposed Rule contributes to the NEM objectives NEM the to contributes Rule The proposed alternati few are there that raised The submissions t with consistent first is step a Rule The proposed