Ergon Energy Annual Stakeholder Report 2015–16 “Our industry is changing fast… so we have to Geoff McGraw, like our other be constantly thinking forward to ensure we can regional managers, takes the opportunity wherever he can to get best deliver for the community. Our goal is to out into the community. Here, and on the cover, he is meeting some of remain at the core of how our kids will choose the next generation as part of our to source and use electricity into the future.” Safety Heroes program. Our school electrical safety education program is helping teachers, like Annette Geoff McGraw Ryan from Whitfield State School, explore the world of electricity Lines Manager Tropical North with their students. p19

Contents

Ergon Energy in profile 3 Year in summary 6 Chairman’s message 8 Chief Executive’s report 9 Review of operations 10 • More value and choice 10 • Evolving the network 22 • Our people, our future 28 Delivering economic value 37 Our corporate governance statement 40

Looking for more information? Our Annual Stakeholder Report is part of a suite of documents available online at www.ergon.com.au/annualreport Ergon Energy is very much part of the fabric of life in regional . We see ourselves as powering prosperity – energising the lifestyles we enjoy and most critically our local economies.

To achieve this we’re delivering the ‘peace of mind’ that comes from a safe, dependable electricity service and enabling greater customer ‘choice and control’ in their energy solutions… all for the ‘best possible price’.

Like many others, we’re evolving as a business to embrace change… in the way our customers are using the network with the take up of new energy-related technologies, change in the energy market itself, and change in the economic environment.

This has seen us responding on a range of fronts: with lower and new tariff choices for our customers, major system changes to boost our service capability, a focus on connecting renewable energy generation and quicker network connection timeframes generally, improvements in employee engagement, and a major program to bring our costs down.

We’ve focused on finding ways to do things smarter and more efficiently for our customers – a journey that will continue now as we merge with our counterpart, Limited. About our report

This report covers Ergon Energy’s overall performance for the 2015-16 financial year. It largely showcases the contribution of Ergon Energy Corporation Limited and its subsidiary Ergon Energy Queensland Pty Ltd. It is being presented as part of Energy Queensland Limited’s suite of reporting documents. Energy Queensland Limited has been created as our parent company, through the merger of Ergon Energy Corporation Limited, Energex Limited and SPARQ Solutions on 30 June 2016.

Sustainability and STAKEHOLDERS’ SUSTAINABILITY MATTERS Ergon Energy OUR RETAIL AND NETWORK CUSTOMERS While our most significant contribution Electricity affordability p 10-13, 19-20, 37, 46 to our stakeholders’ sustainability Reliability and security of supply p 16, 17, 24-27 concerns for regional Queensland Infrastructure costs / connection timeframes p 18, 26, 27 remains our response to electricity Energy conservation / renewables p 14, 15, 18, 23, 34, 35 affordability (being central to addressing the cost of living and of doing business), COMMUNITY STAKEHOLDERS this report also addresses a range of Regional economic development p 14, 15, 22-25, 27 other matters material to our different Strong disaster response capability p 19 stakeholders and our purpose as an Community impact and social inclusion p 21, 31, 32 organisation. We are looking to create Community electrical safety p 19, 20 shared value across these areas. Environmental protection and climate change p 34-36 We are active in assessing our Resource (incl energy) conservation p 36 stakeholder expectations – an imperative that has been fundamental GOVERNMENT AND REGULATORS in guiding the content of this report. Electricity affordability p 10-13, 19-20, 37, 46 Our approach to reporting also Economic prosperity / employment p 14, 15, 22-25, 27, 32 continues to be guided by Global Service standards and compliance p 16-18, 26, 29, 30, 35, 36, 40, 46, 47-51 Reporting Initiative’s Principles of Financial returns / debt reduction p 6, 37-37, 49 Sustainability Reporting, as well as the Australasian Reporting Awards OUR PEOPLE criteria for best-practice reporting Employment opportunities p 31-33 (last year’s report benchmarked as Work health and safety p 29, 30 Silver). We welcome your feedback Workplace diversity and social inclusion p 21, 31 on our reporting. OUR INDUSTRY PARTNERS Sustainable industry outcomes (incl procurement p 11-15, 22-25, 33, 35, 39, 46 practices and other economic opportunities)

2 ABOUT OUR REPORT ERGON ENERGY ANNUAL STAKEHOLDER REPORT 2015–16 Ergon Energy in profile

Our vision Our purpose To be a high-performance, To provide safe, reliable, efficient and customer-driven energy business. sustainable energy solutions to support our customers and the Queensland economy.

Review of operations p10

More value and choice

Evolving the network Our people, our future

Delivering economic value p37

Our distribution business Our role as a distributor is to transport electricity along our ‘poles and wires’ across regional Queensland. The distribution network, which is part of the National Electricity Market (NEM), is regulated by the Australian Energy Regulator (AER). The regulator determines the revenue we are allowed to collect from our customers for the use of the network. These charges are just one of the components making up the price of electricity. We also operate under electricity industry laws and regulations.

Our retail business Our retailer (Ergon Energy Queensland Pty Ltd) buys electricity from the generators, through the market and in direct deals, and on-sells it to our customers. We sell electricity at the Queensland Government’s notified prices, which are set by the Queensland Competition Authority (QCA). This enables Queenslanders to access the same regulated electricity tariffs (with the support of the government’s Community Service Obligation payment), wherever they are, even though the supply cost may be different.

Our other businesses Nexium Telecommunications (Ergon Energy Telecommunications Pty Ltd) services Ergon Energy’s communications needs and, as a licensed telecommunications carrier, also sells wholesale high-speed data services to the market. SPARQ Solutions Pty Ltd, our joint venture company with Energex Limited, provides each of our respective organisations with information and communications technology solutions and services.

ERGON ENERGY IN PROFILE ERGON ENERGY ANNUAL STAKEHOLDER REPORT 2015–16 3 Our history In our many forms we have always played an integral part Since becoming Ergon Energy, of Queensland’s lifestyle and prosperity. we have grown to a workforce of Ergon Energy was formed in 1999 from the six former regional Queensland Government-owned electricity distributors and over 4,000 with an asset base of their subsidiary retailer. These regional ‘electricity boards’ were created in the seventies, from the earlier community- $11.8 billion. based electricity generators and small network operators, to manage the electricity grid as it expanded across our We are now serving over 740,000 vast service area. homes and businesses, up over 25% In many ways, this journey parallels the development of in the 17 years – with a electricity networks around the world where greater economies of scale have been sought through expansion of 2,518MW, up 45%. and mergers. The growth of electricity networks in Australia in the second In this time reliability has improved half of the 20th Century is considered one of the great dramatically – today we have an modern feats of engineering. Before this time there were only small, local electricity networks across Queensland. average of 2.9 power outages per Today this change continues. Our next chapter will be as customer each year. part of Energy Queensland. Bringing Ergon Energy, Energex and SPARQ Solutions together has created a truly statewide And we have connected 118,000 solar team of locals all working to deliver 24/7 for our communities. energy systems to our network. The move places us in the best possible position to adapt to the changes underway in electricity supply sector as a customer-oriented, efficient business. This will help us to deliver positive price outcomes for our local communities, as well as long-term, sustainable business returns to the Queensland Government as our owner, and ultimately to the people of Queensland.

Our network Around 75% of our electricity network runs through rural Queensland, a vast service area with large distances between HOW ERGON ENERGY COMPARES TO communities. Our customer density per network kilometre is OTHER DISTRIBUTORS the second lowest in the NEM. We have a proportionately high investment in subtransmission 20% assets, compared to our urban counterparts, and one of the largest Single Wire Earth Return (SWER) networks in the world. Compared to a meshed or interconnected network, 15% the radial design of our network and the limited capacity the ‘SWER’ lines limits what we can do when responding to peaks in demand or outages. 10% ERGON Ergon Energy also has 33 stand-alone power stations ENERGY supplying communities isolated from the main grid; in , the Gulf of Carpentaria, Cape York, various 5% Torres Strait islands, and Palm Island. Our retailer also has a gas-fired power station at Barcaldine, which supplies the main grid. PROPORTION OF NEM CUSTOMER NO. 0% 0% 10% 20% 50% 30% 40% PROPORTION OF NEM NETWORK AREA

Our service area is by far the largest distribution area in the National Electricity Market (NEM). However, proportionally our customer base is small.

Source: Huegin Ergon Energy Expenditure Benchmarking.

4 ERGON ENERGY IN PROFILE ERGON ENERGY ANNUAL STAKEHOLDER REPORT 2015–16 Ergon Energy supplies electricity across a vast, diverse service area of more than one million square kilometres – across 97% of the state of Queensland.

TORRES STRAIT Boigu Is. Saibai Is. Dauan Is. Bamaga Stephens Is. Yorke Is. Darnley Is. Mabuiag Is. Yam Is. Murray Is. Mapoon Badu Is. Coconut Is. Lockhart Warraber Is. Napranum Kubin, Moa Is. River Hammond Is. Aurukun Thursday Wasaga, Horn Is. Is. Coen TORRES STRAIT

Pormpuraaw

Kowanyama Cooktown

Gununa, Mornington Is. Mossman

Cairns Mareeba Key Administration Centre Burketown Atherton Normanton Innisfail Distribution Network Doomadgee Ravenshoe Tully Georgetown Depot/Workshop Ingham Palm Island Isolated Supply Home Hill Camooweal Julia Creek Charters Towers Bowen Mt Isa Cloncurry Richmond Hughenden Proserpine

Pinnacle Mackay Sarina Winton Moranbah Clermont Boulia Middlemount Yeppoon Emerald Longreach Barcaldine Blackwater Gladstone Springsure Bedourie Biloela Miriam Vale Jundah Blackall Monto Moura Gin Gin Theodore Childers Biggenden Mundubbera Maryborough Gayndah Kilkivan Charleville Wandoan Quilpie Murgon Roma Kingaroy Chinchilla Yarraman Tara Dalby Cunnamulla St George Millmerran Warwick Stanthorpe

network service customer 160,000km 2 control 69 depot 2 solutions of powerlines centres locations centres

ERGON ENERGY IN PROFILE ERGON ENERGY ANNUAL STAKEHOLDER REPORT 2015–16 5 Year in summary

Performance highlights

• Played our role in stabilising prices with • Advanced how we supply the remotest our investment proposal for 2015 to 2020 parts of the state with 17 Grid Utility supporting a 20% reduction in what Support Systems now installed, and our we charged for the use of our network ability to operate the network remotely this year. p11 increasing. p24 & 25

• Boosted our customer service • Progressed numerous data capability, and ability to offer ‘choice’, management improvements, from with the transition from a 30-plus year- an investment in new network planning old billing system to a suite of new systems to mobile field devices that modern systems. p11 interface back to our control centres. p25 & p33 • Established a Joint Market Transaction Centre, bringing together Ergon Energy • Completed a range of major Network and Energex’s market data, infrastructure works, before scaling metering and billing services. p12 back our capital investment program in line with new efficiencies in delivery and • Continued our network tariff reform our demand forecasts. p27 journey, with fairer and more equitable pricing signals offering customers real • Increased employee engagement savings when the network is not being by 26%, laying the foundation for the used to its full capacity. p13 culture needed to deliver on the vision for the corporate merger underway. p31 • Collaborated on a number of major renewable energy projects – to harness • Achieved operating cost reductions in the sun and the wind to drive a new wave the order of $30 million, as part of our of economic prosperity for Queensland. efforts to secure a more sustainable p14 & p34 cost base. p33

• Further reduced the time it takes to be connected to the network – now down 48% compared to the average timeframes for new connections five years ago. p18

OUR FINANCIALS IN A SNAPSHOT

2011-12 2012-13 2013-14 2014-15 TREND 2015-16

Total Profit After Tax (million) $193 $308 $295 $696 $443

Total Capital Investment (million) $870 $872 $812 $983 $774

Dividends Provided For (million) $256 $326 $392 $1,9251 $476

Community Service Obligation $415 $596 $519 $596 $542 Payment (million)

1 This was a special dividend payment as part of the Queensland Government’s Debt Reduction Action Plan.

FOR MORE ON OUR FINANCIAL PERFORMANCE SEE PAGES 37-39.

6 YEAR IN SUMMARY ERGON ENERGY ANNUAL STAKEHOLDER REPORT 2015–16 An overview of our performance

To monitor our success we have a range of performance targets shown in the table below. These targets were set through our Statement of Corporate Intent, our performance agreement with our shareholding Ministers for 2015-16 (tabled in the Queensland Parliament). The results shown here are discussed throughout this report.

TARGETS RESULTS

More value ‘Value to Customer’ Survey Better than peer average 97

and choice Supply Reliability Indicators: p10 System Average Interruption Duration: - Urban ≤149 128

- Short Rural ≤424 350

- Long Rural ≤964 955

System Average Interruption Frequency: - Urban ≤1.98 1.3

- Short Rural ≤3.95 3.0

- Long Rural ≤7.40 6.8

Asset Related Public Shocks ≤242 235

Evolving the network Demand management reductions1 ≥2.1MVA 2.3MVA p22

Our people, Employee Engagement 60% 57%

our future Safety Indicators: p28 - Lost Time Injuries Frequency Rate – Employees ≤2.1 2.3

- Total Recordable Injuries Frequency Rate – Employees2 ≤6.7 6.5

- Lost Time Injuries Frequency Rate – Contractors ≤2.7 1.8

Environmental Protection Agency Breaches (Class 1) Nil breaches Nil breaches

Delivering Net Profit After Tax ≥$560 million $443 million economic Dividends Provided For ≥$560 million $476 million

value Customer Service Obligation Payment ≤$479 million $542 million p37

The value to customer score and the employee engagement measure are provided by external research providers. Our network reliability performance and financials (p50) are audited by external parties. The measures for workplace safety, environmental and asset related public shocks are audited through our external certification program (ISO 14001, AS/NZS 4801 and OHSAS 18001).

1 The original Statement of Corporate Intent had a target of 14.4MVA. A variation was approved in early 2016 in line with changes in the Demand and Energy Management Plan (p24).

2 Since the original Statement of Corporate Intent, the All Injuries Frequency Rate has been renamed the Total Recordable Injuries Frequency Rate – Employees to align with the industry standard definitions.

YEAR IN SUMMARY ERGON ENERGY ANNUAL STAKEHOLDER REPORT 2015–16 7 Chairman’s message

Ergon Energy has been working hard, It has also seen Ergon Energy embrace, across the organisation, to deliver for on a number of fronts, the integration of its customers and to respond to the battery storage into the supply solution. fast-paced changes happening Further progress has been made with throughout the electricity industry. trials of the many battery systems now in the market and a number of medium This has included preparing for the scale ‘battery’ systems rolled out to next stage of the company’s journey – support grid supply for our rural merging with Energex to form Energy customers. This is seeing the company’s Queensland Limited. expertise in this area remain at the forefront of the industry. Australia’s biggest power company The formation of Energy Queensland From a financial perspective it has been has created the largest power company a challenging year. in Australia. It’s a continuation along the The Net Profit After Tax result is down path we have been on to ensure we can at $443 million. This largely reflects the continue to deliver real customer value fact that the network business’s revenue for the best possible price. allowance was reset by the AER at the I am pleased to be staying on as a start of 2015-16. The Board has overseen Director for Energy Queensland. a suite of activities to transition to the My aim will be to provide continuity new arrangements, and significant through the transition, and advocacy savings have been achieved. However, for regional Queensland, as we move to further work is still required to adjust build the new merged company. The the company’s cost base to come in line creation of Energy Queensland is an with the new operating environment as exciting step, as it puts the business in we move towards 2020. the best position possible to adapt to the changes underway in the sector. It Creating a bright future will allow the business to evolve faster I would like to recognise here the people and further than it could have done as a right across Ergon Energy for their stand-alone entity and it provides the continued focus and commitment scale needed to lead the industry as to creating a bright future for our opportunities unfold. customers, and for the business. In my time as the Chairman of the Board Energy Queensland is about making I have witnessed countless examples it easier for customers, offering a of where employees have gone above world-class service and developing “We know our customers want and beyond, showcasing the skills and innovative products. It is about stable electricity prices, more expertise within the organisation, to supporting the investment needed in deliver new and innovative solutions. choice and control, and new technologies to keep the company greater access to emerging at the core of how Queenslander’s I would also like to thank Ian McLeod energy technologies as they choose to source and use energy. and Roslyn Baker for their contribution as they led the company consecutively become available.” A solid year of achievements through what has been a challenging This year there have been some great year. They have positioned the company steps forward. We know customers want well. I also thank the outgoing directors stable electricity prices, more choice of Ergon Energy Corporation Limited and control, and greater access to for their stewardship as we progressed emerging energy technologies as they the merger. become available. I look forward to seeing some This focus has seen a boost in the really strong outcomes for regional customer service capability of the Queensland from all of these endeavours business with the introduction of as we move forward as part of Energy new customer-related systems. Queensland Limited. The investment has set the foundation to deliver more value, choice and flexibility into the future with our retail and network businesses now operating independently like others in the market.

There has also been work at the leading CLIVE SKAROTT AM edge of industry change. This includes CHAIRMAN efforts, both by our retail and network businesses, to work collaboratively to support the emerging renewable economy boom. I see this investment as a vital stimulant for economic growth across regional Queensland.

8 CHAIRMAN’S MESSAGE ERGON ENERGY ANNUAL STAKEHOLDER REPORT 2015–16 Chief Executive’s report

2015-16 saw us proactively responding By helping them understand and access to the changes in Ergon Energy’s the new technologies coming to the operating environment, refining our market, I believe we will be able to priorities to remain in front of the deliver more affordable energy solutions opportunities and challenges before us. in the future with the same ‘flick of a switch’ convenience they enjoy today. Large scale renewables bring promise An area of our focus has been on the new energy storage system solutions. One of the opportunities has This has seen us testing the battery been the rapid uplift in demand products coming onto the market to for the connection of large-scale see how they could operate with the renewable generation. network, and to understand any safety Based on enquiries, we believe there risks. In line with this, we have been could be up to 1.7GW of renewable working with Standards Australia and energy investment in the pipeline for others to establish the installation and regional Queensland, and we’re connection safeguards necessary. determined to play our role in bringing this new wave of economic activity to Our success is life. A highlight here has been our Queensland’s success financial support to what will be We are very much part of regional Australia’s largest wind farm in Queensland, and we will continue to Far . invest in our communities, and in our people who live and work in them. To help Queensland capitalise on the economic promise of the new renewable This includes ensuring meaningful, economy, we’re also focused on long-term job opportunities, fostering delivering effectively across our core the next generation of industry talent, operations, collaborating where we can and ensuring that our workforce has add value, and ensuring we have a the skills to thrive and adapt in an competitive connection offering. industry which is undergoing absolute transformation. Our aim is to maintain This will build on the 1GW of distributed real opportunities within the energy resources already feeding into organisation, and to see our industry the network, much of which comes from partners thrive. our partnership with the sugar industry. This saw us contribute $58.8 million to Throughout 2015-16 our people rallied “…we’re focused on delivering this industry throughout the year. behind our efforts to address electricity across our core operations, to affordability as a critical input into our Making it easier to do state’s economic prosperity. being a truly customer-centric business with us business, with a nationally Our investment plans for the current Our focus on becoming more 2015-20 regulatory control period, competitive offering.” customer-driven, with less bureaucracy, included an intention to reduce our has spurred progress across a range expenditure by around a billion dollars. Moving from strength to strength of initiatives. Then the AER’s final determination I thank Ergon Energy’s Board for their The most significant was our investment made further cuts to our revenue direction and support. In the current in modernising our customer-related allowance. In line with this, we environment of industry reform and systems. This has set the foundation for successfully reduced our operational competing stakeholder expectations, how we will interact with our customers, cost base by over $30 million by the I feel we have, at every level of the and our industry partners, into the end of the financial year, and we will organisation, demonstrated our future. It will allow our customers to do continue to find further efficiencies as responsiveness for the benefit of our business with us when it is convenient to we move forward. customers, our people and the them, even outside business hours. This achievement, and the countless Queensland Government. We are continuing to engage with others documented in this report, has As we transition further into the merger our customers and other stakeholders been supported by a significant jump of Ergon Energy, Energex and SPARQ to help drive our service delivery in how engaged our employees are, Solutions, I am confident that our people transformation efforts. This has especially around the changes to how are ready to embrace the change and supported real improvements across the we are doing business. This is an help shape the future of our industry, board, most importantly in the average important lead indicator for success. and ensure we are able to deliver time it takes for new customers to be Perhaps the most pleasing area of outstanding services and real value to connected to the network. progress here is in the development our customers well into the future. We are also continuing to evolve our of our safety culture. In this area, product offering, and embracing however, I feel we can and must do technology to give our customers more. We can never become greater choice and control. complacent. Safety is central to our performance as a business, and we must continue to strive to be a top performer. This includes maintaining our focus on ROSLYN BAKER the safety incidents relating to our CHIEF EXECUTIVE (ACTING) assets in the community.

CHIEF EXECUTIVE’S REPORT ERGON ENERGY ANNUAL STAKEHOLDER REPORT 2015–16 9 Review of operations: More value and choice

“… if we continue to work through the current market upheaval together, with our stakeholders, we can only unearth greater value for our customers into the future.”

Michael Dart External Stakeholder Manager

We know we must continue to respond to customer Michael Dart finds reward in helping needs to remain at the core of how Queenslanders to align our priorities with our many stakeholders’ – here he is with Darren access and use electricity. Hunt from Darren Hunt Designer Homes in Bundaberg checking in to Our strategic focus here has been on building see that we are doing all we can to customer value and addressing electricity affordability support economic development – not only through our own efficiencies but, importantly, across regional Queensland. by supporting an effective market for economic energy solutions. Our efforts here are highlighted in this section, along with how we have delivered across our service commitments and operated as a responsible service provider.

10 REVIEW OF OPERATIONS MORE VALUE AND CHOICE ERGON ENERGY ANNUAL STAKEHOLDER REPORT 2015–16 Our residential customer score remained Playing our role in stable at 6.9 out of 10 on average for NETWORK CHARGES OUT TO 2020 stabilising prices the year. However, our ‘better than peer average’ ratio score dropped to $2,000 97 (where 100 equals parity). One of Our proposal is now taking the factors identified here is that our us to 2020 customers feel they do not have a lot of ‘choice and control’ with limited Ergon Energy Network’s Regulatory competition in regional Queensland. Proposal to the AER for 2015-20 was This means we have to work harder to $1,000 about delivering ‘peace of mind’ by deliver what our customers are looking way of a safe and reliable electricity for. This is driving many of the initiatives supply, as well as greater ‘choice and referenced in this report. control’ around how our network is used (connecting solar and other Our business customer score showed technologies), all for ‘the best possible some improvement at 6.2 out of NETWORK CHARGES (MILLION) $0 price’. Our investment proposals 10 on average for the year (compared helped inform the AER’s draft and final to 5.8 in 2014-15). Delivery to our 2017-18 2016-17 2015-16 2014-15 2018-19 decisions on the amount of money we business customers remains a key 2019-20 are allowed to collect for the use of focus area for our customer service Jurisdictional Scheme Transmission Use of System our electricity network. improvement programs. Distribution Use of System The five-year Regulatory Proposal, Compared to our peer suppliers, Ergon Energy has maintained which was effectively a plan to reduce As the first year in the new regulatory our overall expenditure in the order of a significantly stronger results for control period, 2015-16 saw more than a billion dollars compared to the previous ‘corporate responsibility’. 20% reduction in what we charge for the use of our distribution network. Going five years, along with the AER’s revenue forward our aim is to keep our Distribution determination, has been instrumental in Use of System charges overall stable. providing price relief to our largest Delivering what With this we are anticipating, with a forecast customers, and to customers in the reduction in transmission charges and customers value the impact of the introduction of the contestable market, who are exposed Jurisdictional Scheme arrangements for to our network charges. the Solar Bonus Scheme flowing out in the We see the future of our retail business later years (p37), that Network Use of System After reducing what we charge for the being about delivering more value charges overall will come down further as use of our network in 2015-16, in line with through new products and services, we move out towards 2020. the AER’s Preliminary Determination, as a trusted energy provider in what is we are aiming to keep these distribution a rapidly changing marketplace. In line charges stable overall for the remaining with this, the future of our network four years to 2020. business is about operating successfully as an open access platform for As well as playing our role in stabilising RESEARCH CONFIRMS NEED TO distributed energy and other prices, this also minimises the burden RESPOND TO CUSTOMER NEEDS energy-related solutions. on the Queensland Government, and ultimately taxpayers, through 6.9 6.9 6.8 a reduction in our Community Service Modern systems for a 6.6 Obligation payment (p38). modern service 6.5 Going into 2016-17, as a retailer, however, The most significant boost to our we are unfortunately seeing increases capability to provide an improved in the other components of the final bill. service and greater ‘choice’ was the The Queensland Government’s notified transition this year from a 30-plus prices are being impacted by higher year-old billing and customer energy costs (p37) and benchmarked information system to new modern, retail costs. There are also some customer-related information systems. network-related cost increases for large users. This was the most substantial system change that we have ever undertaken. It saw us separate our retail and VALUE TO CUSTOMER SCORE 3 Value perceptions linked distribution systems so that we could 2 2015 20 1 2014 2016 to choice best support regional Queensland as it 20 1 progresses toward being a more active, We continued to track perceptions contestable electricity marketplace. For residential customers, ‘cost and of overall value through our ‘value to affordability’ remained the major concern. The new arrangements allow us to customer’ research. The score measures To respond and lift perceptions of value we operate through the NEM with our retail know we need to continue to put downward the value customers place on their and network businesses interacting pressure on electricity prices, support our electricity supply, taking into account customers in their ability to control their with each other at arm’s length for the views on reliability, customer experience, costs, and enable choice through access to first time in the same manner as other emerging energy-related technologies. corporate and social responsibility, and Australian network and retail businesses. the cost and affordability of electricity.

REVIEW OF OPERATIONS MORE VALUE AND CHOICE ERGON ENERGY ANNUAL STAKEHOLDER REPORT 2015–16 11 WHAT MADE UP THE PRICE OF ELECTRICITY?

R = RETAIL N = NETWORK

21% 3% 8% 45% 23%

Electricity Generation Green Schemes Solar Bonus Transmission and Retail Wholesale Electricity Costs Renewable Energy Target Feed-in Tari Scheme Distribution Metering, Billing and Poles and Wires Customer Service

Percentages and typical (median) customer savings based on QCA’s publications of 2015-16 electricity prices.

The regulated retail prices set by the QCA are based on both Retail and Network (N+R) charges. As we moved into 2015-16 these prices stabilised or decreased after consecutive year-on-year increases.

For typical residential customers on Tariff 11, the overall reduction in their annual bill was around $7 or 0.5%. For the QCA’s typical customer on the main small business Tariff 20, prices decreased by 3.5% or $73 in their annual bill, while the typical customer on Tariff 22 saw a decrease of 1.7% or $135. These reductions vary with actual energy use.

It has been a big step forward – The rollout of the Electrical Partner’s A future-focused service one that will continue to deliver more Portal, for example, is now providing an flexible solutions for our customers in interface directly to our systems, giving model for retail the future with the addition of an online electrical contractors 24/7 online access During the year our future energy self-service portal. The portal will to submit and track network connection services model continued to evolve allow customers to arrange move-in requests and other works. The new with our product offering embracing a and move-outs. Customers will system and work processes also support range of innovative energy-related also be able to organise payment our National Energy Customer technologies to give our customers arrangements when it is convenient Framework (NECF) obligations (p17). greater ‘choice and control’ around their to them without the need to call our energy solutions. It has also supported the establishment Customer Solutions Centre during of a Joint Market Transaction Centre, business hours. Improvements to operating from within Energex with the overall customer experience have employees from both businesses. also already been supported by other This has proven to be a real contact centre technologies introduced joint-working success story. Delivering earlier in the project. industry benchmark standards, it is now Leading the way is EnergyCheck, our The distribution system, which is the efficiently managing all of our market online energy monitoring tool being same one used by Energex, provides data and processing all of our high offered for free to business customers. customer information management volume market-facing transactions, More than 10,000 customers are now and network billing capabilities, better from network metering and billing signed up – they are tracking their management of meter assets, readings services to network-related customer energy use online, undertaking tariff and consumption data, as well as a new service requests. The centre is comparisons, comparing their energy complaints management system (p17). effectively the Network businesses’ usage to other businesses and receiving interface with the NEM, including our energy saving recommendations. At the time of writing this report, we retailer, Ergon Energy Retail. We appreciate that knowledge is were transitioning through the system power, so we have also continued stabilisation phase following the ‘go live’ We are also working closely with to proactively work with our large in March. Energex to progress our metering customers to ensure they are on the capability generally so that we can, with The investment also provides us optimal tariff for their business, as well the roll out of advanced meters in the with an opportunity to develop other as ensuring the provision of this service future, give customers better access to online services to support specific to other businesses through our their electricity consumption data. This customer groups. Customer Solutions Centres. work is in line with regulatory changes to metering services under the Australian Energy Market Commission’s Power of Choice program.

12 REVIEW OF OPERATIONS MORE VALUE AND CHOICE ERGON ENERGY ANNUAL STAKEHOLDER REPORT 2015–16 We invited a select group of business Tariff reform core to Driving a customer-driven customers to trial our new Business Solar Saver product. The offer provides effective market transformation high usage business customers with a Our program of network tariff reforms In our distribution business, a major solar energy system, up to 30kW in size, continued to be central to our efforts customer-driven transformation without the financial barrier of upfront this year in supporting an efficient and program is also underway with service costs. They simply pay an annual service effective market. We embarked on our improvement plans formulated for fee for the installation and ongoing network tariff reform journey over three each of our key customer segments – maintenance of the system on top of years ago, very much aware of the need from our end users to developers. their normal monthly bill, based on the to deliver fairer and more equitable The program started with significant actual electricity used. One of the pricing signals. customer research into how to best participants in the trial, Townsville meet our customers’ needs into the Our Tariff Structure Statement, which we Marine, is already benefiting from future. This was followed by internal submitted to the AER for consideration savings of $700 a month on their workshops with customers participating in November 2015, has established energy costs. We are working closely to help identify solutions. with the customers in the trial to better 2016-17 as our foundation year with understand the customer benefits of the majority of our major reforms now Our aim is to ensure our service the offer before rolling it out more in place. We landed on a refined suite improvement initiatives focus on widely in the future. of demand-based, seasonal time-of-use the areas that will drive the most network tariffs. These optional tariffs value for customers, our end-to-end For our residential customers, our can offer customers real savings when processes are customer-centric and our HomeSmart product trial has continued. the network is not being used to its full performance is measured against what The trial of the internet-based solution, capacity, offset by more appropriate, is important to customers. This will be which started with 100 homes in ‘cost reflective’ rates during peak supported by ongoing customer Townsville, was expanded this year to periods in the summer months. It is at research and ‘real time’ performance 50 homes in Rockhampton. The product these peak times that the level of monitoring, allowing us to respond to lets customers monitor and control their demand is more likely to drive future customer needs in a timely manner. home energy use with their smartphone, capital investment. tablet, laptop or computer. Given the Our focus on customer value also success to date, plans are underway to To ensure we considered diverse continues to be supported by our expand the trial in the near future to perspectives, the development process peak body engagement activities. allow more customers to benefit. involved consultation with customer Our Customer Council, established in advocacy groups, major customers, 2011, remains our ‘umbrella’ listening The Hybrid Energy Service also electrical contractors/solar industry, forum to both explore customer needs, continued this year, partly funded by retailers and our government and and to look with a customer’s lens at the Australian Renewable Energy regulatory stakeholders. initiatives or emerging issues in the Agency (ARENA). The trial, involving supply of energy solutions to regional Our Tariff Structure Statement covers 33 homes in Townsville, Cannonvale Queensland. We have also continued our tariffs from 2017 to 2020. During and Toowoomba, includes the supply, with our industry forums as an this period we plan to keep our tariff installation and maintenance of a solar engagement channel for the agricultural, structures relatively stable to allow us energy and battery storage system, all solar/micro generation and real-estate to build a greater understanding of the for an affordable monthly service fee. development industries. With an energy management system, new tariff options and to promote their time-of use tariffs and the system, a benefits. Our larger energy users, who We have also been engaging with the customer can plan when to use the solar, are already familiar with demand-based agricultural industry in a practical way, battery or the network to maximise tariffs generally, are already opting for with our Energy Savers program helping savings. This trial is helping us develop the new tariffs, with many gaining an farmers rein-in their power costs. The how to best meet our customer needs additional financial benefit by actively program, delivered in partnership with as the industry evolves. shifting some of their electricity demand the Queensland Farmers Federation and outside of the peak demand window. funded by the Queensland Government, Complementing the work in our is providing information on the benefits For our smaller users, a key initiative will product offering is a focus on improving of new and more efficient technologies. now be our Tariff 14 Trial. This is already our customer segmentation to better It includes energy assessments of farm underway with employees participating understand the needs of different irrigation, heating, cooling, lighting and in the first phase to pilot the introduction customer groups, from new families processing to quantify potential savings. of the new residential, demand-based to industry sectors, in order to tailor Some farmers participating are already tariff. This initiative, along with a smaller our solutions. on their way to cutting their electricity trial which will involve small business costs for irrigation by 20%. With up to customers, will help us to understand 100 audits to be undertaken during the the customer experience, and build our program, it will provide valuable case analytics so we can give our customers studies across a range of farming the information they need to decide if contexts to better target energy they could benefit from moving to these efficiency and productivity measures new voluntary tariffs. in the sector.

REVIEW OF OPERATIONS MORE VALUE AND CHOICE ERGON ENERGY ANNUAL STAKEHOLDER REPORT 2015–16 13 A PPA was also put in place, through We have been working with customers, Powering an Expression of Interest process (p34), mostly local councils, to deploy 270 LED prosperity together to support the $360 million 170MW street lights this year in four regional in Far North areas to test the technology and the Renewable energy and other new Queensland. This was a major potential deployment processes in technologies are emerging as a real milestone for the project as the different conditions. These trials support opportunity, when integrated into agreement provides the revenue our engagement with all 70 local the network and the energy market, stream which underpins the financial councils in regional Queensland. to drive a new wave of prosperity case for the project. The first phase of the five-year strategy for Queensland. is looking to initially exchange about 20 We are facilitating the connection of street lights per council area. While the the $69 million, 25MW Barcaldine Solar Ergon Energy has traditionally cost per LED light is currently higher Farm, which will be situated next to partnered with Queensland sugar mills, than a traditional light we expect this to Ergon Energy’s Barcaldine power solar farms, wind generators and hydro significantly decrease over the next few station, with completion expected in generation projects, and is now seeing years, and will therefore deliver savings late 2016. opportunities in other types of for our local communities. renewable generation. The under construction 13MW solar This is just one of the ways we are array and 5.34MWh battery storage There is a growing variety of renewable looking to offer new services. We know facility at Lakeland also moved another energy projects forming in the pipeline. we can drive greater prosperity by using step forward with the signing of a We see our role as a retailer to purchase our expertise and resources more project knowledge sharing plan. the energy locally from these projects, innovatively, and by building on existing The Tri-party Participant Deed, signed where we can, and as a network partnerships and establishing new ones by project owner Conergy, ARENA provider and market enabler, to work to deliver new products and services for and Ergon Energy, was an important with these customers to efficiently and our customers. cost-effectively plan the connection of milestone in obtaining $17 million these projects to the grid. in Federal grant funding. We are currently actively managing Collaborating to more than 50 enquiries for major harness renewables projects that are expected to come online over the next five years to export During the year we collaborated with renewable energy into the grid, and Power Purchase Agreements (PPAs) to we are aware of numerous other progress two major renewable energy opportunities being explored. projects, in Normanton and Mount Our support for these projects has Emerald. There is also another major the potential to provide a major solar project connecting to our network economic windfall for regional in Barcaldine. In addition, work is Queensland as we move towards continuing with other prospective a renewable energy future. renewable energy projects that are seeking federal funding through ARENA. As well as progressing connection requirements for these projects and Construction has commenced on the PPAs as appropriate, we are looking $12 million, 5MW solar farm to be at other ways to best collaborate with established in Normanton, near our these customers, potentially in the substation, in the state’s remote operational and maintenance areas. Ergon Energy Meter Strategy Manager, northwest . The commercial Andrew Gillespie, with former Burdekin This approach complements the focus Shire Mayor, Bill Lowis, during the strength viability of this project, which is we have on our service offering for testing of pole arm brackets for the new expected to be connected by December our major customers (p18). energy-efficient LED lighting in Ayr. 2016, was cemented by Ergon Energy Retail’s nine-year PPA and ARENA grant funding support. Moving to more efficient street lighting The project was developed collaboratively between Scouller Energy, With the rapid rise of new technologies, Canadian Solar and Ergon Energy in LED (light emitting diode) street lights order to secure ARENA funding. From are set to deliver a more cost efficient an Ergon Energy Network perspective street lighting solution for regional it will allow us to better understand the Queensland. Our local government benefits in reducing energy loss by customers are already showing a keen having a solar farm at the very fringe of interest in the technology, and Ergon our grid. The project will also allow us to Energy has developed a Street Lighting explore regulatory changes that would Strategy to ensure a comprehensive and best support more renewable energy cost-effective plan for the transition. installations in fringe-of-grid locations The technology comes, however, with across Australia. some challenges including the cost involved to modify existing street light pole arms to take the additional weight of the LEDs. These factors have been considered in the strategy to ensure the most cost-effective transition possible.

14 REVIEW OF OPERATIONS MORE VALUE AND CHOICE ERGON ENERGY ANNUAL STAKEHOLDER REPORT 2015–16 Our network is a platform for distributed energy resources with over 1GW of capacity now connected – including 444MW of solar – and a significant number of major projects in the pipeline. We are contributing to this economic growth in numerous ways – our support for the generation of renewable energy by the Queensland sugar mills saw $58.8 million go to this industry over the past year.

11.5% of the electricity on our main grid is from renewable sources 25% of detached houses have solar

Over the last year 595 businesses connected solar to the network.

Distribution network

Solar

Bagasse (sugar by-product)

Hydro and wind 118,000 solar energy systems are connected to the grid across regional Queensland

REVIEW OF OPERATIONS MORE VALUE AND CHOICE ERGON ENERGY ANNUAL STAKEHOLDER REPORT 2015–16 15 CUSTOMER SCORECARD

Targeting our Our worst performing feeder Performance in the general enquiries reliability investment improvement program led to detailed area is measured through a grade of reviews of sections of the network service of 70% of calls being answered In 2015-16 we met all six of the that are currently underperforming. within 120 seconds. This year our general Minimum Service Standard (MSS) This has identified areas to target enquiries number for the distribution limits for network reliability. The largest improvements for our customers, in business achieved a service grade improvement was in our response times, line with the regulatory requirements of 80.8% and general enquiries for which has reduced the average duration set out in our Distribution Authority. the retail business recorded 65.0%. of outages. This reflects the significant This will see investment focused This result is primarily due to the focus and investment made over recent towards a number of short and long implementation of the new Customer years to achieve the MSS standards. rural feeders in North Queensland and Information System (p11). As expected, Overall the frequency and duration of . there was increase in the average call supply interruptions has improved by time following the changeover in March, Running parallel with MSS limits is 6.6% and 9.3% respectively since 2011-12. this has since improved. the AER’s Service Target Performance The result was achieved despite an early Incentive Scheme. This framework Call centre performance for the start to the storm season, and a number provides a financial incentive for unplanned outage enquiries and of severe weather events. Major storms improving unplanned outage emergency line was well above the affected supply to 8,000 customers performance, as well as customer target of 77.3% of calls answered within in Rockhampton in early December, service standards. Our results have 30 seconds, with the support of a 8,000 customers in the secured a financial benefit under this reduction in outage-related calls, with two days before Christmas and 14,000 scheme for the business. a service grade of 79.0% achieved. in the Fraser/Burnett region in February. Further information on our network’s We will continue to look for ways to Standing by our service reliability, and our worst performing commitments achieve the standards through our feeders, is available in our Distribution practices and with realistic and efficient Annual Planning Report online. As part of our service promise, Ergon investment in the network. Energy has a range of Guaranteed Service Level (GSL) commitments This year saw a significant shift in our Meeting customer service where, if we don’t deliver, we pay investment strategy with a focus on expectations the customer for the inconvenience. targeted network issues rather a drive to The GSL regime is part of the Electricity achieve overall reliability improvements. Customer solutions satisfaction Distribution Network Code. It covers This follows research that showed the Ergon Energy has customer solutions network reliability (outage restoration majority of our customers are largely representatives in Townsville and timeframes and the number of outages), satisfied with the level of supply they Rockhampton to manage customer the notification of planned power receive and are looking for downward enquiries. This year saw a change in the interruptions, appointments, new pressure on electricity prices. way we measure customer satisfaction connection and reconnection around these enquiries following new timeframes, wrongful disconnections, Contact Centre Technology in July 2015. and the resolution of hot-water The new technology enabled us to supply matters. introduce a ‘post call survey’ for all customers to respond to, instead of This year there was an increase in getting feedback from a small sample network reliability claims. This was of ‘general enquiry’ calls. This change primarily due to the early start to the has provided us with a better way of storm season and the need to manage measuring the customer’s perception of our response to numerous storm events. the quality of the service they receive. This year we achieved an average satisfaction rate of 78.4%. OUR RELIABILITY STATISTICS

MSS 2011-12 2012-13 2013-14 2014-15 TREND 2015-16

System Average Interruption Duration Index (minutes of outage)

• Urban Distribution ≤149 136 135 119 134 128

• Short Rural Distribution ≤424 393 341 292 359 350

• Long Rural Distribution ≤964 1,042 952 796 1,053 955

System Average Interruption Frequency Index (number of outages)

• Urban Distribution ≤1.98 1.4 1.5 1.4 1.3 1.3

• Short Rural Distribution ≤3.95 3.6 3.0 2.8 3.2 3.0

• Long Rural Distribution ≤7.40 7.0 6.2 6.1 6.8 6.8

Reporting based on the Minimum Service Standards (MSS) exclusion criteria outlined in the Electricity Industry Code.

16 REVIEW OF OPERATIONS MORE VALUE AND CHOICE ERGON ENERGY ANNUAL STAKEHOLDER REPORT 2015–16 PROFILE OF DISTRIBUTION AVERAGE DURATION AVERAGE FREQUENCY NETWORK (FEEDER LINES) OF OUTAGES OF OUTAGES 3.2 373 362 350 2.9 2.9 341

2.8 2.7

287 IFI S A L

Isolated 8% A Long Rural 11% T O TOTAL SAIDI Short Rural 57% T Urban 24% 2 2 20 1 20 1 2015 2015 2013 2013 2014 2014 2016 2016

Ergon Energy operates one of the longest While the network was impacted by the Overall our customers are experiencing distribution networks in Australia, with only early start to the storm season experienced an average of 2.9 outages per year. five customers per kilometre of line on the this year, the overall average duration of With overall network reliability now main grid. Our reliability challenges are both outages was down slightly to 350 minutes. generally delivering the level of service common to the industry and unique. With Data includes our regulated main network our customers expect, to deliver customer less than a third of our network supplying and our isolated networks. value we are now looking to ensure reliability our urban communities, the topography of expenditure targets improvements across our network is largely made up of radial rural our worst performing feeders. lines with limited redundancy in the event of a fault.

With the introduction of NECF in GUARANTEED SERVICE LEVELS July 2015, improvements were implemented to notify customers at 2014-15 2015-16 least four business days before a CLAIMS PAYMENTS CLAIMS PAYMENTS planned power interruption. Our focus here, including staff training, saw a Network Reliability 5,510 $572,949 6,343 $723,102 24% reduction in claims against this Other: GSL. There was also a significant • Notification Planned 2,609 $82,108 1,982 $65,845 reduction across the remaining GSLs. Interruption Other improvements are also being • Remaining GSLs 1,981 $151,498 1,181 $89,395 progressed to ensure compliance with TOTAL 10,100 $806,555 9506 $878,342 the national framework (p49).

Complaints management OUR CUSTOMER SERVICE STATISTICS We know the importance of effective complaint handling to deliver quality CUSTOMER SERVICE DELIVERY 2011-12 2012-13 2013-14 2014-15 TREND 2015-16 customer service, and we have continued (Annual Value to Customer – average our commitment to manage complaints Residential Research 104 105 101 101 97 100 = peer Parity in an equitable, objective and unbiased average) manner. This year saw the introduction Value to Customer – (Annual 6.6 6.8 6.9 6.9 6.9 of new complaint management systems Residential Research Score average) for our retail and distribution businesses. Value to Business – (Annual 6.0 6.1 6.0 5.8 6.2 The systems will allow us to improve the Research Score average) customer experience and efficiencies in Call Volumes to 1.65m 1.76m 1.76m 1.68m 1.47m the complaints process. Customer Solutions Centre Customer Solutions Target Centre – 86% 92% 91% 91% 78.4% ≥75% Customer Satisfaction1 86.4% 89.8% 80.8% General Enquiries – Target Dist’n Dist’n Dist’n Calls Answered in 72% 47% ≥70% 120 Seconds 69.1% 60.3% 65.0% Retail Retail Retail Unplanned Outage Enquiries and Target Emergency Calls2 84.8% 82.1% 81.3% 80.8% 79.0% ≥77.3% – Calls Answered in 30 Seconds New Connections – Target Average Time from 170 days 155 days 128 days 124 days 113 days ≤160 days Contract to Construction

1. From 2015-16, Customer Satisfaction surveys were expanded to include complaints management, billing and payment satisfaction. In light of this change, the target has been adjusted to 75%.

2. Target as set for the AER’s Service Target Performance Incentive Scheme.

REVIEW OF OPERATIONS MORE VALUE AND CHOICE ERGON ENERGY ANNUAL STAKEHOLDER REPORT 2015–16 17 CUSTOMER SCORECARD (continued)

We continued to perform favourably With plans to add a second 1MVA in the Energy and Water Ombudsman generator in the future, the project THE TAKE UP OF Queensland’s (EWOQ) complaints will produce enough energy to power SOLAR IS CONTINUING scheme which provides an independent thousands of homes for up to 20 years. view of the complaints management Landfill Gas Industries has begun performance compared to other scheme construction of another generation

members. It also provides a valuable site near Gladstone, with similar 117,856 mechanism to highlight areas of possible opportunities available across the 110,552 improvement for customer service numerous local councils in Queensland. 96,733 delivery and complaints management. This year Ergon Energy Retail Improved timeframes for represented 7.4% of total cases, well smaller connections 79,201 below our proportion of the customer We have continued the service base. Ergon Energy Network achieved improvements made in recent years 2.2 complaints per 10,000 customers, around our smaller, non-complex 46,018 or 1.4% of the total EWOQ cases. customer-initiated connections and upgrades, with the average time Making connecting to the taken from ‘contract acceptance to network easier construction’ for these works reduced to 113 days. This is now down 48% on the

Working closer with major average timeframes being experienced SOLAR ENERGY SYSTEMS customers five-years ago. The result is well within 2 20 1 2015 2013 2014 2016 During the year a taskforce was our target, and has seen 99% of these connections delivered by the agreed established to review our performance Ergon Energy has seen a dramatic increase around the delivery of new or upgraded date. During the year we reviewed our in the solar energy systems connected to network connections for our major operating model for these works, and the grid over recent years, with around put in place plans to improve the time 118,000 now connected, and the average customers. This was about giving an size now 3.8kW. executive focus to addressing our ability it takes for us to make a customer an to give tailored advice to our major offer, and to ensure we meet their customers, and our commercial expectations around the delivery of competiveness in this area. the works.

We are currently focused on increasing Connecting solar transparency and cooperation with our During the year, more than 7,300 new customers. This has seen collaboration solar energy systems were connected workshops with our engineers and the to the network. While this has dropped customer at the planning stage of a new compared to 2014-15, the rate of new project, so that we can better work applications has been fairly consistent together to explore construction options over the year. and consider other potential operational matters. Our annual major customer We have continued to improve satisfaction survey results showed 61% our approval timeframes for solar of our major customers are likely to applications, with almost 50% of speak well of Ergon Energy. applications now approved immediately after lodgement. For applications The growth in connection activity requiring a technical assessment, a this year has been in the number of response is usually provided within commercial and industrial businesses one to three weeks. The new Electrical placing solar systems, often between Partners Portal will support these 100kW and 150kW, onto rooftops timeframes, as well as providing of existing sites. We are actively additional benefits to the solar energy collaborating to support the uptake industry and electrical contractors (p12). of renewable energy (p14), with a focus on the cost, timeliness and value of the Interest in emerging technologies has associated network connection, to also continued this year with ensure we play our role in contributing approximately 300 customers applying to economic growth. to connect batteries to the network. We expect this figure to grow One of the most innovative projects significantly over the next 12 months this year was the connection of the as battery products become less cost 1MVA Maryborough Landfill Gas prohibitive. p23 Generator. Installed and operated by Landfill Gas Industries, the generator is fuelled by gases collected from the landfill facility as a by-product of organic waste decomposition.

18 REVIEW OF OPERATIONS MORE VALUE AND CHOICE ERGON ENERGY ANNUAL STAKEHOLDER REPORT 2015–16 During these events our crews have Our other home electrical safety Being a responsible been able to increasingly rely on our messages continued to be delivered provider own new digital radio network. The new through our ‘Think Ahead a Bit’ around ‘two-way’ network essentially connects Electricity advertising campaign using Ergon Energy places a priority on good crews around the state with our control the memorable character, the Grim corporate citizenship. Beyond our centres in Rockhampton and Townsville. Llama. The success of this campaign, central role in powering the prosperity To date we have replaced the old which was launched in 2014, was of regional Queensland, we see our analogue radio system used in our major recognised by the advertising industry responsibilities mostly associated with centres with the digital infrastructure, this year with numerous Brisbane ‘being there after the storm’, community which is integrated into our core Advertising and Design Club awards. electrical safety awareness, support telecommunications network. Over the Our school electrical safety education for those in financial hardship, local next 18 months this replacement will program, Safety Heroes, launched in employment and skills development, extend to our rural depots and fleet. 2015, was also extremely well received environmental protection, energy and With normal communications methods with over 684 schools adopting the resource conservation, and community like mobiles phones often unavailable program, delivering vital electrical participation generally. Our contribution following major storms or other natural safety messages as part of the school here is highlighted in this section and on disasters, this investment is especially curriculum to around 71,000 pages 34 to 36 of this report. critical to emergency response. primary-aged school children. Thanks to the strong interest in the program, An effective Investing in community this year a further investment was made emergency response electrical safety awareness to help teachers better explore the world of electricity with their students We know the importance to a Safety is a high priority for Ergon Energy and spread our safety messages. While community of Ergon Energy being – not only in the workplace (p29) but in the program focuses on years five and there as soon as possible after a storm. the community. Through our Community six, it also provides opportunity for It is why we invest so significantly Electrical Safety Awareness Plan we students from prep to year six to in our summer preparedness and are continuing to invest and engage participate in Electrical Safety Week resourcing. Our aim is to ensure the with the general public and at-risk activities in September each year. efficiency, effectiveness and safety of industry groups to maintain a high level our response to emergency and natural of electrical safety awareness, especially Targeting the at-risk industries disaster events. around the safety risks associated with Tragically there were two fatalities our electricity infrastructure. To support our preparedness this year, associated with our infrastructure this we not only undertook our normal Scouts spread the message… year. The first incident was on a farm disaster scenario testing, we hosted Be Prepared near Dalby. The second was a helicopter a series of open community disaster accident near Carmila, south of Mackay. This year our summer storm season planning, resilience, response and messages were relaunched with a It is this tragic loss of life, and the recovery events in , Townsville helping hand from Scouts Queensland. impact on all the other lives that have and Brisbane. These saw local council The ‘Be Prepared’ for Summer campaign been changed by the other incidents and emergency services personnel, encourages the community to think that have occurred, that drives our industry leaders, and other stakeholders forward and be prepared for whatever community safety team in its work and our own employees sharing nature might have in store. The Scout’s to raise awareness of the dangers of disaster recovery experiences. At the motto was used to help reinforce the working in close proximity to powerlines. events, Rod West from the American importance of having a fully stocked The team’s work in this regard focuses power company Entergy, shared the storm kit at the ready and knowing on farmers, contractors, road transport lessons from Hurricane Katrina, and a how to stay safe after the storm. users, the aviation sector and other disaster simulation was used so that targeted industry groups. participants could consider how new technologies could improve both To reinforce the ‘Look Up and Live’ community resilience and any future message this year the team delivered emergency responses. more than 100 face-to-face industry presentations and participated in Another highlight of the year was the many more industry events and recognition of our power restoration agricultural shows. effort in the wake of Cyclone Marcia, in February 2015, at the 2015 Premier’s Awards for Excellence with a Highly Commended in the Excellence in Performance category. Fortunately, our region did not experience a major natural disaster this year. The Queensland summer storm The ‘Be Prepared’ for Summer campaign enlisted the Scouts to help spread our safety season did start early though, with a messages – Stay well away from fallen number of severe weather events (p16). powerlines. Always assume they are ‘live’ and dangerous. Report them immediately to Triple Zero (000).

REVIEW OF OPERATIONS MORE VALUE AND CHOICE ERGON ENERGY ANNUAL STAKEHOLDER REPORT 2015–16 19 They also continued to actively collaborate with Workplace Health and COMMUNITY NETWORK TYPES OF COMMUNITY Safety Queensland, Electrical Safety RELATED SAFETY INCIDENTS NETWORK-RELATED Office and Dial Before You Dig, as well SAFETY INCIDENTS as Energex and Powerlink, to develop strong, consistent safety messaging 677

for joint activities and cobranded 642 materials. In addition, the team worked closely with other industry bodies including AgForce Queensland, Local 452 Government Association Queensland, Queensland Master Builders association 323 and Queensland Master Plumbers 284 association, Queensland Building and Construction Commission, Queensland Trucking Association, Civil Contractors Association, Cotton

Australia and Canegrowers. INCIDENTS Motor vehicle Vegetation clearing 8% 2 accidents 43% Construction/demolition 6% 20 1 2015 2013 2014 In addition, Ergon Energy is also now 2016 Road transport 21% Earthmoving 5% offering customers a number of new Agriculture industry 11% Vandalism, aviation overhead powerline markers for both and other 6% temporary and permanent powerlines The escalation in the number of incidents stabilised this year, after the recent annual to improve their visibility in key areas. increases associated largely with the Pleasingly we have seen further reductions This follows the success of last year’s regulatory requirements expanding the in the number of network-related safety trials into more cost-effective solutions scope of reportable incidents to those incidents in the community linked to involving low voltage wires and poles. to improving the visibility of our assets vegetation clearing and earthmoving. This data is continuing to drive our However, over the past 12 months there in order to reduce community safety engagement activities. has been a notable increase in the number incidents. These markers can be of motor vehicle and aviation accidents installed by a single person removing associated with our assets. the cost barrier.

The statistics are focusing Assisting those We understand the importance of the our efforts hundreds of community groups and experiencing financial non-government organisations who Ergon Energy analyses the electrical hardship support our customers in regional safety incidents that take place in the Queensland. This year saw the launch community to best target our Ergon Energy continues to work of our Customer Assist e-bulletin. Sent engagement strategies. closely with customers to help them manage their electricity bills and every six months, the e-bulletin provides During the year, 677 community usage and considers disconnection these organisations information about electrical safety incidents associated for non-payment as a last resort. our Customer Assist program and directly with our assets were recorded. We make every attempt to contact energy efficiency advice. It is a great Fortunately, the large increases in customers to discuss their options to way to connect and build valuable incidents of recent years have stabilised avoid disconnection, providing payment working relationships with these (these were largely associated with the plans and information about our important community groups. regulatory requirement to expand the hardship program. scope of reportable incidents). Supporting our drought-affected During the last 12 months, there has farmers Over the past 12 months the number been an increase in the customers that With more than 83% of Queensland now of incidents associated with vegetation we know are experiencing financial drought declared, we continue, on clearing and earthmoving has reduced, hardship. This increase is largely due to behalf of the Queensland Government, however, motor vehicle and aviation earlier identification of financial hardship to provide support to primary producers incidents have increased. These will be signals, as well as the softening of the asking for assistance, specifically looking a focus for our efforts going forward. economy across regional Queensland. at possible changes to their tariffs and The number of incidents of electric Marking 10 years this year, our Customer waiving fixed charges for farming or shocks reported relating to our assets Assist program supports customers irrigation purposes. was 235 (compared to 191 for 2014-15). who are in financial hardship and are With a high number of drought-declared This result demonstrated that people are unable to pay their accounts. During areas located within the Ergon Energy increasingly aware of the need to report the year 4,133 customers successfully service area, the affect is felt close to a ‘shock or a tingle’. exited from the program with an home for many of our employees, In addition to the community cost of improved financial capability and the inspiring them to throw their support these incidents, network-related energy usage knowledge needed to behind Queensland farmers by raising incidents often cause inconvenience meet their energy debts in a sustainable funds to purchase bales of hay for to customers and add operational and independent way. livestock in drought regions. costs, with outages of approximately 8.6 million customer minutes impacting over 30,000 customers.

20 REVIEW OF OPERATIONS MORE VALUE AND CHOICE ERGON ENERGY ANNUAL STAKEHOLDER REPORT 2015–16 Working with our Indigenous communities Ergon Energy supplies the majority of regional Queensland’s Indigenous communities, one of the most disadvantaged consumer groups in Australia. Providing electricity services to these communities is challenging, with the majority being remote and supplied by stand-alone power stations. This year saw the successful trial of new card-operated meters in the remote Indigenous communities of Wujal Wujal and Hammond Island. The new meters make it easier for customers to add credit and manage their electricity usage and costs using paywave technology on the meter, as well as an Through our sponsorship of the SES, we’re working together to find smarter ways of doing things increase to the amount of emergency for our communities. The new equipment provided through the joint sponsorship is both replacing old equipment and addressing their needs as technology advances. credit available to customers. Work is also well underway to introduce new technology which will connect Playing our role as part of Our customers and employees with the cutting-edge meters to provide the community continued to give generously here, two-way communication and extensive We have continued to connect with our with donations, via our electricity bill, data to Ergon Energy, such as how many ‘local faces’ active in their communities, reaching $10 million in donations. times customers go into emergency participating in business community This fantastic milestone was thanks credit, how often they self-disconnect, forums and local community events, and to the 127,000 plus Queenslanders energy usage statistics, meter-reading now with the launch of a new employee who give to this life-saving service. capabilities and the ability to remotely volunteering program. We see this as We also extended our partnership change customer tariffs. This data important to building relationships with the RFDS in 2016, supporting their will help us to better understand our critical to ensuring we are operating inaugural Local Hero Awards, which customers in remote communities effectively at the local level and working recognised local community members and be more customer-focused in together to create shared value where who provide support to their nine bases our interactions. ever possible. located across Queensland. Extensive customer engagement The employee volunteer program is At the grass roots level, our Community was undertaken to inform customers of being trialled by our Retail operations Fund continued to support our smaller the features of the new meters and as an with a new Made Better website created local organisations. The fund continues added benefit, during the engagement to help us connect with organisations to bring their ideas to life, with 170 our team identified an additional that are looking for volunteers. applications received. 20 customers who were eligible for The program gives employees the This year the projects supported concessions. Customer feedback equivalent of one day’s leave per year included the purchase of equipment to following the trial was positive and will to volunteer as part of a workplace create ‘Tropical Energy Saving Toolkits’ support plans to expand the project into team. This builds on the time many of at the Townsville City Council Library more than 30 other remote communities our employees are already giving to help which are loaned free of charge to over the next couple of years. charities, sporting groups, emergency Townsville residents and community As part of the Community Fund grants services and events in our communities. organisations, providing resources to this year, support was provided to The other highlight in our community make informed decisions on saving the Red Cross to deliver a community program this year was the sponsorship energy in the home. Funding was also workshop in the Indigenous community of the Queensland State Emergency provided for Mundubbera State School of Woorabinda. The workshop focused Service (SES) Equipment Program. to create a sustainable learning space on understanding power bills, and on The SES consists of more than 6,000 in their library with the installation of providing information on payment unpaid volunteers who are trained and energy efficient and motion detecting methods, tariffs, assistance programs, equipped to help their communities. lighting. In that project, power usage rebate schemes and energy efficiency. By joining forces with Energex and was measured and students could , we have been access the school’s solar net site to see In addition to the workshop, Ergon improved efficiencies and usage trends. Energy staff also provided a ‘train able to help SES groups across the state to buy vital equipment for In addition, funding was also provided the trainer’ course to educate Red to upgrade the electrical system at the Cross staff and enable them to continue use in the frontline of post-disaster or emergency response, from Hervey Bay Girl Guides for improved to assist the community to manage safety and reliability. In doing so, this their energy use and their bills. battery-operated lighting to specialist emergency stretchers. also provided an opportunity to educate the Guides and created an awareness This builds on our other partnerships, of the importance of electrical safety. including Royal Flying Doctor Service (Queensland) (RFDS) donations program, which started 16 years ago.

REVIEW OF OPERATIONS MORE VALUE AND CHOICE ERGON ENERGY ANNUAL STAKEHOLDER REPORT 2015–16 21 Review of operations: Evolving the network

“We see that batteries could ultimately allow our customers to source their power needs more cost effectively, and at the same time help us avoid costly infrastructure investment.”

Michelle Taylor Manager Technology Development

Ergon Energy, like other network providers, is operating Michelle Taylor is passionate about in a period of rapid change – especially in the choices our harnessing the new technologies emerging in the marketplace for the customers are making in meeting their energy needs. In benefit of all. Here she is checking response, we are evolving the network to ensure it is best in with Alan Louis, Senior Engineer able to meet the needs of the future. Distributed Energy, on our battery testing program – this one is a large Here, we showcase how we are supporting the connection unit designed to provide centralised, of renewables to the network and preparing for the mass community-level energy storage from within our network. market take-up of batteries and electric vehicles. We also look in this section at the demand on the network, and how we are optimising the use of the network.

22 REVIEW OF OPERATIONS EVOLVING THE NETWORK ERGON ENERGY ANNUAL STAKEHOLDER REPORT 2015–16 This year, to minimise voltage issues on Phase three is in development to The changing use the network, we introduced mandatory continue our efforts to explore how we of the network reactive power control inverter settings can interface with the smart technology, for new solar connections. and engage customers, to create a more The way our customers are using the holistic power supply solution. In an Australian first we have also electricity network is undergoing been successful in adapting the use We have also been working with unprecedented change. Just five years of Statcom power electronics devices to Standards Australia and other industry ago there were only around 20,000 form part of the solution. The innovative bodies to establish installation and solar energy systems connected to use of the technology, originally connection standards for battery our network, and the average size was designed to manage reactive power energy storage systems, and improve around 2.4kW. Today, around 118,000 on individual systems, has been proven other related standards. While there are connected with an average size in our trials to be a more cost-effective are issues that need to be addressed, of 3.8kW. way to enable the uptake of residential we anticipate that the capabilities in The increase in the average size of solar energy. This will see the targeted today’s systems will be rapidly the systems being installed is a result use of these low voltage control devices surpassed and prices will fall. of both an increase in the size of the across our network. residential systems being purchased We have also progressed plans to A path forward for (this year averaging 4.5kW) and the trial a change in voltage from 240V increase in number of larger commercial electric vehicles to 230V in seven areas across the and industrial size connections (an state. This alignment with international We are actively providing leadership average size of 17.4kW). The size of the standards will allow more solar onto and planning for the Electric Vehicles residential systems, in particular, means the network in the future. (EVs) market to grow substantially in the majority are exporting electricity the coming years. into the local grid during the day. This two-way flow of electricity is Battery technology is In a partnership with Mitsubishi, we altering the nature, operation and showing promise brought eight plug-in hybrid electric planning of the network, and solar vehicles into our operational fleet is seen as only the first technology We have continued to build our this year. We also offered lease in the industry’s disruption. understanding of emerging battery arrangements to employees for the technologies to determine how they new plug-in hybrid electric vehicle To assist in our longer-term could interact with our network in the (PHEV) Mitsubishi Outlander, the world’s response to the change underway, future. We see energy storage systems first plug-in hybrid SUV. This partnership we have continued our work with as having the potential to substantially was an important step forward in our the CSIRO and others, through the change how we collectively use, share, goal to provide leadership in electric Energy Networks Association, to distribute and cost energy. transportation. develop a shared roadmap for the transformation of the electricity Coupled with smart energy To help customers understand the network. The partnership, and the management systems, batteries could benefits we also launched a new future scenarios modelled, is helping give customers the flexibility to source Smarter Energy webpage to showcase guide us in transitioning the network their power needs more cost-effectively, the EVs now on the market and the to one that efficiently supports the and at the same time help us manage associated charging costs by model. peak loads on the network. This will new operational need. To support the potential adoption of allow us to reduce our investment in electric vehicles, we mapped our Our Feeder of the Future Strategy is all costly infrastructure, and deliver savings network for potential charging stations about ensuring the distribution network, for the community as a whole. Our from Toowoomba to Cairns. This looked at the community level, can support modelling has also shown that batteries at what would be needed to create an better customer outcomes as the sector could be an invaluable tool to respond electric car super highway. It identified accommodates the rapid adoption of to solar-related voltage issues and to around 100 potential sites with capacity new technologies. It is about ensuring deliver network reliability benefits. the network can operate increasingly to host ‘fast chargers’ with the aim of as an open access platform for solar This year has seen us, in our laboratory improving the utilisation of our existing and other distributed energy resources. facility in Cairns, further one of assets. The sites were also selected The strategy, advanced this year Australia’s most comprehensive trials based on EV driving range and the need following detailed technical studies and of residential battery energy storage to address the ‘range anxiety’ explored analysis, articulates a set of principles to systems (Resi-BESS). Eight different on our earlier EV trials. systems are now being trialled with guide our asset management decisions. Our focus on EVs is allowing us the most recent additions being two to talk with industry and all levels Tesla Powerwall batteries and two of government about the development Investing today to LG systems. support renewables of electric transportation as a real We have also been testing some of solution for regional Queensland. While the network is operating well these systems in a number of ‘real world’ During the year we joined Tesla Motors, in most instances with the two-way trials. One of our ‘Resi-BESS’ trials AGL, TransGrid and others pushing flow already being experienced, we moved into phase two this year, with for a ‘path forward’ to accelerate the continued to focus existing resources the 10 households in Townsville helping take-up of electric cars in Australia. and target investment into areas of us gain insights into how our tariff This saw a discussion paper, led by the network with high levels of solar reforms could benefit our customers ClimateWorks Australia and co-signed penetration to manage voltage issues, and our network. The trial has been by Ergon, submitted. and more broadly, security of supply. using a range of different systems and sizes to look at how customers interact with the technology and the opportunities for the network.

REVIEW OF OPERATIONS EVOLVING THE NETWORK ERGON ENERGY ANNUAL STAKEHOLDER REPORT 2015–16 23 We are also developing our ability to Cool off this Get up to Optimising the use summer and save predict zone substation load for the of the network $ immediate week ahead, based on CASHBACK500 current demand and weather forecasts, Ergon Energy now has a greater when you install a PeakSmart rather than basing our response solely air conditioner* capacity to drive value from the on historical demand. network. Our goal is to achieve a Further information is available balance between having a safe, secure, *Available to eligible residential and business customers in Cannonvale and Riordanvale. Terms, conditions and eligibility criteria apply. Visit ergon.com.au/incentives. online in our Demand and Energy reliable, and high quality electricity Management Plan. supply, and a service provided at minimal cost. By way of example, the program has already helped customers such as the Using technology to better Whitsunday Christian College and manage local demand Focus shifts from demand a local AMCAL Pharmacy undertake to energy flows major lighting retrofits, replacing old 2015-16 saw the use of energy technology lighting with new high storage as part of a grid solution To increase our network utilisation, efficiency LED lighting. This is a win-win, reach an important milestone with support the changing energy market reducing both demand on the network the installation of 17 of our Grid Utility and better manage a range of other and their annual electricity bill by Support Systems, known as GUSS, network risks, we shifted our demand thousands of dollars. This initiative has across our SWER network. management planning focus this year also continued to build on the success increasingly towards managing energy GUSS is one of the first economically of the Trade Ally Network. and energy flows. This shift saw us viable applications of energy storage dramatically reduce our demand This year’s 2.3MVA demand reduction embedded within the main grid in management reduction target as also came from the continuation of Australia. The unit is effectively a we moved into the current regulatory the Mackay EMPower program, in medium scale ‘battery’, which stores control period, this year to 2.1MVA, the high-growth area of South Mackay, power during off-peak times and puts with 2.3MVA achieved. as well as continued delivery of the it back on the network during times Kingaroy program and the delivery of peak demand. They house 56 While demand is stable overall, there of demand reduction in Alpha. Our Lithium-Ion type batteries, with the are still pockets of demand growth that program also includes an investment capacity to provide enough power for we are targeting with new and existing in maintaining the 41MVA in customer the average home for up to five days. network constraint programs. To assist demand that we now have under our engagement on these programs Ergon Energy’s network has over contractual control. we have developed our online advisory 65,000 kilometres of limited capacity, information, including a Network In addition, we continue to benefit from limited redundancy SWER line Capacity Incentive Map of our entire the 700MW of demand we can control technology. While the SWER technology electricity network. under our economy Tariffs 31 and 33. was an ideal solution in the early years We have been piloting new ways to of the electrification of the state, today The timely integration of customer control these hot water and other the way we use electricity in our modern demand-side solutions into our overall controllable loads. The new dynamic lives is increasingly seeing these approach is seen as a cost-effective operational approach is allowing us to lines overloaded and constrained. way to respond to demand growth, better utilise the control capability, and Our investment in the GUSS units is and avoid costly expenditure in major only turn the supply off when we need addressing this issue, boosting the electricity infrastructure. to respond to peak in demand on the power supply to 12 of our worst To support this, during the year, we electricity network. performing SWER networks. have further developed risk-based valuation techniques to ‘price’ future network risk much earlier in the risk cycle. The intention with this approach is to enable a lower-cost program with a longer-term outlook. We have also been developing cost-reflective tariffs (p13), which we expect to increasingly integrate into our approach to help us work with customers to respond to network risk. The most significant on-the-ground initiative launched this year was the Cannonvale Incentive Program in . The program aims to offset forecast load growth by providing cashback incentives for residential and commercial customers to implement measures that reduce demand on the network over the peak summer demand period.

Our GUSS battery energy storage units, this one in Kinnoul, are both enhancing the local capacity of the network and managing voltage issues, for a lower cost than traditional network solutions.

24 REVIEW OF OPERATIONS EVOLVING THE NETWORK ERGON ENERGY ANNUAL STAKEHOLDER REPORT 2015–16 Around 700 customers across our This year we made further progress with Better planning through vast rural networks are now benefitting our ability to monitor capacity in real spatial maps from this – including those in the time. Measuring actual conditions using We have continued this year to expand south around Kinnoul, Coolabri and real time data, from field devices and our Geospatial Information System (GIS) Cotton Gin, in central Queensland weather stations, gives us greater capability to improve management of around Lotus Creek, Mistake Creek and flexibility in our load management the network. Middlemount, and in North Queensland response, which can be critical when around Dajarra. responding to asset failure. This saw us upgrade to the latest Smallworld EO Platform. The upgrade The innovative modular design of GUSS, Machine-to-machine technologies are provides improved network design which are mounted on skids, facilitates also now advancing reliability standards capabilities allowing modelling of relocation to other constrained parts of for those in the most remote parts of emerging technologies and is integrated the network as required. the state, many of who are several hours through design processes, logistics drive from our closest depot. In addition and mobility. Ensuring we are ready to to the standard of supply, the use of this remote monitoring and control We are introducing a geospatial respond to supply issues capability has also improved safety analytics tool with the implementation To ensure we are delivering a high and delivered cost efficiencies. of Esri’s ArcGIS. This is already providing standard of electricity supply, we The capability is allowing us to remotely sophisticated displays of accurate undertook a comprehensive review of detect, isolate and then respond to and timely asset information on the main elements of the network this issues on the network with a flow on spatial maps and helping key personnel year to fully understand the redundancy effect of reducing the number of crews identify emerging patterns and trends built into the network, and the required for planned switching events. to changing conditions. Most performance risk. This information has significantly, the technology will allow allowed us to further review and develop Using data to help drive a faster response to disaster events, our network plans. better decisions as trialled during Cyclone Marcia, To drive better asset management with real-time integrated decision- Where necessary, contingency plans decisions our focus on improving making tools and analysis. The Esri have been developed to ensure we are our data management capability platform will work alongside our best placed in the event of an incident has continued. Smallworld GIS to provide visualisation to manage the asset under our new and analysis to mobile users. risk-based planning approach called During the year our aging network Safety Net. This new approach is all modelling tool was replaced with The expansion of our GIS capability about driving value from our investment the PowerFactory software solution, is also continuing to be supported by in the network. It has led this year to enabling the business to better embrace the remote asset management a further investment in our mobile technologies like battery storage and technology, Roames. The technology supply solutions, including additional renewables. This has given our planners solution maintains a precise, Pegasus high-voltage injection units an advanced ability in a single package high-resolution earth simulation that that work in conjunction with generation to see potential impacts across the includes models of our network and equipment, to provide the ‘safety net’ entire network, with the aid of visual the surrounding environment, created when network repairs could take an tools. The solution integrates key using geospatial data captured by extended time period. sources of network data and is being airborne sensors, without the need to supported by progressive improvement deploy field crews. Developed by Ergon to data quality. Energy, then sold to Fugro to support Building our capability its commercialisation, Roames was with smart technologies We have also overhauled our current recognised again this year through state assessment tool and created the Queensland Spatial Excellence Technology is at the heart more user-friendly ‘dashboards’ to Awards. As well as facilitating more of the improvements we are help planners see with near-live updates cost-effective vegetation management, making in our network and asset what is happening across the network. the technology has been used to management capability. develop a major refurbishment program Deciding when to carry out preventative to rectify situations where our powerline Network automation and maintenance on the network is also now conductors are not a safe distance away remote control better supported by data with an from the ground. Evolving a smarter network, with investment in a Condition Monitoring greater use of remote monitoring and System. The system brings together the control, and ultimately automation, is volumes of data that we capture into the allowing us to operate the network one system for the first time, putting us in a more efficient and dynamic way. in the best position to make decisions that gain the maximum value out of the This journey began with upgrades to various maintenance tasks and to our monitoring control and automation improve our forward works planning. capability, as well as a significant investment in our own all-encompassing This work is being complemented by core telecommunications network, the progress achieved in our Enterprise which links our smarts in the field Business Intelligence program. with our Control Centres. This program is all about improving While we are finding more innovative, the way the business uses data, more non-network alternatives to meet our customers’ supply needs, we are continuing broadly, to enable better decisions, to invest in critical infrastructure. This year informed by hard data. we completed the Marian South substation near Mackay. The $14 million substation will support the growth of the sugar industry into the future.

REVIEW OF OPERATIONS EVOLVING THE NETWORK ERGON ENERGY ANNUAL STAKEHOLDER REPORT 2015–16 25 OUR NETWORK SCORECARD

Energy delivered and demand met TREND IN SYSTEM-WIDE PEAK DEMAND In 2015-16 the electricity distributed through our main grid and our isolated 4,000 networks decreased to 14,997GWh. The largest fall in demand was in our non-regulated network that supplies the Carpentaria Mineral Province. Electricity used by the average Forecast range household across regional Queensland 2,000 fell this year with the take up of more energy efficient appliances and behaviours. This was balanced, however, by growth in customer numbers of 1.5%. As expected, in line with our own forecasts and those of the Australian MW 0 Energy Market Operator, the year 2015 1995 also saw only low level overall demand 2010 2020 2005 2000 growth. The system-wide coincident peak recorded at the substation level This year’s coincident system-wide peak of 2,481MW showed demand overall remaining steady. was up on last year at 2,481MW, on With regional Queensland continuing to face national and economic challenges, post the boom Thursday, 18 February 2016, in line with in resource investment, we are forecasting the continuation of low level growth. our previous highs of 2007 and 2010. While recorded at 7.30pm in the evening, the actual peak in consumption would have occurred mid-afternoon; OUR ELECTRICITY STATISTICS however, on that day solar energy 2011-12 2012-13 2013-14 2014-15 TREND 2015-16 generation was potentially meeting No. of Connections 8.5% of that demand locally. 700,989 712,634 724,264 733,261 740,881 Supplied With the global and domestic economy Average Annual remaining subdued, we are continuing Electricity Use per 7,166kWh 6,811kWh 6,396kWh 6,474kWh 5,941kWh to forecast that energy consumption Household Maximum Coincident and overall demand will remain steady. 2,417MW 2,380MW 2,441MW 2,382MW 2,481MW Peak Demand However, some areas are continuing to see localised growth. With investment Electricity Distributed 15,212GWh 15,097GWh 15,247GWh 15,140GWh 14,997GWh in the resource industry down, and Electricity Generated 118GWh 114GWh 111GWh 108GWh 118GWh the LNG industry moving from project by Ergon Energy construction to production, this growth is being driven from outside the mining sector, from industries like tourism, and OUR NETWORK STATISTICS from residential housing investment.

UNITS Works program successfully transitioned Power Stations (grid connected & isolated) 34 Bulk Supply Points 30 2015-16 saw us scale-back our capital works program in line with the five-year Zone Substations 323 investment plans we put to the AER as Major Power Transformers (33kV to 132kV) 601 part of our Regulatory Proposal, and as Distribution Transformers 110,000 a result of further softening of demand 1 million for customer requested works. It is Power Poles important to note that our investment in Overhead Powerline critical safety investments and - Sub-transmission 15,400km refurbishment of asset failures and - High Voltage Distribution 118,600km defects remained at similar levels to the 1 previous year. - Low Voltage: Distribution 20-25,000km Underground Power Cable 9,200km As part of this transition, we undertook a fresh review of our investment plans to 1 Estimate of length only. lock in a comprehensive two-year works plan aimed at enabling greater FOR FURTHER DETAILS ON OUR REGULATED ASSETS, AS WELL AS OUR efficiencies through the continued ASSET MANAGEMENT POLICIES, STRATEGIES AND SPECIFIC INITIATIVES integration of asset planning and works REFER TO ERGON ENERGY’S DISTRIBUTION ANNUAL PLANNING REPORT, delivery objectives. AVAILABLE ONLINE.

26 REVIEW OF OPERATIONS EVOLVING THE NETWORK ERGON ENERGY ANNUAL STAKEHOLDER REPORT 2015–16 We are now further refining our • Stage 2 of the $39 million East • $10 million in works associated with longer-term plans in line with the AER’s Warwick substation rebuild program. Duchess Road substation in Mount final determination to best inform our Ensuring a reliable supply to the Isa, with the installation of a new resourcing and procurement strategies. Warwick community, the project saw 132kV feeder bay, to accommodate the installation of two new control change of supply arrangements. The change to our investment portfolio, buildings and transformers at the site. including both system and non-system To respond to customer initiated investment, saw the level of capital • $22 million upgrade of the Gladstone requests for network connections investment reduced this year to South substation. One of two primary or upgrades we invested $157 million. $774 million (down from $983 million points of supply for the Central This was down slightly from the in 2014-15). Queensland community, the project $162 million in 2014-15, reflecting the included the installation of two current levels of economic activity, The regulated capital expenditure control buildings and transformers especially in the mining sector. associated with the distribution and 11kV switchboard. system (Standard Control Services) A $25 million investment was also made • $14 million Marian South substation was reduced to $414 million, compared in our stand-alone isolated networks project. The project will bolster to $595 million in the previous year. where we have significant generation energy supply in the Mackay region This was mainly due to reductions in assets. This included the replacement of and support the growth underway in aged asset replacements, augmentation, numerous generation units and progress the local sugar industry. reliability, and telecommunications on a new power station for Palm Island works. Despite this however, this year • $10 million upgrade to the Biloela in North Queensland. we completed a number of major substation. The project includes infrastructure works. The highlights the installation of a new transformer included the completion of: and replacement of the load control equipment to improve reliability of • $86 million Toowoomba Central supply to the area, particularly in substation project. The project, times of peak demand. which will support the city’s growth • three major projects associated for decades to come, included a new, with our Atherton substation. fully-enclosed substation as part of This $6 million investment included the new Grand Central Shopping upgrades to the transformers, Centre, an upgrade of the South replacement of aged equipment Toowoomba substation and a high and the installation of protection reliability powerline connecting the software to reduce the risks two substations. associated with fallen powerlines.

INVESTMENT IN THE CAPITAL PROGRAM UNDER CUSTOMER REQUESTS FOR NETWORK REGULATORY ALLOWANCE NEW CONNECTIONS BELOW EXPECTATIONS $872 $866 $208 $841 $201 $190 $739

$692 $162

$157

$571

Renewing the Reliability and other network $271M targeted investment $52M MILLION Connecting new Investing in our MILLION

customers $157M generation assets $25M 2 1-12 Meeting growth 20 1 2015 2013 2014 2016 20 1 2012-13 2014-15 in demand $91M 2013-14 2015-16 Allowance

Network renewal remained our main area The scaling back of the capital expenditure While we were anticipating the rate of of investment – the level of safety and plan is being supported by the new planning new connections and upgrades to remain refurbishment (incl defect remediation) criteria, greater efficiencies in our delivery relatively stable for the coming years, there investment has been maintained here, and demand remaining steady overall. It also has been a reduction, most notably in although there has been a reduction in reflects the fall in customer connections. any major investment in the mining sector. aged asset replacement. Our next biggest This graph shows the 2015-16 investment We are, however, seeing a jump in demand investment area is customer connections, for our Standard Control Service (SCS), for the connection of major renewable which has fallen this year. We are also compared to both the AER’s allowance in its energy projects. This graph includes SCS keeping our investment down in meeting final determination and to previous years. and Alternative Control Services. growth in demand (p24) and reliability improvement (p16). Investment in generation increased with the commencement of a new power station on Palm Island.

REVIEW OF OPERATIONS EVOLVING THE NETWORK ERGON ENERGY ANNUAL STAKEHOLDER REPORT 2015–16 27 Review of operations: Our people, our future

“I’m working collaboratively within a range of regular consultative groups throughout the business. I am also directly involved in the merger discussions... there’s currently a genuine level of inclusion and a lot of good things happening.”

Ken Feltham Regional Program Coordinator

To us ‘high-performance’ is about embracing the changes Ken Feltham, as a Union Delegate is committed to advocating for taking place in our operating environment. It is about other employees. He is fuelled by delivering for our customers today, as efficiently and his passion for ensuring a fair, safe effectively as possible across our vast region, and and supportive workplace for all. ensuring we are ‘future ready’. Here, he is talking to colleague John Fowler in our Townsville office. In this section we focus on our priority on work safety performance. And highlight our ongoing efforts to develop a culture of empowerment and how we are investing in the capability of our people. We also cover how we are driving our cost base down, and detail our environmental performance.

28 REVIEW OF OPERATIONS OUR PEOPLE, OUR FUTURE ERGON ENERGY ANNUAL STAKEHOLDER REPORT 2015–16 Work safety an Our annual Field Safety Day Supporting employee health Championships continued this year, and wellbeing absolute priority with crews from Clermont, Home Hill, Gladstone and Rockhampton meeting Ergon Energy continues to have a strong Ergon Energy is committed to ensuring in Townsville to test their technical and focus on supporting employee health, the health and safety of our people. safety skills against the best of the best. wellbeing and fitness for work – this year Our aim is to be ‘Always Safe’ and to The selection of workgroups is based achieving Gold Recognition from the stand with the best in our industry. on the Comprehensive Safety Indicator Queensland Government’s Healthier. (p30) results and the team’s leadership Happier. Workplaces initiative (up from We know more work is needed to create and focus on safety performance. silver last year). the right safety culture, and that we The competition allows teams to need to maintain our focus on our key come together, learn, grow and During the year we established a mental risk areas to ensure our people go home achieve, as well as recognise and health and wellbeing taskforce to ensure without injury each day. In these times showcase their skills. we have a best-practice approach to of change we are also being proactive providing a mentally healthy workplace. about health and wellbeing. This saw sessions underway across the “Ergon Energy continues state, facilitated by a professional psychologist, to provide tools and Safety culture supports to have a strong focus on safe behaviours strategies for use at home and work to supporting employee health, recognise when someone is struggling, To continue to evolve our safety culture wellbeing and fitness for work” and to help people manage change and and drive the right behaviours, we personal stress. continued the roll out of our Safety Another highlight of the year was the Citizen program, first introduced to our launch of our Fitness Passport program. leaders and field based employees in We continued to meet the Health Safety and Environment Management System Developed from employee feedback, the 2014-15. This saw us further embed the program gives participants an affordable program in the field, with the training of requirements to operate as an electrical entity in accordance with Electrical option to use a range of gyms and pools nominated field staff as Safety Citizen without having to be a member at each Coaches, new toolkits and with Safety Office regulatory requirements, and we received external recertification location. The program is offered for a webinars, and the expansion of the low single or family weekly fee. More program to corporate employees. against International and National Standards for Environment, Occupation than 300 employees have already The corporate Safety Citizens program Health and Safety including ISO 14001, signed up. specifically focuses on the risks involved AS/NZS 4801 and OHSAS 18001. Other ongoing initiatives include the in working in an office environment 10,000 steps program, where more (such as stress, manual tasks, prolonged than 300 employees are focused on repetitive work and the risks associated Managing fatigue remains a priority increasing incidental activity during with driving). The roll out of the the day. More than 1,700 employees corporate program will continue over Each year, Ergon Energy employees also participated in the free influenza the coming months to positively drive upwards of 32 million kilometres. vaccination program. And, since it challenge people to shift their safety It is a high risk business, considering commenced in 2014, 109 employees focus (or mind-set) to the next level. that in Australia road traffic injury is the have now participated in the Health We believe this program is part of leading cause of work-related death. Matters Quit Smoking program. the solution to a safer workplace and This makes managing fatigue a critical issue for Ergon Energy. Drug and alcohol testing continues to safer communities. be a key initiative to ensure employees The success of this program, and other This year we worked with Energex are ‘fit for work’. to align our fatigue management safety initiatives, has seen a significant Our Employee Assistance Program improvement in our safety leadership frameworks, gaining the support of the National Heavy Vehicle Regulator for also continued to provide employees capabilities, measured through an and their families with free confidential independent safety impact study. our approach during emergency response. In line with our best-practice counselling service for work and The study, which included an onsite personal concerns. safety evaluation and a safety climate fatigue management framework, our survey, saw a 68% improvement in employees driving heavy vehicles have leaders’ ability to have effective safety some flexibility to work in excess of the Leading industry with interactions and an 18% improvement in standard fatigue work and rest hours in asbestos best practice the workgroup safety climate – including emergency situations. Ergon Energy continued its focus to a 12% improvement in the willingness to We also started planning to pilot report incidents and errors. become an asbestos-free workplace an In-Vehicle Management System. by 2027 with recognition of our ‘best Proudly one of the initiatives that The system supports driver safety to practice’ standards at the second has had a positive impact across the enable better on-road driving decisions. International Asbestos Management business was developed by one of Studies into the technology used at and Awareness Conference held in our own Work Group Leaders, Andrew other organisations have revealed a November 2015. Bowe. Andrew’s ‘safety as defence’ significant reduction in accidents, better concept uses a rugby league analogy driving performance and more efficient Our asbestos management practices to explain how if a team has a defensive utilisation of fleet resources. were also showcased during the mind set instead of just focusing on conference. The two case studies, their attack they’ll get the job done ‘a systematic approach to managing without safety suffering. asbestos’ and ‘putting safety into practice’, provided an insight into the

REVIEW OF OPERATIONS OUR PEOPLE, OUR FUTURE ERGON ENERGY ANNUAL STAKEHOLDER REPORT 2015–16 29 work that had occurred to manage and These sites have now been labelled asbestos hazard from our workplace. eradicate asbestos containing materials and a program of work is now being We also sit on the Senior Steering from our workplaces. developed to address them. Committee and Technical Advisory Group for the ASEA as the Energy This year the focus was also on The safety of our people, contractors Network Association’s representative, inspecting over 11,500 pits across our and the public is a priority and we and are part of the Leadership Team for underground network for the presence continue to work with Workplace Health the Asbestos Industry Association of asbestos, with a small number of pits and Safety Queensland, the Asbestos Queensland. identified as containing the material. Safety and Eradication Agency (ASEA), regulators and unions to eradicate the

OUR WORK SAFETY OUR WORK HEALTH AND SAFETY STATISTICS SCORECARD 2011-12 2012-13 2013-14 2014-15 TREND 2015-16 Lost Time Injuries Frequency Target 2.6 2.6 1.4 1.9 2.3 Rate – Employees ≤2.1 Striving to be an industry Total Recordable Injuries Target 9.8 7.8 6.4 5.0 6.5 top performer Frequency Rate1 ≤6.7 Lost Time Injuries Frequency Target 1.8 2.2 3.2 3.2 1.8 In 2015-16 there was an increase in the Rate – Contractors ≤2.7 Lost Time Injury Frequency Rate (LTIFR) Total Dangerous Electrical 1,050 956 1,116 1,152 1,094 – Employees, from 1.9 in 2014-15 to 2.3. Events (DEEs) There was also an increase in the Total – Unassisted Asset Failure Recordable Injury Frequency Rate (within Ergon Energy’s 359 323 423 367 395 (TRIFR) – Employees from 5.0 last control) year to 6.5 (new name for the All Injury – Assisted Asset Failure Frequency Rate (AIFR) – Employees (outside Ergon Energy’s 691 633 693 785 741 control) used in previous years in line with new Dangerous Electrical Events Target standard industry reporting). 2.5 4.4 3.1 3.5 1.9 Frequency Rate – Employees ≤2.5 These results reflect the level of change 1 From 2015-16 in line with industry standards, the All Injuries Frequency Rate – Employees is now reported currently occurring. The overall figures as the Total Recordable Injuries Frequency Rate. also include a significant injury that occurred during the year. TOTAL INJURIES LOST INJURIES We have continued to strive to be an FREQUENCY RATE FREQUENCY RATE industry top performer with a range of safety and employee engagement 9.8 programs (p29). In addition, a review of the injuries that were occurring and 2.6 2.6 the contributing factors was completed 7.8 to identify specific opportunities for 2.3 1.9 6.5 improvement. It found that an increased 6.4

focus on the psychosocial factors could 1.4

support our safety goals. Our focus is 5.0 now on these areas, as well as the physical hazards. On the positive, we almost halved both the level of Dangerous Electrical Events Frequency Rate (DEEFR) – TRIFR Employees (from 3.5 in 2014-15 to 1.9) LTIFR 2 and the LTIFR – Contractors (from 2 20 1 2015 2013 2014 20 1 2015 2013 2016 2014 3.2 in 2014-15 to 1.8). The latter was 2016 supported by the achievement of zero The frequency of workplace injuries has The organisation’s Lost Time Injuries lost time injuries across a half-million increased this year. Supporting our people Frequency Rate reflect the level of change hours of work by our contractor UGL through the current period of organisational occurring throughout the business. They also and industry change, and our safety include an increase in the injury severity rate Limited who support the delivery of leadership programs are seen as key following a significant injury to an employee our works program. to maintaining a safe place to work. during the year. Another safety highlight for the year was the achievement of our Ergon Energy incorporates the TRIFR, Severe storm events were again the Banyo workshop’s two year’s free along with other lag and lead indicators, largest contributor to the Dangerous from lost time injuries and medical into a Comprehensive Safety Indicator Electrical Events (DEEs) – Assisted treatment injuries. to give our people at the work-group Asset Failures. They also accounted level a meaningful score of how they for 40% of all DEEs occurring across are performing from a holistic safety our service area. perspective. Our overall performance is stable at the silver benchmark, with FURTHER INFORMATION ON 549 total points allocated against a COMMUNITY SAFETY IS AVAILABLE range of areas, out of a possible 600. ON PAGE 19.

30 REVIEW OF OPERATIONS OUR PEOPLE, OUR FUTURE ERGON ENERGY ANNUAL STAKEHOLDER REPORT 2015–16 These, and other initiatives, have been major changes underway. The wages Embracing change particularly important to the success and conditions for the majority of – being future ready of the voluntary retrenchment program employees are covered by Ergon (p33), which aimed to balance our Energy’s Unions Collective Agreement Over last 12 months we have been need to reduce our overheads while 2015. This agreement will continue to working hard to ensure that we are maintaining our capacity to deliver for apply under the merged structure. responsive, as an organisation, to our customers. This process has relied our customers’ changing needs and on our people openly exploring how Valuing diversity expectations, and that our people are to best maintain effectiveness while future ready. delivering the savings required. and inclusion The increased focus on diversity and This has seen a major focus on employee A high level of employee engagement inclusion this year has been about engagement, on ensuring diversity was also vital in our preparations for the creating a culture in which difference is of thought in the workplace, and on move to our new customer information accepted and encouraged. This will see building the capability of our people systems – and key to our readiness us with a workforce that is innovative, to perform to a high standard. confidence to ‘go live’. The potential ramifications of a breakdown at any diverse in thought and better reflective point in the transition to the new of our customers. Engaging our people in systems could have been significant, the journey Our leaders have been engaged in so it was vital issues were exposed a wide range of initiatives designed In our employee survey undertaken and resolved prior to the system to enhance diversity and inclusion in June 2016 we saw a very pleasing changeover. p11 outcomes. More than 400 of our 26% improvement in the levels of Our focus in creating a high-performing leaders have now participated in the employee engagement across the culture is about providing employees unconscious bias awareness training. organisation. The achievement of an with clear expectations of performance Developed in-house, the training overall whole-of-business score of outcomes and behaviours, and enabling provides an understanding of how 57% engaged, although just below the ability to deliver on these. unconscious or hidden beliefs or our ambitious target of 60%, means attitudes can unintentionally impact we have exceeded the 2016 energy Building constructive decision making and contribute to sector industry norm and compare workplace relations patterns of behaviour that can impact favourably with the norm across the diversity and inclusion. We have also worked to build other industries in Australia and New constructive industry union To support women in the workplace, Zealand who participate in the same engagement. There has been a strong we also rolled out a number of targeted benchmarking conducted by the focus on collaboration, and on exploring initiatives. As part of Queensland external provider. new ways to engage. This saw a joint Women’s Week, local panel discussions This has been supported by a concerted Independent Review Panel established were held around the state to discuss effort by our Chief Executive and our to review the Voluntary Retrenchment the importance of building supportive senior leaders to ensure our people are and Early Retirement Scheme networks, having the self-confidence engaged through the change journey applications received as part of our to have a go, and the different underway. This has included getting out efficiency drive, to partner with the approaches to achieving flexible working and about and personally connecting business in ensuring business critical conditions. We also piloted a program with our people across the organisation roles were not lost and that the process based on the book Lean In: Women, to provide direction and clarity on the was equitable and transparent. Work and the Will to Lead. This saw organisational changes progressing and 45 women come together regularly to An Industrial Relations Consultative what we need to do, together, to achieve discuss their personal and professional Group has also been established to success in the future. path to achieving their goals, while support the merger, and to identify the addressing work-life balance. The YourView survey feedback will people principles now applying to the now look to inform our future people initiatives as we progress with the organisational changes associated with the merger. Our focus is supported by studies showing high engagement supports better customer and business outcomes. To complement our existing support for employees, we engaged a leading career transition advisor, Lee Hecht Harrison, to deliver tailored support sessions for employees, providing tools and information on career planning, resume development and interview skills. The focus here was on how our people need to operate to ensure success.

A record 17 females and nine Indigenous candidates, from a total of 85, were successful in securing an apprenticeship with Ergon Energy in 2016.

REVIEW OF OPERATIONS OUR PEOPLE, OUR FUTURE ERGON ENERGY ANNUAL STAKEHOLDER REPORT 2015–16 31 Our effort to raise awareness of Investing in our people This year has also seen a continuation domestic and family violence continued of our leadership development to with an increase in domestic and In addition to our engagement and support leaders to inspire and lead family violence leave provisions along cultural efforts, our People Strategy teams through complex environments, with flexible work arrangements to is also driving investment in building enhance their performance and that help protect employees and their our leadership capability and growing of their teams, and connect with families. White Ribbon Day was our talent pool, as well as focusing on their employees. highlighted through events held better performance management. We have continued with the successful around the state and employees Field Leadership Series provided by spoke out in a video saying NO to Building our leaders the Australian Institute of Management, domestic and family violence. These We know our leaders’ ability to which provides diploma level activities were also complemented engage and lead employees in qualifications to current and upcoming through our volunteer Sexual changing environments is vital. work group leaders. Since the start of Harassment and Anti-Discrimination the series, 305 current and potential Officers network and changes to our This year we have continued to leaders have participated in the policies. These changes have resulted embed the leadership capabilities workshops and training. in Ergon Energy being acknowledged and behaviours into the performance as achieving a green seven star rating and talent framework, setting and Growing our organisational talent from the Services Union. measuring the expected outcomes of high performing leaders. The Senior Our talent and succession strategy This year we had a record number of Leader engagement forums continued is about identifying and developing women in our apprentice intake. Of the to provide opportunities to align and the current talent within the business 85 new recruits, 17 were female. We now focus our leaders on the strategic to build a strong leadership pipeline have a total of 36 female apprentices priorities of the business. Visible for the future. working towards trade qualifications. leadership and clear communication was a key expectation of all managers By providing employees with targeted We are also continuing to support to drive the business and customer development opportunities, including indigenous employment, with an outcomes required whilst also engaging the opportunity to act in different roles increase in the number of Aboriginal and with our people. or participate in the merger project and Torres Strait Islander (A&TSI) recruits in our apprenticeship intake this year. OUR PEOPLE STATISTICS

This has been supported by a unique 2011-12 2012-13 2013-14 2014-15 TREND 2015-16 three week training program, an ‘Introduction to the Electricity Supply Number of Employees 5,060 4,614 4,415 4,447 4,137 Industry’. We targeted female and Indigenous applicants who had not Full Time Equivalent 4,869 4,435 4,308 4,349 4,053 secured an apprenticeship in last year’s Staff Turnover (annualised) 8.1% 14.3% 8.9% 7.6% 11.2% intake largely because they didn’t have exposure to trade related skills. Women in the Workforce 1,337 1,204 1,126 1,163 1,050 The accredited training is transferable Women in Senior to other trade and construction 17% 16% 16% 20% 19% Management sectors, expanding the employment Women in Middle 21% 21% 22% 27% 27% opportunities and apprenticeship Management competitiveness for participants. A&TSI in Entry Level Positions 67 58 58 55 55

OUR WORKFORCE OUR WORKFORCE OUR WORKFORCE BY AGE BY REGION BY GENDER 1,204 1,024 1,020

584 265 40

Northern 40%

Central 29% Female 25% <25 65 + Southern 22% Male 75% 25 ≤ 35 55 ≤ 65 45 ≤ 55 35 ≤ 45 Brisbane 9%

Our workforce of 4,137 (Full Time Equivalent Being predominantly field-based, in a male The age profile of our workforce has 4,053) is based across Queensland, from dominated industry, around three quarters of remained largely stable during the year, with the northern and western reaches, to the the workforce is male. the most notable change occurring at both population centres along the coast, and in ends of the age spectrum with the recent the south-east. voluntary redundancy scheme.

32 REVIEW OF OPERATIONS OUR PEOPLE, OUR FUTURE ERGON ENERGY ANNUAL STAKEHOLDER REPORT 2015–16 other initiatives, they have been able to As well as formal training, this year we In addition, efficiencies are being build their skills and our talent base. promoted self-learning opportunities achieved in specific operating activities, Through this, our employees become through our online learning portal and such as vegetation management, and more engaged and resilient. Employee extensive course database. The portal through a reduction in field-based capability and skill is built largely offers online courses on a range of contractor hours. We are also working through experiential learning, as the topics, from Microsoft Word and Excel, with Energex to deliver greater most effective form of development, through to marketing and sales, project efficiencies in the procurement area. complemented by formal training management, time management or These programs have collectively where required. becoming a manager to name a few. achieved more than $30 million in Our 11 current graduates are also We also continued to invest in our savings across our cost base. considered an important talent pool graduate and apprentice programs, These measures and the achievement for the future. As an organisation, we already discussed, and in traineeships. of further savings are essential to ranked second best this year in the list These programs ensure that the relevant reducing our operating costs in line of Australia’s 75 top graduate employers. skills, experience and business with the AER’s final determination The rankings list is created from a survey knowledge are built through targeted over the five years to 2020. of over 1,900 graduates, conducted rotations within the business, including Our efficiency journey also by the Australian Association of field placements, relevant technical continued to be supported by our Graduate Employers – the peak body training and ongoing internal mentoring. ongoing investment in technology. for the graduate recruitment and Our apprentice program, which places Having information at our fingertips, development market. new recruits in 40 locations across the through advances in information and Two of our emerging engineering state from Thursday Island to Charleville, communications technologies, is seen leaders best demonstrate the rising provides career pathways to become a as critical to our ability to respond talent within our business. Our General systems electrician, communication to the changes taking place in our Manager Network Development, technician, fitter and turner, boilermaker, operating environment and to Blake Harvey and Principal Engineer linesperson or sheet-metal worker. continuing our efforts to deliver Technology Innovation, Dr David Ingram more effectively for our customers. The talent of our apprentices was were awarded Fellowships this year recognised this year with Mackay based A highlight has been our Field Force from Engineers Australia – recognition Systems Electrician apprentice Stewart Automation (FFA) project, which was from the peak industry association Dorante named as the Tec-NQ Mackay named ‘Best in Cost Savings’ at the of their leadership and contribution Electrical Apprentice of the Year and Field Services Management Excellence to the profession. Blake is one of the Home Hill based Electrical Fitter Awards Summit in Sydney in March. youngest ever to receive this high Mechanic apprentice Alex Romeo honour and comes after he recently nominated for the Tec-NQ Townsville served as the Queensland President Electrical Apprentice of the Year. of Engineers Australia. Another engineer, Technology Innovation Engineer, Stephen Sproul, Placing a priority received the prestigious E.S Cornwall Memorial Scholarship this year. on efficiency It presents a once-in-a-lifetime career opportunity to work for electricity From an organisational change industry leaders in Europe and the perspective, this year’s priority has United States and learn all aspects of been on securing a more sustainable smart grids and how they could translate cost base, in line with our works to our network in regional Queensland. program and revenue forecasts (p37), and the preparations for our merger with Energex and SPARQ Solutions. Electricity System Designer Luke Leighton Training and development uses the FieldSmart mapping to identify and We continued to utilise our established One of the levers used to achieve the view assets in the field. performance management framework efficiencies included targeted voluntary to define and set clear performance workforce reductions. This has been expectations for our people. supported by a review of our executive With bottom line benefits in excess of (p40), senior leadership and contract The framework includes the setting $50 million, phase two of the project positions. Then, in May 2016, the launch of performance and development is now expanding workforce automation of a voluntary retrenchment program plans on an annual basis, with mid-year to planned line works, to support asset for our corporate support areas, reviews to ensure performance is designers in the field, and rolling out targeted operational areas of the on track. The development plans FieldSmart mapping software to provide network business and targeted areas are discussed between leaders and our customer delivery and lines crews in the retail business. While this program employees to identify development with a geospatial view of assets and is continuing, it has already seen opportunities specific to the employee work order locations. The software significant employee and organisational and their role – including formal training, allows users to view, find, edit and change. The promotion of flexible project and leadership opportunities. update data while in the field, and link working options has also been used to sketches and photos, with flow on data As a registered training organisation, achieve cost reductions while at the quality improvements. Once phase we continued to deliver a diverse range same time supporting our people to two is fully implemented, by early 2017, of technical and non-technical training. achieve a better work and life balance. around 900 of the mobile ‘toughpads’ In total there were over 150,000 hours will be in use in the field. of training delivered, over 16,000 units of competency achieved and 52 formal Other advances in smart technology qualifications issued. were discussed on page 25.

REVIEW OF OPERATIONS OUR PEOPLE, OUR FUTURE ERGON ENERGY ANNUAL STAKEHOLDER REPORT 2015–16 33 We are also continuing to seek greater Conserving energy and The solar farm powers the equivalent of efficiencies through our property 30 homes, or around 8% of the town’s strategy. During the year the mitigating emissions total energy needs. In addition to saving redevelopment of our facilities in diesel fuel, the farm also assists with Looking to the market for Glenmore Road, Rockhampton was reliability of supply during extended renewable energy partnerships completed. This has reduced our wet seasons when the community can operational sites in Rockhampton This year we expanded our commitment be cut off from fuel supplies for up to from six properties to three, and to source renewable energy for our six months. delivered a better disaster response customers with Ergon Energy Retail We are also progressing plans to capability, improved fleet management releasing an expression of interest (EOI) upgrade our geothermal power station and logistics, as well as improved in August 2015 for a further 150MW of in Birdsville, the only utility operated traffic safety. As part of this strategy, we renewable energy. system in Australia that uses water have continued the redevelopment of Our goal was to develop new renewable from the Artesian Basin to generate our facilities in Garbutt, Townsville, with energy projects with companies who . Planning is stage one completed in November 2015 could demonstrate their projects would advanced on a project to replace the and design well underway for stage contribute significantly to helping us existing 85kW system and increase two. This investment furthers the meet our renewable energy requirements the net output to between 150kW and consolidation of our people in the under the Federal Government’s 200kW. The proposal is to integrate Townsville area. Renewable Energy Target (RET). the new geothermal power station Following strong interest, an agreement with the existing diesel power station was put in place with the Mount Emerald to allow for the penetration of renewable Protecting the Wind Farm in . energy to reach up to 70% of the total environment This one agreement, which will run for energy generated. the next twelve-and-a-half years, was Ergon Energy has a corporate above our original target, providing responsibility to demonstrate leadership 170MW of ‘wind’ energy, enough to in protecting the environment and power a city the size of Mackay. conserving resources. To us, a high standard of environmental performance We are already the largest purchaser is an important element of being a of renewable high-performing organisation. through agreements with our sugar mills who generate electricity from bagasse a This year, we were recognised as by-product of sugar refining, the PPA Business Innovator of the Year at with the 5MW solar farm in Normanton, the 2015 Climate Alliance Business and other agreements. The Mount Leadership Awards in Melbourne for Emerald Wind Farm will add to this. p14 our strategy and leadership in the response to climate change. This follows The project was chosen from the the inclusion of an objective to create an 51 projects (more than 2,000MW of We are planning to upgrade the Birdsville capacity) put forward by 22 proponents. geothermal power station using open access platform for renewable and state-of-the-art technology to significantly distributed energy in our Strategic Plan We are still in discussions with other boost its output. since 2007-08. proponents to explore how else we can best support further development The strategy included efforts to enable of renewable energy generation into Reducing the electricity used an effective market for renewable the grid. energy and other distributed energy Energy conservation has long been a resources, meet best-practice Reducing our reliance on diesel focus of Ergon Energy, both within our own operations and by helping our environmental management standards We are continuing to increase our customers save on their usage. Energy and to leverage business imperatives capacity to generate electricity using and operational efficiencies have been and investment in smart technologies renewable energy in our remote isolated central to the delivery of our new to enhance the collective climate communities, to reduce our reliance on administration and technical buildings, change response. diesel. We remain committed to our aim which have incorporated many energy of reducing our reliance on diesel to zero Looking forward, we are expanding conservation technologies including by 2050, through energy conservation, our credentials and contribution to using natural light and ventilation and increased renewable generation and community and government objectives installing movement sensors to manage energy efficiency activities. by encouraging and enabling the lighting and air conditioning. p33 efficient connection of large scale Our 264kW solar farm in remote We have also continued to support our renewable projects to our network. p14 Doomadgee in north-west Queensland customers with energy efficiency has now been in operation for over We have also worked to increase the information and advice through the two-and-a-half years, and since starting profile of environment and cultural expansion of our EnergyCheck product, full production in October 2013 it has heritage by leveraging off our internal HomeSmart energy trial (p12) and the exported 1,215MWh of electricity. branding Always Safe. This saw us Energy Savers program (p13). introduce Always Sustain, with the This performance is 9.4% better than message to minimise our footprint was expected for the system and has and consider our environmental impacts, equated to more than 303,000 litres and Always Respect to express the of diesel saved since it started importance of showing respect for our production. We are continuing to look cultural heritage and remembering our for ways to expand on this success. past, for the benefit of our future.

34 REVIEW OF OPERATIONS OUR PEOPLE, OUR FUTURE ERGON ENERGY ANNUAL STAKEHOLDER REPORT 2015–16 ENERGY SCORECARD

Our carbon footprint Emissions associated with the use of electricity (Scope 2) – these emissions OUR CARBON FOOTPRINT Ergon Energy’s greenhouse gas are largely unavoidable network energy emissions total 760,761 tonnes of carbon losses, comprising around 76.3% of our dioxide equivalent. This information is carbon footprint. This figure includes based on available 2014-15 emissions real network losses and losses data as the most up to date at the time associated with unmetered supplies. of publishing. Street lighting is also a significant contributor to emissions associated with Our emissions, as per the National electricity use, estimated to be Greenhouse and Energy Reporting Act responsible for 8.4% of our footprint. 2007 (Cth), include: The electricity used across our Direct Emissions (Scope 1) – electricity operations in our 100 plus buildings generation through our 33 diesel-fired represents 2.5%. power stations, which we use to supply Ergon Energy’s operations also result in electricity to our communities isolated indirect emissions (Scope 3). These are from the main grid, accounts for 9.5% of associated with other entities, including Network losses 76% Operational our total emissions. Our remaining direct the operations of joint venture SPARQ 11% electricity use 3% emissions are mostly from fuel used in Transport and other 2% Solutions. Electricity used by our vehicle fleet. street lights 8%

Renewable energy OUR ISOLATED GENERATION STATISTICS Ergon Energy continues to support the 2011-12 2012-13 2013-14 2014-15 TREND 2015-16 establishment and growth of renewable Diesel Generation 93,213MWh 96,841MWh 100,774MWh 102,753MWh 107,433MWh generation sources. Renewable 1,602MWh 1,964MWh 2,283MWh 2,207MWh 1,672MWh For our grid connected customers, we Generation purchased over 11.5 % of our energy requirements directly from renewable Emission Reduction1 1,139tCO₂-e 1,396tCO₂-e 1,454tCO₂-e 1,502tCO₂-e 1,209tCO₂-e energy generators. 1 Based on renewable generation off-setting diesel generation. Through the 44c/kWh Feed-in Tariff (FiT) under the Queensland RENEWABLE ENERGY RENEWABLE ENERGY Government’s Solar Bonus Scheme, IN ISOLATED COMMUNITIES FOR THE MAIN GRID more than $110.4 million was credited to customers for the 372GWh of renewable energy they exported back into the grid in 2015-16. At the end of June, approximately 63% of customers on the scheme receive the 44c/kWh FiT. The remaining 37% received the regional FiT of 6.35c/kWh, which is funded separately by a customer’s electricity retailer (it rose to 7.45c/kWh from 1 July 2016). We also purchase additional Renewable Energy Certificates, to meet our liability under the Australian Government’s renewable energy targets. Our Wind 67% Bagasse 58% Large-scale Generation Certificate Solar 25% Solar 39% Geothermal 8% Wind and Hydro 3% compliance requirements for 2015-16 were equivalent to sourcing 11.9% of our customers’ energy requirements from renewable generation. We also met our We continue to use renewable energy to Our network is increasingly operating as supply our isolated systems. This year saw an open access platform for distributed compliance under the Small-scale a reduction in total renewable generation. energy resources, with power purchasing Renewable Energy Scheme by buying This was partly due to the need to upgrade agreements renewed this year with the Small-scale Technology Certificates, at a the aging Birdsville geothermal power local sugar industry, and solar exports now station, which is expected in 2017, which contributing 38% to the renewable energy level equivalent to sourcing 10.7% of our will significantly increase our renewable for the grid. customers’ energy requirements from energy output (p34). renewable energy.

REVIEW OF OPERATIONS OUR PEOPLE, OUR FUTURE ERGON ENERGY ANNUAL STAKEHOLDER REPORT 2015–16 35 Ensuring best Protecting our cultural heritage practice operations Ergon Energy remains committed to ENVIRONMENTAL INCIDENTS protecting the diverse cultural heritage Working sensitively to found in our region, and minimising protect biodiversity the impact of our works program. We continue to work closely with the We continued our high standards of Department of Aboriginal and Torres weed and vegetation management Strait Islander Partnership (DATSIP) practices this year, including the through an industry-based network continued vigilance to help protect forum of Cultural Heritage Officers. banana farms in northern Queensland The forums purpose is to set industry against the Panama TR4 disease. best practice which protects cultural We also undertook a number of specific heritage while balancing the needs for initiatives this year to protect the public infrastructure development. biodiversity of the environment. One of those projects was a streetlight trial to Minimising environmental incidents help the declining population of turtles Ergon Energy has a robust Health, in Bundaberg. Safety, Environment and Cultural Fauna and flora related 72% Heritage Integrated Management Fuel and oil spills 21% Artificial lighting near turtle nesting Excavation/other land disturbances 3% beaches can sometimes lead turtles to System (HSE IMS) that ensures Delivery and supervision of work impact 2% select sub-optimal nesting locations and appropriate planning is undertaken Other 2% can also disorient hatchlings, which can to help prevent environmental incidents. contribute to an increase in hatchling The HSE IMS also ensures effective Fauna related incidents, involving birds and mortality. Along with the Department monitoring of early trends in flying fox contacting powerlines continues environmental issues and incidents to be our most frequent environmental of Environment and Heritage Protection, incident. During 2015-16 there were we participated in a series of scientific for continuous improvement. 230 environmental incidents in total. trials at the Mon Repos turtle rookery in We maintained our certification of Bundaberg to compare various types of AS/NZS ISO 14001 Environmental standard and non-standard street lights. Management System and will be We continue to own and manage a The trials provided valuable information transitioning to the new ISO 14001:2015 number of native forest properties for to assist in future planning of public standard by late 2018. hardwood pole production in order to ensure a sustainable pole supply for lighting near turtle nesting beaches During the year, we had no serious maintenance and expansion of our and have also contributed to a decision environmental incidents or breaches network. Management plans ensure to make changes to street lights on of the Environmental Protection Act 1994 ecologically sustainable forest the Woongarra Coast. (Qld) (Class 1 or 2 incidents). management practices are used to We had one notifiable activity under This year has also seen the use of maximise forest health and pole the Duty to Notify requirement of the fauna cameras to survey for rare production, which is done on a cost Environmental Protection Act 1994, and threatened species in proposed neutral basis with the sales of non-pole where a pole transformer exploded powerline corridors. After signs of an products reinvested to fund weed releasing the contents to the ground. endangered quail were identified in management, road maintenance, fire one project, the cameras were used to There were a total of 230 incidents management and non-commercial confirm the species presence, as well as that occurred this year, with 72% thinning. The properties are also the presence of echidnas, koalas and a being fauna related incidents involving used by the University of Southern goshawk. Confirmation of fauna species birds, flying fox and small animals Queensland (USQ) students studying during initial studies ensures specific contacting powerlines. native fauna as part of their wildlife controls can be applied to minimise management studies. the impact on local wildlife during We have been improving our construction and in the long term. environmental governance around our We also continued our waste oil field-based construction activities with recycling, with 620,011 litres of waste We have also worked to create a new measures developed. This year also oil collected this year. We recovered ‘biosecurity layer’ in GIS to help identify saw the largest number of contaminated 933 tonnes of scrap metal including and manage biosecurity risks. The layer land site investigations initiated, as part copper, aluminium, steel and brass assists with identifying biosecurity issues of a project to address risks associated (which is comparable to the five year when planning for, constructing and with potential contamination from average of 1,042 tonnes), and recycled maintaining the network. It includes legacy activities. a further 1,231 tonnes of scrap metal information on various biosecurity issues from redundant transformers. including Panama TR4 areas, banana farms, cattle feedlots, declared plants Best practice use and We have also commenced a recycling (weeds) and fire ant restricted areas, to recycling of materials program for used mercury vapour name a few. The improvement helps us bulbs, following a cost benefit analysis While the quantity of materials we meet our obligations under the new in 2014-15. use is directly related to the scale of Biosecurity Act 2014 and existing Land our works programs, we are committed More than 132kg of batteries have been Protection (Pest and Stock Route to maximising the life of plant and saved from landfill following a small Management) Act 2002 for preventing equipment to make the best us of these group of dedicated employees starting the introduction and spread of pests. resources and our expenditure. a battery recycling program. It has grown through word of mouth, with This year we purchased around 14 battery recycling stations now 8,000 new poles (compared to 11,000 available across the state. in 2014-15) and 2,769 transformers (compared with 3,120 in 2014-15). We continue to look for better solutions regarding the disposal of our waste.

36 REVIEW OF OPERATIONS OUR PEOPLE, OUR FUTURE ERGON ENERGY ANNUAL STAKEHOLDER REPORT 2015–16 Delivering economic value

A prudent and efficient service remains core to our economic contribution to Queensland. This contribution flowed from price relief this year, with the charges we make for the use of the network reduced, and through other areas of our service, and in the commercial return we make to our shareholder, the Queensland Government, and ultimately tax payers.

The key services that changed with this Retail results impacted by Our financial relate to Type 5 and 6 metering and the challenging energy market performance connection of real estate developments. Our retail business, Ergon Energy Our revenue from these services is now Queensland Pty Ltd, delivered a exposed to market conditions. As an Net Profit After Tax of $134 million Investment proposal is Alternative Control Service, we are also (below the target of $146 million). delivering value actively seeking revenue for the design and construction of assets for large This result was largely due to To assist the AER in determining our customer connections (p18). challenging wholesale energy trading revenue cap for 2015 to 2020 we conditions and an increase in Renewable provided our future investment plans as A below forecast Energy Certificate costs. To manage a Regulatory Proposal in October 2014. these renewable energy costs going This informed the AER’s draft position profit result forward we have entered into a major on our revenue allowance, released agreement to purchase 170MW of in April 2015, which was reflected in Profit levels adjust to new renewable energy from a new wind our network charges in 2015-16 (p11). operating environment farm to come online in Far North Following stakeholder submissions Ergon Energy Corporation Limited Queensland (p14). and a revised proposal from ourselves, delivered a consolidated Net Profit After which saw us adjust our expenditure Tax of $443 million (below our target of The profit was supported by gains of forecasts down further with the greater the $560 million agreed in our SCI (p7) $40 million in the mark to market value confidence in our ability to realise and down on the previous year) and an of the hedges entered into to manage the efficiencies already built into our Earnings Before Interest and Tax result the purchase price risk associated with proposal, the AER then made a Final of $900 million (compared to the target electricity sales forecast for future years. Determination in October 2015. of $1,080 million). Other contributions to Our proposal was for a 17% reduction With the transition to our new revenue commercial value in our expenditure for the five years to allowance there was a forecast step Our subsidiary Ergon Energy 2020, compared to 2010-15. The AER down in the expected profit, this Telecommunications Pty Ltd determined we could reduce this by was due to the AER’s position on our (trading as Nexium), continued to another 10%. This included cuts of Weighted Average Cost of Capital, and provide commercial value through 4.6% to our operating expenditure, our capital and operating allowances. the provision of wholesale and retail and 12.9% to our capital investment high-speed fibre-optic connectivity plans. This, along with improvements in The below target element of the performance was largely due to a to the resource, transport, energy and the cost of capital, reduced our revenue government sectors. Ergon Energy allowance for the five-year regulatory drop in network connections revenue, higher wholesale energy market also continues to deliver a range of control period to $6.3 billion. This is other non-regulated services. now dictating what we can charge for costs, and the final position on our the use of the network out to 2020. operating costs. Throughout this process we have been The profit result was boosted by conscious of the need to provide price changes in the National Electricity relief while still ensuring a sustainable Rules around the treatment of the revenue stream to deliver what the costs associated with the solar Feed-in community expect from us. Our revenue Tariff. These costs are now being dealt allowance will be challenging. The AER with through Jurisdictional Scheme outcome, and changes to our works arrangements. As a result, the cost of plans, has driven a major focus this the tariff payments we actually made year on securing a more sustainable in 2013-14 were passed on this year and cost base (p33). we also collected the revenue associated with the payments we expected to make With the transition to the new under the new arrangements in 2015-16. regulatory control period, we This lag in how these expenses where have also been managing the AER’s previously dealt with, has meant there reclassification of a number of services. has been a temporary $114 million While these services have shifted from increase this year in this revenue. being Standard Control Services to In 2017-18 the collection of this revenue Alternative Control Services they are will be fully aligned with the year we still subject to pricing regulation. incur the expense. p35

DELIVERING ECONOMIC VALUE ERGON ENERGY ANNUAL STAKEHOLDER REPORT 2015–16 37 The Financial B. WHAT ARE OUR MAIN C. WHAT WAS OUR CAPITAL EXPENDITURES? INVESTMENT? Statements Our operating expenses for the year Ergon Energy delivered a $774 million explained totalled $646 million, up by $26 million. total capital investment program (down from $983 million in 2014-15). From an operational perspective, Capital projects Ergon Energy initiated This section explains the key financial we have continued to bring down were $414 million down from outcomes for Ergon Energy Corporation our cost base with our efficiency and $588 million in 2014-15. An additional Limited for 2015-16. effectiveness efforts. Payroll costs $157 million was invested into network were contained at $629 million This commentary is not intended to connections or upgrades requested by (both allocated as operating expenses be comprehensive – for full disclosures our customers. p26 please refer to the Annual Financial and capitalised) with significant Statements for Energy Queensland organisational change undertaken. Limited and its controlled Entities, Although we incurred the associated D. WHAT RETURN DO WE available online at www.ergon.com.au/ redundancy costs, by the end of the GIVE TO OUR OWNERS? annualreport year our payroll cost base had been reduced by $30 million. We also In June 2016, our shareholding Ministers On 30 June 2016, the ownership of delivered $13 million in procurement issued a direction (p49) for Ergon Ergon Energy Corporation Limited savings, while still adhering to Energy to declare and pay a dividend (and Energex Limited) was transferred procurement policy and encouraging of $476.3 million on 29 June 2016. to this new entity. Energy Queensland local sourcing. We see further This was based on 100% of Ergon Limited’s consolidated Annual Financial opportunities to address costs Energy’s forecast consolidated Net Statements provide detail on the key under Energy Queensland Limited. Profit After Tax. measures detailed here. The group’s Maintaining the dividend payments reporting also covers the overall asset Our other major expenses at this level supports the Queensland and liability position of the group, included electricity purchases, up Government’s debt reduction plan. including details of the key return, to $584 million, and transmission At the same time, the Queensland debt and equity ratios. charges paid to Powerlink Queensland, up to $354 million. Government made the $542 million ‘CSO’ payment to Ergon Energy for A. WHERE DOES OUR The Community Service Obligation the benefit of our customers. REVENUE COME FROM? payment from the Queensland Government – $542 million for 2015-16 Ergon Energy’s revenue for the financial – is treated as an offset expense of year totalled $2,474 million, a decrease the network charges (Network of $153 million compared to the prior Charges/Electricity Purchases). financial year. The Uniform Tariff Policy, and the There was a reduction in retail electricity associated ‘CSO’ payment, allows sales revenue (to $1,938 million) and Ergon Energy Queensland Pty Ltd in distribution revenue from our to sell electricity to its customers using non-retail customers (to $395 million); the same regulated electricity tariffs, and a decline in customer contributions wherever they are located, even though from connections to the network the supply cost may be different. (to $45 million). The payment was the difference between the costs to supply energy The revenue collected from customers in South East Queensland and, for for the use of our electricity distribution some our largest customers, our Eastern network (network charges) is regulated zone, and the costs to supply regional by the AER. These charges are billed Queensland customers generally. to both our retail business and the retailers of customers, who entered the contestable market in regional Queensland. The AER also regulates certain payments by our customers for capital contributions towards network extensions and other services.

38 DELIVERING ECONOMIC VALUE ERGON ENERGY ANNUAL STAKEHOLDER REPORT 2015–16 FINANCIAL SUMMARY FOR ERGON ENERGY CORPORATION LIMITED (CONSOLIDATED)

2011-12 2012-13 2013-14 2014-15 2015-16 TREND $million $million $million $million $million

A. OUR REVENUE

Revenue and Other Income 2,511 2,839 2,440 2,627 2,474

B. OUR EXPENDITURE

Network Charges/Electricity Purchases (853) (995) (481) (252) (396)

Operating Expenses (682) (615) (678) (620) (646)

Depreciation Expense (380) (430) (488) (454) (493)

Finance Charges (321) (369) (372) (310) (299)

p37 OUR PROFIT

Earnings Before Tax 275 430 421 991 640

Tax Expense (82) (122) (126) (295) (197)

Net Profit After Tax 193 308 295 696 443

C. OUR INVESTMENT

Total Capital Investment 870 872 812 983 774

D. DIVIDENDS

Dividends Provided For 256 326 392 1,9251 476

1. This was a special dividend payment as part of the Queensland Government’s Debt Reduction Action Plan.

REVENUE IMPACTED BY RESET FOCUS ON REDUCING OUR PROFIT REFLECTS AND DEMAND COST BASE REVENUE RESET $2.8 $696 $2.6 $682 $678 $2.5 $2.5 $646 $2.4 $620 $615 $443 $308 $295 $193 MILLION BILLION MILLION 1 2 2 20 1 2012 20 1 2013 2015 2013 2014 2014 2015 2016 20 1 2015 2013 2014 2016

While the AER’s Final Determination or Our efficiency and effectiveness After a profit boost last year from the ‘revenue reset, led to a drop in forecast efforts have continued to deliver results, electricity trading and savings success, revenue, the revenue actually collected was supporting a decline in our cost base this year we forecasted a step down also impacted by a drop in demand for new by the end of the year in the order of with the regulatory revenue reset process connections and the associated customer $30 million. However, the organisational (p37). We also saw falls in demand for contributions towards the electricity change underway saw a related redundancy connections, higher energy costs, and distribution network. cost incurred this year. incurred the impact of organisational change on our operating costs.

DELIVERING ECONOMIC VALUE ERGON ENERGY ANNUAL STAKEHOLDER REPORT 2015–16 39 Our corporate governance statement

Ergon Energy’s corporate governance practices are in line with the Australian Stock Exchange (ASX) Corporate Governance Principles and Recommendations, where applicable, as well as the Queensland Government’s Corporate Governance Guidelines for Government Owned Corporations.

ADDITIONAL INFORMATION IS Board charters The membership of each committee AVAILABLE ONLINE AT WWW.ERGON. The responsibilities of the Ergon Energy and the committee charters, along with COM.AU/ABOUT-US/WHO-WE-ARE/ Corporation Limited Board are outlined their key focus areas during 2015-16, is OUR-COMPANY/CORPORATE- in the Board Charter (summarised p46). outlined in the table on page 46. The GOVERNANCE The Board delegates functions to Directors’ Report, online in the Annual management. However, certain matters Financial Statements, provides the Principle 1 – Lay solid are reserved for the Board, as detailed committee meeting attendance. foundations for in the Charter, and a policy document, Delegation of Powers. These documents Executive Leadership Team management and oversight are available online. Ergon Energy’s Executive Leadership Team comprises the Chief Executive Our companies The activities of the subsidiary and seven other executives, including Ergon Energy Corporation Limited companies are overseen by their the Chief Executive of SPARQ Solutions. has two operating subsidiaries, Ergon own boards. The team is currently based in three Energy Queensland Pty Ltd and Ergon In October 2015, Ergon Energy locations, Townsville, Maryborough Energy Telecommunications Pty Ltd, Queensland Pty Ltd’s Board, which was and Brisbane. as well as a joint venture with Energex previously made up of senior executive Our focus on reducing costs and Limited – SPARQ Solutions Pty Ltd. p3 members, was reappointed with three our future sustainability, including Since 30 June 2016, as a result of non-executive directors creating an preparations for the merger, led to the Government Owned Corporations independent board. The members are significant changes within the leadership (Energy Consolidation) Regulation 2016, Ergon Energy Corporation Limited team during 2015-16. Most notably, in Ergon Energy Corporation Limited directors’ Gary Stanford (Chairman) February 2016, Ian McLeod left the has become a subsidiary of Energy and Gary Humphrys and a new director, organisation with his contract as Chief Queensland Limited. While it is Rod Wilkes, an experienced energy Executive ending. This saw Roslyn Baker no longer a Government Owned industry professional. Rod played a step into the role, in an acting capacity, Corporation, it remains a public, leading role in industry reforms in New from her position as Executive General unlisted company. South Wales, Tasmania and the Northern Manager Retail. The other changes to Territory, and has extensive experience the executive (all made in an interim Prior to the 30 June, when it was a in market deregulation, retail and capacity due to the pending merger) Government Owned Corporation, its network separation, and establishment were critical to allowing attention to shares were held by two shareholding of competitive energy retailers. be focused on key delivery areas, for Ministers on behalf of the Queensland different members to participate in Government (Honourable Curtis Pitt, Ergon Energy Telecommunications the merger preparations, and for the Treasurer, Minister for Aboriginal and Pty Ltd Board is made up of executive changes in functions and reporting Torres Strait Islander Partnerships and members: Roslyn Baker and lines needed to take us forward into Minister for Sport and Honourable Mark Peter Effeney. the new entity. Bailey, Minister for Main Roads, Road The Board of SPARQ Solutions Pty Ltd Safety and Ports and Minister for has detailed shareholder agreements The performance of the team is Energy, Biofuels and Water Supply). that guide the governance of this evaluated annually. The Board sets the key performance measures for It is governed by the provisions of the company with its board. This board the Chief Executive for the year, in line Corporations Act 2001 (Cth), except comprises one independent with the Statement of Corporate Intent (during its time as a Government Owned non-executive director, Adam Aspinall (p7), and reviews the performance of the Corporation) as otherwise provided by (who is also on the Board of Ergon Chief Executive and the Ergon Energy the Government Owned Corporations Energy Corporation Limited), as the group based on these agreements. Act 1993 (Qld). Moving forward Energy Chairman and executive members from This process then cascades through Queensland Limited, as the Government both Ergon Energy Corporation Limited the Chief Executive to the Executive Owned Corporation, will be required to and Energex Limited. Leadership Team. meet the obligations of the Government Board committees Owned Corporations Act 1993 (Qld). Investment review functions To assist with the discharge of directors’ Ergon Energy Corporation Limited’s duties, the Board has four committees to For the development and prioritisation electricity distribution responsibilities consider, and respond to specific of investment programs, the Board and are outlined under its Distribution governance and organisational the Executive Leadership Team are Authority and the Electricity Act performance matters or risks, many of supported by various internal approval 1994 (Qld). which are linked intrinsically to regional processes, including the Investment Queensland sustainability challenges Review Committee (IRC) and the (such as electricity affordability, future Network Investment Review Committee infrastructure investment, community (NIRC), and a range of assessment tools. safety, environmental matters, workplace health and safety and continued on page 47 other people-related issues).

40 OUR CORPORATE GOVERNANCE STATEMENT ERGON ENERGY ANNUAL STAKEHOLDER REPORT 2015–16 Our governance framework

Energy Queensland Limited Board and Management Team

Boards of the Ergon Energy Group

Ergon Energy Corporation Limited

Subsidiaries • Ergon Energy Queensland Pty Ltd • Ergon Energy Telecommunications Pty Ltd (Nexium Telecommunications)

Incorporated Joint Ventures • SPARQ Solutions Pty Ltd (50% owned)

Board Committees • Audit & Financial Risk Committee • Operational Risk Committee • Establishment & People Committee • Regulatory Committee

POLICIES AND PROCEDURES Chief Executive

Executive Leadership Team

Business units REVIEW FUNCTIONS / INVESTMENT RISK MANAGEMENT

Network Optimisation (incl Nexium Telecommunications) INDEPENDENT REPORTING INDEPENDENT

People & Culture Retail

Customer Service Finance & (network) Corporate Services

SPARQ Solutions Internal Audit, Business (Office of the Chief Risk & Compliance Information Officer)

OUR CORPORATE GOVERNANCE STATEMENT ERGON ENERGY ANNUAL STAKEHOLDER REPORT 2015–16 41 The Board of Directors

CLIVE SKAROTT AM GARY HUMPHRYS ADAM ASPINALL Dip.FM AM FAICD FAMI CA GAICD BE GAICD CPEng

CHAIRMAN DEPUTY CHAIRMAN INDEPENDENT NON-EXECUTIVE Independent Non-Executive Director Independent Non-Executive Director DIRECTOR

First appointed First appointed First appointed September 2015 October 2009 October 2015 Term in office 1 year Term in office 7 years Term in office 1 year Clive Skarott has had extensive experience Gary Humphrys brings to Ergon Energy’s Adam Aspinall is a mechanical engineer developing and managing regional businesses Boards more than 40 years of experience in with more than 35 years’ experience in in a variety of industries. Born in Atherton, the energy and mining industries. A chartered electricity generation, transmission, North Queensland, he gave 35 years of accountant, he has held senior executive roles remote supply networks, distribution, service to the Electricity Credit Union (ECU), in both the private and public sectors across retailing and market trading in Australia serving as CEO and Company Secretary a range of disciplines, including finance and and overseas. As the power sector lead before retiring in 2008. Clive was named accounting, treasury, taxation, information with global consulting firm Advisian, Cairns’ Citizen of the Year in 2011, and in 2012 and technology, procurement, risk Adam also brings expertise with was made a Member of the Order of Australia management and audit. In recent years, Gary regulatory authorities, infrastructure for his contributions to export, tourism, held board and related committee roles in the owners, fuel supply companies and major banking, sport and education. Clive is the water, energy, mining and health industries. contractors to the Ergon Energy Board. Patron of Advance Cairns, Director of Energy He is currently a director of St Vincent’s Adam’s broad experience in the electricity Super, and has undertaken board and related Health Australia Ltd and H.E.S.T Australia Ltd. industry has recently led to him being roles at James Cook University. He is currently engaged as an expert on international Chairman of JCU Dental and JCU Founders contract arbitrations. He previously led Committee Cairns Campus and President production and business development of the Cairns Historical Society and the functions at CS Energy, and worked Cairns Museum. in the UK with the National Grid’s interconnections division. Adam is the Chairman of SPARQ Solutions Pty Ltd.

42 OUR CORPORATE GOVERNANCE STATEMENT ERGON ENERGY ANNUAL STAKEHOLDER REPORT 2015–16 GARY STANFORD DR LORRAINE STEPHENSON FTSE MAppFin DipAppFin BCom GAICD BSc (Hons) MBA PhD GAICD

INDEPENDENT NON-EXECUTIVE INDEPENDENT NON-EXECUTIVE DIRECTOR DIRECTOR

First appointed First appointed December 2014 October 2015 Term in office 1 year Term in office 1 year 9 Months Gary Stanford has had a wealth Lorraine Stephenson has over 30 years’ of management experience in the energy experience in energy, infrastructure, industry gained through numerous senior agribusiness and R&D. She was formerly a and executive level roles in Boral Ltd, Origin Partner at EY and held senior executive roles Energy Ltd and, more recently, Alinta Energy. at , Boral and Caltex. Lorraine Over his career he has held responsibilities was the first Chief Clean Energy Advisor to in wholesale energy trading, gas and the Queensland Government. As the principal electricity contracts, retail pricing, risk consultant of Lightning Consulting Services, management, acquisitions, government Lorraine now advises major local and relations and stakeholder communications. international industries on energy, climate He has also previously been on the board of change and strategic sustainability issues. Retail Energy Market Company Pty Ltd Lorraine has been an active participant (REMco), the gas retail market operator for in UNFCCC meetings since 2000 and is Western Australia, and South East Australia currently a Non-Executive Director of Good Gas Pty Ltd (Seagas). Environmental Choice Australia, a member of the NSW Climate Change Council, a Fellow of the Australian Academy of Technology and Engineering and member of the Technical Advisory Board, Energy Action Pty Ltd.

CHANGES TO THE BOARD John Gardner brought an extensive John Love brought to the board his The Board had a number of new background in both private and public perspective as a licensed electrical appointments, including Clive Skarott as sectors to the board. His experience covered contractor with extensive experience Chairman, which saw Gary Humphrys return banking, finance, governance, technology, in electrical contracting and reticulation, to his previous role as Deputy Chair. The utilities, business services and economic as well as his experience in the management following Board members resigned during development, in the Northern Territory, of large-scale commercial and industrial 2015-16. Their full profiles are provided in Queensland and Victoria. As well as executive construction projects. He was the founding the Directors’ Report available online. and senior technical appointments in director of John Love Electrical, Australia, he has worked overseas which grew to be one of Queensland’s assignments in Canada and the USA, largest privately-owned electrical where he studied at Harvard University. contracting companies.

OUR CORPORATE GOVERNANCE STATEMENT ERGON ENERGY ANNUAL STAKEHOLDER REPORT 2015–16 43 Our Executive Leadership Team

ROSLYN BAKER PETER BILLING PAUL JORDON TONY PFIEFFER BCom(Accounting) MBA Dip.FM BE CPEng RPEQ FIEAust GAICD GAICD

CHIEF EXECUTIVE (ACTING) EXECUTIVE GENERAL EXECUTIVE GENERAL EXECUTIVE GENERAL MANAGER, NETWORK MANAGER, CUSTOMER MANAGER, RETAIL OPTIMISATION (ACTING) SERVICE (ACTING) (ACTING)

Roslyn Baker is responsible for the Peter Billing is responsible for Paul Jordon is responsible for Tony Pfeiffer is responsible for business’ overall direction and, the safe, efficient and effective the customer service elements of Ergon Energy’s electricity retailing ultimately, for our ability to deliver utilisation of Ergon Energy’s our network business, and for the business and oversees retail value over the longer-term for our electricity distribution and safe and efficient operation and strategy, energy procurement, customers and the community, associated communications maintenance of the distribution retail corporate services, retail and to meet the financial networks and, where necessary, network. He is also responsible operations and customer service. objectives of our shareholders. the delivery of new major for supply to our isolated Tony brings 30 years of industry Roslyn has 18 years’ experience in infrastructure projects or communities, and the commercial experience in business strategy, managing transformational other non-traditional solutions. delivery of modular infrastructure economic regulation, operation, change across a diverse range of He brings a wealth of industry, and generation solutions. Paul construction, asset management industries. During her career, leadership and change brings with him a breadth of and business performance in the Roslyn has held senior management experience to distribution and retail experience electricity utility industry. He was management and board positions the executive, from trade roles and skills having worked in involved in the initial formation of within the education, dairy and to management. Peter was Distribution entities for over the National Electricity Market petroleum sectors. She currently directly involved in the 30 years, leading Ergon Energy’s and development of the National holds a position on the Committee deregulation of the electricity Customer Service Retail arm and Electricity Code. He is a for Regional Development industry in South Australia in providing distribution consultancy Non-Executive Director of Enova Australia (Townsville and North the 1990s. He is on the board of services internationally in the past. Community Energy and a board West Queensland). Within Ergon Energy Skills Queensland. member on the Australian Power Energy she is the Chair of Ergon Institute and the Queensland Energy Telecommunications Pty Geothermal Energy Centre of Ltd and is a director of SPARQ Excellence Advisory Board. Solutions Pty Ltd.

44 OUR CORPORATE GOVERNANCE STATEMENT ERGON ENERGY ANNUAL STAKEHOLDER REPORT 2015–16 ROD WILLIAMS BELINDA WATTON PETER EFFENEY BBus (Accounting) MBA MEcSt B.Com, M App Law, Grad Cert BEng(Hons) BSc MBA HonDBus CPA App Fin, GAICD CQU FAICD

EXECUTIVE GENERAL EXECUTIVE GENERAL CHIEF EXECUTIVE MANAGER, FINANCE AND MANAGER, PEOPLE AND SPARQ SOLUTIONS CORPORATE SERVICES CULTURE (ACTING) (ACTING)

Rod Williams is responsible Belinda Watton is responsible Peter Effeney is the Chief for managing the financial for the people and culture Executive Officer of SPARQ and commercial aspects of functions of the business Solutions Pty Ltd, Ergon Energy’s the business – this includes incorporating human resources, Information and Communications responsibility for the strategy organisational culture, health, Technology (ICT) joint venture and regulatory functions, along safety and environment and with Energex. As the Chief with our legal counsel and risk employee communications. Information Officer, his and assurance program, and Belinda brings extensive responsibility is to ensure strategic procurement. Rod is experience from executive Ergon Energy’s ICT strategy, also responsible for the roles in various public, private architecture and investment and corporation’s customer and and not for profit organisations. SPARQ Solutions’ ICT services external stakeholder engagement, Her expertise includes strategy are aligned with the business’ and shared services functions. development, organisational, strategic priorities, and deliver He is focused on driving business leadership and talent maximum value. Prior to leading performance to deliver greater development, developing the formation of SPARQ customer value and strong and leading high performing Solutions, Peter held various commercial outcomes. He brings cultures, as well as industrial management, engineering and with him over 30 years of relations, stakeholder and ICT roles within Ergon Energy. experience both within Ergon remuneration management. Energy and in the private sector Belinda also has expertise in covering a range of industries, corporate communications. including manufacturing, mining and construction.

OUR CORPORATE GOVERNANCE STATEMENT ERGON ENERGY ANNUAL STAKEHOLDER REPORT 2015–16 45 FOCUS OF THE BOARD AND THE BOARD COMMITTEES

MEMBERSHIP SUMMARY OF CHARTER FOCUS IN 2015-16

Ergon Energy Corporation Limited Board Current Members • Responsible for the strategic direction • Overseeing ongoing organisational reforms members: during year: of the organisation. and driving operational efficiencies through C Skarott* J Gardner • Ensures the corporate governance the business. G Humphrys J Love required to monitor operational, safety, • Continued to support the Queensland A Aspinall environmental, social and financial Government’s industry reforms and evolving performance and reports to the market reform agenda. G Stanford Shareholding Ministers. • Monitored the corporate risks associated L Stephenson • Delegates authority to the Chief with the high level of uncertainty in the Executive, management and employees. current operating environment. Ergon Energy Queensland Pty Ltd Board Current • Responsible for setting our Retail • Reviewing the Retail business risk profile and members: business objectives and plans under the governance framework. Gary Stanford* corporate strategy. • Overseeing the renewable energy Gary Humphrys • Approves Ergon Energy Queensland purchasing process and Ergon Energy’s Rod Wilkes Pty Ltd policies, performance electricity trading activities. assessment and governance risks. • Oversaw the implementation and transition to the new retail customer billing system. Audit and Financial Risk Committee Current Members • Approves and monitors Ergon Energy’s • Reviewed reports re solvency and the members: during year: internal audit program. integrity of financial systems/controls. G Humphrys* J Gardner* • Provides ongoing assurances to the • Reviewed and recommended approval of G Stanford Board that its obligations are being met the annual Internal Audit Plan and a range L Stephenson in relation to: of external and internal audit reports. C Skarott^ • financial integrity • Oversaw compliance with the conditions of • financial risks the Australian Financial Services Licence. • regulatory reporting • Noted the direction to pay a dividend for 2015-16 in June. p49 • compliance issues. • Reviewed and recommended approval of the Financial Statements. Operational Risk Committee Current Members • Assists the Board in its response to • Reviewed and recommended approval of members: during year: business and operational risks and amendments to the Risk Management A Aspinall* J Love* oversight responsibilities in relation to: Policy. p49 G Stanford J Gardner • health and safety, including • Reviewed updates on Health, Safety & community safety Environment organisational risks. L Stephenson G Humphrys • environmental risks • Reviewed and recommended approval of C Skarott^ • risk exposure amendments to the Corporate Risk Profile. • insurance and claims management. • Endorsed and recommended approval of the Insurance Program for 2015-16. Establishment and People Committee Current Members • Assists in developing a strategic, • Endorsed the Employee & Industrial members: during year: long-term and sustainable approach Relations Plan for 2016-17 for submission L Stephenson* J Love* on issues relating to people working to the Queensland Government. for Ergon Energy. A Aspinall J Gardner • Oversaw extension of acting executive • Fulfils the Board’s oversight appointments and development of initiatives G Humphrys responsibilities in relation to remuneration; for the Executive Leadership Team. p40 C Skarott^ performance management; industrial • Reviewed succession planning, performance relations; employee engagement; management, professional development and organisational culture; and learning the voluntary retrenchment programs. and development. Regulatory Committee Current Members • Assists the Board to fulfil its corporate • Reviewed the Network Tariff members: during year: governance and oversight responsibilities Structure Statement. G Stanford* J Gardner* by reviewing and reporting on the due • Oversaw the preparation of the submission diligence process conducted in relation A Aspinall to the AER of the Annual Performance, to the preparation and outcomes of Economic Benchmarking and Category. G Humphrys regulatory proposals. • Analysis and Regulatory Information Notice. C Skarott^ Reviewed compliance with the National Energy Customer Framework and strategies for improving compliance. p16 & 49

* Chair of Committee ^ Ex-officio member.

46 OUR CORPORATE GOVERNANCE STATEMENT ERGON ENERGY ANNUAL STAKEHOLDER REPORT 2015–16 continued from page 40

The IRC is Ergon Energy’s peak While Ergon Energy Corporation As necessary in the performance of investment governance committee Limited’s Board has a number of its duties, the Board has the authority providing strategic oversight and committees, discussed in detail in this to initiate investigations or retain stewardship of Ergon Energy’s entire statement, it does not have a nomination services, such as legal or accounting capital and operating investment committee. The current directors were services, from time to time, at the portfolio. The committee ensures appointed for a set term of office by company’s expense. Individual directors’ the appropriate balance across our Queensland’s Governor-in-Council, Code of Conduct also provides for investment portfolio, between network in accordance with the Government each director to have the right to seek asset-related investments, customer Owned Corporations Act 1993 (Qld). independent professional advice at the service improvement, product and This acts as a review mechanism for company’s expense, subject to the asset research and development and enhancing Board performance, allowing approval of the Chairman. business transformation. new members to be selected on a A Deed of Access and Indemnity regular basis, for their expertise and The IRC delegates part of its oversight with each director gives them right ability to contribute on behalf of our responsibilities to the NIRC, as its of access to all documents that were regional Queensland customer base. sub-committee. The NIRC scrutinises provided to them during their term all significant network asset-related Assessing Board performance in office, for a period of 10 years capital investment proposals to after ceasing to be a director, and to ensure they adequately address risk Ergon Energy’s governance framework indemnify them to the extent allowed management, performance outcomes, requires that the Board reviews its own by law, in respect of certain liabilities sustainability, and efficiency. performance, and that of the Board that they may incur as a result of, or committees, on a regular basis, to by reason of, being a director. During the year, our governance ensure they are working effectively. processes were central to The focus of the directors has been on formulating our detailed two-year the success of the Board in setting the Principle 3 – Act ethically works plan, following the AER’s corporate direction and monitoring and responsibly Final Determination. p26 achievement of strategic objectives, as well as on ensuring the effectiveness of It is a fundamental principle of Ergon Energy to conduct all business Principle 2 – Structure the committee roles, key relationships and governance processes. activities legally, ethically and with strict Board to add value observance of the highest standards of The Board has operated effectively, and integrity and propriety. Independence of directors managed the uncertainty associated Ergon Energy Corporation Limited’s with the merger of Ergon Energy Code of conduct and disclosure Board consists of five non-executive Corporation Limited, Energex Limited of interests directors and Ergon Energy Queensland and SPARQ Solutions under the holding This principle is implemented through Pty Ltd’s Board consists of three company Energy Queensland Limited the Ergon Energy Corporation Limited non-executive directors. p42 & 40. from 30 June 2016. In light of the Board Charter and Directors’ Code ongoing uncertainty, the Board has of Conduct, and Conflict of Interest All of these directors are considered to continued to adopt a business as usual Guidelines. The subsidiary boards have be independent. This assessment is approach. In light of the merger, the adopted the Directors Code of Conduct made by the Board on a case-by-case Board did not undergo an external applicable to the Ergon Energy basis against the seven criteria listed review of its performance during Corporation Limited Board. The Board in the ASX Corporate Governance the year. of SPARQ Solutions Pty Ltd has a Principles and Recommendations that Corporate Governance Manual, which reference relationship materiality. The effectiveness of the Board of Ergon Energy Queensland Pty Ltd, includes a Code of Conduct based on The directors of Ergon Energy our retail business, is also being those approved by its shareholders. Telecommunications Pty Ltd are internally monitored. Each director is expected to have regard executives of Ergon Energy and are for these practices and policies in the not independent. SPARQ Solutions Pty Access to information and performance of their duties as a director Ltd has five directors, four of which are quality advice of the company. executives of Ergon Energy or Energex The directors have unfettered access and therefore not independent, and one to the information and records relevant The Corporations Act 2001 (Cth) applies of whom is an independent director who to the Board, in effectively discharging to all of the companies in the Ergon is also on the Board of Ergon Energy their duties in accordance with the Energy group; accordingly, the statutory Corporation Limited. requirements under the Government duties of directors apply. The Boards Owned Corporations Act 1993 (Qld) follow normal procedures for the and the Corporations Act 2001 (Cth). disclosure of directors’ standing The appropriateness of Board agendas interests and material personal interests, and papers are reviewed on an ongoing and how to deal with them. All new basis with a formal annual review. declarations of interest are brought to Directors also have access to the the attention of the other directors. Company Secretary on any matter relevant to their role.

OUR CORPORATE GOVERNANCE STATEMENT ERGON ENERGY ANNUAL STAKEHOLDER REPORT 2015–16 47 Ergon Energy’s employees are expected Principle 4 – Safeguard Strategic planning and to act appropriately and practice reporting cycle ethical behaviour. This expectation integrity in corporate reporting Ergon Energy documented its is outworked through the Code of corporate performance commitments Conduct Standards. Our Code, which Ergon Energy has a robust structure for the financial year within its Statement applies to all employees, is available on to independently verify and safeguard of Corporate Intent (see summary p7). the intranet and is reinforced regularly the integrity of our financial reporting, These commitments formed the through our learning and development as well as a comprehensive internal basis of quarterly reporting to our programs, and employee engagement. and external audit process, of which shareholding Ministers. the Audit and Financial Risk Committee Our strategic planning framework is Reporting breaches of conduct has oversight. The Committee’s charter illustrated here, as it relates to our Ergon Energy continues to operate and focus for the year is provided key public documents that support the FairCall Service, established in 2003, on page 43. The role of the Chair transparent public disclosure of Ergon as a means by which staff, contractors of the Committee is not held by Energy’s performance. Ergon Energy’s and members of the public can report the Board Chair. unethical conduct, breach of corporate longer-term strategic planning cycle policy – such as the Code of Conduct The Chief Executive provides aligns with the distribution business’ – or suspected fraud. The service is representation, through the Audit five-year regulatory control period. independently operated and reflects and Financial Risk Committee, to the The year in review was the first year of the principles embodied in the Public Board that the Financial Statements the AER’s Final Determination 2015-16 Interest Disclosure Act 2010 (Qld), and Directors’ Report are a true and to 2019-20 (p37). fair view and in compliance with and various whistleblowers’ protection Our Distribution Annual Planning reporting standards. standards, ensuring fairness to Report, which is published at the all concerned. As per the provisions of the same time as this report, details our All allegations lodged using the Auditor-General Act 2009 (Qld), the rolling five-year asset management plan. FairCall Service are referred to the Queensland Auditor-General is the Published online, it details how Ergon Senior Internal Auditor for investigation external auditor for Ergon Energy Energy is managing and developing and, where these are substantiated, Corporation Limited and its subsidiaries. its network, with the objective of appropriate disciplinary measures The Audit and Financial Risk Committee delivering an adequate, economical, are applied. During the year, eight review the performance of the external reliable and safe connection of allegations were received; after audit annually. electricity supply to our customers. investigation no disciplinary action It provides further analysis of the was required. Principle 5 – Make timely performance of the network. The Senior Internal Auditor is also and balanced disclosure Privacy and right to information the liaison officer for referring any Disclosure to shareholders Ergon Energy has an obligation to suspicions of corrupt conduct to the protect the personal information of Crime and Corruption Commission, During the year, the Board had reporting individuals collected and used during as required of government-owned and disclosure obligations to the its operations, in accordance with the corporations by the Integrity Act 2009 shareholding Ministers under the Privacy Act 1988 (Cth). To prevent (Qld), as well as overseeing any Government Owned Corporations misuse, interference, loss, unauthorised investigations and reporting of the Act 1993 (Qld), as well as under the access, modification or disclosure, strict findings/outcomes. Ergon Energy’s Corporations Act 2001 (Cth). These data security systems and procedures Fraud and Corrupt Conduct Policy, obligations were outworked through are in place around the collection, Employees’ Code of Conduct Policy, Disclosure to Shareholders Policy, access, use, disclosure and storage Employees’ Code of Conduct Standards and a Communications Strategy of personal information. Procedure and Reportable Conduct Guideline, ensuring the Queensland Guidelines support the commission’s Government is kept informed of Ergon Energy manages applications for legislative power to investigate material matters. Going forward these access to documents in accordance with suspicions of corrupt conduct. obligations will be outworked through the Right to Information Act 2009 (Qld) Energy Queensland Limited. and the Information Privacy Act 2009 Supporting diversity at board level (Qld). Also, in accordance with the Right and in the workplace Ergon Energy also has established to Information Act 2009 (Qld), policies and practices that specifically Ergon Energy publishes on its website As part of the board-appointment cover our government communication process, shareholding Ministers consider disclosure log access decisions, which obligations around performance are considered to be of significant diversity when reviewing the register of targets, public safety, probity, suitable board candidates. interest to the wider public and do occupational health and safety, not contain personal information. In the workplace, Ergon Energy has employment practices, privacy The process for individuals to apply a diversity policy, which is implemented and environmental protection. for information and summary through the diversity program as a information of documents released is part of Ergon Energy’s people strategy, found at www.ergon.com.au/ about-us/ to support an inclusive workplace contact-us/right-to-information culture. p31

48 OUR CORPORATE GOVERNANCE STATEMENT ERGON ENERGY ANNUAL STAKEHOLDER REPORT 2015–16 ANNUAL STRATEGIC PLANNING AND REPORTING CYCLE

STRATEGIC PLAN CORPORATE STATEMENT QUARTERLY ANNUAL REPORT PLAN OF CORPORATE INTENT REPORTS

Articulates our Outlines our Our performance agreement Performance Tabled in stakeholders’ priorities and with our shareholding Ministers. across our key parliament and expectations, the performance The 2015-16 Statement of Corporate result areas is used to publicly challenges, and measures for the Intent, summarised on page 7, is reported to our communicate our our longer-term next five years. tabled in Parliament with this Annual shareholding performance and response. Stakeholder Report. Ministers. future challenges.

DISTRIBUTION ANNUAL PLANNING REPORT

A public document that ASSET NETWORK provides visibility of our MANAGEMENT VISION network investment plans PLANS and network constraints.

PUBLIC DOCUMENTS DEMAND AND ENERGY DEMAND AND ENERGY MANAGEMENT MANAGEMENT PLAN OUTCOMES REPORT

Details our demand management Presented to the Queensland Government program and its objectives. and published online.

Principle 6 – Respect the including the organisation’s overall The earlier directions relevant to the efficiency and effectiveness. financial results of the corporation in rights of security holders 2015-16 include: Ergon Energy respects the rights of Directions and notifications • a direction given in May 2013, under its shareholding Ministers, as the Under the Government Owned the Electricity Act 1994 (Qld), to ultimate owners of the business, and Corporations Act 1993 (Qld), the reserve implement new wholesale electricity commits to work in collaboration with powers of the shareholding Ministers supply arrangements for Ergon the government to deliver the best provide that they may, in the public Energy’s retail electricity load. outcomes for our customers and the interest, notify Ergon Energy of a The new market-based wholesale Queensland economy. public sector policy that is to apply to energy procurement arrangements the corporation. In addition, under that were implemented for a four-year Government shareholder Act the shareholding Ministers may term from 2013-14. The precise communications request information, and issue directions financial impact of the direction is The Chairman met regularly with including directions to amend the considered to be commercially our shareholding Ministers and their SCI and directions to pay a specified sensitive information. representatives, as part of a broader dividend. Directions can also be given • a direction from April 2015, pursuant government engagement program, to under the Electricity Act 1994 (Qld). to the Electricity Act 1994 (Qld), for ensure active dialogue throughout the In June 2016, as part of the process to Ergon Energy to provide information year. This ensures the operation and consolidate Ergon Energy Corporation and assistance to the Electricity strategic direction of the business is Limited under our new parent entity Mergers Working Group in its consistent with the Queensland Energy Queensland Limited, a number deliberations. This led to a number of Government’s energy policy and of directions were made: requests being made in 2015-16 under broader objectives, and generally this direction to progress the merger. meets shareholder expectations. • under the Government Owned Corporations Act 1993 (Qld) (section • a direction was issued in June 2015, During the year we also operated 131), Ergon Energy was directed to pursuant to the Government Owned under a comprehensive reporting pay a dividend for 2015-16 on 29 June Corporations Act 1993 (Qld) (section regime, prescribed by the Government 2016 of $473.6 million (due to the 131) for Ergon Energy to pay a Owned Corporations Act 1993 (Qld), and planned transfer of shares to Energy dividend comprising 100% of GOC Amendment Regulation (No. 2) Queensland Limited on the 30 June profits for 2014-15. (2009), as well as other mechanisms. 2016). p38 This is supported by teams dedicated to managing the business’ government and • under the Government Owned regulatory relationships, and to Corporations Act 1993 (Qld) (section responding to reporting requests. 86), a direction was given to amend our subsidiary constitutions to deal The content of Ergon Energy’s annual with the appointment of directors reporting suite is one of many reports and company secretaries. which endeavours to enable our government shareholders to have an informed assessment of our operations,

OUR CORPORATE GOVERNANCE STATEMENT ERGON ENERGY ANNUAL STAKEHOLDER REPORT 2015–16 49 Principle 7 – Recognise • Insurance Program: this year’s Ergon Energy’s financial systems, renewal of the program ensured processes and controls are audited and manage risk cost-effective coverage of the by the Auditor-General of Queensland. organisation’s insurable risks, and The company’s financial results and Our risk management framework ongoing endorsement of the program position are consolidated into the Ergon Energy recognises that effective by the Board. Energy Queensland Limited group risk management and compliance • Corporate Risk Profile and Business annual financial statements, which frameworks are necessary to meet Unit Risk Profiles: These were are also audited by the Auditor-General the expectations of its shareholding updated. This included a review of of Queensland. Ministers, customers, the community against Ergon Energy’s Corporate and other stakeholders. Fundamental The scope of our internal audit function Plan and business unit plans to to this is that our directors and covers all of Ergon Energy’s operations, ensure alignment. management are able to demonstrate either directly or through the co-sourced an understanding of the business risks • Risk Assurance Maps: These internal audit provider contracted by and compliance obligations and that continued to be used to show the the organisation or its subsidiaries. these are being efficiently and assurance activities performed in Our internal audit function helps us effectively managed. relation to key corporate risks and to accomplish our objectives by bringing progress the internal audit plan. a systematic, disciplined approach to To give effect to its risk management evaluate and improve the effectiveness The key compliance matters for and compliance commitments, Ergon of risk management, control and 2015-16, which are discussed elsewhere Energy has established policies on these governance processes. The Ergon in the report, include network reliability and other areas (eg. Health, Safety and Energy Internal Audit Charter is standards (p16); Guaranteed Service Environment) and implemented a risk established by the authority of the Levels (p16); network planning (p25); management framework based on the Ergon Energy Audit and Financial safety performance (p29); renewable Joint Australia/New Zealand Risk Risk Committee. Management Standard: AS/NZS ISO energy targets (p35); and environmental 31000:2009, and a compliance program incidents (p36). This year’s plan included audits of retail trading, Field Force Automation, based on the Australian Compliance With NECF coming into effect in project management – network projects, Standard AS ISO 19600:2015. Queensland in July 2015 we also project management and governance – had a compliance focus on the Ergon Energy also has a Standard for Strategic Projects, Executive at-risk framework’s new customer-related Corporate Risk Management, Corporate performance payment process, obligations. From a retail perspective, Risk Management Guidelines and WorkCover Qld claims and associated the customer protections include Corporate Risk Assessment Tables. payroll entries, fixed assets, payroll, hardship assistance (p20), meter reading The standard sets out the principles corporate card, billing of external and billing timeframes and the use of that Ergon Energy’s management works and an audit of ASX Corporate card-operated meters (p21). Breaches needs to follow to achieve effective Governance Principles. These reviews were reported quarterly to the AER, risk management. The tables, used in focused on documenting and testing and at the time of finalising this report, conjunction, provide uniform risk key management controls. management criteria to support the AER have not taken any further consistent risk-based assessments. action. From a distribution perspective, The Group Manager Risk, Assurance The standard, guidelines and tables are the framework includes the and Investment reports for reviewed annually to ensure they remain de-energisation and re-energisation of administrative purposes to the Chief appropriate to the needs of the business. premises, life support registration, and Financial Officer but retains unrestricted the notification of planned interruptions. access to the Chief Executive to discuss Risk management activities Breaches were reported here and the any matter relating to the finances or and compliance AER issued two notices. Improvements operations of Ergon Energy. Internal have been made to our processes to Audit also ensures its independence During 2015-16 the following risk ensure compliance (p17). by reporting to the Audit and Financial management and compliance activities Risk Committee on progress against were undertaken: Further, Ergon Energy Queensland Pty the Internal Audit Plan and resolution Ltd complied with the risk appetite of • Organisational Resilience Framework: of issues raised in reports. The Group the Board, as detailed in the Energy This was reviewed and updated to Manager Risk, Assurance and Commodity Risk Management Policy. reflect an ongoing focus on the Investment also has access to the standards relating to organisational Board through the Audit and Financial External and internal audit resilience and crisis management. Risk Committee Chair. Ergon Energy submits to a number of • Risk Management Framework: a external audits in pursuit of world-class review of the framework supported practice and, in some cases, to gain or assurances to the Board by the Chief retain the certification required to do Executive and Chief Financial Officer, business, such as Quality Assurance ISO in accordance with section 295A 9001 certification for our Transmission of the Corporations Act 2001 (Cth), and Project Services. Other audits we that the framework is founded regularly undergo include Australian on a system of risk management Standard 4801 Occupational Health and internal control and that it is and Safety, Electrical Safety Legislation, operating effectively in all material International Customer Service respects in relation to financial Standards and Environmental Standard reporting risks. ISO 14001. These audits provide external assurance of the performance statements made in this report.

50 OUR CORPORATE GOVERNANCE STATEMENT ERGON ENERGY ANNUAL STAKEHOLDER REPORT 2015–16 Principle 8 – Remunerate Non-executive directors are remunerated separately from Additional fairly and responsibly the executive. Directors’ emoluments, Ergon Energy recognises that to attract as a board or committee member, are information and retain the personnel necessary to set by the Queensland Government. deliver on the company’s strategic plan Reimbursement is made for expenditure Entertainment and hospitality and achieve its vision, salaries and salary incurred in performing their roles as In furthering Ergon Energy’s business packaging must be competitive, flexible directors of the company. Non-executive interests, and working to achieve its and performance orientated. directors of the company do not corporate goals, from time to time participate in any variable reward or entertainment and hospitality is As part of our human resources policy, at-risk plan and are not eligible for provided to employees, clients, we have a total employment offering retirement or other benefits other than customers and community groups. considered to be attractive by both for statutory superannuation. Executive Reasonable limits have been maintained prospective and current employees and directors do not receive additional during 2015-16 for total event representative of the expectations of payment for their role as director of expenditure and expenditure per head. our community. This policy is designed any of our subsidiary companies. to attract high calibre employees, At the request of shareholding Ministers, retain employees, incorporate current The Board’s Establishment and People the SCI includes information on industry benchmarks and ensure Committee assists in developing a Corporate Entertainment and employees are aware of what they strategic, long-term and sustainable Hospitality. For 2015-16, the following need to do to contribute to team and approach on issues relating to people entertainment and hospitality expenses organisational goals. working for Ergon Energy. over $5,000 were:

Performance agreements are Details of remuneration to non-executive Event Investment based on the strategic objectives directors and executives, and at-risk Employee Christmas Function $6,390 of the organisation. Executive payments are reported in the Annual – Cairns compensation is disclosed in the Annual Financial Statements (available online), Employee Christmas Function $8,430 Financial Statements. To encourage consistent with the requirements – Townsville of Australian Accounting Standard Employee Christmas Function engagement our leaders have ‘at-risk’ $9,930 performance payments as part of their AASB 124. – Rockhampton Employee Christmas Function remuneration. This allows them to share $7,260 – Toowoomba in the success when we do well and to Employee Christmas Function $6,450 better appreciate the implications when – Brisbane we do not. These payments were not made across the business for 2015-16 – Ergon Energy had a lot to overcome to respond appropriately to the reduced revenue allowance in the AER’s Final Determination and while progress was made our financial targets were not met.

OUR CORPORATE GOVERNANCE STATEMENT ERGON ENERGY ANNUAL STAKEHOLDER REPORT 2015–16 51 Glossary Key service centres

Cairns 109 Lake Street AER Australian Energy Regulator CAIRNS QLD 4870

ARENA Australian Renewable Energy Agency Townsville (Registered Office) 420 Flinders Street Asbestos Safety and Eradication Agency ASEA TOWNSVILLE QLD 4810 Australian Stock Exchange ASX Mackay ATSI Aboriginal and Torres Strait Islander 23 Cemetery Road WEST MACKAY QLD 4740 DATSIP Department of Aboriginal and Torres Strait Islander Partnerships Rockhampton EOI Expression of Interest Cnr Fitzroy and Alma Streets ROCKHAMPTON QLD 4700 EV Electric Vehicle EWOQ Energy and Water Ombudsman Queensland Maryborough 97-99 Adelaide Street FFA Field Force Automation MARYBOROUGH QLD 4650 FiT Feed-in Tariff Toowoomba Cnr South and Hampton Streets GIS Geospatial Information System TOOWOOMBA QLD 4350

GSL GSL Brisbane GUSS Grid Utility Support Systems 825 Ann Street FORTITUDE VALLEY QLD 4006 HSE IMS Health, Safety, Environment and Cultural Heritage Integrated Management System ICT Information and Communications Technology IRC Investment Review Committee LED Light Emitting Diode MSS Minimum Service Standard NECF National Energy Customer Framework NEM National Electricity Market NIRC Network Investment Review Committee PHEV Plug-in Hybrid Electric Vehicle PPA Power Purchase Agreement QCA Queensland Competition Authority Resi- Residential Battery Energy Storage System BESS RET Renewable Energy Target RFDS Royal Flying Doctor Service SCS Standard Control Service SES State Emergency Service SWER Single Wire Earth Return USQ University of Southern Queensland

52 OUR CORPORATE GOVERNANCE STATEMENT ERGON ENERGY ANNUAL STAKEHOLDER REPORT 2015–16 Common industry measures

Reliability SAIDI System Average interruption Duration Index. Network reliability performance index, indicating the total minutes, on average, that customers are without electricity during the relevant period (minutes). SAIFI System Average Interruption Frequency Index. Network reliability performance index, indicating the average number of occasions each customer is interrupted during the relevant period (interruptions). Customer Customer minutes is a measure of the number of customers interrupted multiplied by the duration of a Minutes power outage or outages, incorporating any staged restoration.

Safety TRIFR Total Injury Frequency Rate – measured as number of injuries per million hours worked. Lost Time Injuries (LTI) + Medical Treatment Injuries (MTI) x 1, 000, 000 / Exposure Hours LTIFR Lost Time Injury Frequency Rate. Number of lost-time injuries per million hours worked over the 12 month reporting period. Lost Time Injuries (LTI) x 1, 000, 000 / Exposure Hours DEEFR Dangerous Electrical Event Frequency Rate. A safe work practice measure that tracks Dangerous Electrical Events (DEEs) associated with work done by our employees (DEEs x million / exposure hours). Dangerous Electrical Events (DEE) x 1, 000, 000 / Exposure Hours

Electricity related V volt: the unit of potential or electrical pressure VA volt ampere: volt amperes are the ‘apparent power’ and are the product of the voltage applied to the equipment times the current drawn by the equipment. The VA rating is limited by the maximum permissible current, and the watt rating by the power-handling capacity of the device kVA kilovolt ampere: one kVA equals 1,000VA MVA megavolt ampere: one MVA equals 1,000kVA kV kilovolt: one kV equals 1,000 volts W watt: a measure of the power present when a current of one ampere flows under a pressure of one volt kW kilowatt: one kW equals 1,000 watts MW megawatt: one MW equals 1,000 kilowatts kWh kilowatt hour: the standard ‘unit’ of electricity which represents the consumption of electrical energy at the rate of one kilowatt over a period of one hour MWh megawatt hour: one MWh equals 1,000 kilowatt hours GWh gigawatt hour: one GWh equals 1,000 megawatt hours or one million kilowatt hours HV high voltage: alternating current above 1,000V LV low voltage: alternating current above 32V and not exceeding 1,000V GJ gigajoule: a measure of energy, one million

Index Electricity prices and affordability . . . p 10-13, 19-20, 37, 46 Network connections (incl solar) p 14, 15, 18, 23 Batteries and electric vehicles ...... p 12, 23 Organisational efficiency ...... p 25, 33 Board and executive ...... p 41-46 Our network and service area ...... p 4, 5, 26 Capital investment ...... p 26, 27 Performance measures . . . p 7, 16-18, 26, 27, 30, 32, 35, 39 Community electrical safety ...... p 19, 20 Reliability and security of supply p 16, 17, 24-27 Disaster response capability ...... p 19 Renewable energy and conservation ...... p 14, 15, 18, 23, 34, 35 Electricity use and demand ...... p 24, 26 Risk management and internal audit ...... p 50 Employee engagement and culture ...... p 29, 31-33 Service standards Energy conservation / renewables . . p 14, 15, 18, 23, 34, 35 and compliance . . . p 16-18, 26, 29, 30, 35, 36, 40, 46, 47-51 Environmental protection Stakeholder engagement ...... p 13, 14 (incl climate change) ...... p 34-36 System investment ...... p 11, 25 Financial performance ...... p 6, 37-39 Vison, purpose and business ...... p 3-5 Governance framework ...... p 41 Work health, safety and wellbeing ...... p 28-30 Government directions p 49 Workplace diversity and social inclusion ...... p 21, 31 Annual Stakeholder Report 2015-16 ergon.com.au

Customer Service 13 10 46 7.00am – 6.30pm, Monday to Friday

Faults Only 13 22 96 24 hours a day, 7 days a week

Life-Threatening Emergencies Only Triple zero (000) or 13 16 70 24 hours a day, 7 days a week

Ergon Energy Corporation Limited ABN 50 087 646 062 Ergon Energy Queensland Pty Ltd ABN 11 121 177 802