Asset Management Plan 2017-2027
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Asset Management Plan 2017-2027 Asset Management Plan UPDATE, APRIL 2017 – MARCH 2027 | Page 1 Asset Management Plan 2017-2027 Asset Management Plan No. 24 A 10 Year Management Plan for Aurora Energy Limited From 1 April 2017 to 31 March 2027 Aurora Energy Limited PO Box 1404 Dunedin 9054 New Zealand Website www.auroraenergy.co.nz Phone + 64 3 474 0322 Fax + 64 3 477 5771 First published March 1993 LIABILITY DISCLAIMER This Asset Management Plan (AMP) has been prepared and publicly disclosed in accordance with the requirements of the Electricity Information Disclosure Requirements 2012 (consolidated in 2015). Some of the information and statements contained in the AMP are comprised of, or are based on, assumptions, estimates, forecasts, predictions and projections made by Aurora Energy Limited (Aurora Energy). In addition, some of the information and statements in the AMP are based on actions that Aurora Energy currently intends to take in the future. Circumstances will change, assumptions and estimates may prove to be wrong, events may not occur as forecasted, predicted or projected, and Aurora Energy may at a later date decide to take different actions to those it currently intends to take. Except for any statutory liability which cannot be excluded, Aurora Energy will not be liable, whether in contract, tort (including negligence), equity or otherwise, to compensate or indemnify any person for any loss, injury or damage arising directly or indirectly from any person using or relying on any content of the AMP. When considering any content of the AMP, persons should take appropriate expert advice in relation to their own circumstances and must rely solely on their own judgement and expert advice obtained. This issue approved by Aurora Energy Board of Directors March 2017 | Page 2 Asset Management Plan 2017-2027 1 CHIEF EXECUTIVE OFFICER’S STATEMENT Energy powers everyday life. We are proud to supply the electricity infrastructure that underpins the economic and social well-being of the communities we serve in Dunedin, Central Otago and Queenstown Lakes. We are also pleased to present this Asset Management Plan - Update (AMP) for the period 2017-2027 which describes major planning changes since the last 2016-2026 AMP. The AMP documents how we intend to protect, enhance and operate the Network while meeting agreed levels of service to our customers and stakeholders. In 2016, Aurora Energy received substantial media attention on its current power pole condition. Aurora Energy’s owner Dunedin City Holdings Limited responded by engaging Deloitte’s to review the network safety concerns. Among other business improvements Deloitte’s recommendations highlighted the need for longer-term planning, more detailed knowledge of asset lifecycles and the urgent need to commit to significant accelerated replacement expenditure. Aurora Energy welcomes this increased stakeholder engagement and a key objectives of this AMP-Update is to respond to the Deloitte recommendations and to deliver high levels of safety, reliability and customer service to the community. The past two AMP’s have shown a ramp up in renewal expenditure however this AMP-Update projects a further significant increase in expenditure, with 10-year renewal expenditure approximately equal to the current value of the Aurora Energy regulatory asset base. This large work program will affect customer service in the short term. Future AMP’s will also consider longer- term 30-year impacts. 1.1 Current Performance The main highlights for Aurora Energy in 2016 are: • Aurora Energy’s assets increased by 5% to $436.5m and customers increased 1% to 86,622 due to high growth in the Central Otago region. • Upgraded power supply to Omakau and surrounding areas in Central Otago including overhead line upgrades and construction of a new substation at Lauder Flat Road, livened in January 2016. • Strengthened power supply to the Closeburn and Glenorchy areas of Lake Wakatipu. • Achieved major milestones in multi-year project to modernise and upgrade our network management, control and communication systems: the completion of the SCADA system upgrade to a modern advanced distribution management system and a new 24/7 network control centre for Dunedin. • Completed significant planned pole replacements and vegetation management projects throughout Dunedin and Central Otago. • Entered partnership with Department of Conservation to reduce the electrocution risk for the rare New Zealand falcon or ka-rearea perching on overhead power equipment. • First South Island rapid charger for electric vehicles opened to the public in Dunedin. 1.2 Meeting the Challenges 1.2.1 Regulatory Impacts As an electricity distributor, Aurora Energy operates in a highly regulated environment. That environment, and any changes in it, greatly influences our plans. While the increase in renewal expenditure will ensure sustainable asset management for the long term future, there will inevitably be short term inconvenience to customers: | Page 3 Asset Management Plan 2017-2027 • The projected 2027 network asset funding requirements will increase significantly, and regulated returns will need to be adjusted to maintain a sustainable business. • The increased work programme will require increased outages and annual planned SAIDI/SAIFI is very likely to be continually above the existing regulated reliability thresholds over the 10 year planning period. Unplanned reliability is also not expected to improve until after the 10 year planning period as new equipment often creates bathtub reliability curve. • Safety risks will increase as a direct relationship to the number of contractors working on the network, however residual public safety risks will reduce over the time taken to deliver the renewal plan. Stringent safe work practices favour de-energised work and, while reducing safety risk, will further impact on reliability targets. The AMP planning is based on an optimised strategy of wider outages grouped geographically in order to process the work as efficiently as possible. The planning period represents an opportunity for a much higher level of customer engagement than lines companies have historically had to provide. Aurora Energy had consecutive reliability breaches in 2015 and 2016. Regulatory reliability limit thresholds were achieved only twice in the last five years and unlikely to be achievable on the required basis of two out of every three years. The current Default Price-quality Path (DPP), with its sinking lid to quality standards and pricing, is unsustainable for Aurora Energy’s revised investment profile. A Customised Price-quality Path (CPP) remains an option for Aurora Energy. 1.2.2 Emerging Technologies The emergence of new technologies, new energy sources and changing consumer demands such as local solar and wind generation and grid-connected battery storage are challenging all participants in the energy sector to re-evaluate their future investment decisions, the regulatory framework and customer relationships. In coming years, the challenge will deepen for electricity networks to; deliver an acceptable reliability and quality of supply for its widening consumer types, adopt emerging technologies and cope with changing usage patterns, with some customers potentially migrating to autonomous power supplies. While the direct impact of these trends remains relatively modest for now, over the long term the pace of change is expected to accelerate, pushed by customer choice and the increasing economic viability of technologies in energy storage, generation and transport. In the near term, we expect overall energy demand to remain stable or increase modestly across the Aurora Energy network. The picture is similar to recent years with flat or declining energy demand in Dunedin (relatively static population and economic activity levels) and increasing demand in Central Otago (from irrigation projects and a growing population). Aurora Energy is working to identify the most efficient means of meeting the new and changing infrastructure requirements that customer investment in new technologies will place on the existing electricity system. A mix of conventional network and smart technology investments is likely to be necessary. The second phase of a major project to install a new advanced distribution management system and combined control centre will continue, with the installation of an Outage Management System (OMS). The added benefits of an OMS will provide better communication between customers, the control room and field staff. Through better collaboration of information and workflow guidance, the system is expected to improve safety and restoration time. | Page 4 Asset Management Plan 2017-2027 We are also taking part in initiatives to promote the uptake of electric vehicles in New Zealand under the Drive Electric banner, establishing charging infrastructure at key locations on State Highway One, including on the Aurora Energy network. Electric vehicles are expected to increase energy consumption and utilisation of distribution networks. 1.3 Summary The planning period will be characterised by the delivery of the largest work program in Aurora Energy’s recent history. We are also planning to quickly implement the recommendations from the Deloitte review in time for the 2018 AMP revision. At the end of the planning horizon, we plan to have spent a total of $720.6M and modernised a significant proportion of the network for our customers and the communities we supply. This investment will support the achievement