Expenditure forecast 2016/17 – 2020/21

ECRC Meeting 18 March 2015

Ed Gaykema Branch Manager Gas Networks In this presentation

• Building blocks to our plan/ the submission • Capital investment priorities 2016-2021 • Operational priorities 2016-2021 • ECRC input

Building blocks overall costs

• Capital (Capex) – Cost of Funding (WACC) – Regulatory Asset Base (RAB) – Capital Expenditure • Depreciation • Operational expenditure (Opex) • Taxes and Charges

2014/15 figures (current level of service)

Capital Expenditure (part of the 49%)

• Additional capital expenditure of $1m p.a. on a long life asset (50 year life) will result in an additional $0.45 on a typical residential customers bill per annum over the five year period. The balance

CAPEX expenditures

• Contribution to the overall costs of the network, Safety

• Must meet minimum mandated requirements Capital Reliability

• Equity for all customers Operations Availability

– High cost we over invest and potential loss of returns loss of customers to other competing energy providers

– Prudent & Efficient cost we get the forecasts and estimates right and AER approve expenditure

– Low cost we have network constraints that limit customer connection, increase operational costs, increased outages and loss of customers to competing energy providers. CAPEX project priorities 2016-2021

• During the 2016/17- 2020/21 period we have the following CAPEX priorities: – Growing (connecting New Customers) • West • Prospect & Denman • Moncrieff secondary – Growing our capacity • Molonglo • West Belconnen – Stay in Business • Fyshwick station upgrade for high flow • Integrity assessments • Metering

Capex expenditure comparison

CAPITAL COMPARISON AA11-15 $110m CAPITAL COMPARISON AA16-21 $90m 1% 1%

30% 32% 42% 48%

21% 28%

Non Distribution Stay In Business

Non Distribution Stay In Business Capacity Development Market Expansion Capacity Development Market Expansion Growth Areas

Market Expansion Projects $45m

Name Description Driver Extension of the network towards West Belconnen, ; new reticulation of mains as well as connection of Gungahlin town centre, Ngunnawal, Casey, to supply new estate areas beyond the current new homes, new medium density and high rise Moncrieff, Bonner, Amaroo and Crace with coverage of the network. residential and commercial customers planning underway for Throsby new reticulation of mains as well as connection of Extension of the network towards West Belconnen, Belconnen; , Lawson and Bruce new homes, new medium density and high rise to supply new estate area beyond the current with planning underway for West residential and commercial customers coverage of the network. Belconnen. Inner North; Major redevelopments in City, Braddon and Dickson along proposed light rail route, new reticulation of mains as well as connection of section 5 Campbell, Airport new homes, new medium density and high rise To support ongoing growth in Gungahlin. commercial developments and planned residential and commercial customers redevelopment of Constitution Avenue and City to Lake project Molonglo Valley; new reticulation of mains as well as connection of Wright, Coombs, North Weston and new homes, new medium density and high rise Support reliability of supply to local areas/streets planning underway for Denman Prospect. residential and commercial customers ; Greenway ; commercial and high new reticulation of mains as well as connection of The Belconnen area is forecast to develop quickly rise developments. new homes, new medium density and high rise Inner South; in the industrially zoned area preferred, and this will residential and commercial customers Yarralumbla Brickworks redevelopment, secure the optimal location allowing deferral of Kingston Foreshore, Barton. other works in the area. Queanbeyan; Googong and Tralee

CDP Projects $30m

Name Description Driver

Lay 3.5 kms of 250 mm ST main from Phillip PRS (Woden Town Centre) along to Heysen Street. Lay 500 m of 100 mm ST to connect with the secondary network Molonglo Primary Extension Stage 1 along Heysen Street. Support staged growth in the (and PRS) Molonglo area. The route is to be confirmed by a DA process. This will be operated at secondary pressures until the installation of a PRS at the end of Stage 3.

Lay 2.4m of 150mm ST (secondary main) from the existing 150mm secondary in Gungahlin Drive along Horse Park Dr to the intersection with To provide reliability of supply to the new estates in Moncrieff Secondary Extension CDP Mirrabei Dr, Moncrieff. Gungahlin (Casey, Moncrieff Install a new 7,000m3/hr SDRS and connect to the medium pressure and Taylor). mains. Lay 4km of 200mm ST main from 100mm ST main in Streeton Drive To provide capacity for growth and reliability of supply to the Molonglo Secondary CDP Stage 1 to the Molonglo development. new estates in Molonglo Install one 7,000m3/hr SDRS. (Wright and Coombes). Lay 4.8km of 200mm ST continuing from Molonglo Stage 1 along either Coppins Crossing Road or proposed road extension of John To provide capacity for growth Molonglo Secondary CDP Stage 2 Gorton Drive. and reliability of supply to the new estates in Molonglo Install one 7,000m3/hr SDRS in Denman Prospect at end of extension

Secure Development Application (DA) approval for route. To provide capacity for growth Molonglo Secondary CD Project (Lay 3.2 km of 200mm ST main continuing from Molonglo Secondary and reliability of supply to the Stage 3 Extension Stage 2 along Coppins Crossings Rd to the proposed new estates in Molonglo location of Molonglo PRS to the north of the ) CDP Projects

Name Description Driver

Lay 3km of 200mm ST from end of existing Extension of the network towards West Belconnen, secondary main on Southern Cross Drive in Holt. West Belconnen Secondary Main to supply new estate areas beyond the current Extension (Southern Cross Drive West) Install new 7,000scmh SDRS. coverage of the network.

Secure Development Application (DA) approval for Extension of the network towards West Belconnen, West Belconnen Secondary Main route and works. to supply new estate area beyond the current Extension (Lay 3km of 200mm ST main westwards from end coverage of the network. (Southern Cross Drive East) of existing secondary main on Stockdill Drive.

Install a 7,000scmh DR) Secure Development Application (DA) approval for route and works. Taylor Secondary Extension CDP (Lay 4km of 150mm ST main along Horse Park To support ongoing growth in Gungahlin. Drive from end of Moncrieff secondary extension. Install a DR at the end.) Medium Pressure projects are supported by indicative project listing mains in Capital Plan and allocations to support field and modelling identified Medium Pressure Mains areas. Support reliability of supply to local areas/streets Actual projects can be expected to vary based on growth and usage due to the very localised nature of the Capacity modelling. The Belconnen area is forecast to develop quickly Belconnen Primary Regulating Station in the industrially zoned area preferred, and this will Secure land for future Belconnen PRS site (PRS) – Secure Land secure the optimal location allowing deferral of other works in the area. SIB Projects $34m

Name Description Driver Undertake relocation of ring mains to address implications from potential third party damage, Reduce risk of potential gas build up in 100kPa Ring Mains building changes and/or pipework or meter set enclosed areas regulator failure. Install a main line isolation valve on the Support operations emergency management Canberra Primary Main Isolation Valve Fyshwick to Watson Primary Main and possible repairs. Upgrade skid, flow control and Install second Support increased load, throughput and supply Hoskinstown CTS Upgrade run, additional valves and gas panel nominations

Integrity Program Integrity and Validation digs Support integrity management

Mixture of Planned and Reactive replacement, including statistical sampling to see if asset Maintain accurate meters in accordance with SIB Metering Program class life can be extended for optimal current standards replacement Update Paddock markers to address Paddock Markers – Primary and Secondary standards, visibility and support protection of Support integrity management Mains one-way feeds Replace non-conforming electrical equipment Ensure compliance with standards improving HP Station Electrical and Instrumental (E&I) at High Pressure (HP) Trunk and Primary site safety, security and lower long term Upgrade Program Facilities operating costs through standardisation Assess requirements and design for future Watson + Phillip PRS assessments upgrade to provide price certainty for next AA Meet future demand and supply security period

OPEX Costs 42% of our building block cost

• An additional Operations and Maintenance costs of $1m p.a. over a five-year period results in an additional $6.75 p.a. to a customers bill OPEX priorities

During the 2016/17- 2020/21 period we have the following OPEX priorities:

Routine Operations and maintenance • Maintaining 4,900 km network, particularly trunk and Primary mains and associated pressure reduction facilities • Attending to over 500 p.a. third party activities working near our assets • Responding to 200 incidents p.a. that require make safe. Sometimes multiple on same day, Typically 15% of these require significant resources for > 1 day • Routine overhauls and operational checks of 8 high pressure facilities and 93 district regulator sets and 798 major meter sets. New OPEX priorities

Opex step changes Requirement/ Driver Non-recurrent/ recurrent

National B2B harmonisation Change in regulatory obligation Recurrent

Access Arrangement review Regulatory obligation Periodic

IT Asset Utilisation Fee Capex driven/net benefit Five year one-off

National Energy Consumer Framework Change in Regulatory Obligation Non Recurrent

Renegotiation of Hoskins town CTS O&M contracts Good industry practice Recurrent?

Emerging Retail Market Procedure changes Change in regulatory obligation Recurrent?

Compliance to revised technical codes for metering Change in regulatory obligation Recurrent

Exposed main inspections Good industry practice Periodic

Fyshwick TRS Upgrade Capex driven Recurrent

Hoskinstown CTS upgrade Capex driven Recurrent

Hume PRS Capex driven Recurrent

Periodic water bath neater inspections Capex driven Recurrent/ periodic

Annual OPEX cost increase $2.5m Building blocks

• The Capex and Opex outlined are key components of determining our required revenue. • next presentation will explore this

What can you do

– Tell us where you would feel we should or should not be investing in Canberra's future? – Our plan aligns to our 5 year objectives – Remember we are part of the competitive energy market