Responsive. Resourceful. Ready. 2010/11

ERGON ENERGY ANNUAL STAKEHOLDER REPORT REPORT STAKEHOLDER ANNUAL ENERGY ERGON ANNUAL STAKEHOLDER REPORT 2010/11 “Our storm season response... is one of the clearest examples in the company’s history of our people truly demonstrating their commitment to our vision of

2010/11 being a world-class, customer-driven energy business.”

Ian McLeod Chief Executive

ANNUAL STAKEHOLDER REPORT responsive. resourceful. ready. 2010/11

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 Ofﬁ ce of the Customer Advocate Customer Advocate PO Box 15107 Brisbane QLD 4002 [email protected]

Ergon Energy Corporation Limited ABN 50 087 646 062 Ergon Energy Queensland Pty Ltd Cover: Dalby’s Chris Mandall works ABN 11 121 177 802 on repairing connections on a pole in Andrew Street, Kurrimine Beach, one of ergon.com.au the areas hardest hit by Cyclone Yasi. ERGON ENERGY ANNUAL STAKEHOLDER REPORT REPORT STAKEHOLDER ANNUAL ENERGY ERGON ANNUAL STAKEHOLDER REPORT 2010/11 “Our storm season response... is one of the clearest examples in the company’s history of our people truly demonstrating their commitment to our vision of

2010/11 being a world-class, customer-driven energy business.”

Ian McLeod Chief Executive

ANNUAL STAKEHOLDER REPORT responsive. resourceful. ready. 2010/11

Ergon Energy Corporation Limited ABN 50 087 646 062 Ergon Energy Queensland Pty Ltd Cover: Dalby’s Chris Mandall works ABN 11 121 177 802 on repairing connections on a pole in Andrew Street, Kurrimine Beach, one of ergon.com.au the areas hardest hit by Cyclone Yasi. readyready for for a record a record summer summer season season

COMMONCOMMON INDUSTRY INDUSTRY UNITS UNITS OF MEASUREOF MEASURE 32,21032,210 FloodingFlooding hampers hampers SAIDI SAIDI LTIDR LTIDR kV kV kilovolt – onekilovolt kV equals – one kV1,000 equals volts 1,000 volts customerscustomers System AverageSystem interruption Average interruption Duration Duration Lost Time LostInjury Time Duration Injury Rate. Duration Total Rate. Total networknetwork repairs repairs Index. NetworkIndex. reliability Network reliabilityperformance performance days lost duedays to lost injuries due toper injuries million per millionW W watt – a measurewatt – a ofmeasure the power of thepresent power present contact Ergoncontact Ergon index, indicatingindex, indicatingthe total minutes, the total on minutes, on hours workedhours over worked the 12 over month the 12 month Energy forEnergy for along thealong Cassowary the Cassowary when a currentwhen ofa currentone ampere of one fl owsampere fl ows average, thataverage, customers that customers are without are without reporting reportingperiod. Lost period. Time LostInjuries Time Injuries under a pressureunder a ofpressure one volt of one volt informationinformation on onCoast. Coast. electricityelectricity during the during relevant the relevant ProgressiveProgressive Days Lost Daysx 1, 000, Lost 000 x 1, / 000, 000 / the fi rst theday. fi rst day. period (minutes).period (minutes). Exposure HoursExposure Hours kW kW kilowatt – kilowattone kW equals– one kW 1,000 equals watts 1,000 watts SAIFI SAIFI System Average System Interruption Average Interruption DEEFR DEEFR Dangerous Dangerous Electrical ElectricalEvent Frequency Event Frequency MW MW megawatt megawatt– one MW –equals one MW equals FloodingFlooding throughout throughout 3 FEBRUARY3 FEBRUARY 1,3401,340 FrequencyFrequency Index. Network Index. reliability Network reliability Rate. A safeRate. work A safepractice work measure practice measure 1,000 kilowatts1,000 kilowatts performanceperformance index, indicating index, indicatingthe the that tracksthat Dangerous tracks Dangerous Electrical Electrical Annual SummerAnnual Summer kWh kWh kilowatt hour kilowatt – the hour standard – the ‘unit’standard ‘unit’ the Souththe East South and East and fi eld personnelfi eld personnel average numberaverage of number occasions of occasions each each Events (DEEs)Events associated (DEEs) associated with work with work of electricity of electricity which represents which represents the the PreparednessPreparedness The monsoonalThe monsoonal South West.South West. from acrossfrom across 7.6m7.6m customer customeris interrupted is interrupted during the during the done by ourdone employees by our employees (DEEs x million (DEEs x million consumptionconsumption of electrical of electricalenergy at energy at Plan deliveredPlan delivered to to trough remainstrough remains AustraliaAustralia are on are on Bungil CreekBungil in Creek in relevant periodrelevant (interruptions). period (interruptions). / exposure/ hours).exposure Dangerous hours). Dangerous the rate ofthe one rate kilowatt of one over kilowatt a period over a period ensure weensure are we are stationarystationary over land over land the groundthe as ground part as part Roma peaks,Roma peaks, CustomerCustomer Customer Customerminutes is minutes a measure is a measure Electrical ElectricalEvents (DEE) Events x 1, 000,(DEE) 000 x 1, / 000, 000 / of one hourof one hour Exposure ExposureHours Hours of the response.of the response. causing morecausing more Minutes Minutes of the number of the of number customers of customers interrupted interrupted MWh MWh megawatt megawatthour – one hour MWh – equalsone MWh equals . . CYCLONECYCLONE for a numberfor a number of days of days READYREADY localisedlocalised multipliedmultiplied by the duration by the of duration a power of a powerV V volt – the unitvolt of– thepotential unit of or potential or 1,000 kilowatt1,000 hours kilowatt hours deliveringdelivering heavy rain heavy rain outage or outageoutages, or incorporating outages, incorporating any any electrical electricalpressure pressure TASHATASHA 12 FEBRUARY12 FEBRUARY fl ooding.fl ooding. GWh GWhgigawatt hourgigawatt – one hour GWh – equals one GWh equals 1 DECEMBER1 DECEMBER staged restoration.staged restoration. VA VA volt amperevolt – voltampere amperes – volt areamperes the are the The CategoryThe Category 1 across1 theacross state. the state. 1,000 megawatt1,000 megawatt hours or one hours million or one million AIFR AIFR All Injury Frequency All Injury Frequency Rate – measured Rate – measured ‘apparent ‘apparentpower’ and power’ are the and product are the product 19 APRIL 19 APRIL kilowatt hourskilowatt hours system crossessystem crosses as numberas of number injuries ofper injuries million per hours million hours of the voltageof the applied voltage to appliedthe equipment to the equipment CYCLONECYCLONE HV HV high voltage high – alternatingvoltage – alternating current current around around DisasterDisaster declared declared worked. Lostworked. Time LostInjuries Time (LTI) Injuries + (LTI) + times the currenttimes the drawn current by thedrawn by the above 1,000Vabove 1,000V in Dalby inand Dalby and equipment.equipment. The VA rating The isVA limited rating byis limited by GordonvaleGordonvale on on YASI YASI Ergon Energy’sErgon Energy’s Medical TreatmentMedical Treatment Injuries (MTI) Injuries x 1, (MTI) x 1, Theodore,Theodore, and and 000, 000 / 000,Exposure 000 / ExposureHours Hours the maximumthe maximum permissible permissible current, and current, LV and LV low voltagelow – alternatingvoltage – alternating current current ChristmasChristmas Day Day The CategoryThe Category 5 5 220220 incident incidentresponse response then in Emerald,then in Emerald, the watt ratingthe watt by the rating power-handling by the power-handling above 32Vabove and not 32V exceeding and not exceeding 1,000V 1,000V and movesand inland moves inland system reachessystem reaches mobile mobile team forteam Cyclone for Cyclone LTIFR LTIFR Lost Time LostInjury Time Frequency Injury Frequency Rate. Rate. Bundaberg,Bundaberg, Number ofNumber lost-time of injurieslost-time per injuries per capacity ofcapacity the device of the device tCO2 -e tCO2 tonnes -e of carbon tonnes ofdioxide carbon equivalents dioxide equivalents to Ravenshoe.to Ravenshoe. the Cassowarythe Cassowary 601,942601,942generatorsgenerators on on Yasi standsYasi down stands down Control roomControl room Central Central Flash fl oodingFlash fl ooding personnelpersonnel and and million hoursmillion worked hours over worked the over the kVA kVA kilovolt amperekilovolt – oneampere kVA – one kVA 120mm120mm Coast andCoast and square square hand duringhand the during the followingfollowing the the Around Around 12 month reporting12 month reportingperiod. Lost period. Time Lost Time equals 1,000equals VA 1,000 VA Highlands,Highlands, North North occurs inoccurs in fi eld crewsfi eld are crews are 8,5008,500 crosses crosses kilometreskilometres of our of ourresponse response effort. effort. completioncompletion of of Injuries (LTI)Injuries x 1, 000, (LTI) 000 x 1, / 000,Exposure 000 / Exposure rain in Emerald.rain in Emerald. Burnett andBurnett and ToowoombaToowoomba MVA MVAmegavolt amperemegavolt – oneampere MVA – one MVA homes andhomes and overnight.overnight. service areaservice has area hasThat’s 70MVA.That’s 70MVA. fi nal assetfi nal asset again makingagain making Hours Hours Woorabinda.Woorabinda. and downand the down the 520,000520,000 equals 1,000equals kVA 1,000 kVA Fitzroy RiverFitzroy River been impactedbeen impacted by by inspections.inspections. disconnectionsdisconnections 3 DECEMBER3 DECEMBER businessesbusinesses are are Lockyer LockyerValley. Valley. weather-relatedweather-related without power.without power. peaks in peaks in 2 FEBRUARY2 FEBRUARY the time thethe time the 16 FEBRUARY16 FEBRUARY to ensureto ensure 27–28 DECEMBER 27–28 DECEMBER communitycommunity RockhamptonRockhampton at at system reachessystem reaches 28 MARCH28 MARCH power interruptionspower interruptions 10 JANUARY10 JANUARY safety. safety. 25 DECEMBER25 DECEMBER Mount Isa.Mount Isa. were experiencedwere experienced by by 9.2m9.2m. . our customersour customers EVENINGEVENING 19–23 APRIL19–23 APRIL 5 JANUARY5 JANUARY 3 FEBRUARY3 FEBRUARY throughoutthroughout the the summersummer storm storm season.season. DECEMBERDECEMBER JANUARYJANUARY FEBRUARYFEBRUARY MARCHMARCH APRILAPRIL

BOM adviceBOM advice CondamineCondamine River River “above average“above average 200-200- peaks in peaksWarwick in Warwick 4.46m4.46m 220,000220,00090%90% 23 days23 days KEY SERVICEKEY SERVICE CENTRES CENTRES at at tropical cyclonetropical cyclone BrisbaneBrisbane River River CYCLONECYCLONE plus homesplus and homes andof customersof customers after theafter event the event It was Ita wassummer a summer of of The recoveryThe recovery effort after effort Cyclone after Cyclone Cairns Cairns activity thisactivity this 600mm600mm peaks. peaks. businessbusiness are are have powerhave power power ispower restored is restored Yasi wasYasi the wasbiggest the biggestdeployment deployment season...”season...” of rain fellof rain fell unprecedentedunprecedented natural natural 109 Lake109 Street Lake Street 7.9m7.9m. . ANTHONYANTHONY without power.without power. restoredrestored in the in the to all of theto all of the of electricalof electrical workers workers in in across northernacross northern fi rst week.fi rst week. homes andhomes and disasters,disasters, with record with record CAIRNSCAIRNS QLD 4870 QLD 4870 Burnett RiverBurnett River 13-14 JANUARY13-14 JANUARY The CategoryThe Category 2 2 Australia’sAustralia’s history –history ensuring – ensuring 8 DECEMBER8 DECEMBER and centraland central system crossessystem crosses 3 FEBRUARY 3 FEBRUARY businessesbusinesses safe safe peaks in peaks in fl oodingfl ooding and the and largest the largest by the endby theof the end fi rstof the week fi rst that week that QueenslandQueensland MundubberaMundubbera and and the coastthe near coast near to reconnect.to reconnect. TownsvilleTownsville (Registered (Registered Offi ce) Offi ce) cyclonecyclone in living in memoryliving memory more thanmore 90% than of the 90% homes of the and homes and over fourover days. four days. Gayndah.Gayndah. Bowen. Bowen. 22 Walker22 WalkerStreet Street 10,50010,500 25 FEBRUARY25 FEBRUARY causingcausing devastation devastation businessesbusinesses impacted impacted had their had their Ergon Energy’sErgon Energy’s TOWNSVILLETOWNSVILLE QLD 4810 QLD 4810 UP TO 27UP TO 27 28 DECEMBER 28 DECEMBER homes andhomes and acrossacross much ofmuch of power backpower on. back on. DECEMBERDECEMBER BrisbaneBrisbane billing billing 15,30015,300 3.2m3.2m businessesbusinesses and traveland travel homes andhomes and 8,9508,950 Queensland.Queensland. For someFor customers some customers however, however, MackayMackay peak reachedpeak reached experienceexperience power powerservice providersservice providers businesses businesses are are residentsresidents are are it didn’t itend didn’t once end the once power the power Ergon Energy’sErgon Energy’s Annual AnnualStakeholder Stakeholder at Myall atCreek, Myall Creek, followingfollowing Ergon Ergon At least Athalf least the halftotal the area total area 23 Cemetery23 Cemetery Road Road interruptionsinterruptions as a as afl ooded. fl ooded. without power.without power. was switchedwas switched back on. back In the on. In the Dalby. Dalby. Energy’sEnergy’s of our stateof our was state affected was affected by by WEST MACKAYWEST MACKAY QLD 4740 QLD 4740 Report Report2009/10 2009/10 maintained maintained Silver Silver Our Brisbane-Our Brisbane- result ofresult the fl oodsof the fl oods FacebookFacebook site for site for heavy rainfallheavy rainfalland fl ooding, and fl ooding, aftermathaftermath of these of disasters, these disasters, we we benchmarkingbenchmarking standard standard in the in the based offibased ces and offi ces and30 JANUARY30 JANUARY 20 DECEMBER20 DECEMBER this season.this season. restorationrestoration which beganwhich in began early inspring. early spring.received received record numbers record numbers of calls of calls RockhamptonRockhampton IT supportIT supportoffi ces offi ces AustralianAustralian Reporting Reporting Awards. Awards. updates.updates. from customersfrom customers experiencing experiencing are evacuated.are evacuated. By December,By December, entire towns entire were towns were Cnr FitzroyCnr andFitzroy Alma and Streets Alma Streets submerged,submerged, some repeatedly some repeatedly hardship. hardship. We expanded We expanded our our ROCKHAMPTONROCKHAMPTON QLD 4700 QLD 4700 8 FEBRUARY 8 FEBRUARY customercustomer assistance assistance program program 12-14 JANUARY12-14 JANUARY 25%25% as the weeksas the went weeks on. went All up, on. at All up, at This reportThis is report printed is printedon certifi on ed certifi ed to ensureto weensure could we help could during help during of Ergonof Energy’s Ergon Energy’s least 10,500least customers 10,500 customers had their had their MaryboroughMaryborough carbon carbonneutral neutralpaper stock. paper stock. power switchedpower switched off at different off at different this diffi thiscult diffitime. cult For time. more For more employeesemployees live in the live in the 97-99 Adelaide97-99 Adelaide Street Street times simplytimes for simply fl ood-related for fl ood-related about ourabout Cyclone our Cyclone Yasi response Yasi response While evacuationsWhile evacuations MARYBOROUGHMARYBOROUGH QLD 4650 QLD 4650 communitiescommunities safety reasons.safety reasons. see pagessee 28–29. pages 28–29. are underway,are underway, crews crews impactedimpacted by the by the The summerThe summer of 2011 isof one 2011 that is one that ToowoombaToowoomba are dedicatedare dedicated to to disaster.disaster. After CycloneAfter Cyclone Yasi crossed Yasi crossed the the QueenslandersQueenslanders will never will forget. never forget. Cnr SouthCnr and South Hampton and Hampton Streets Streets disconnectingdisconnecting the the coast in coastFebruary in February more than more than 220,000220,000 customers customers had lost had lost It remindedIt reminded us of what us itof means what it means TOOWOOMBATOOWOOMBA QLD 4350 QLD 4350 power topower ensure to ensure power –power a third – of a ourthird entire of our entireto be readyto be to ready respond, to respond, and and communitycommunity safety. safety. customercustomer base. In base.the worst In the worstthat, by that,working by working together together as a as a BrisbaneBrisbane ResponseResponse to Cyclone to Cyclone affectedaffected areas the areas network the network had hadcommunity, community, we can trulywe can rise truly rise 61 Mary61 Street Mary Street AnthonyAnthony fast-tracked fast-tracked to be rebuiltto be from rebuilt the from ground the up.ground to up. the challenge.to the challenge. BRISBANEBRISBANE QLD 4000 QLD 4000 in readinessin readiness for the for the arrival ofarrival Cyclone of CycloneYasi. Yasi. ready for a record summer season

COMMON INDUSTRY UNITS OF MEASURE 32,210 Flooding hampers SAIDI LTIDR kV kilovolt – one kV equals 1,000 volts customers System Average interruption Duration Lost Time Injury Duration Rate. Total network repairs Index. Network reliability performance days lost due to injuries per million W watt – a measure of the power present contact Ergon index, indicating the total minutes, on hours worked over the 12 month Energy for along the Cassowary when a current of one ampere fl ows average, that customers are without reporting period. Lost Time Injuries under a pressure of one volt information on Coast. electricity during the relevant Progressive Days Lost x 1, 000, 000 / the fi rst day. period (minutes). Exposure Hours kW kilowatt – one kW equals 1,000 watts SAIFI System Average Interruption DEEFR Dangerous Electrical Event Frequency MW megawatt – one MW equals Flooding throughout 3 FEBRUARY 1,340 Frequency Index. Network reliability Rate. A safe work practice measure 1,000 kilowatts performance index, indicating the that tracks Dangerous Electrical Annual Summer kWh kilowatt hour – the standard ‘unit’ the South East and fi eld personnel average number of occasions each Events (DEEs) associated with work of electricity which represents the Preparedness The monsoonal South West. from across 7.6m customer is interrupted during the done by our employees (DEEs x million consumption of electrical energy at Plan delivered to trough remains Australia are on Bungil Creek in relevant period (interruptions). / exposure hours). Dangerous the rate of one kilowatt over a period ensure we are stationary over land the ground as part Roma peaks, Customer Customer minutes is a measure Electrical Events (DEE) x 1, 000, 000 / of one hour Exposure Hours of the response. causing more Minutes of the number of customers interrupted MWh megawatt hour – one MWh equals . CYCLONE for a number of days READY localised multiplied by the duration of a power V volt – the unit of potential or 1,000 kilowatt hours delivering heavy rain outage or outages, incorporating any electrical pressure TASHA 12 FEBRUARY fl ooding. GWh gigawatt hour – one GWh equals 1 DECEMBER staged restoration. VA volt ampere – volt amperes are the The Category 1 across the state. 1,000 megawatt hours or one million AIFR All Injury Frequency Rate – measured ‘apparent power’ and are the product 19 APRIL kilowatt hours system crosses as number of injuries per million hours of the voltage applied to the equipment CYCLONE HV high voltage – alternating current around Disaster declared worked. Lost Time Injuries (LTI) + times the current drawn by the above 1,000V in Dalby and equipment. The VA rating is limited by Gordonvale on YASI Ergon Energy’s Medical Treatment Injuries (MTI) x 1, Theodore, and 000, 000 / Exposure Hours the maximum permissible current, and LV low voltage – alternating current Christmas Day The Category 5 220 incident response then in Emerald, the watt rating by the power-handling above 32V and not exceeding 1,000V and moves inland system reaches mobile team for Cyclone LTIFR Lost Time Injury Frequency Rate. Bundaberg, Number of lost-time injuries per capacity of the device tCO2 -e tonnes of carbon dioxide equivalents to Ravenshoe. the Cassowary 601,942 generators on Yasi stands down Control room Central Flash fl ooding personnel and million hours worked over the kVA kilovolt ampere – one kVA 120mm Coast and square hand during the following the Around 12 month reporting period. Lost Time equals 1,000 VA Highlands, North occurs in fi eld crews are 8,500 crosses kilometres of our response effort. completion of Injuries (LTI) x 1, 000, 000 / Exposure rain in Emerald. Burnett and Toowoomba MVA megavolt ampere – one MVA homes and overnight. service area has That’s 70MVA. fi nal asset again making Hours Woorabinda. and down the 520,000 equals 1,000 kVA Fitzroy River been impacted by inspections. disconnections 3 DECEMBER businesses are Lockyer Valley. weather-related without power. peaks in 2 FEBRUARY the time the 16 FEBRUARY to ensure 27–28 DECEMBER community Rockhampton at system reaches 28 MARCH power interruptions 10 JANUARY safety. 25 DECEMBER Mount Isa. were experienced by 9.2m. our customers EVENING 19–23 APRIL 5 JANUARY 3 FEBRUARY throughout the summer storm season. DECEMBER JANUARY FEBRUARY MARCH APRIL

BOM advice Condamine River “above average 200- peaks in Warwick 4.46m 220,000 90% 23 days KEY SERVICE CENTRES at tropical cyclone Brisbane River CYCLONE plus homes and of customers after the event It was a summer of The recovery effort after Cyclone Cairns activity this 600mm peaks. business are have power power is restored Yasi was the biggest deployment season...” of rain fell unprecedented natural 109 Lake Street 7.9m. ANTHONY without power. restored in the to all of the of electrical workers in across northern fi rst week. homes and disasters, with record CAIRNS QLD 4870 Burnett River 13-14 JANUARY The Category 2 Australia’s history – ensuring 8 DECEMBER and central system crosses 3 FEBRUARY businesses safe peaks in fl ooding and the largest by the end of the fi rst week that Queensland Mundubbera and the coast near to reconnect. Townsville (Registered Offi ce) cyclone in living memory more than 90% of the homes and over four days. Gayndah. Bowen. 22 Walker Street 10,500 25 FEBRUARY causing devastation businesses impacted had their Ergon Energy’s TOWNSVILLE QLD 4810 UP TO 27 28 DECEMBER homes and across much of power back on. DECEMBER Brisbane billing 15,300 3.2m businesses and travel homes and 8,950 Queensland. For some customers however, Mackay peak reached experience power service providers businesses are residents are it didn’t end once the power Ergon Energy’s Annual Stakeholder at Myall Creek, following Ergon At least half the total area 23 Cemetery Road interruptions as a fl ooded. without power. was switched back on. In the Dalby. Energy’s of our state was affected by WEST MACKAY QLD 4740 Report 2009/10 maintained Silver Our Brisbane- result of the fl oods Facebook site for heavy rainfall and fl ooding, aftermath of these disasters, we benchmarking standard in the based offi ces and 30 JANUARY 20 DECEMBER this season. restoration which began in early spring. received record numbers of calls Rockhampton IT support offi ces Australian Reporting Awards. updates. from customers experiencing are evacuated. By December, entire towns were Cnr Fitzroy and Alma Streets submerged, some repeatedly hardship. We expanded our ROCKHAMPTON QLD 4700 8 FEBRUARY customer assistance program 12-14 JANUARY 25% as the weeks went on. All up, at This report is printed on certifi ed to ensure we could help during of Ergon Energy’s least 10,500 customers had their Maryborough carbon neutral paper stock. power switched off at different this diffi cult time. For more employees live in the 97-99 Adelaide Street times simply for fl ood-related about our Cyclone Yasi response While evacuations MARYBOROUGH QLD 4650 communities safety reasons. see pages 28–29. are underway, crews impacted by the The summer of 2011 is one that Toowoomba are dedicated to disaster. After Cyclone Yasi crossed the Queenslanders will never forget. Cnr South and Hampton Streets disconnecting the coast in February more than 220,000 customers had lost It reminded us of what it means TOOWOOMBA QLD 4350 power to ensure power – a third of our entire to be ready to respond, and community safety. customer base. In the worst that, by working together as a Brisbane Response to Cyclone affected areas the network had community, we can truly rise 61 Mary Street Anthony fast-tracked to be rebuilt from the ground up. to the challenge. BRISBANE QLD 4000 in readiness for the arrival of Cyclone Yasi. responsive. Ergon Energy is dedicated to powering regional Queensland, to being customer-driven in everything we do, whether it be responding to the impact of ‘mother nature’ on our network or to the changing needs of our customers. resourceful. We are looking for smarter ways of doing things to improve efficiency, better manage demand, and demonstrate leadership. It’s about being resourceful in our response to the many challenges we face so we can provide the power supply of the future at an affordable cost. ready. One year in to our five year ‘horizon’ plan, we have made progress against our goals – it’s about being ready to meet the challenges ahead. It’s about embracing innovation and developing our network and services for an increasingly technology-driven world.

CONTENTS

ABOUT OUR REPORT 2

ERGON ENERGY IN PROFILE 3

THE YEAR IN SUMMARY 6

CHAIRMAN’S MESSAGE 10

CHIEF EXECUTIVE’S REPORT 12

REVIEW OF OPERATIONS 14

Customer-driven 14 Details the emphasis we are placing on being customer-driven, on being more cost-efficient and delivering increasing customer value and choice.

Asset Management Excellence 22 Showcases how we are delivering a secure, reliable and quality electricity supply for our customers, wherever they are in regional Queensland.

Leverage Climate Change Response 32 LOOKING FOR MORE INFORMATION? Highlights how we are leveraging environmental value from the community’s This Annual Stakeholder Report, response to climate change and from our own broader business imperatives. the Annual Financial Statements for A Leader in Safety 42 Ergon Energy Corporation Limited and its Controlled Entities (including Explains the many ways we are building a sustainable safety culture into all the Directors’ Report and our Financial facets of our business and making safety inherent in everything we do. Statements) and our reports from previous years are available High Performance Organisation 48 online at Demonstrates progress towards our goal of being a high performing and www.ergon.com.au/annualreport commercially focused organisation, delivering economic value within a sound corporate governance framework. Hard copies of our reports can also be obtained by contacting us on 13 10 46. OUR ECONOMIC AND FINANCIAL PERFORMANCE 60 Abbreviations, an index and common industry units of measure are provided CORPORATE GOVERNANCE STATEMENT 64 on page 80 and the inside back cover. ABOUT OUR REPORT ready to report openly

Our Annual Stakeholder Report 2010/11 presents a holistic insight into the organisation’s overall performance for the financial year and demonstrates the contribution that Ergon Energy is making to address the broader sustainability issues currently facing regional Queensland. The report covers Ergon Energy Corporation Limited and its subsidiary Ergon Energy Queensland Pty Ltd, as well as commentary on our other subsidiaries and joint venture. (p 64–65)

P uBLISHING Performance Against Ehancesn readers’ understanding Set Goals Builds Confidence In The of the key sustainability Organisation’s Governance Wye h w issues we can contribute to report what Reporting transparently Ensures we meet best-practice builds understanding, trust we do corporate reporting standards and and our reputation our stakeholders’ expectations

WHY WE REPORT WHAT WE DO customer research, internal employee The content of this report has also been In line with the best-practice surveys and other feedback loops we guided by the Australasian Reporting governance principle of timely and reassessed our understanding of their Awards criteria for best-practice balanced disclosures, it is our aim to needs and expectations. Assessing reporting, as well as the Energy Supply demonstrate that we are accountable our stakeholders’ information needs Association of Australia’s Sustainable and committed to continuously against the challenges we face as a Practices Framework. The Global improving the transparency and business, and addressing any concerns Reporting Initiative’s (GRI) G3 Principles relevance of our stakeholder they have in these areas, not only of Sustainability Reporting have also communications. guides the materiality of disclosure been used to enhance the comparability in this report but also, ultimately, the of our reporting – to easily locate Broadly, our stakeholders are our strategic priority they are given by information about specific GRI customers, the communities we work the business. indicators addressed in this report in and serve, our employees (including an index is available online at At Ergon Energy we believe that representative unions), our government www.ergon.com.au/annualreport shareholders, the regulators, our reporting from both a financial and suppliers and industry associates. non-financial perspective helps us Our aim is to continually improve our Individually, or as a group, these develop a shared understanding with reporting and we sincerely invite your stakeholders potentially can be our stakeholders of our common feedback through our online Feedback impacted by our operations or affect our objectives and encourages the adoption Form, also found at ability to serve our customers. (p 73) of more sustainable practices and www.ergon.com.au/annualreport, or actions throughout the business, by our you can contact our Stakeholder and To ensure our stakeholders receive the employees, as well as by our industry Government Relations team on 13 10 46. information they want from our report, and other stakeholders. this year through in-depth interviews,

ABOUT OUR REPORT ERGON ENERGY ANNUAL STAKEHOLDER REPORT 2010/11 2 ERGON ENERGY IN PROFILE ready to serve

Boigu Is. Saibai Is. Dauan Is. Stephen Is. Darnley Is. Torres Strait Yorke Is. Bamaga Mabuiag Is. Yam Is. Murray Is. Badu Is. Coconut Is. Warraber Is. Mapoon Kubin, Moa Is. OUR VISION Hammond Is. To be a world-class, Lockhart River Thursday Is. Wasaga, Horn Is. Torres Strait customer-driven energy business. Aurukun Coen

OUR PURPOSE Pormpuraaw Key Service Centre Kowanyama Cooktown Distribution Network

To enhance the economic Depot/Workshop Gununa Mossman and lifestyle aspirations of our Barcaldine Power Station Cairns Mareeba Isolated Generation customers through sustainable Burketown Atherton Normanton Innisfail Doomadgee Ravenshoe stationpower® energy solutions. Georgetown Tully Stand-alone Power System Ingham Palm Island Townsville OUR VALUES Home Hill Camooweal Julia Creek Charters Towers Bowen Cloncurry Proserpine Success is built on our SPIRIT Mt Isa Richmond Hughenden Pinnacle Mackay values of: NORTHERN Sarina Moranbah Safety Winton St Lawrence CENTRAL Clermont Boulia Middlemount Professionalism Yeppoon Rockhampton Longreach Emerald Barcaldine Blackwater Gladstone Springsure Integrity Bedourie Biloela Miriam Vale Jundah Blackall Moura Gin Gin Monto Bundaberg Respect Theodore Childers Windorah Biggenden Hervey Bay Mundubbera Innovation Birdsville Gayndah Maryborough Charleville Proston Kilkivan Quilpie Wandoan Murgon Roma Kingaroy Teamwork Chinchilla Yarraman SOUTHERN Tara Toowoomba Dalby Cunnamulla St George Millmerran Brisbane Warwick Stanthorpe

Ergon Energy supplies To deliver on our purpose – ‘to enhance Today, our principal operating electricity to around 690,000 the economic and lifestyle aspirations companies are Ergon Energy of our customers through sustainable Corporation Limited, responsible customers (690,708 as at energy solutions’ – Ergon Energy has for the distribution business, and 30 June) across a vast operating around 4,700 employees (4,752 as at its subsidiary Ergon Energy area of more than one million 30 June) located across Queensland Queensland Pty Ltd, a non-competing and a total asset base of $10.0 billion. electricity retailer. square kilometres – 97% of OUR BUSINESS Our shareholding Ministers are the the state of Queensland – from Honourable Stephen Robertson, Ergon Energy is a Queensland the state’s expanding coastal Minister for Energy and Water Utilities, Government-owned corporation, and the Honourable Rachel Nolan, and rural population centres formed in 1999 from the six regional Minister for Finance, Natural Resources Queensland electricity distributors to the remote communities of and The Arts. outback Queensland and the and their subsidiary retailer. Torres Strait.

ERGON ENERGY IN PROFILE ERGON ENERGY ANNUAL STAKEHOLDER REPORT 2010/11 3 The distribution business We also operate under the Electricity These tariffs are available to all As our distribution business – the ‘poles Industry Code, overseen by the domestic, rural and business and wires’ – largely remains a monopoly, Queensland Competition Authority customers who have chosen not it is regulated by the Australian Energy (referred to as the QCA), which sets to enter the competitive market. minimum service standards for Regulator (referred to through this report These arrangements ensure that network performance. (p 31) as the AER). Prior to 2010/11 we were Queenslanders pay the same for their regulated at the state level. The AER set The retail business electricity, wherever they live, even the revenue we are allowed to collect for Ergon Energy is not a competitive though the cost to supply may be our distribution services over the current retailer, having sold our competitive different. Customers can choose, five-year control period. These charges retail business in 2007. Ergon Energy however, to purchase their electricity are just one of the components that make is only permitted by legislation, as a from a competitive retailer at a price set up the price of electricity. They also government-owned retailer, to sell by that retailer. operate a scheme that provides financial electricity at the notified prices, that incentives relating to network reliability is, the government-set tariffs. performance and service delivery.

OUR INDUSTRY

Our industry comprises a range of In this market, electricity is sold by Ergon Energy is unusual in the industry as private and government-owned operators, the generators to the retailers, largely it plays a role across all four links in the playing different and multiple functions. through a trading ‘pool’. The power electricity supply chain: generation, Together we participate in the National is then supplied to homes and businesses transmission, distribution and retail. Electricity Market. through the transmission and distribution networks to the customer of the retailer.

A range of energy sources (coal-fired, Ergon Energy also owns and operates biomass, gas, hydro and wind) are used to 33 stand-alone power stations, with local generate Queensland’s electricity. distribution networks that supply communities isolated from the main electricity grid in Although not a major generator, Ergon Energy Western Queensland, the Gulf of Carpentaria, owns and operates a 55MW gas-fired power GENERATION Cape York, various Torres Strait islands and station at Barcaldine. Through Ergon Energy Palm Island. We also supply and service small Queensland Pty Ltd, it supplies power for the stand-alone power systems to cater for the state-wide electricity grid. needs of remote properties.

The transmission network consists of lines it depends on Ergon Energy’s capability that carry electricity from the point of and expertise to help provide and maintain generation over long distances and feed it its assets. into the distribution network. We also own and operate the 220kV network in TRANSMISSION While Powerlink Queensland owns and the Mount Isa region. operates the high-voltage transmission network that extends the length of the Queensland coastline,

Distribution lines then carry electricity directly Around 70% of our powerlines run through to Queensland’s homes and businesses. rural Queensland, covering vast distances in largely unpopulated areas. Much of this part Electricity is delivered across regional of our network, around 65,000 kilometres Queensland through Ergon Energy’s network of line, uses the electricity distribution of ‘poles and wires’. The distribution network DISTRIBUTION technology known as SWER (Single Wire has approximately 150,000 kilometres of Earth Return). (p 26) powerlines and one million power poles.

Electricity is purchased from a retailer, who Ergon Energy is a non-competing retailer, also provides a range of customer services. which means we only offer government-set tariffs to our domestic, rural and business There are a number of electricity retailers customers. Our retail business has specialist operating in regional Queensland – they buy expertise in energy trading, billing and electricity from the generators and on-sell it RETAIL customer service, to name a few key areas. to customers.

ERGON ENERGY IN PROFILE ERGON ENERGY ANNUAL STAKEHOLDER REPORT 2010/11 4 OUR CONTRIBUTION TO develop holistic responses to issues SUSTAINABILITY ranging from financial hardship to Ergon Energy’s priority is to provide a climate change. safe, dependable and smart electricity To ensure positive, longer-term supply for regional Queensland. We outcomes for the communities we believe delivering on this responsibility serve, Ergon Energy continues to is our most important contribution to engage with our many stakeholders the sustainability efforts of regional around their energy needs and Queensland communities. concerns. By creating a more Through our involvement across all sustainable organisation ourselves, elements of the supply chain Ergon we believe we can also help lead and Energy is playing a major part in educate our stakeholders. helping regional Queenslanders We trust this report gives you a address the myriad of energy-related greater insight into the economic, sustainability issues. This vertical environmental and social contribution integration, which is somewhat unique we are providing to our customers, in the Australian electricity industry, employees, government shareholders helps enable us to research and and other stakeholders.

OUR STATISTICS 2011 Total Customers Served 690,708

Network Area Serviced 1.7 million km2

Employees 4,752

Power Stations (grid connected and isolated) 34

Bulk Supply Points 26

Zone Substations 378

Major Power Transformers (33kV to 132kV) 686

Distribution Transformers 91,500

Power Poles 1 million

Overhead Powerlines

-Subtransmission 15,200km -High Voltage Distribution 112,000km -Low Voltage: Distribution1 20-25,000km

Underground Power Cable 7,000km 1. Estimate only.

ERGON ENERGY IN PROFILE ERGON ENERGY ANNUAL STAKEHOLDER REPORT 2010/11 5 THE YEAR IN SUMMARY ready to deliver

OUR HIGHLIGHTS Advanced our ability to manage network demand and reduce the pressure on electricity tariffs – driving savings for our customers, our business and the environment. (p 18 & 34) Injected $660.5 million into the network to increase capacity and improve reliability. (p 24) Rose to the challenges of the summer storm season, demonstrating the value of our summer preparedness efforts and disaster management capability. (p 27) Significantly improved network reliability – with the duration and frequency of outages down 21% and 24% respectively compared to 2009/10. (p 31) Helped our customers connect more than 15,000 solar energy systems to the network, avoiding 36,000 tonnes of greenhouse gas emissions – the equivalent of taking 8,600 cars off the road. (p 37) Achieved significant gains in developing our safety culture, evidenced by a 48% reduction in the frequency of employee lost time injuries. (p 43) Took major steps to becoming a high-performance, information-enabled organisation. A highlight being the ROAMES project, which is set to change the way we manage the network. (p 51 & 52) Met our profit commitment with a Net Profit After Tax of $321.6 million, delivering a Return on Assets of 8.0%. (p 60)

FINANCIAL PERFORMANCE SUMMARY

2010/11 2009/10 2008/09 2007/08 2006/07

Net Profit After Tax ($’000) z 321.6 166.5 129.3 162.9 1,198.1

Total Assets ($’000) z 9,974.9 8,698.3 8,011.3 7,100.5 7,715.7

Total Capital Investment ($’000) z 830.5 806.1 844.3 841.4 806.5

Dividends Provided For ($’000) z 252.6 137.5 116.6 118.4 955.4

Return on Average Assets z 8.0% 5.7% 5.3% 5.7% 22.7%

Return on Average Equity z 10.8% 6.4% 5.1% 6.6% 47.7%

Gearing (including reserves) b 56.6% 59.8% 59.1% 54.3% 50.6%

EBITDA to Interest Cover (times) z 3.6x 3.2x 3.1x 3.7x 7.0x

FOR MORE ON OUR FINANCIAL PERFORMANCE SEE PAGES 60–63.

THE YEAR IN SUMMARY ERGON ENERGY ANNUAL STAKEHOLDER REPORT 2010/11 6 OUR CHALLENGES At the same time, we are readying The affordability of electricity for our ourselves to respond to the forecast customers, particularly the hardship increase in electricity demand to come being experienced by the vulnerable from the mining sector, the new growth segments of our communities, remains industry of natural gas and the regional a significant challenge for Ergon Energy. Queensland communities that will support these developments. To ease the pressure on prices we are focusing on managing peak electricity And there is no escaping the challenges demand, a key driver for network that the summer storm season brings. investment, and achieving operational Broader expectations around the efficiency. We are also educating our reliability and the technical capability customers on the energy-efficiency of our network are also increasing. measures they can take to get value We also need to maintain our strategic for their money, and we are making focus on safety for our employees and sure we have a safety net in place for the community to build on recent those in need. improvements and, it is our social responsibility to play our role in the community’s climate change response.

CORPORATE RESPONSIBILITY MATERIALITY MATRIX CORPORATE RESPONSIBILITY MATERIALITY MATRIX HIGH

4 8 5

6 1

10 3 9 7

11 MEDIUM 12

NOT MATERIAL TO REPORT LOW RISK TO OUR BUSINESS OUR TO RISK LOW MEDIUM HIGH CONCERN TO OUR STAKEHOLDERS

Although all complex issues, this matrix cross references the concerns of our stakeholders – in the areas where we believe we have a corporate responsibility – against the potential risks associated with these issues on Ergon Energy as a business.

MATERIALITY RANKING 1. Affordability of Electricity/Financial Hardship 2. Potential Growth in Infrastructure Demand 3. Disaster Response Capability 4. Workforce Health and Safety 5. Reliability and Security of Electricity Supply 6. Climate Change Impacts/Future Carbon Price 7. Community Health and Safety 8. Employee Engagement and Representation 9. Environmental Impacts 10. Local Employment and Development Opportunities 11. Diversity and Inclusion/Indigenous Rights 12. Community Project Support

THE YEAR IN SUMMARY ERGON ENERGY ANNUAL STAKEHOLDER REPORT 2010/11 7 OUR PERFORMANCE SUMMARY Ergon Energy’s performance targets for 2010/11, agreed with our shareholding Ministers, are detailed in our Statement of Corporate Intent (SCI). These performance measures, highlighted here with our strategic priorities, are discussed in more detail throughout the report. This section also provides an overview of our future challenges and aspirational goals.

SUMMARY STATEMENT OF CORPORATE INTENT 2010/11 CORPORATE STRATEGY CORPORATE OBJECTIVES 2010/11 MEASURES TARGETS PERFORMANCE OUTCOMES 2010/11 KEY HIGHLIGHTS 2010/11 CHALLENGES AND GOALS 2010/15

Meet reasonable customer expectations We will benchmark our performance with Better than peer average as measured by ’Value to Customer’ ratio score three Established a new Customer Council. (p 15) Service – Deliver quality, cost, value and for service delivery and choice while our peers across the customer dimensions ’Value to Customer‘ survey. points above parity. Advanced our ability to reduce pressures on tariffs. choice as appropriate to each customer delivering economic and social benefits to of: electricity supply, customer interaction Guaranteed Service Levels – Network Guaranteed Service Levels – Network (p 16 & 34) segment. Customer-driven the community. experience; corporate social responsibility Reliability ≤ $667,880 claims paid (6,423 Reliability $114,296 claims paid. Boosted capacity to help those in hardship. (p 18) Customer Satisfaction – Maintain strong and cost/affordability. 1 p 14–21 claims) Guaranteed Service Levels – Other customer relationships so we can work Supported ATSI reconciliation through together to identify and meet their Guaranteed Service Levels – $165,435 claims paid. engagement. (p 18) Other ≤ $796,793 claims paid future needs. (21,097 claims)1 Benchmarks strongly with community investment. (p 20) Achieved the lowest level of complaints in the industry. (p 21) Deliver for our customers a secure, Our network will perform at or below the Supply Reliability Indicators: Supply Reliability Indicators: Established criteria to assess network health. (p 23) Reliability – Meet minimum service standards reliable and quality electricity supply Minimum Services Standards set in the Duration (SAIDI): Duration (SAIDI): Invested $660.5 million to increase capacity and and secure optimal performance incentive that effectively balances both commercial Electricity Industry Code for the average - Urban ≤ 149 - Urban ≤ 149 improve reliability. (p 24) results. Asset Management and customer perspectives without duration and frequency that our customers - Short Rural ≤ 424 - Short Rural ≤ 426 Advanced a range of intelligent network solutions. (p 25) Prudent and Efficient – Prudently invest and Excellence sacrificing safety. are without power. - Long Rural ≤ 964 - Long Rural ≤ 828 efficiently deliver the capital expenditure and p 22–31 Prepared well and met the summer storm season operating expenditure programs. Frequency (SAIFI) Frequency (SAIFI) challenge. (p 27) - Urban ≤ 1.98 - Urban ≤ 1.63 - Short Rural ≤ 3.95 - Short Rural ≤ 3.53 X Reduced the frequency of outages by 24%. (p 31) - Long Rural ≤ 7.40 - Long Rural ≤ 5.26 Leverage climate change response as both We will continue to reduce our carbon Tonnes of carbon dioxide equivalent Tonnes of carbon dioxide Demand management on track to avoid 54,000 tonnes Demand Management – Reduce peak load 2 2 a social responsibility and as a business emissions to meet Queensland emitted : equivalent emitted : of emissions. (p 34) growth to defer capital expenditure on strengthening opportunity. Government and corporate set targets. our network. Leverage Climate - Passenger and light commercial - Passenger and light commercial Secured up to 27MVA of demand reductions in We will secure regulatory and external fleet≤ 9,450.3 fleet 11,422 X Townsville. (p 34) Emissions Reduction – Reduce fleet, property, Change Response funding to advance energy conservation, - Electricity use – occupied - Electricity use – occupied Solar City reduced peak demand by 32%. (p 35) travel and isolated generation emissions to p 32–41 efficiency and demand management meet government and internal targets. initiatives. buildings ≤ 19,181 buildings 18,612 Helped customers connect 15,000 solar - Air travel ≤ 2,618 - Air travel 2,714 X energy systems. (p 37) Demand management savings Realised peak demand savings of Reduced our operational greenhouse gas of ≥ 15MW2 17.1MW2 emissions. (p 40) On track to be diesel free in generation by 2050. (p 40) Target zero injuries within our workplace We will measure our performance AIFR – Employees ≤ 13.7 AIFR – Employees & Contractors 13.7 Lost time injuries frequency rate down 48%. (p 43) Safety – Make sustained progress towards and wider community. against the All Injuries Frequency LTIFR – Employees ≤ 7.6 LTIFR – Employees 3.2 Driving positive behavioural change through ‘no one gets hurt today’ in ensuring a safe Rate (AIFR) and Lost Time Injuries (LTI) safety indicator. (p 44) workplace for our people and the broader A Leader in Safety metrics to reduce injury levels in line LTIDR – Employees ≤ 60.0 LTIDR – Employees 62.3 X community. p 42–47 with longer-term trend targets. LTIFR – Contractors ≤ 1 LTI Frequency Rate – Contractors 2.2 X Ongoing safety forum with contractor workforce. (p 44) FR=Frequency Rate Total Dangerous Electrical Events Total Dangerous Electrical Events 8852 Implemented a new integrated 2 management system. (p 45) DR=Duration Rate (DEEs) ≤ 995 ‘No One Gets Hurt Today’ goal gains loyal following. (p 45) Community safety program recognised as best-practice. (p 46) Be a preferred employer in regional We will further improve productivity Improved employee productivity, Employee ‘Have Your Say’ survey 21 Employee engagement strengthens to 71%. (p 49) Skills and Culture – Build and foster a 2 Queensland with a high performance, and efficiency through successful performance and culture (entropy). compared to corporate target of ≥ 12. Moved towards earned value works delivery resilient and adaptable organisation with professional, values-based culture. implementation of the new organisational - Opex per route kilometre ≤ $2,410 Annualised staff turnover 6.8%2 management. (p 50) the skills and culture required to manage High Performance structure. increasingly sophisticated networks, Organisation Opex per route kilometre $2,494 X Property strategy lifting organisational capability. (p 50) information systems and renewable p 48-59 Deliver the works program on time The aggregated operating and capital Cost Performance Index (CPI) and Reinforcement of supply to North Mackay Enabling performance improvement through energy solutions. and on budget through innovation, works programs will be delivered on time Scheduled Performance Index (SPI) ≥ 1 – CPI 3.1, SPI 1.00. information. (p 51) Information – Integrate a spatial model into technology, standardisation, design and within budget. for capital projects > $75m regulated Increase capacity to Dalrymple Bay/Hay Over 350 graduates, apprentices and trainees business processes to enable our people to 3 and works packaging. and $60m unregulated. Point – CPI 1.6, SPI 1.00, supported across the business. (p 52) improve work practices and efficiency. Ubinet – CPI 1.2, SPI 1.00 SharePoint intranet helps employees collaborate. (p 54) Deliver best practice environmental We will maintain our Environmental and AS/NZS ISO14001 Environment AS/NZS ISO14001 Environment Standard Protected endangered species with outcomes. Safety Certifications. Standard and AS4801/ISO 18001 and AS4801/ISO 18001 Safety Standards corridor mapping. (p 59) Safety Standards maintained. maintained. No major breaches. Be a high performing and commercially We will manage our operational and Net Profit After Tax≥ $300.7m Net Profit After Tax $321.6m Strategy set to limit rises to network charges. (p 60) Network Charges – Drive network charges focused organisation delivering economic capital investment expenditure within Return on Assets ≥ 8.2% Return on Assets 8.0% X Unregulated revenue growing from diverse down towards the CPI over the long term. value within a sound corporate governance the aggregate five-year allowances used Financial Actual operating expenditure within Operating expenditure was outside solutions. (p 60) Financial Targets – Consistently achieve framework. by the AER in our final 2010-15 revenue financial targets that meet or better our Performance determination. regulatory allowance. the regulatory allowance due to the Employed around 4,700 Queenslanders. (p 62) cost incurred in Cyclone Yasi regulatory allowance and provide a & Governance Actual capital expenditure within Reviewed the business insurance program. (p 76) commercial return on assets. regulatory allowance. restoration effort. X p 60-79 Established regular Board level diversity Unregulated Business – Increase unregulated Capital expenditure was within the program reporting. (p 79) regulatory allowance. revenue while improving core business.

1. Targets set without a benchmark due to changes in the legislation governing Guaranteed Service Levels. 2. Additional corporate (not-SCI) measures and results. 3. New indices were introduced to move the organisation towards an earned value management of works delivery performance. (p 50)

THE YEAR IN SUMMARY ERGON ENERGY ANNUAL STAKEHOLDER REPORT 2010/11 8 SUMMARY STATEMENT OF CORPORATE INTENT 2010/11 CORPORATE STRATEGY CORPORATE OBJECTIVES 2010/11 MEASURES TARGETS PERFORMANCE OUTCOMES 2010/11 KEY HIGHLIGHTS 2010/11 CHALLENGES AND GOALS 2010/15

THE YEAR IN SUMMARY ERGON ENERGY ANNUAL STAKEHOLDER REPORT 2010/11 9 CHAIRMAN’S MESSAGE

Ergon Energy has an important role to play in supporting sustainability – I see a dependable, affordable electricity supply as being central to the lifestyles we enjoy today, as well as to realising the economic opportunities that lie in the future for regional Queensland.

MEETING OUR COMMITMENTS Under this new framework, our As a result, responding to the rising Ergon Energy has delivered strongly financial returns better reflect the cost of electricity for our customers is this year. investment being made in the network at the centre of our strategic response. and the increased costs of borrowing in This is all the more important in light of Most pleasing to the Board has the market place. been the fact that the rate of lost the current debate around the federal time injuries in the workplace has The profit result provides for a government’s proposed carbon price. almost halved. $252.6 million dividend. This in part This developing policy area is being compensates the Queensland monitored by the Board, both from a Reliability performance has also Government, as our owner, for the customer and business impact improved dramatically with a 24% turn $399.3 million subsidy they provide, perspective. around in the frequency of outages in the form of a Community Service despite enduring one of the most Obligation payment, to ensure regional ADDRESSING AFFORDABILITY extreme weather periods in recent Queenslanders do not pay more for By combining a customer focus, history. It is an achievement that electricity than their big city smart technologies and demand-side demonstrates the maturity and counterparts. management, along with efficiency strength of the organisation’s and productivity improvements, we To achieve this, it is Ergon Energy’s response capability. are positioning the business to limit role as a retailer to offer the growth in network charges to less Looking forward we are aiming to government’s uniform electricity than the Consumer Price Index over maintain the momentum of these tariffs across Queensland. achievements. the long-term. UNDERSTANDING THE CHALLENGE We also met our financial commitments Although this will not take immediate with a Net Profit After Tax of Ergon Energy’s strategic challenge is pressure off prices it is a critical $321.6 million. clear – we need to minimise our impact element of our affordability response on rising prices while ensuring we are – one that I believe is vital to sustaining 2010/11 was the first year of the new able to respond to electricity demand the local economies and lifestyles of five-year regulatory control period. and growing expectations around regional Queensland. This saw us come under a national reliability and choice. regulator, the AER (previously this The goals we have set across our was a state function). While prices are rising due to multiple strategic areas of focus are all and complex factors, recent increases interlinked and contribute to this Broadly, it is the AER’s role to enforce have largely been due the investment overarching goal – whether they the National Electricity Law and the needed to cater for more homes and relate to being customer-driven, National Electricity Rules and to businesses using more energy at peak excelling in asset management, or approve the amount of revenue we can times. This has driven the record simply developing as a high earn to cover our expenses incurred investment in the network over recent performance organisation. throughout the regulatory control years, and is continuing to drive our period, based on what the AER thinks forward investment forecasts and put is prudent and efficient. pressure on electricity prices.

CHAIRMAN’S MESSAGE ERGON ENERGY ANNUAL STAKEHOLDER REPORT 2010/11 10 Take, for example, our current efforts These efforts are also being We are also working with Google to to address affordability through energy supported by engagement with our potentially transform the way the efficiency education. major customers to ensure we can company manages its assets. Google’s deliver the network connections they spatial applications will see us using While this is ensuring our customers require in a timely fashion. To meet the simulations to help plan everything get the best possible value for what future demands from the resource from our response to a natural disaster they pay for, it is also central to our sector in particular we are working to the forecast growth in electricity demand management objectives. towards greater certainty around the usage in a particular area. We are currently trialling a broad cost and timelines for supply and range of tools and techniques to network augmentation. THE ERGON ENERGY OF TOMORROW better manage demand. I am confident, smart technologies These efforts are aiming to defer or “I am confident, smart like those embodied in the ROAMES avoid costly network investment – with technologies... fresh thinking venture, fresh thinking and a shared a target of 100MW over the current and a shared determination determination to work safely and five-year regulatory control period. efficiently will develop further as This is the equivalent to the electricity to work safely and efficiently the hallmarks of Ergon Energy in demand of around 20,000 houses. will develop further as the the future. It is about working with our customers hallmarks of Ergon Energy I see this future already forming with so that together we reduce overall in the future.” what has been delivered this year. And I costs – short and long-term – and, as a would like to thank the Board and all of win-win, strengthen our climate change This will see our current focus on works the people who worked diligently response and reduce carbon emissions. delivery improvement and more broadly for Ergon Energy toward these our asset management excellence achievements for their contributions. The other important plank of our come to the fore. affordability response is about having In particular, I would also, once the safety nets in place to protect the A TECHNOLOGY ENABLED FUTURE again, like to publicly recognise the outstanding efforts of Ergon Energy’s vulnerable segments of the community. Technology is also being used to target workforce and industry partners in efficiency and productivity with one of The Board sees the support that is restoring power following this year’s our most promising initiatives, known being provided to those in financial floods and cyclones. It really was a as ROAMES – our remote observation, hardship as central to meeting the summer where everyone did their bit automated modelling and economic organisation’s social responsibilities. – whether in the field, behind a desk, simulation capability – targeting our This led to our endorsement of a bill answering a call from a customer or vegetation management costs. waiver for the customers hardest hit helping ensure Ergon Energy and its by this year’s floods and cyclones. Ergon Energy is currently spending over industry partners had what they needed READY TO RESPOND TO DEMAND $80 million a year to address vegetation to do the job. growing around powerlines. While this It is this type of response that gives me At the same time as expanding our work is vital for both community safety confidence that as an organisation, demand management tool kit, we’re and network performance, we needed Ergon Energy is ready to rise to the also continuing to invest in the network to find smarter ways to respond. to ensure we are ready to meet the challenges in the years ahead. potentially dramatic increase in In the near future, as part of the electricity demand foreseen by a ROAMES initiative, we will be taking to resurgent mining sector and the new the sky with two aircraft equipped with growth industry developing around our laser scanners and digital cameras. natural gas resources. This will be the start of a year-long journey that will see the entire Ergon DR RALPH CRAVEN This is the contradiction of the two Energy electricity network, and any CHAIRMAN speed economy that we are servicing vegetation encroaching on it, mapped across regional Queensland. While from the air. The efficiencies in some areas are quite stagnant, to vegetation management alone that enable growth and prosperity we this will deliver will save the company are still preparing to meet a boom millions of dollars. (p 52) in infrastructure demand in the communities surrounding and The information gained as a result of supporting the mining developments. this mapping process will then have the potential to deliver countless flow on benefits.

CHAIRMAN’S MESSAGE ERGON ENERGY ANNUAL STAKEHOLDER REPORT 2010/11 11 CHIEF EXECUTIVE’S REPORT

Ergon Energy’s focus this year has been around delivering greater customer value, lifting our asset management capability, and deploying a range of strategies to strengthen the performance of the organisation.

The 2010/11 year saw floods and This is one of the clearest examples in This has included a program of cyclones bring destruction and the company’s history of our people replacing defective switches and heartache to our region, from the far truly demonstrating their commitment investing strategically in our network’s north across to our remotest western to our vision of being a world-class, monitoring and control capability – communities, and right down into the customer-driven energy business. a highlight being the integration of a state’s capital. telecommunications network into the The scale of the response effort, electricity network. Our response to these storm events along with access issues in the flooded was a big part of our year. communities, however, have had SAFETY CENTRAL TO HIGH an impact on the delivery of our PERFORMANCE DELIVERING WHEN IT WAS broader works program, from our We have continued to place the NEEDED MOST customer-requested network utmost priority this year on building Despite more than 75% of our state connections to our vegetation a sustainable safety culture across being declared a disaster zone at one management program. all facets of our business. And as a point, affecting countless communities Getting back on track remains a focus result we have seen a turnaround in and the lives of many of our own people, of our management team. our performance in this area – a we were able, time and time again, to 48% drop in the frequency rate for rapidly take steps to ensure the safety Despite the challenges, however, lost time injuries. of our communities and to restore we achieved a significant network critical electricity supply. reliability improvement this year – with The safety performance of the the duration and frequency of outages network also continued to improve Over the summer, weather-related down 21% and 24% respectively with a reduction in dangerous events saw the power interrupted to compared to last year. electrical events. almost 520,000 customers. Our Minimum Service Standards, set Being a leader in safety is fundamental Our biggest challenge was without a by the QCA, for the frequency of outages to our definition of high performance. doubt Cyclone Yasi. were met across all three powerline This led us to establish a new Never before have we had to grapple categories. The standards for the Comprehensive Safety Indicator this with such overwhelming logistics, duration of outages were favourable year. It includes a range of both lead with such extensive damage over for two of the three – with a 33% and lag indicators that are helping to such a widespread area. Yet our improvement for urban supply. drive the improved safety behaviours people stepped up. They worked needed to ensure no one gets hurt. These gains have primarily been as shoulder-to-shoulder with emergency a result of the removal of previous This focus is not just about our people, services, as well as colleagues from operating constraints on live-line works it is also about the broader community. across Queensland and interstate. and other improvements to operational Sadly this year three community Every time – and there were plenty of practices, however, we have also been members died in separate accidents occasions – that they encountered focused on realising longer-term involving the network. Our sympathies obstacles with access, transport, improvements from a suite of go to their families and the accommodation or resources they asset-focused initiatives. communities they lived in. found a solution. Not everything went seamlessly, but we knew our customers needed us, so we were determined to do our very best.

CHIEF EXECUTIVE’S REPORT ERGON ENERGY ANNUAL STAKEHOLDER REPORT 2010/11 12 These events are why we remain BRINGING POWER BILLS DOWN From a customer perspective, while determined to provide a safe network The year has also seen us continuing Ergon Energy doesn’t set prices, we are and to get our safety messages out to work with our customers to find committed to providing value for money through our electrical safety awareness smarter solutions that help them to in terms of reliability of supply and our program. It vital that the community manage their electricity use and service standards. understands the risks associated with minimise costs. This will see the ongoing evaluation electricity and how to interact safely and introduction of new technologies with our assets. This year our innovative powersavvy program, as an example, helped our and practices that improve network DRIVING EFFICIENCIES INTO off-grid communities reduce their performance. THE BUSINESS power bills by an average of 15%, and We will also meet the new requirements We have for some time recognised provided us with diesel savings of over under the National Energy Customer that affordability would become one 1.5 million litres in our isolated Framework and continue to drive of the most important issues facing the generation area. operational efficiencies into the industry and our customers. This has business, by managing costs in a seen us doing everything possible to “Our storm season response prudent manner and using technology be efficient and keep our costs down. was a big part of our year... we to find more effective and more efficient ways of undertaking our work. We have continued to work this knew our customers needed year jointly with Energex, our partner us, so we were determined to This will contribute to other government organisation in the Queensland do our very best.” initiatives that are driving for efficiency electricity industry, sharing our in the electricity industry, including the expertise and investment capital to initiatives in the Queensland Energy deliver a suite of improvement Our success in the Townsville Management Plan and associated with outcomes. These range from changes community over recent years is also retail tariff reform. to our asset management approach to now being harnessed to deliver even economies of scale in our procurement. greater value. Working together as an Achieving across these priorities is Energy Sense Community will help us important to delivering a more This partnership is also expanding reduce the investment necessary to sustainable and affordable electricity further to extract maximum value from keep pace with demand – and in the service for regional Queensland. our Information and Communications longer-term reduce the pressure on THE POWER OF WORKING TOGETHER Technology investment – this is electricity prices. about becoming an increasingly Ergon Energy has a highly skilled information-enabled, high performing By working with our customers and and capable geographically disperse organisation with improved decision other stakeholders in this way, we workforce, with experts in many making and more efficient business are not only reducing costs, we are fields from electrical engineering to processes. leveraging environmental value by administration, and across the trades. reducing greenhouse gas emissions. We have also continued to drive They have also come to the organisation value from earlier changes to our This is where the asset imperative to many different backgrounds. organisational design and to lift better manage demand, as well as the I have no doubt that this diversity the management control across community’s broader response to is key to our ability to address the our operations to realise productivity climate change, come together. challenges ahead. improvements. These activities are both strengthening I thank all of our employees for These efforts have seen us finish our business and meeting what we see their efforts over the past year – the first year of our regulatory as a social responsibility. especially those who gave their all determination, which spans from despite facing their own personal OUR FOCUS IN 2011/12 2010/11 – 2014/15, having largely difficulties in the aftermath of the managed our operating and capital Looking forward, like all many natural disasters experienced expenditure within the parameters Queenslanders, I’m hoping the across regional Queensland. set by the AER. weather will be kinder than in the past 12 months so that we can push forward I look forward with confidence to the At the same time there has been a rise with our goals. new financial year as we continue to in employee commitment towards the demonstrate the many ways we are organisation and cross-workgroup While we have achieved a lot, we are truly responsive, resourceful and ready. cooperation. The results from the continually lifting the bar to meet our annual survey of our employees also stakeholders’ expectations, especially shows that our people are also feeling in regard to safety, reliability, delivery more empowered to do their job. and efficiency. These attributes are central to high We will continue to lift our safety performance, and fostering a resilient performance, as well as ensure we and adaptable organisation. comply with the new laws that become IAN MCLEOD applicable through the harmonisation of CHIEF EXECUTIVE workplace health and safety legislation taking place nationally.

CHIEF EXECUTIVE’S REPORT ERGON ENERGY ANNUAL STAKEHOLDER REPORT 2010/11 13 REVIEW OF OPERATIONS

Customer-driven 14

setMAs anagement Excellence 22 Leverage Climate Change Response 32 A Leader in Safety 42 High Performance Organisation 48

REVIEW OF OPERATIONS CUSTOMER-DRIVEN ERGON ENERGY ANNUAL STAKEHOLDER REPORT 2010/11 14 REVIEW OF OPERATIONS: CUSTOMER-DRIVEN ready to listen

Our priority is to be customer-driven – providing a more cost-efficient and dependable electricity service, one that is focused on delivering increasing customer value and choice, as well as broader economic and social benefits, now and in the future.

Ergon Energy’s 690,000 plus customers A similar trend was reflected in the range from large industrial energy overall Value to Business score, which users to ‘mums and dads’. They are not looks at the perceptions of our business HIGHLIGHTS only geographically dispersed, but they customers. It fell to 6.0 from 6.5 in ■■ Established a new Customer have different expectations around 2009/10. (see statistics on page 21) Council ‘level of service’. This diversity, coupled NEW COUNCIL FOR CUSTOMER VOICE with the way they use electricity, means ■■ Advanced our ability to reduce we need to work hard to achieve the To help us better connect with our pressures on tariffs right balance of quality, cost, value and customers, this year we launched a choice for our customers. Customer Council. As a consultative ■■ Boosted our capacity to help forum, its aim is to engage with the those in hardship A FOCUS ON VALUE community on customer-related ■■ Supported ATSI reconciliation Since 2001, we have been using a Value challenges and opportunities around through engagement to Customer metric as one of the key the supply of electricity to regional measures of what is important to our Queensland. It brings together ■■ Benchmarked strongly with customers. This metric allows us to representatives from Ergon Energy and community investment monitor how our residential customers nine peak organisations from across ■■ Achieved the lowest level of judge value in terms of what they regional Queensland involved in the receive versus the price they pay. community services, environmental complaints in the industry. This year’s results clearly highlighted and business sectors. It allows these the need to address the impact of rising organisations to inform and influence electricity prices on our customers. our business decisions and, in turn, facilitate wider community consultation RESEARCH CONFIRMS FOCUS While our overall ratio score compared and information provision to their ON AFFORDABILITY positively to the peer suppliers we constituent groups. While customers’ perceptions around cost benchmark against at 103 (where and affordability are driving down the value 100 is parity) – thanks to the customer The Council has been well received, they RESEARCHplace on the serviceCONFIRMS we deliver, Ergon interaction experience, particularly with the first meeting held during the EnergyFOCUS is performing ON AFFORDABILITY above the pool of around the provision of energy solutions reporting year focusing on the priority comparative suppliers we benchmark and advice (a strategic focus area areas of energy efficiency and against in this area. to address affordability) – our affordability, service delivery, climate overall value score dropped to change, community safety and regional

6.5 out of 10 from 7.0 out of 10 in representation. Meetings will continue 7.6 7.3

2009/10. This result was driven largely to be held quarterly. 7.0 6.9

by our customers’ perceptions around 6.5 We have also continued a suite of other cost and affordability. customer insight initiatives to monitor satisfaction across different customer segments – see the Customer Experience Scorecard. (p 21) Together these efforts have provided us with an in depth understanding of powersavvy Field Officer Wendy Phineasa’s SCORE CUSTOMER TO VALUE role has been central to engaging our isolated what our customers’ value. This is communities in the Torres Strait around energy underpinning our efforts to address 2007 2008 2009 2010 2011 efficiency – this program is about sharing the the cost pressures associated with simple things that can be done to save power. (p 19) our role in supplying electricity,

REVIEW OF OPERATIONS CUSTOMER-DRIVEN ERGON ENERGY ANNUAL STAKEHOLDER REPORT 2010/11 15 ELECTRICITY SUPPLY COSTS =

42% GENERATION COSTS +

TRANSMISSION + DISTRIBUTION COSTS = 49% NETWORK COSTS + The inaugural Customer Council meeting: From L, General Manager Service Operations Alan Newman, Agforce representative Sue Bennetto, Executive General Manager Customer and Stakeholder Engagement Justin Fitzgerald, Linda Parmenter from QCOSS, Customer Advocate RETAIL COSTS Tanya Acheson, CCIQ representative Mark Menkens, Greening Australia’s Bob Osborne, UDIA’s 9% Paul Spina, Lifeline representative Don Anderson and Greg Hoffman from LGAQ. including our demand management Many of the demand management This change not only provides and operational efficiencies initiatives, initiatives, detailed in this report, are immediate savings to customers who as well as our efforts to help our part of our partnership with the switch to off-peak, but will reduce customers get greater value and Queensland Government to deliver the peak load on the network and delay to support our vulnerable and Queensland Energy Management Plan. the required capital investment and disadvantaged customers. This Plan outlines how, by working resultant tariff increases. This is just together, we can avoid the need for a one example of how tariff reform HELPING EASE COST PRESSURES will play a critical role in responding The recent increases in the price of “We’re working hard to deliver to demand. electricity largely reflect the scale a dependable, affordable TARIFF REFORM TO GIVE CHOICE of investment being made across electricity supply for our Queensland’s electricity networks Our demand management efforts and to meet customer-driven demand. customers.” our customers’ abilities to pay may also For Ergon Energy, this investment be assisted by a new tariff structure could be up to $4.5 billion for the new 1,000MW power station by 2020; announced by the Queensland current five-year regulatory control saving more than $3.5 billion in avoided Government in June, which currently is period. (p 25) network and generation costs. in consultation for implementation in July 2012. Ergon Energy is continuing to A typical household currently pays a One of the first initiatives was the engage on this matter, following the quarterly electricity bill of around $375. change to tariff policy enabling pool government engaging the QCA, owners easier access to the cheaper Ergon Energy understands that rising believing the proposed tariff structure retail Tariff 33 electricity supply. The electricity prices are just one of the would offer customers greater choice change means pool owners can now cost-of-living pressures that our and reward them for using electricity connect their pool pumps to off-peak customers are facing but it is one we (and, as a consequence, the network) electricity via a standard power point can influence. That’s why we have set more efficiently. rather than having to hard-wire back about positioning the business to limit to the home’s electricity system. The proposed tariff structure reform increases to network charges (the main The change also means pool owners will remove the Benchmark Retail Cost component of the end price that we can will no longer need to employ a licensed Index (BRCI) methodology currently influence) to less than the Consumer electrician to disconnect and reconnect used to set notified electricity prices Price Index (CPI) over the long-term. their electricity supply when their pool and replace it with a more transparent This is being achieved through a range filtration or sanitation systems system based on the underlying cost of of initiatives being progressed through need repair. supply. Other reforms being discussed our strategic plan, most notably our include the introduction of an inclining efforts to reduce peak load through This barrier to the take up of Tariff 33 block tariff structure for Tariff 11. demand management and alternative was identified in Ergon Energy’s pool energy solutions, which will defer or pump economiser trial in Cairns over avoid network investment. the past year. The trial found a switch in tariff can provide a significant saving for pool owners – it is estimated customers on the Cairns trial will save about $255 a year.

REVIEW OF OPERATIONS CUSTOMER-DRIVEN ERGON ENERGY ANNUAL STAKEHOLDER REPORT 2010/11 16 This type of tariff would encourage The year has also seen a focus on HELPING OUR CUSTOMERS SAVE customers who use a lot of electricity to developing shared construction and Ergon Energy has been running an reduce their use without financially material standards. This commonality integrated marketing strategy, ‘energy impacting low consumption customers. is helping us realise economies of scale sense’, since April 2010. The initiative with joint tendering for key plant, such Another proposed change is to was launched to help customers reduce as high-voltage switchgear, and to establish a voluntary residential the size of their bills in the face of optimise inventory management. Time-of-Use tariff for customers who increased energy use and rising prices. For example, two recent achievements install an interval meter. This would include; the introduction of aluminium The strategy uses a mix of marketing allow prices to be varied across for high-voltage underground cabling, initiatives, including television, cinema, different times of the day and give which is far more cost-effective, saving press, collateral, outdoor, direct mail, customers an incentive to shift up to $1.9 million a year; and the online and community partnerships. discretionary portions of their addition of a new design to our range consumption away from higher-priced Energy sense shows customers of modular substations, which is peak periods to times of the day when ways to save money by using expected to lead to cost savings in prices are lower. electrical appliances more efficiently. excess of $2.2 million over the current It demonstrates which household To better understand how this would five-year regulatory control period. activities use the most power and work in practice and ensure equitable Modular solutions are assembled provides an online calculator to outcomes, we are currently undertaking cost-effectively in our workshop help target activities to reduce a Rewards Based Tariff Trial with before being relocated to the field electricity usage. volunteer residential customers from where needed. In the field they are Cairns and Toowoomba. The trial, quickly set up and commissioned. We are also continuing to provide advice which began in early 2011, offers on our customers’ bills that shows their To increase efficiency, safety and households incentive payments of up energy use in comparison with other compliance, we have also progressed to $300 over the next two years for customers in their area. common defect classification manuals energy usage behaviours that support for transmission, distribution and These efforts are starting to achieve the management of peak demand. substations. This has supported the behavioural change with more than Preliminary data analysis is indicating introduction of a common hand-held 84% of customers showing an interest customers are willing to change their automated solution for recording in receiving information on how to behaviour in response to the dynamic substation defects. save electricity. peak pricing signals being issued through the trial. We are also working jointly to extract While ‘energy sense’ is all about maximum value from our significant reducing the customer impact of LIFTING OUR OWN Information and Communications price rises and delivering value to OPERATIONAL EFFICIENCY Technology investment. This customers by providing solutions and As well as identifying and trialling partnership is about enabling us advice, it also provides the added ways to reduce demand on the network, to meet the needs of our customers advantage of helping us to achieve we have maintained our focus on into the future (p 51) and realising reductions in network load. operational efficiency and effectiveness. our shared vision for a ‘smart’ network. We are also showing leadership by (p 25) Significant savings have been made applying energy sense to reduce through the year in a number of areas Another highlight in the information electricity consumption in our own – through the Joint Workings program space is our ‘ROAMES’ initiative, which buildings. (p 40) with our south-east Queensland when implemented, promises to deliver Making account management easier counterpart Energex, our expertise savings of around $44 million over five Another initiative to help our customers and investment capital have been years in our vegetation management manage their electricity costs is the brought together to deliver a suite space. (p 52) ability to pay their bill by direct debit – of improvement outcomes for our To improve our operational efficiency weekly, fortnightly, monthly or respective companies. and manage our overhead costs more quarterly. This year our focus was on Initiated in 2008, this year the broadly, we are also concentrating on helping customers match their direct program has implemented a shared improving our works delivery capability. debit payment with the typical value of condition-based risk-management These efforts are about streamlining their bill, to address changes to pricing approach to asset replacement and workflows, cutting waste and removing and their personal consumption. developed a common network asset unnecessary bureaucracy. (p 50) We have also had a good take-up by management framework. This work Our financial performance is also being customers paying their electricity bills has been about shaping the future supported by ongoing savings from via BPay, which provides them with the – allowing us to benchmark our major initiatives undertaken in previous convenience of paying online. maintenance activities against one years, including our Organisation another, as well as like entities around To better manage their budgets, Design Review (and the late 2009 the world, to identify ongoing this year also saw more than restructure) and the Depot 3PR improvement opportunities. 11,000 customers pay their power initiative (the rollout of a purpose-built bills direct from their Centrelink management control system across our benefits. Called Centrepay, this initiative operations, which commenced in 2008). complements our financial hardship policy (p 18), which is designed to keep customers connected.

REVIEW OF OPERATIONS CUSTOMER-DRIVEN ERGON ENERGY ANNUAL STAKEHOLDER REPORT 2010/11 17 ASSISTING CUSTOMERS We also continued our work with Our ongoing relationship with EXPERIENCING FINANCIAL HARDSHIP outside agencies: Centrelink Remote Indigenous Services The current economic conditions is helping us to support customers ■■ we built a closer relationship with experiencing difficulty paying for their across regional Queensland and the the Department of Communities’ electricity needs. widespread impact of this year’s natural Home Emergency Energy Assistance disasters, combined with price rises Scheme to support customers in To further support our A&TSI in goods and services across the need and facilitate payments for debt Community Engagement Strategy board, are creating financial stress totalling approximately $500,000. we have established a governance in households and businesses. structure, with both a high-level In response, we expanded the capacity ■■ we worked with Good Shepherd Youth and Family Service to steering committee and an of the team who deliver our customer operational committee, to better assistance program. increase the awareness of their No Interest Loan Scheme available coordinate engagement with these After our summer of natural disasters, to low-income earners to purchase communities and drive the delivery around 3,900 customers are now essential whitegoods. of real improvements. benefiting from the protection our ■■ we developed our relationship The goals of this strategy align with customer assistance program provides. with Lifeline Community Care the principles of a Reconciliation Action This equates to approximately 0.6% of Queensland to better identify Plan, as developed by Reconciliation our customer base. people in hardship and to provide Australia, the peak national body for Our customer assistance program gives support for its financial literacy and building and promoting reconciliation. general energy advice on how to reduce energy-efficiency program. Reconciliation Australia’s three main consumption, organises payment plans action themes are: opportunities, and alternative payment methods and ENGAGING WITH OUR relationships and respect. At Ergon provides direct referral to Lifeline INDIGENOUS COMMUNITIES Energy we are working towards Community Care Queensland if Ergon Energy supplies the majority of achieving good outcomes in each of counselling is needed to build a regional Queensland’s Indigenous these areas with a particular focus on customer’s long-term capacity to pay. communities with power, either through community sustainability, education, the grid, via stand-alone power stations employment and the provision of We are also exploring ways to identify and local distribution networks, or energy services. at risk and vulnerable customers early. through small stand-alone power supply systems. Our aim is to contribute ENGAGING communities ON OUR A dedicated 1800 number was MAJOR projects established for customers in our to the economic and social well-being of hardship program. This service is these communities by engaging with Recognising that communities can have free and enables customers to them and through the delivery of our significant concerns about the impact of contact us easily to discuss their services to them. major infrastructure, such as substations payment problems. and line routes, be it existing, proposed As part of our Aboriginal and Torres or under construction, Ergon Energy In light of the number of natural Strait Islander (A&TSI) Community progressed its commitment to engage disasters that happened during the Engagement Strategy, we established with regional Queensland communities to year, we introduced a disaster waiver a new role in the Customer Advocate foster understanding of its infrastructure program so we could provide bill relief Office to engage with Indigenous building program. to customers hardest hit by this year’s communities. This role is helping us floods and cyclones. Since being to build a clearer picture of the issues We tested our revised model of introduced in January 2011, more than and opportunities relating to our community engagement for major capital 160 customers have taken up this offer A&TSI communities. projects through a pilot involving several such projects. with more than $100,000 waived from The initial focus of this role has mainly, their accounts. but not exclusively, been on improving Ergon Energy seeks to integrate engagement with the communities of community impact assessment and Hope Vale, Aurukun, Doomadgee and engagement ‘always and early’. Palm Island. These efforts will guide Importantly, this approach introduces the broader deployment of our engagement principle of multi-criteria methodology strategy. Some of the challenges being for assessing community impact as early addressed to date include: land tenure, as practicable during the planning and communication protocols, employee project design phases. Regionally based accommodation and the purchase of subject matter experts (SME), together power cards. with SMEs from such areas as property, environment, cultural heritage and We have also created two A&TSI design, operate as ’virtual teams’ to liaison officer roles within our ensure all dimensions of the project Customer Service area to work with are covered. stakeholders across our business, the community, government and This commitment to community business sectors to identify and engagement is in line with our help deliver improved services to over-arching stakeholder engagement A&TSI communities. framework. (p 73)

REVIEW OF OPERATIONS CUSTOMER-DRIVEN ERGON ENERGY ANNUAL STAKEHOLDER REPORT 2010/11 18 CASE STUDY: CREATING A NEW ENGAGEMENT MODEL ready to work together

Our powersavvy project, launched in 2010 to actively engage with whole communities to change the way they think about and use electricity, has created a new model for community and customer engagement.

The isolated communities’ energy saving pilot has successfully demonstrated, in a largely Indigenous context, that an engagement model using a mostly personal, face-to-face approach can change behaviour. The 12-month trial, funded through the Office of Clean Energy, aimed to significantly reduce electricity consumption, greenhouse gas emissions and the overall cost of electricity supply in Queensland’s isolated communities served by diesel-fired power stations. Energy consumption overall has been powersavvy used the principles of Community Based Social Marketing to develop a model that engaged reduced by more than 15% across the pilot with both residents and businesses, educating them on energy efficiency and helping them develop power-saving strategies. Here, Field Officer Wendy Phineasa (left) talks to customer Paula from communities of Thursday Island, Horn Mabuiag Island about some of the simple things she can do to save power at home. Island and the Northern Peninsula Area, all located around the most northern tip of “I learnt lots more because the Australia. This means our customers are now saving hundreds of dollars a year off field officers came to show me their power bills. how to save energy. I’ve never Around 5,500 predominantly Indigenous read an energy saving book. I residents live in these communities, which never knew why my monthly bills is one-third of the customers served by the were $300 to $400. Now I’m only 33 isolated power stations. The success of paying $100 to $200! That was the approach has led to the rollout of the because I used to leave air con program to the remaining 30 remote communities over the next three years on all night. powersavvy taught me to turn everything off and SUSTAINABILITY IN ACTION how much power the air con ■■ 875 households participated in a takes and now I am saving lots powersavvy home energy-saving of money.” consultation, helping them make big reductions in their power usage and Residential customer from therefore their power bills – some saving independent research hundreds of dollars a year.

■■ Energy audits conducted with 100 large Commercial customers account for 60% of commercial customers, including electricity use in the pilot communities, so government departments, recommended powersavvy focused on measures to reduce this, initiatives to save more than $978,000 a with some saving up to 33%. year with most now being implemented.

■■ Overall the pilot is estimated to be delivering annual power station fuel savings of more than 1.5 million litres of diesel, worth approximately $2.2 million.

■■ These diesel generation savings will avoid the production of more than 4,200 tonnes of greenhouse gas emissions a year.

■■ The trial supported local employment with five Indigenous field officers sharing their knowledge with residents.

■■ Following the resounding success of the The program has a major school education pilot, powersavvy has been extended to element which promotes and reinforces the outer Torres Strait Islands with initial energy-saving behaviours at home. Using the results showing similarly positive slogan ‘be brave and save’, a team of students sustainability outcomes. at Bamaga High School embarked on a school-wide energy efficiency campaign, A powersavvy website was launched to spread the cutting their school’s power consumption by word about how to save power and money. 22% over a four-month period.

REVIEW OF OPERATIONS CUSTOMER-DRIVEN ERGON ENERGY ANNUAL STAKEHOLDER REPORT 2010/11 19 During the year we continued to work The year also took our partnership B asyeING e to deal with closely with local governments, as a key with the Queensland section of the Throughout 2010/11 we have been community engagement channel, to Royal Flying Doctor Service (RFDS) working on the overall customer identify areas for collaboration – from to new heights. Since 2004 more than experience. We want our customers energy conservation to modelling $5 million has been raised through to say ‘Ergon Energy knows me and community evolution and economic the outstanding generosity of our is easy to deal with’. activity – to improve our service delivery. customers and our employees – a To support this goal, we truly humbling figure considering the commenced an end-to-end review Through these relationships, financial burden of the floods and of the customer experience – consultation continued around our cyclones experienced across our starting with what happens when a Community Powerline Project works. regions this year. customer contacts us with a specific This saw $2.3 million invested to query, and then how the query assist local communities relocate, Since our partnership began, moves to a service order for the underground or replace overhead more than 94,000 customers have business to carry out the work, powerlines as part of community-owned opted to take part in the initiative. through to final resolution for the beautification projects in Mount Isa, The money raised through a voluntary customer. The aim of this work is to Cairns, Biloela, Bowen, Gin Gin and donation scheme supports the RFDS’s improve our internal processes and deliver better response times for Maryborough in addition to numerous aircraft replacement program and our customers. smaller projects in other regional the purchase of essential medical Queensland cities and towns. We also equipment. We also introduced more worked with local governments self-service transactions through This year, to gauge the effectiveness our General Enquiries Interactive throughout our disaster response of our community investments, we Voice Recognition system to allow activities, and as part of our ongoing invested in a modelling tool developed 24/7 access for our customers to, Cyclone Area Reliability Enhancement by the London Benchmarking Group, for example, change their payment (CARE) program. (p 37) a group of more than 100 companies arrangements. ADDING VALUE THROUGH OUR working together to improve the One of our most challenging service COMMUNITY PARTNERSHIPS measurement and management of areas this year has been around community involvement. This tool solar energy systems, which During 2010/11, our sponsorships captures our main community require connection to our grid to and corporate donations saw us take advantage of the solar bonus investment activities and enables us to invest more than $750,000 toward tariff. We experienced a dramatic benchmark these investments against targeted social and environmental jump in enquiries, which required other companies across Australia and initiatives. Our strategy is to inject significant cross-business New Zealand, especially those in the funds into regional Queensland for collaboration and resourcing, energy sector. We are pleased to say community-driven projects that deliver as well as communicating with our community investment compared installers to ensure positive positive outcomes for both our business strongly to other organisations across customer outcomes. (p 37) and the community as a whole. a range of categories. We are driving a program of One of the key partnerships this year improvement in the major customer FOR MORE ON OUR COMMUNITY was with the North Queensland area. This includes a management ENGAGEMENT SEE PAGE 33–39. Cowboys Rugby League Team. Created priority on reducing turnaround around the concept of ‘join my team’, we times for connections (p 24–25 & 50), are using a group of Cowboys’ players as well as a range of customer to support community awareness of our relationship management improvements. Our goal is to better ‘energy sense’ messages. We anticipate understand the needs of these this will lead to the adoption of more customers so we can respond energy-efficient behaviours. This more effectively. campaign is adding value to the club by In the process of improving our assisting it to build its environmental customers’ experience, we are also and sustainability credentials. preparing ourselves for compliance Ergon Energy’s $100,000 Envirofund, with the more stringent launched in May 2009, also continued requirements of the National Energy Customer Framework with 19 community-based groups (NECF). Ergon Energy has bringing their energy conservation and participated in the development environmental vision to life. (p 35) of the Ministerial Council on Social media sites, Twitter and Facebook, were Our PowerAid program saw $172,700 Energy’s NECF package of reforms. introduced for the first time as disaster response The Queensland Government has donated to charities of our employees’ community communications channel. decided that the majority of the choice throughout the year, taking the Our Facebook followers peaked at almost 9,000. NECF reforms will be introduced There were more than 15,000 ‘comments’ and total donated since its inception in 2004 in Queensland in July 2012. ‘likes’ posted by followers and incredibly more to almost $1.8 million. The PowerAid than six million views of the news items. The national framework will be initiative is a simple concept that regulated by the AER and cover involves work teams accruing points for the non-economic aspects of safe work practices, which are then energy retail sale and distribution converted into donation dollars by connection and supply, including Ergon Energy. (p 44) consumer protection.

REVIEW OF OPERATIONS CUSTOMER-DRIVEN 20 SCORECARD CUSTOMER EXPERIENCE

C oNTACT centre TELEPHONETELEPHONE GRADE GRADE OF SERVICEOF SERVICE – CALLS – ANSWERED IN 30 SECONDS performance sound ThroughCALLS January ANSWERED to May, ourIN 30customer SECONDS service team experienced extremely challenging The natural disasters over summer saw conditions, with dramatic increases in call volumes and durations due to the floods and our National Contact Centre rise to the cyclones. A high proportion of the team were personally affected by the disasters. challenge of a dramatic increase in call

volumes – with double the usual number 80% in February alone. The centre serviced the 2010/11 TARGET 70% greater call volumes during the power restoration efforts, and then managed a heightened level of enquires in the months following. This was due to three main reasons: a backlog of bill enquiries due to accounts being suspended during the response effort; the heightened level of hardship being experienced throughout the community; and the dramatic jump in 0% JUL SEP JAN OCT FEB APR DEC JUN AUG NOV solar enquiries. MAY MAR As a result, the ‘grade of service’ for the percentage of calls answered in 30 seconds B eNCHMARKING complaints Srvice e eXCELLENCE recognised dropped between January and May. At the management Ergon Energy was recognised for its same time, however, we were able to The Energy and Water Ombudsman commitment to customer service maintain overall customer satisfaction, Queensland’s annual complaints excellence as the Queensland winner in the finishing the year with an above target statistics for 2010/11 are evidence of Ergon State and Federal Government category at result of 88% (compared to an average of Energy’s internal complaints management this year’s Australian Service Excellence 91% in 2009/10). systems, showing we recorded fewer Awards. We were also highly commended Efforts to address the resourcing challenge unresolved complaints over the last in the national category for State and through recruitment, training and greater financial year than any other electricity Federal Government. retailer or distributor in Queensland. Ergon rostering flexibility saw service levels Certification against the International Energy’s combined retailer and distributor recover to finish the year above target at Customer Service Standard, which is complaints represented only 6% of total 72.8% (target 70%). However, the overall administered by the Customer Service complaints escalated. result for the year was 64.4% of calls Institute of Australia, was maintained. We answered within 30 seconds (71.2% Despite this, our customers were not always achieved a rating in the top 5% of certified in 2009/10). satisfied with how we handled complaints, organisations and were the leading utility Twitter and Facebook were introduced with this result fluctuating between 68% and in 12 of 29 categories assessed. 56% toward the end of the year (average of as disaster response community This strong outcome was pleasing as 62% overall satisfaction throughout the communication channels. the assessment centres on how the year). We are working to improve this level organisation was able to remain These social media sites were very of customer satisfaction. successful in supporting our traditional customer-focused through a disaster customer communication channels. Ergon Energy maintained our high response. The assessors visited the depots Our Facebook followers peaked at almost conformance rating with the International of Roma and Chinchilla, and the service 9,000, and there were more than six million Standard on Complaints Handling (AS ISO centre in Rockhampton. These sites all had views of our news items. 10002), as confirmed by an independent first-hand experience of, and were able to bi-annual review. demonstrate their response to, the severe G uARANTEED service weather events. levels improve SERVICE FAILURE CLAIMS PAYMENTS This commitment to external review to We continued to improve on delivery Network Reliability 1,099 $114,296 drive continuous improvement will see an around our Guaranteed Service Levels GSLs ongoing focus on improving our support to (GSLs), detailed in our Customer Charter. Other GSLs 3,701 $165,435 customers in hardship and our customer Changes to GSL payment rules in July 2010 TOTAL 4,800 $279,731 service delivery capability. required us to make automatic GSL payments to customers when we failed to THE STATISTICS deliver. Previously, in most cases, the customer had to lodge a claim. Given this, CUSTOMER SERVICE DELIVERY 2010/11 2009/10 2008/09 2007/08 2006/07 we have not provided comparison results. Value to Customer – Target ≥ b 103 109 100 103 106 However, process improvements have Residential Research Parity 100 (peer lifted our service standards and resulted in average) the final level of GSL payments being well Value to Customer – b 6.5 7.0 6.9 7.3 7.6 below forecast. (p 8) Residential Research Score From an electricity distribution Value to Business (research score) b 6.0 6.5 na na na perspective, GSLs cover network reliability Call Volumes to Contact Centre z 1.67 1.55 1.45 1.39 1.47 standards, as well as new connection and million million million million million reconnection timeframes, wrongful Contact Centre – Target b 88% 91% 90% 89% 85% disconnections, the resolution of hot water Customer Satisfaction ≥ 85% supply matters, appointments and the Contact Centre – Calls Target b 64% 71% 71% 74% 70% notification of planned interruptions. Answered in 30 Seconds ≥ 70% These are complemented by the retail New Connections – Average Time Target ≤ z 218 162 165 173 na GSLs for billing errors. from Contract to Commissioning 160 days days days days days

REVIEW OF OPERATIONS CUSTOMER-DRIVEN ERGON ENERGY ANNUAL STAKEHOLDER REPORT 2010/11 21 REVIEW OF OPERATIONS

CuSTOMER-driven 14 MAsSET anagement Excellence 22

LeVERAGE Climate Change Response 32 A Leader in Safety 42 High Performance Organisation 48

REVIEW OF OPERATIONS ASSET MANAGEMENT EXCELLENCE ERGON ENERGY ANNUAL STAKEHOLDER REPORT 2010/11 22 REVIEW OF OPERATIONS: Asset Management Excellence ready to build on success

Ergon Energy is committed to delivering a secure, reliable and quality electricity supply for our customers, wherever they are in regional Queensland – one that effectively balances both commercial and customer perspectives without sacrificing safety.

FINDING THE RIGHT BALANCE The health of our network is measured Asset management is all about balance by many interrelated aspects, the HIGHLIGHTS – the balance between ‘investing in’ obvious ones being reliability and and ‘driving value from’ an asset. quality of supply. Others include our ■■ Established criteria to assess Our strategic focus on excellence in performance against our broader social network health this area recognises that this balance responsibilities, notably the challenge ■■ Invested $660.5 million to increase can only be achieved with a full of electricity affordability and the capacity and improve reliability understanding of the overall health need to demonstrate environmental stewardship. The network’s health is of the network. ■■ Advanced a range of intelligent also being measured by it resilience network solutions Ergon Energy’s infrastructure network and responsiveness to external events, is vast and complex. It comprises many such as this year’s natural disasters, ■■ Prepared well and met the individual assets, each at different growth in demand and network summer storm season challenge stages of their useful lives. Despite this, utilisation, which are vital to meeting our electricity supply network must our financial obligations. ■■ Reduced the frequency of outages perform at a consistent standard by 24%. day in day out. To ensure the health of the network we are continuing to augment and plan our capital program for future growth in “Our goal is to manage our demand, most notably in resource rich These outcomes were the result of assets in a more sustainable centres in central and southern three major influences: Queensland. way – by adopting new ■■ milder summer conditions – the lack technologies and smarter We are also developing our asset of high temperature days, where ways of doing things.” management capability, changing we normally see an increase in air practices and adopting new conditioner use, coinciding with the energy usage patterns of a normal This is where asset management technologies in response to both the working week. becomes central to meeting our demand challenge and reliability stakeholders’ expectations. By expectations. ■■ natural disasters – three cyclones and a string of wet weather days optimising lifecycle management, We are drawing on a suite of significantly impacted the state’s we can enhance network performance non-traditional demand-side solutions. mining operations, tourism industry and, in turn, customer satisfaction. Intrinsically linked to our climate and transport-dependent businesses. We can also deliver more sustainable change response these customer- This was compounded when Cyclone development within our funding facilitated solutions are discussed in Yasi put a significant section of the constraints, which ultimately optimises more detail in the next section. our return on investment. Lifecycle network out of service during the management also delivers better safety It is all about providing a more traditional peak demand period. cost-efficient, sustainable and and environmental outcomes. ■■ economic drivers and behavioural dependable service for our customers. change – we are continuing to monitor THE DEMAND CHALLENGE REMAINS how demand is being impacted by the DESPITE MILD SEASON current economic climate, price rises and the growing awareness and take Peak demand for 2010/11 was up of energy-efficiency measures, Crews across southern and central Queensland significantly lower than forecast at including home insulation, solar hot undertook plenty of preventative switching 2,349MW, down 8.8% on the previous during the past summer’s long-running flood water and solar energy systems. crisis. Here a crew is disconnecting in summer. The total energy distributed for Rockhampton. the year was down 5% to 14,544GWh.

REVIEW OF OPERATIONS ASSET MANAGEMENT EXCELLENCE ERGON ENERGY ANNUAL STAKEHOLDER REPORT 2010/11 23 It has been estimated that these three OrN u eTWORK Demand Forecast factors resulted in a 270MW reduction Despite the recent weakening in system-wide peak demand, in the areas of Queensland in electricity demand compared to that are supporting the resources sector we are still anticipating an increase in electricity what could have been expected based demand – this could see a system-wide peak of 3,554MW by 2020. Forecasting is reviewed on medium economic conditions, regularly to ensure investment in the network is prudent. average weather conditions and no MW natural disasters. 5,000 High Growth Scenario Despite recent trends however, the 4500 potential still exists for electricity 4000 demand to increase considerably from the last peak of 2,584MW in March 2007 3500 to a forecast of 3,554MW by 2020. 3000 2,500 Our future infrastructure plans are Low Growth Scenario based on an average growth in 2000 system-wide peak of 4.1% each year 1500 over the next 10 years, with higher than average growth expected across 1000 southern and central Queensland 500 where a strong recovery in the 0 resources sector is anticipated.

Population growth and the continuing 1991 2011 2020 take up of energy-hungry appliances, such as home air conditioners, also THE STATISTICS continues to be a major factor. (p 33) ENERGY USAGE SNAPSHOT 2010/11 2009/10 2008/09 2007/08 2006/07 Population of Ergon Energy’s Our forecasts will continue to be z 1.521 million 1.50 million 1.47 million 1.44 million 1.40 million reviewed regularly, at a regional Service Area level, to ensure network investment No. of Customers z 690,708 680,095 667,502 653,640 637,325 Average Electricity Use per is prudent. b 7,242kWh 7,623kWh 7,978kWh 7,893kWh 7,882kWh Household INVESTING WISELY IN THE NETWORK Household Air Conditioning 2 – 79% 79% 71% 67% 62% During 2010/11, Ergon Energy invested Penetration Maximum Coincident ‘Peak’ $660.5 million through its capital works b 2,349MW 2,542MW 2,406MW 2,333MW 2,584MW Demand program to deliver both network improvements and increase capacity. Electricity Distributed b 14,544GWh 15,678GWh 15,722GWh 15,547GWh 15,294GWh Electricity Generated by Ergon This investment was within our z 117GWh 114GWh 112GWh 178GWh 199GWh regulatory allowance. This was Energy mainly Ergon Energy-initiated and 1. Estimate based on trend. 2. Queensland Household Energy Survey 2011 see page 33. customer-initiated electricity distribution works, however, it also This approach to managing risk is now The project includes smart included various generation projects. considered central to ensuring technologies such as state-of-the-art The Ergon Energy-initiated capital prudence and efficiency in investment Point of Presence equipment and works saw $446.4 million invested, decisions and is being used to prioritise microwave radio equipment, which will 2.1% ($9.5 million) higher than 2009/10. individual projects. allow us to pick up data and voice traffic and direct it to where it is required. Investment highlights: Network connections initiated by our To date, 44 telecommunication shelters customers saw an additional $188.4 A highlight of this year’s program have been constructed and 27 are million invested. This was the lowest is the roll out of our $135 million in place on site. Just under 50 level of customer-initiated works UbiNet project, a ubiquitous or communication poles have been since 2005/06, $32.2 million lower all-encompassing telecommunications erected and 15 towers and masts than 2009/10. network. When the flagship project is have been constructed. complete in 2012, about 40 depots and The extended wet season and the scale 90 substations will be linked by a core Other highlights of this year’s capital of our emergency responses impacted telecommunications backbone. program included: on the delivery of the capital works program right across the state. Demand The investment will help us more easily ■■ commissioning of the $90 million for new connections and augmentation identify power network faults, meaning North Mackay power reinforcement more generally was also impacted by the faster restoration to customers when program, which increased installed uncertainty in global financial markets. faults occur. It provides the foundation transformer capacity at bulk supply for our network vision by enabling the points by 100MVA. While committed to getting the program connectivity required to service ■■ establishment of the $20 million back on track, particularly the cycle intelligent network devices, which will Belgian Gardens and $27 million times for new connections, there are help us better monitor and control the Oonoonba zone substations no major risks across the dimensions power grid. in Townsville, the $23 million now used to determine the health of Jubilee Pocket zone substation in the network.

REVIEW OF OPERATIONS ASSET MANAGEMENT EXCELLENCE ERGON ENERGY ANNUAL STAKEHOLDER REPORT 2010/11 24 Airlie Beach and the $24 million NETWORK INVESTMENT REMAINS Berserker zone substation in VITAL FOR SECURITY OF SUPPLY Rockhampton. These increased Network-related capital works saw installed transformer capacity at $660.5NETWORK million investedINVESTMENT to maintain security our zone substations by 310MVA. of supplyREMAINS and meet VITAL customer FOR demand. ThisSECURITY was down OFslightly THE on SUPPLY the previous year ■■ significant progress made with the due to delays associated with the extreme re-development of the $37 million weather conditions and reduced customer Dalby Central zone substation and demand for network connections. Ingham’s $5 million Lannercost zone substation; together this will provide

an additional 20MVA of installed 797 transformer capacity. 741 714 675

■ 661 ■ replacement of generating sets at 661 Burketown, Jundah, Kowanyama, Windorah, Kubin, Pormpuraaw, Mabuiag Island and Warraber Island power stations, as well as significant progress with the replacement of generating sets at Bedourie, Birdsville and Palm Island power stations. (p 40)

Building our flagship telecommunications network includes the construction and ■■ an increased level of investment installation of more than 45 telecommunication in renewing the ageing sections shelters, 69 communication poles and of the network and other reliability 29 telecommunication towers and masts. measures – including the MILLION $ To get an idea of the scale of these structures, commissioning of a new $33 million the largest mast is 90 metres high and the high reliability 110kV line in the South 2007 2008 2009 2010 2011 2012 communication poles and largest West from Middle Ridge to Warwick. telecommunications towers are up to 50 metres tall. FINDING SMARTER WAYS TO RESPOND CUSTOMER-INITIATED WORKS REMAIN DOWN Peak demand lasts for only short intervals, predominantly in the While work to meet the demand for new customer connections required summer months, and fluctuates from CUSTOMER-INITIATED $188.4WORKS million REMAIN in investment, DOWN this was the year to year. Conservatively an lowest level since 2005/06. This area of investment of around $500 million our capital program was impacted by the over recent years has been made to continuing uncertainty in global financial meet this peak, which is experienced markets, as well as the weather conditions. for just over 3% of the year or a handful of hours a day over summer. 295 293 To keep the cost of electricity down for 289 our customers, Ergon Energy is looking The $90 million North Mackay Power for smarter ways to respond to this reinforcement program, undertaken to keep pace with current and future load growth in the demand and improve asset utilisation. 221 rapidly growing city, involved the construction

Through our long-term demand 188 of a new high-voltage line from Pioneer Valley management strategy, we are to Glenella, construction of a new bulk supply developing smart asset management substation at Glenella and construction of a new high-voltage feeder from Glenella to the techniques and investing in research existing North Mackay zone substation. and development into demand management technologies. We are also encouraging our customers to change the way they use electricity MILLION $ through financial incentives and 2007 2008 2009 2010 2011 education. The suite of customer demand management programs and their greenhouse gas emissions reductions are discussed in the next Embedded generation is being targeted section. (p 33 - 39) at supporting the network and Trialling new technologies complementing other demand The technology solutions we are management initiatives. Initially it will Southern Downs customers are enjoying the trialling include standby and embedded see a small number of strategically benefits of 65 kilometres of line that has been generation, improved voltage control placed generation-ready nodes rebuilt, as well as upgrades at the Middle Ridge and power factor correction and load established that enable easy, rapid and Warwick substations. This work began in 2008 to address reliability issues. shifting and load control, to name a few. connection into capacity strained areas.

REVIEW OF OPERATIONS ASSET MANAGEMENT EXCELLENCE ERGON ENERGY ANNUAL STAKEHOLDER REPORT 2010/11 25 We are looking at technology that These trials are allowing us to collect will allow us to carefully control voltage data for network analysis, as well as to to the lower end of the allowable range assess our customer response to to reduce network demand and time-of-use tariffs – see our Solar City customer energy consumption. project (p 35) and the Reward Based Tariff Trial. (p 17) The use of distributed network devices, such as pole-mounted capacitors Through the Townsville Energy Sense and static compensators, are being Communities program, which used to support power factor incorporates many of the technologies correction, ultimately realising their discussed here, we are planning to full demand management benefit install nearly 2,700 of these meters. through a future planned investment (p 39) This will build on our knowledge in a distribution management system. of the systems and processes required An increasing investment in remotely to support a possible wide-scale Our innovative Grid Utility Support Systems operated switches and feeder ties for deployment of AEMs. were designed with some help from a local load shifting is being used to improve artist who gave them a rainforest design Linking it together to blend into the environment of the Atherton network flexibility, and hence asset Linking these smarts together will be Tablelands, where tourism is an important part utilisation. of the local economy. our telecommunications investment. Taking advantage of the load (p 24) This will also support the spatial under control In an effort to cost-effectively improve representation of the network – with the safety, capacity, utilisation and We are looking at how we utilise technologies such as Google Earth reliability of the SWER network, we are the load already controlled, through (p 52) – and the value of a future deploying a comprehensive program to our economy tariffs, at the time of a distribution management system. embed the latest design standards into contingency event. This is about the network. This includes advancing building our knowledge and confidence Related to this, as an implementation our switching capability so that when in the percentage of load curtailment partner with NBN Co, we successfully a fault occurs it does not impact the that can take place in a particular area. rolled out the National Broadband Network to around 2,000 premises in whole line. Just under 365,000 residential the western suburbs of Townsville, Power quality, encompassing such customers currently benefit from these including parts of Aitkenvale and issues as voltage dips, extended discounted off-peak tariffs. They enable Mundingburra. Ergon Energy’s outages, momentary interruptions and us to control the load of such things as involvement in these pilot sites has voltage flicker, is an issue that has hot water systems and swimming pool allowed us to better understand the grown in significance with the take-up pumps; to shift the time that they use design and construction requirements of sensitive electronic consumer goods. electricity to outside peak times. of the fibre optic network for We are enhancing power quality by installation on our electricity assets Our reliance on this capability, which installing 500 new technology and given us access to first-hand has been developing for more than low-voltage regulators on the network. intelligence on advances in 20 years, is seeing us continuing to communications technology. To address capacity constraints in a invest in the control devices; repairing cost-effective way we are continuing or replacing the signal receivers This work has led to negotiations to trial targeted demand management that are either ageing, configured around a state-wide facilities access measures with customers on SWER incorrectly or are compromised by a agreement. networks. Our efforts across the four reduction in the signal strength. BOOSTING SUPPLY QUALITY FOR trial SWER networks are yielding Understanding changing energy RURAL CUSTOMERS significant savings for both the local usage patterns rural property owners and Ergon A major demand challenge is occurring At the same time as exploring how Energy. This program supports across our rural areas. Around 70% of technology can assist us, technology is capital works improvements catering our powerlines run through rural empowering our customers to take for the continuing load growth on Queensland. They cover vast distances greater control of their electricity use. the SWER network. of sparsely populated areas to supply This is most notably demonstrated in some of regional Queensland’s most Technology also is being used to help the rapid take up of small-scale solar remote townships. manage peak demand and improve energy systems, which is changing the supply quality and reliability in a nature of our network. (p 37) More than 65,000 kilometres of what is 12-month trial that has seen two energy known as SWER (Single Wire Earth The new operating environment will storage systems commissioned in Far Return) line is used across regional require us to better understand North Queensland. Called GUSS (Grid Queensland. This technology is a single changing usage patterns, and use Utility Support Systems), these systems wire with limited capacity that radiates time-based data to manage capacity are being housed in a small shipping out over long distances and, issues and accommodate such things container and are made up of an subsequently, has a greater likelihood as the growing level of distributed inverter, battery storage, intelligent of reliability and quality of supply generation. control and communications issues. Despite its constraints, this part technology. We already are testing the use of of our network is still growing – we are Advanced Electronic Meters (AEM), typically connecting around 5MVA of Thirty Redflow battery storage units which support this. additional capacity every year. have also been installed and trialled across a number of regional areas.

REVIEW OF OPERATIONS ASSET MANAGEMENT EXCELLENCE ERGON ENERGY ANNUAL STAKEHOLDER REPORT 2010/11 26 SUMMER PREPAREDNESS We have also continued to build up our PROVES INVALUABLE contingency plant and equipment, from Our Summer Preparedness Plan for skid mountable substations and mobile 2010/11 outlined a whole-of-business generation to smaller inventory items, strategy for dealing with the extreme to ensure we are equipped to deal with weather risks of the storm season and the next inevitable natural disaster that the potential for peak demand to comes our way. increase substantially over summer. The challenges of the 2010/11 season The plan was published on our internet came from a series of major weather page to provide transparency of our events that impacted across the state Helicopters were used to inspect lines before the throughout the summer (see inside summer brought its wild weather. This saw commitments. It outlined a range of photographs of the powerlines from aerial specific deliverables that have since front cover). It started with Queensland inspections like this one, undertaken by proved to be invaluable in preparing us experiencing the wettest spring since Townsville-based duo of Transmission Live for this challenging part of our year. records commenced in 1900, with near Linesperson Jim Gauvin and Linesperson/Cable triple the average rainfall. Then came Joiner Nathan Brown, used to pinpoint any These actions, both the new and potential trouble spots that needed attention. routine, centre on: the first cyclone of the season, Tasha, on Christmas Day, followed by more ■■ continued investment into the network This technology can moderate network flooding. By January, floodwaters load and improve quality by charging ■■ enhancements to our emergency covered around 600,000 square when network demand is low and management response capability kilometres of Ergon Energy’s supply area – the worst flooding seen in feeding stored energy back into the grid ■■ customer and stakeholder 100 years. Locations such as Dalby, when demand peaks. The system also engagement. has the potential to provide back-up St George and Condamine flooded supply during network outages. As discussed earlier, investment in the several times. network is critical to ensuring that As the floodwaters moved into We are also investigating technologies capacity can meet peak demand on the the South East, we were there such as energy storage solutions, hottest of days or in times of equipment with reinforcements to help our electronic meters and enhanced maintenance or failure. network controls on the Wambo Creek fellow electricity distributor Energex SWER near Chinchilla as a test bed for In 2010/11, we again lifted overall security with its massive task of restoring the future development and integration of supply at our bulk supply substations power. We also needed to enact of these innovations. – 77% now have the higher ‘N-1 level of business continuity plans when our security’, up from 70% in the previous Brisbane-based billing mail-house We have continued a broader power year. N-1 is a higher level of security than operations flooded and our CBD and IT quality monitoring program with more has been historically applied in our support offices had to be evacuated. than 1,750 network monitoring units planning – it means that supply can be Then, in late January, Cyclone Anthony now installed. This is allowing us to maintained even if a major element at the crossed the coast followed closely by respond more proactively to quality of site fails. Of our zone substations, 85% Cyclone Yasi, which is showcased in the supply issues. As a result, in the now meet the specified targeted security following case study. But still, the rains national power quality survey, our of supply load levels, up from 80%. improvements benchmarked positively did not relent – as late as mid-April, we against other distributors in Australia. Investment is also important for reliability were facing yet more flooding in the – this year, $7.4 million was invested to South West. The outcomes of these efforts will be underground key strategic overhead lines Ergon Energy’s response to these used to develop our broader SWER in cyclone-prone communities. (p 37) improvement strategy. weather events truly demonstrated the professionalism of our emergency THE STATISTICS response and, in many ways, the increasing resilience of our network. SECURITY OF SUPPLY 2010/11 2009/10 2008/09 2007/08 2006/07 The limited number of safety incidents Investment in the Network Target b $660.5m $674.9m $741.1m $713.8m $660.6m in the communities impacted also ≤ $792.6m confirmed that our electrical safety Additional Transformer b 100MVA 220MVA 168MVA 77MVA 200MVA messages, and broader customer and Capacity - Bulk Supply Points stakeholder engagement around the Additional Transformer z 310MVA 118MVA 231MVA 146MVA 157MVA challenges associated with the summer Capacity - Zone Substations season, are being heard. (p 46) Higher Security Level: - Bulk Supply Substations z 77% 70% 57% 57% 48% - Zone Substations z 85% 80% 78% 78% 81%

REVIEW OF OPERATIONS ASSET MANAGEMENT EXCELLENCE ERGON ENERGY ANNUAL STAKEHOLDER REPORT 2010/11 27 CASE STUDY: CYCLONE YASI, OUR LARGEST RESPONSE EFFORT EVER ready to respond

The summer storm season was extraordinary. Never before have we faced such an extended season of major weather-related events, overwhelming logistics and extensive asset damage over such a wide area.

Cyclone Yasi – the largest system in living memory – was the most notable event of the summer from an electricity supply perspective. Yasi crossed the Queensland coast over Mission Beach in Far North Queensland as a category-five cyclone in early February. It was more than 600 kilometres wide and at its height had wind speeds of 295 kilometres an hour – well above the wind rating our lines are designed to withstand. The damage caused to the network saw nearly a third of our customer base without power – more than 220,000 homes and businesses. The three-week restoration effort is believed to be the largest single deployment of electrical field workers in Australia’s The hardest hit region was the Cassowary Coast, including the communities of Tully, Mission Beach and Cardwell (the highway through Cardwell is pictured here during the restoration). Yasi, however, history. Crews worked in extremely difficult was far reaching, affecting many regional Queensland communities from Cooktown to Sarina and west conditions of heat, humidity and rain. to Mount Isa. At the peak of the response, there were around 1,340 personnel and support staff on the ground, as well as many hundreds more involved in the effort from Ergon Energy offices across the state. On the day following Cyclone Yasi’s crossing, customers made a record 32,212 calls to Ergon Energy – three times the number of calls received on a normal business day. In the three weeks, more than 210,000 calls were made to our contact centre. Despite the automated messages assisting a large number of callers, more than 130,000 calls were handled personally by our customer representatives. We used mobile generators in those communities hardest hit so basic services could be maintained while we repaired the network. More than 220 generators (with 70MVA in capacity) were on hand to support the response. Key to our efforts was keeping people safe and supporting our employees so they Field crews worked long hours, frequently at The response saw around 600 kilometres of could get the ‘lights’ back on as quickly and heights – like Todd Twidale from St George electricity cable and conductor line and almost efficiently as possible. working here in Tully – in very difficult operating 2,300 poles and cross arms brought in to rebuild conditions, making fatigue management a critical lines like this one near Tully – as well as around element of the restoration effort. 25,000 fuses, 6,700 insulators and 350,000 bolts, screws, brackets and clamps.

REVIEW OF OPERATIONS ASSET MANAGEMENT EXCELLENCE ERGON ENERGY ANNUAL STAKEHOLDER REPORT 2010/11 28 Twenty-two companies from around Australia helped Ergon Energy with the More than 96% of customers in the Ingham and Townsville area were without restoration effort. At the peak, more than 560 personnel from other utilities, power. The vegetation damage across Townsville, as pictured, was substantial. partner companies and suppliers were working shoulder-to-shoulder with Since the event, in partnership with the Townsville City Council, we engaged our employees, both in the field and behind the scenes, to help restore power Greening Australia to investigate the tree damage. This has helped us to and hope to the communities that bore the brunt of the storm. We cannot better understand which species hold up best against a cyclone – this will thank them enough. guide our vegetation management decisions in the future, as well as better Here Energex crews are being given a comprehensive safety briefing in inform the community about the most suitable choices to plant. Innisfail prior to going out into the field.

Ergon Energy made nearly 4,900 accommodation Harold Pratt from Mission Beach – like many Dani Mahmut and Geoff Bowes were invited to bookings as employees were moved in and out of members of the community – praised the represent Ergon Energy when the then Prince impacted areas. Throughout the restoration crews working in the heat and humidity to William visited Cairns – it was one of the many effort, more than 71,000 meals and 100 pallets of restore power. moments that our central role in assisting bottled water were organised for crews. communities impacted by Cyclone Yasi recover “The Ergon guys are great – doing a top job in very was publicly recognised. Michelle Bishop and Rover Arnold began their tough conditions … I don’t believe it would have days doing barbecue breakfasts at the Tully been possible for the crews to work any harder depot as part of this massive effort! or any faster. They’re brilliant.”

REVIEW OF OPERATIONS ASSET MANAGEMENT EXCELLENCE ERGON ENERGY ANNUAL STAKEHOLDER REPORT 2010/11 29 RELIABILITY IMPROVEMENT During the year, we also continued the Our vegetation management program A PRIORITY accelerated upgrade of our network was accelerated in 2008 after a major An integrated reliability improvement monitoring and control capability with review identified a growing backlog plan was developed in late 2010 to the installation of SCADA (Supervisory in rural vegetation clearing and better coordinate our efforts and Control and Data Acquisition) treatment. This year, we continued address reliability performance. technology into our zone substations. to ‘fast track’ the program with It included both operational and This gives us the ability to monitor loads $82 million invested to clear almost asset-focused initiatives. and other system parameters remotely 490,000 spans of powerlines, close to from our operational control centres half our entire network. This work is the cornerstone of our and to carry out switching to either To meet the accelerated timeline, we commitment to keeping pace with rising avoid an outage or restore supply are using a narrower clearing profile customer expectations, achieving our as quickly as possible following an and concentrating our efforts on targets under the AER’s Service Target interruption. This investment removing vegetation from the Performance Incentive Scheme (STPIS) program, and the developing Ubinet immediate zone around lines. Over and meeting the requirements telecommunications network, will subsequent vegetation management of the QCA’s Minimum Service provide the foundation for the cycles, we will extend the clearing zone Standards. (see over) distribution management system out again to achieve longer-term capability planned. The reliability performance gains effectiveness. We remain confident that achieved this year have been as a The plan is also seeing targeted asset we will be able to address this backlog result of the removal of previous replacement programs for the as planned before the end of 2012. operating constraints put in place worst-performing feeder lines. around our live-line works, as We are also using biodiversity well as a range of other changes This work is being supported by a modelling to better target vegetation to our operational practices. continuous improvement focus management practices for cost across information and technology. effectiveness and improved This operational response has included environmental outcomes. In the For example, our Enterprise Resource a major effort centred on planned coming year, this will see us use Planning system is improving the outage management, including leading-edge aerial observation management of maintenance work improvements to works scheduling, technologies and sophisticated through improvements to the reporting processes and tools, and computer modelling to inform our availability of timely data; our increasing the use of mobile planning decisions. Known as the Geographic Information System (GIS) generators. This has also included ROAMES initiative, this will reduce the and FdrSTAT (outage information) improvements to works packaging, time-consuming task of travelling the systems are being complemented by which is when different activities entire line to identify vegetation issues. Google Earth allowing us to undertake are bundled together to minimise It will also provide more accurate greater analysis of outages and supply interruptions. estimates of regrowth and density to develop targeted, reliability-focused better formulate appropriate vegetation There has also been a strong focus on maintenance and improvement management methods. (p 52) our unplanned outage management. programs of work. As well as generally raising the priority We also continued our Plant Smart In addition, we identified a range on minimising response times, this partnership with Greening Australia of ‘smart’ technologies, such as focus has included reviewing fault crew this year, engaging them to investigate intelligent switches and fault indicators, resourcing and comparing restoration how different tree species held up for the network that are either being performance by location to identify against Cyclone Yasi. These findings will deployed or trialled. These new and improvement opportunities. help guide our vegetation management emerging technologies will support decisions, and already are informing Further improvement will be both demand management and the community about the best trees to realised over the longer-term reliability performance. from asset-focused initiatives largely choose for landscaping. Cumulatively, these measures aim centred on expanding the functionality The Plant Smart initiative engages with to achieve the level of network of the network. councils, nurseries, schools and resilience and performance needed community groups to inform them This has included outworking the to meet our current and future about the management and planting of replacement of a large number of customer expectations and our suitable low-growing species near defective switching devices, both Air regulatory obligations. Break Switches and Ring Main Units. powerlines in their areas. A number of in-service failures of VEGETATION MANAGEMENT ON To develop better field practices in these devices led to network operation THE FAST TRACK vegetation management, the restrictions being put in place in The management of vegetation around partnership is continuing with April 2009. These switches account powerlines is critical to ensure additional field surveys to monitor for around one-third of those in service community safety and reduce vegetation management techniques and across the network so their defects interruptions to supply. This work is a measure the long-term impacts of our have significantly reduced our ability major element of our preventative program on biodiversity. Greening to isolate sections of the network to maintenance program. Australia also provided information and carry out planned maintenance and advice on identifying and managing fault restoration. threatened species found in the field. FOR MORE ON OUR ENVIRONMENTAL PERFORMANCE SEE PAGES 57–59 & 78.

REVIEW OF OPERATIONS ASSET MANAGEMENT EXCELLENCE ERGON ENERGY ANNUAL STAKEHOLDER REPORT 2010/11 30 SCORECARD NETWORK PERFORMANCE

Overall network reliability performance PROFILE OF THE DISTRIBUTION FREQUENCY OF OUTAGE SHOWS has improved significantly – with the NETWORK (Feeder Lines) MAJORFREQUENCY IMPROVEMENT OF duration and frequency of outages down Ergon Energy’s reliability challenges are ChangesOUTAGE to operational SHOWS practices, and our 21% and 24% respectively compared both common to the industry and unique – asset-focused initiatives, have reduced to 2009/10. MAJOR IMPROVEMENT overPROFILE 443,000 OF of DISTRIBUTION our customers are the overall frequency of outages by 24%. Minimum Service Standards (MSS), set by suppliedFEEDER through POWERLINES non-urban lines with This work is part of our commitment to the Electricity Industry Code of Queensland limited redundancy in the event of a fault. achieving performance levels as close as for the frequency of outages (SAIFI) were possible to Minimum Service Standards. met across all three feeder categories of urban, short rural and long rural. Outage duration (SAIDI) performance was 4.2 favourable for two of the three categories 4.1 – with a 33% improvement in urban supply. The short rural result was the only 3.3

measure outside the limits. This was due to 3.2 3.1 the pronounced impact of Cyclone Tasha on short rural performance in late December 2010. Our ability to recover from this position was significantly hampered by the onset of state-wide flooding, which Isolated 9% extended restoration timeframes. Long Rural 12% A dramatic turnaround in planned outages, Short Rural 48% which allow us to work on the network, was Urban 27% achieved by reinstating live-line work SAIFI TOTAL practices (suspended for about 10 months in 2009 to enable safety concerns to be 2007 2008 2009 2010 2011 addressed) and progressively replacing defective Air Break Switches. DURATION OF OUTAGES DOWN DRAMATICDRAMATIC IMPROVEMENT IMPROVEMENT IN Unplanned performance, which indicates DESPITE STORM SEASON PLANNED OUTAGES the resilience of the network, remained DURATION OF OUTAGES DOWN IN PLANNED OUTAGES comparable to 2009/10 across all six ThereDESPITE was a 21% STORM improvement SEASON in the The dramatic turnaround in planned overall outage duration, despite the outage performance has been realised categories despite one of the most floods leading to extended restoration by the reinstatement of live-line work sustained extreme weather patterns in timeframes. The scale of the Cyclone Yasi practices, which were suspended for recent history. response effort also impacted our ability to about 10 months in 2009 to enable safety To normalise the statistics, eight Major maintain response times across the state. concerns to be addressed. Event Days where excluded from our performance statistics as per the requirements of the Code, seven were 169 508

weather-related. However, the effects of 485 161 the major events extend beyond the days declared. Since Cyclone Yasi, for example, a 134 411 program of planned outages has continued 393 382 to remedy cyclone-related defects. The progressive impact of much of the regional 105 Queensland floods was also not excluded. 71 Running parallel with our requirement to meet the MSS set by the Code is the AER’s Service Target Performance Incentive Scheme (STPIS). This framework provides a financial incentive for Ergon Energy PLANNED SAIDI PLANNED to improve unplanned outage performance SAIDI TOTAL – the impact of the summer season has 2007 2008 2009 2010 2011 meant only two out of the six targets have 2007 2008 2009 2010 2011 been achieved. (p 77) THE STATISTICS

NETWORK RELIABILITY 2010/11 2010/11 2009/10 2008/09 2007/08 2006/07 PERFORMANCE MSS Result Result Result Result Result Duration Index (SAIDI) - Urban Distribution ≤ 149 b 149 222 217 179 172 - Short Rural Distribution ≤ 424 b 426 544 609 457 448 - Long Rural Distribution ≤ 964 b 828 999 1,108 1,030 957 Frequency Index (SAIFI) - Urban Distribution ≤ 1.98 b 1.63 2.25 2.33 1.85 1.82 - Short Rural Distribution ≤ 3.95 b 3.53 4.58 4.93 3.49 3.71 - Long Rural Distribution ≤ 7.40 b 5.26 7.19 7.73 6.40 6.60

* Reporting based on the Minimum Service Standard (MSS) exclusion criteria outlined in the Electricity Industry Code http://www.qca.org.au/files/ER-Industry-Code-DME-EICV9-0611.pdf

REVIEW OF OPERATIONS ASSET MANAGEMENT EXCELLENCE ERGON ENERGY ANNUAL STAKEHOLDER REPORT 2010/11 31 REVIEW OF OPERATIONS

CuSTOMER-driven 14 Asset Management Excellence 22 LeVERAGE Climate Change Response 32

A LeADER in Safety 42 High Performance Organisation 48

REVIEW OF OPERATIONS LEVERAGE CLIMATE CHANGE RESPONSE ERGON ENERGY ANNUAL STAKEHOLDER REPORT 2010/11 32 REVIEW OF OPERATIONS: LEVERAGE CLIMATE CHANGE RESPONSE ready to leverage positive action

Ergon Energy is leveraging our customers’ and other stakeholders’ actions, as well as our broader business imperatives, to respond to climate change. We see this as both a social responsibility and a business strengthening opportunity.

responding to THE CHALLENGE Carried out with Energex, the survey Ergon Energy’s Climate Change of almost 3,500 home owners HIGHLIGHTS Response Plan 2010-2015 is across Queensland was the most built around: comprehensive snapshot undertaken to ■■ Demand management on track to date into our customers’ electricity use avoid 54,000 tonnes of emissions ■■ leveraging the climate change and energy-saving attitudes. responses of our stakeholders, ■■ Secured up to 27MVA of demand especially our customers, as well Around air conditioner usage in the reductions in Townsville as our other business imperatives, Ergon Energy region the survey found: to deliver greater mutual benefit ■■ Solar City reduced peak demand ■■ 79% of homes have air conditioning, by 32% than would have resulted from us with an average of 2.7 units per operating alone household. This is forecast to average ■■ Helped customers connect 15,000 ■■ mitigating greenhouse gas emissions, 83% by 2012/13, with more than three solar energy systems from our own operations and those units per house, however, northern ■■ Reduced our operational associated with our customers’ Queensland is expected to hit 90% electricity use penetration by the end of this year greenhouse gas emissions

■ ■■ adapting our network and our ■■ The forecast for air conditioner ■ On track to be diesel free in business more generally to penetration is in line with other generation by 2050. withstand climate impacts and lifestyle purchases, such as plasma facilitate our customers’ responses and LCD televisions, and the growing to climate change. popularity in home design for a Other interesting statistics from the dedicated ‘media room’. 70% of the survey included: OUR CUSTOMERS ARE READY systems across the state are split To enable us to work with our systems, typically three to four ■■ Regional Queenslanders are more customers and achieve a win-win years old likely to use the clothesline instead of the dryer than those in the South outcome, this year we undertook a ■■ The proportion of those who use their East, and they have a higher uptake of major piece of research into electricity air conditioner most of the time over solar hot water systems, particularly use in Queensland households. summer decreased from 17% in among older residents, with a 14% 2009/10 to 12% in 2010/11. But only It confirmed regional Queensland’s love increase this year affair with air conditioners and 40% of customers are using the ideal o ■■ 68% of Queensland homes have at energy-intensive appliances is ‘25 C’ setting on those really hot days least one flat-screen television, with continuing to grow. That is, comfort and ■■ Around one-third of householders this expected to rise as more than lifestyle are winning in the battle to with air conditioning or electric 60% of households intend to purchase curb electricity demand. However, it heating are willing to change their one or more also found about one in five behaviour if incentivised by pricing Queenslanders want more information strategies aimed at reducing peak ■■ While 76% of regional Queensland to better understand electricity tariffs, electricity demand. But personal homes have ceiling fans, households peak demand and how to manage comfort is still the strongest in regional Queensland are less likely energy use and save money. motivator for when they turn on to have insulation compared to the the air conditioner. South East ■■ 98% of respondents said climate change/environmental impacts, while not a primary motivator, were a Magnetic Island identities Don and Barbara Kinsey have reduced their energy use by more strong secondary motive to changing than 30%, thanks to support from our Solar City their energy use. project, showing by working together we can make a difference. (p 35)

REVIEW OF OPERATIONS LEVERAGE CLIMATE CHANGE RESPONSE ERGON ENERGY ANNUAL STAKEHOLDER REPORT 2010/11 33 By supporting investment options and Armed with this knowledge, as part of AIRAIR CONDITIONING CONDITIONING UPTAKE UPTAKE IS DRIVING DEMAND solutions to reduce peak demand, our Townsville Network Demand IS DRIVING DEMAND which occurs for just a few hours on Management trial we have targeted 79% of homes now have air conditioning – with almost three units installed – and the a few days over the summer period, commercial and industrial customers take-up is continuing. It is expected that Ergon Energy seeks to delay or avoid and secured commitments from 85% of homes will have air conditioning the significant expenditure required to 31 customers to reduce their electricity by 2013/14 – an almost 20% increase in meet that peak demand. demand by up to 27MVA, 7MVA in just six years. excess of the targeted 20MVA. In We are delivering 30 demand January 2011, we began our Toowoomba management projects, a number of Power Factor Correction Pilot. That which are highlighted below, to realise 85%

83% project has identified a further 9.6MVA 81% 79% 79% network, customer and environmental of opportunities, almost double the benefits. The program delivered 17.1MW 71% initial 5MVA target.

67% of peak demand energy savings for 2010/11, well above the targeted 15MW. Helping our residential customers save Part of this program is funded by our By leveraging our customers’ concern partner, the Queensland Government, around price and the environment we through its Office of Clean Energy. are aiming to change the way our The funding of $17.8 million is on track residential customers use energy. We to deliver $10 million a year in savings are securing our customers’ long-term on customer bills, defer more than participation and support for our HOUSEHOLDS WITH WITH HOUSEHOLDS CONDITIONING AIR $111 million of future network residential initiatives by offering construction and avoid more than appropriate incentives and engaging 2008 2009 2010 2011 2012 2013 2014 54,000 tonnes of greenhouse gas customers by deploying community emissions annually – the equivalent engagement programs to raise The detail of this research allows of taking 12,800 cars off the road. awareness of how customers can us to work with our customers and save money by changing behaviour stakeholders to encourage behaviours “Energy conservation is the and tariffs. that conserve energy and, in turn, most cost-effective way to save our customers money, take the reduce emissions and, at the With air conditioner penetration pressure of the network and achieve increasing, demand for air conditioner positive environmental outcomes. same time, it takes pressure growth-related capital expenditure is off the network.” expected to be over $1 billion over the The research already is being used to five-year regulatory control period. refine our customer communications, Every demand management initiative We have completed trials in air especially our ‘energy sense’ campaign, undertaken has delivered a return to conditioning direct load control and which includes a focus on air customers greater than the value of the are now assisting the market to develop conditioner use to build a greater public funds committed, with on a standard air conditioning direct awareness of energy efficiency. (p 17) average every dollar spent putting eight load control product offering – times the value back into the pockets of a demand-enabled air conditioner – DEMAND MANAGEMENT DELIVERS these customers. ENVIRONMENTAL GAINS that will meet Australian Standards Commercial and industrial initiatives (AS4755). We believe these Ergon Energy is placing a major make good sense demand-enabled air conditioners will focus on managing peak demand On average, the cost of supplying 1MVA be able to operate at a lower electrical to improve network utilisation in network capacity to a commercial input during peak demand periods with and investigate opportunities for customer is $3 million over 20 years in no noticeable difference to customers’ value-adding services for customers present value terms. This is made up of comfort levels. beyond the meter box. These efforts $800,000 generation, $700,000 will deliver environmental benefits. Pool pumps make a significant transmission and $1,500,000 contribution to peak load due to their This focus extends across the entire distribution costs. This expense makes high energy consumption. The average business and includes playing an active the deferral of new infrastructure vital pool filtration system contributes role in understanding the challenges and to limit growth in network charges to 1.1kW to network load and frequently maximising the opportunities associated less than CPI over the long-term. is operated in peak demand periods. with climate change awareness and Our commercial and industrial demand By working with the Queensland policy to add shareholder and customer management program is targeting Government, we have been successful value. To manage peak demand we are: customer savings of 50GWh per annum. in leveraging regulatory changes that ■■ encouraging our customers to change At current prices, this equates to will deliver long-term benefits to pool the way they use electricity, through around $9.6 million in savings to the owners. (p 16) financial incentives and education customers participating in this initiative The ‘Energy Savers’ program continued upon achieving load reduction ■■ using smart asset management in Mackay and Mount Isa to investigate milestones. techniques and investing in research how best to use existing incentives to and development into demand ensure high customer participation in management technologies (discussed energy conservation and demand under Asset Management Excellence management programs. p 25).

REVIEW OF OPERATIONS LEVERAGE CLIMATE CHANGE RESPONSE ERGON ENERGY ANNUAL STAKEHOLDER REPORT 2010/11 34 Energy and Water Utilities Minister Stephen Thanks to advice from the Solar City team, The Magnetic Island Solar Skate Park’s 100kW Robertson is ‘sold’ on Ergon Energy’s work in Magnetic Island residents, Pete and Tania, photovoltaic system was commissioned this year. reducing peak demand on constrained parts of reduced their electricity use by 114kWh over As well as being the largest solar array in the network. St Anthony’s Catholic College the year, which included a 51% reduction in the Queensland, it will provide solar shade for skate Townsville Captains Tianne Killoran and Mitchell first month of making changes to the way they park users, a family barbecue and picnic pavilion, Baker accept a cheque for reducing the college’s use electricity. a sporting team visitors pavilion and a stage for peak demand by 110kVA from Minister Robertson. community presentations.

Preliminary analysis shows that by electronic meters and cost-reflective demand management and technology providing information and tools, such pricing in large-scale grid-connected innovation trials and applying it to a live as the ClimateSmart Home Service, to urban sites to trial new sustainable capital deferral opportunity on the residential customers they have been models for electricity supply and use. mainland to enable Townsville to able to reduce their consumption by become a true Energy Sense So far, the Solar City project has 1,400MWh annually. We are now Community. (p 39) We are also conducted energy assessments with identifying other locations to roll-out extending our successful off-grid almost 80% of the households and this program to achieve maximum powersavvy program. (p 19) commercial businesses on Magnetic network benefit. Island, installed more than 1,500 Ergon Energy’s Envirofund has again A focus on educating households about advanced electronic meters and 640kW drawn great interest from community sensible energy use and peak demand of solar photovoltaic distributed groups, schools and non-profit was central to the landmark Rewards generation. The analysis of the data organisations across Queensland. The Based Tariff Trial undertaken in Cairns gathered shows the success of key program has seen 32 not-for-profit and Toowoomba this year. (p 17) We also initiatives across the effectively community groups and organisations in continued to promote our off-peak retail engaged community, including the regional Queensland share $200,000 in tariffs (Tariff 31 and 33) to build on reduction in energy consumption by funding since 2009. Grants have been the 70% of homes in Ergon Energy’s 39%, the reduction in peak demand by awarded to widely diverse projects, network already taking advantage of 32% and savings of 27,735 tonnes of such as a mobile energy education them for hot water savings. (p 26) greenhouse gas emissions compared to trailer in South West Queensland, the business-as-usual forecast. It has rehabilitating injured endangered Working with, and in, our community allowed us to defer by at least eight turtles in Cairns, solar heating a The $32 million Townsville Solar City years a $17 million investment in an barramundi tank at a Townsville school, project has continued its success. additional undersea cable. establishing organic community The program involves distributed solar gardens in Toowoomba and Ergon Energy is taking the knowledge technologies (including solar hot water rehabilitating the Bargara foreshore and expertise developed through Solar and photovoltaic technologies), energy near Bundaberg. efficiency, load management, advanced City and other energy conservation,

HOUSE A: NON-ENERGY EFFICIENT HOUSE HOUSE B: ENERGY EFFICIENT HOUSE If HOUSE A adopted the energy Costs are based on a family of efficient practises of HOUSE B, four per annum. To see how we they could halve their annual calculated all the costs go to Electric hot Electric hot electricity bill. water system water system ergon.com.au Air connected to connected to conditioner Tariff 11 Domestic Tariff 33 Economy Air Desktop set at 20 Laptop + standard + energy efficient conditioner computer degrees in computer XBOX showerheads showerheads set at 25 XBOX $33 summer $6 game $764 $180 degrees in game console $166 summer console $116 Standard $33 $33 Energy light efficient globes light globes $176 $42

Air Air conditioner Clothes Clothes Cooking conditioner set at 20 Cooking dryer – dryer – appliances set at 25 220 litre, degrees in appliances 2 loads per 1 load per $113 degrees in 2 star Plasma TV summer $113 week $54 week $27 summer LCD TV refrigerator $77 $314 $220 $46 $140

Front Top loading loading washing Chest Upright washing freezer machine machine freezer 420 litre, Dishwasher $27 Dishwasher 420 litre, $119 2 star $14 $150 Appliances, run on run on 3 ½ star refrigerator game consoles standard Swimming Swimming economy refrigerator $374 cycle $196 pool pump pool pump cycle $125 $261 TOTAL and chargers TOTAL left on standby connected connected to ELECTRICITY $113 to Tariff 11 Tariff 33 ELECTRICITY COSTS Domestic Economy COSTS $3,385 $655 $393 $1,695

Providing energy saving advice is seen as central to providing customer value. In this issue of our customer newsletter, The Wire, one of many communication channels we invest in, we brought together all of the energy savings ideas to compare a non-efficient house with an energy efficient house without compromising the household’s lifestyle.

REVIEW OF OPERATIONS LEVERAGE CLIMATE CHANGE RESPONSE ERGON ENERGY ANNUAL STAKEHOLDER REPORT 2010/11 35 CASE STUDY: ENVIROFUND SUPPORTS SOUTH BURNETT ready to help the community

The ’Wise Up to Energy Use Week’ at the The community day was followed by a South Burnett Energy Centre in week-long schools program that provided Nanango, launched with a community almost 300 local students with an day in June 2011, took place thanks to introduction to energy conservation at Ergon Energy funding. school, at home and at the energy centre, which displays a range of energy efficiency The event showcased sustainable materials and houses the generators that product displays from local suppliers once powered Nanango. – including one of the Mitsubishi iMiEV electric vehicles being trialled by SUSTAINABILITY IN ACTION

Ergon Energy and an LED bulb promotion ■■ Built capacity in the local community, with to encourage the installation of the tools now available to reduce energy energy-efficient light bulbs – and provided consumption and realise financial savings Ergon Energy electrical safety and energy for themselves, their businesses and Ergon Energy man and General Manager Service sense advice, as a well as full access to the the community. Delivery Southern Region Paul Jordan were at the new South Burnett Energy Centre. The day ‘Wise Up to Energy Use Week’ community day also included a special Queensland Arts ■■ Reductions in energy consumption to challenge the community to think about their Council performance of ’Unplugged‘, through the long-term behavioural change energy usage now and in the future. the Ergon Energy-sponsored energy that will be achieved by introducing energy conservation performance for children conservation to local school children. about how the choices they make impact on the environment.

COLLABORATING TO DRIVE Ergon Energy is also working within the Ergon Energy is securing regulatory CLIMATE OUTCOMES whole-of-government Strategic Energy and external funding to advance energy We believe we can deliver maximum Efficiency Policy for Queensland conservation, efficiency and demand value to both Ergon Energy and our Government Buildings and the management initiatives through stakeholders by using our combined associated Carbon Reduction Strategy allocations from the Australian and resources to leverage climate for Government Office Buildings, which Queensland Governments, as well change action. have established mandatory energy as the allowance in our distribution reduction targets. determination. Ergon Energy has We are partnering with the Queensland around $100 million available for energy We are also working with the Government to deliver the Queensland conservation and demand management Queensland Government to deliver Energy Management Plan, which initiatives over the current five-year energy efficiency outcomes in the built includes the proposed tariff reform regulatory control period. discussed earlier. (p 16) It contains environment. The Urban Land 28 initiatives that complement our Development Authority (ULDA), a Material regulatory issues, such as the internal efforts to better manage government authority, is working with proposed changes to the retail tariff electricity consumption and peak us to ensure that houses on ULDA arrangements (p 16), continue to be demand, with the ultimate aim of estates are designed and constructed pursued with our government partners. to minimise energy use and reduce ensuring Queenslanders continue In addition, we are working with peak demand. The ultimate aim of this to enjoy a reliable supply of electricity our peak body to ensure that the collaboration is to prove that lower wherever they live. development and implementation of a demand dwellings can be established future price on carbon by the Australian The plan includes the establishment of on ULDA sites in Townsville, Mackay Government occurs in such a way as a single reference point for energy and Gladstone with a view to reducing to have the least possible impact on information that will provide free advice the infrastructure requirements to our customers. on a diverse range of issues including; supply power to these sites. Actions climate control and air conditioning; range from ensuring separate circuitry In relation to any possible future price energy efficient lighting; hot water is made available in all new buildings on carbon we are also continuing to systems alternatives and load control to enable things like hot water, pool monitor any impact of the valuation of options; energy efficient house wiring; pumps, washing machines and dryers the portfolio of hedge contracts held by and, solar photovoltaic purchase to be connected to off-peak tariffs, our retailer, Ergon Energy Queensland and connection. Planning for this to educating residents about the Pty Ltd and to ensure an appropriate web-based Energy Information Portal, costs benefits of adopting energy energy trading strategy. (p 72) led by Ergon Energy and Energex, is conservation and demand management Our employees are rising to well under way. features in new dwellings. the challenge This initiative recognises that it will An organisation’s achievements can continue to be difficult to drive only be as successful as its employees’ behavioural change and realise our efforts, and our people are increasingly demand management goals if our making decisions in their personal and customers don’t have easy access to professional lives to respond to energy conservation information. climate change.

REVIEW OF OPERATIONS LEVERAGE CLIMATE CHANGE RESPONSE ERGON ENERGY ANNUAL STAKEHOLDER REPORT 2010/11 36 This is particularly the case for our Embracing solar – and a new world fleet, air travel and electricity use More than 15,000 regional Queensland where Ergon Energy staff have made homes went solar this year – twice as inroads into our emissions reductions many systems as what were connected through a commitment to energy to the network a year ago. The rate of efficient work practices. While the take up was particularly steep towards business is providing the tools to the end of the year, largely driven by the reduce energy consumption, our fact that the Australian Government’s employees are doing the hard work solar rebate was being reduced on to achieve these outcomes. (p 40) 1 July 2011 and that the eligibility for More than 600 of our employees the Queensland Government’s Solar contribute through Ergon Energy Bonus Scheme was being restricted Green Team activities volunteering to systems with inverters of 5kW or less from 8 June 2011. their time to actively support a With help from local Ergon Energy Green Team range of community-based members, their families and volunteers from The total generating capacity of the now environmental initiatives. the Gladstone community, Green Team Co Leader for Capricornia Noel Crosbie shows 20,000-plus units is more than 45MW, National Tree Day in mid-2010 focused off his handiwork. effectively avoiding an estimated 36,000 tonnes of greenhouse gas on weeding and mulching activities at Showing we CARE seven sites across the state, with emissions a year, the equivalent to Over the past decade, through the taking 8,600 cars off the road. around 5,500 trees and grasses planted Cyclone Area Reliability Enhancement in partnership with community groups. program – known as CARE – we have Ergon Energy paid these customers The team continued its outstanding been building resilience into our $6.6 million this year through the Solar support for Clean Up Australia Day, with network to better absorb the impact of Bonus Scheme feed-in tariff for the more than 130 volunteers collecting storms and cyclones. This preparation renewable energy that their systems more than 228 bags of rubbish. proved vital in our restoration response exported to the grid. The Green Team also raised nearly following Cyclone Yasi. To keep up with the rate of connections, $13,000 for Landcare groups. Funding The program, in coastal areas from we dedicated significant resources and went to several projects, including vital Mackay north involves placing essential streamlined our connection processes. research into the protection of the electricity supply underground – to We also worked closely with our Mary River Turtle and the rare and hospitals, water treatment plants, stakeholders, including the government endangered Grassland Earless Dragon sewerage plants and emergency and the solar installers, to facilitate on the Darling Downs. The Green Team centres – and taking action to make our smoother connection processes. also ran a colouring competition among overhead network more robust. It saw the children of Ergon Energy employees Ergon Energy is also working $7.4 million invested through major closely with the government to to celebrate World Environment Day projects completed or significantly and delivered a mobile recycling ensure minimum product and progressed in Gordonvale, Townsville, installation safety standards. program during National Recycling Ayr and Mackay. Week, with nearly $1,400 going to We’re helping to shape the Australian the Cerebral Palsy League. Finding smarter solutions standard for inverters for grid The increased customer interaction connection of small-scale energy ADAPTING TO MEET CLIMATE with the distribution network, through generation (including solar) and CHALLENGES the proliferation of solar energy storage equipment. Ergon Energy is showing leadership systems and the future possibility of At the same time we have been in mitigating its greenhouse gas electric vehicles, discussed next, as working to mitigate any potential emissions, showcased in the following well as changes to climate change network issues. scorecard. However, the reality is that policy and a future price on carbon, regardless of how successful we are are all requiring a well considered we will have to continually adapt to response from Ergon Energy. changing conditions. This is where our asset management It is said that cyclones are becoming excellence programs and climate more intense and will move further change response come together. south, consequently rain events may By working towards the smart grid become more widespread and cause of the future, we can better adapt more flooding. At the same time, as a business, while achieving drought conditions are expected to environmental outcomes. increase in many areas. Add to this more strings of hot days that will encourage increased air conditioner penetration and use, which will create higher demand for electricity.

REVIEW OF OPERATIONS LEVERAGE CLIMATE CHANGE RESPONSE ERGON ENERGY ANNUAL STAKEHOLDER REPORT 2010/11 37 OUR CUSTOMERS EMBRACE SOLAR To minimise potential problems, BY CHOICE inverter systems sized above certain AustralianOUR CUSTOMERS Government EMBRACE rebates and the thresholds require a rigorous technical QueenslandSOLAR BY Government’s CHOICE Solar Bonus assessment before connection. To meet Scheme have driven a significant increase the expectations of customers installing in installation of solar photovoltaic these systems, we developed a tool to systems across the network. simulate the voltage rise caused by a planned solar energy installation to give us the results within hours. Previously technical assessments

22,087 for larger systems involved complex modelling that took days. The five i-MiEV we are trialling will help us The new tool is helping us to identify the benefits and the challenges understand the impact of solar clusters associated with this technology and, ultimately, allow us to support customers who may want to on our network to avoid quality of supply drive them in the future. The i-MiEV will be the 13,606 issues in the future. first mass-production electric vehicle available for purchase in Australia. 4,115

We have been working with Energex on this shared challenge by developing The electric vehicle could well be part 1,868 7,068 of the house of the future – one with

618 a power quality planning matrix, as

SYSTEMS well as a Joint Network Performance energy storage batteries, solar on the Standard and Voltage Management roof, a customer interface to monitor Standard. These will help provide our and control your electricity usage in DEC–08 DEC–09 DEC–10 JUN–09 JUN–10 JUN–11 customers with consistent quality of real-time and smart appliance, all supply and network performance. installed as normal practice. In addition, customers continued to To learn more about how this will CLEANCLEAN ENERGY ENERGY SUPPORT INCREASES purchase Clean Energy, Ergon Energy’s work we are creating this future – AsSUPPORT well as an increasingINCREASE number of accredited renewable energy product. called the Smart Lifestyle Home - at customers reducing their energy usage Horseshoe Bay on Magnetic Island as and investing in solar energy, an increasing RESEARCHING THE FUTURE TODAY part of our Solar City project. (p 35) number continued to support our renewable energy product. To better understand the dynamics of a The house will feature the latest in future network where solar and energy smart appliances, solar energy storage technologies will be more production and energy-efficient prolific, as will the challenges around products to demonstrate how residents both managing demand and quality of can monitor, produce and control their 66,540

65,000 supply, this year we launched the state’s energy use. Work on the Smart

61,490 first major electric vehicle trial. Lifestyle Home will inform the future 57,795 connection of a range of sophisticated Considering an electric vehicle’s energy

50,000 information technologies to our load is roughly equal to an average electricity grid. house, we need to understand how and when motorists will recharge them and the affect of this on the network. We are looking at ways to use the excess energy stored in the vehicle’s battery at the end of the day, to supplement a household’s energy consumption and

2007 2008 2009 2010 2011 reduce network peak demand through our load management capability. The trial involves five Mitsubishi i-MiEVs, which stands for I series Mitsubishi Innovative Electric Vehicle. These vehicles are plug-in, all-electric hatchbacks, boasting zero drive-time carbon emissions. They can be fully charged in a domestic environment in less than seven hours. However, in the future, commercial fast charge stations are expected to reduce this time to about 15 minutes. The trial also includes two converted vehicles based on a Mazda 2 and VW Caddy van.

REVIEW OF OPERATIONS LEVERAGE CLIMATE CHANGE RESPONSE ERGON ENERGY ANNUAL STAKEHOLDER REPORT 2010/11 38 CASE STUDY: BECOMING AN ENERGY SENSE COMMUNITY a ready community

The Energy Sense Communities program being rolled out in Townsville consists of ‘Smart Asset Management Capital Deferral’ and ‘Network of the Future’ initiatives supported by stakeholder, community and customer engagement programs.

A knowledge framework is being developed to ensure outcomes are captured and shared. The initiatives have considered network-side and customer-side solutions in a complementary way to deliver capital deferral value for Ergon Energy, as well as customer benefits and enhanced learning opportunities. The program’s objective is to find cost-effective and sustainable technologies to better address rising electricity demand. It will help to develop and prove the technology that will allow customers to play a more active role in how they consume, produce or store energy in the future.

The use of smart asset management Ergon Energy has joined with the Townsville City Council to lead the way with energy conservation and techniques and technologies to defer sustainability in the city. Here Townsville Mayor Les Tyrell joined North Queensland Cowboys centre planned network investments, including Brent Tate to start painting our ‘energy sense’ message onto a local billboard. the Mount St John and Bohle Plains zone substations if feasible, will maximise SUSTAINABILITY IN ACTION ■■ Builds on the knowledge already gained the value of the 2010-15 capital through Ergon Energy’s experiences with expenditure plan. ■■ About 30 integrated initiatives, including demand management techniques, the Townsville Solar City project and the The outcomes from Energy Sense distributed energy resources such as solar broader energy conservation and demand Communities will not only inform future power and energy storage systems, management program, as well as a program initiatives but will help inform portfolio of technology trials. future submissions for funding, both network automation, smart customer externally and through our regulatory applications and community programs, ■■ Utilises and potentially extends existing framework. are either reviewed or scoped for roll out partnerships in Townsville to deliver over the next four years. benefits for residential customers, the commercial and industrial sector and ■■ The initiatives, consistent with the Network Vision 2030, aim to manage Ergon Energy’s own electricity network. the electricity network more efficiently, meet reliability service standards and find suitable alternatives to meet rising demand.

REVIEW OF OPERATIONS LEVERAGE CLIMATE CHANGE RESPONSE ERGON ENERGY ANNUAL STAKEHOLDER REPORT 2010/11 39 SCORECARD OUR EMISSIONS

Despite a small reduction in the key Compliance with the shareholding greenhouse gas emissions associated with Ministers’ requirement to purchase our operations, it remains difficult to accredited greenhouse gas emissions reduce emissions yet meet growing offsets for 2010 air travel and for passenger electricity demand. and light commercial vehicles below specified Green Vehicle Guide ratings, Ergon Energy’s greenhouse gas emissions, occurred in December 2010. We have also both direct and indirect, are equal to supported the Queensland Government’s around 6.2 % of the emissions associated QFleet ClimateSmart Policy by adopting the with our customers’ electricity use. same targets. We were on target to achieve We therefore not only have a responsibility a 15% reduction in emissions from our to help customers reduce their passenger and light commercial vehicles electricity-related emissions but also by 31 December 2010 (based on a 2006/07 to reduce our own emissions. baseline), through purchasing a higher A key step forward has been the proportion of four-cylinder, diesel and/or enhancement of our greenhouse gas more fuel-efficient vehicles, purchasing a emissions data collection systems and higher proportion of E10 petrol (10% database. In part, this ensured Ergon ethanol blend ) and reducing vehicle Energy complied with the legislative numbers. However, due to operational requirements of the National Greenhouse requirements, achieving that target was and Energy Reporting Act 2007, but it also not possible. Since January 2011, we have supported other internal and external been offsetting 50% of all passenger and reporting requirements. These database light commercial vehicles emissions, with reports provide us with deeper insights a plan to reach 100% in 2020. Ergon Energy employee Sammy Tynan is a fan of into the impacts of our operations and help video-conferencing, and others are catching on. It ensure emissions reduction initiatives are S tRATEGIES to lower Scope 2 – saves time and hassle at the airport and is helping focused on the highest priorities. Indirect Emissions minimise our carbon footprint Ergon Energy met our liability for An obvious but unavoidable consequence of Renewable Energy and Gas Electricity the electricity supply process is that some S tRATEGIES to lower Scope 3 – Certificates. (p 78) energy is lost, largely in the form of heat Indirect Emissions from powerlines, but also from electrical As a regional distributor with a geographic S tRATEGIES to lower Scope 1 – equipment and unmetered installations. footprint approximately the size of France Direct Emissions Emissions attributed to these losses made and Germany combined, air travel is a Operating 33 diesel-fired generation plants up around 85% of our emissions inventory critical part of our business. In 2009/10 we in communities isolated from the main in 2009/10. Network loss data for 2010/11 had reduced emissions from employee air grid accounts for the majority of our direct, was not available at the time of finalising travel by 24% ahead of our target of a 20% or Scope 1, greenhouse gas emissions. this report, however, in 2009/10, 5.32% of reduction by 2010/11. However, this year, Diesel fuel accounts for more than half the energy entering our network was lost. we fell behind the target by 3.6%. Since the cost of isolated generation and the We occupy more than 108 buildings, July 2008, Ergon Energy has offset 100% fluctuation in diesel prices is a risk factor including 83 depots, to support maintaining of emissions associated with employee air we are actively mitigating. a safe and reliable power supply. Our new travel. In the past two years, the number of video-conferencing hours per month has Part of our response is to replace diesel buildings are being designed and built to almost tripled from 300 to 850 hours. generators with renewable sources. a 5 Star Green Star rating and 4.5 star We currently have two wind turbines on NABERS (National Australian Built Thursday Island, five solar concentrator Environment Rating System) rating. dishes at Windorah and a geothermal Building design features are contributing to generator at Birdsville. The latter is being Ergon Energy’s commitment to reducing upgraded to enable it to provide in excess our environmental footprint. (p 58) of 720MWh of renewable energy, avoiding From a 2009/10 baseline, Ergon Energy up to 500 tonnes of emissions a year. (p 58) has established targets of reducing Biodiesel B5 blend (5% biodiesel and 95% electricity-related emissions by 5% by 2012 diesel) has been successfully introduced to and 20% by 2014. We bettered this year’s five isolated systems for use in the diesel target of 2.5% in emission reductions by generating sets at Birdsville, Bedourie, more than double. Achieving this target will Boulia, Jundah and Windorah. The blend is be easier in the future as we apply our now sourced from Rocklea in Queensland, Environmentally Sustainable Design using tallow, soy and canola feedstock. approach to future building fabric and fit Ergon Energy will begin to explore using out and commit to operating our buildings higher blends, such as B20 (20% biodiesel in line with the sustainable requirements. and 80% diesel), and expanding its use In addition, detailed facilities studies have into more locations. In addition, our been undertaken at Ergon Energy’s major powersavvy program, which achieved sites and energy audits at smaller sites and significant gains in electricity and depots. These studies and audits will greenhouse gas reductions this year, support Ergon Energy in reducing its is being rolled out to all of our isolated energy consumption and a planned communities. (p 19) program of work in the coming years.

REVIEW OF OPERATIONS LEVERAGE CLIMATE CHANGE RESPONSE ERGON ENERGY ANNUAL STAKEHOLDER REPORT 2010/11 40 THE STATISTICS

EMISSIONS (tCO2 -e) 2010/11 2009/10 2008/09 2007/08 2006/07 Greenhouse Gas Emissions from Fleet, Air Travel and Electricity Use – Tonnes of b 40,644 43,137 43,835 45,369 41,082 Carbon Dioxide Equivalent Building Electricity Use per Employee – b 3.92 3 4.63 4.66 5.34 4.68 Tonnes of Carbon Dioxide Equivalent Scope 11 – Direct Emissions - Isolated generation b 75,258 76,711 76,295 80,996 82,192 - Vehicle fleet – passenger and Target ≤ 9,450 b 11,422 11,442 9,829 10,640 11,118 light commercial - Vehicle fleet – other b 7,896 7,906 9,703 8,281 7,143 Scope 2 – Indirect Emissions - Network losses na2 833,886 794,829 840,883 886,950 - Electricity use – occupied buildings Target ≤ 19,181 b 18,6123 21,325 21,275 23,192 19,398 Scope 3 – Indirect Emissions - Air travel Target ≤ 2,618 b 2,714 2,464 3,028 3,256 3,423 1. Scope 1, 2 and 3 emissions are as defined in the Greenhouse Gas Protocol, developed by the World Resources Institute and the World Business Council for Sustainable Development. 2. Network losses, and accordingly emissions associated with them, have not been calculated at the time of publication. 3. This year property data was refined to remove unoccupied but metered substations and radio huts, from the scope of properties for which Ergon Energy has emissions reduction targets.

RENEWABLE ENERGY GENERATION THE PLAN FOR DIESEL-FREE INCREASING GENERATIONTHE PLAN FOR IN DIESEL-FREE OUR ISOLATED COMMUNITIESGENERATION IN BY OUR 2050 RenewableRENEWABLE energy generation ENERGY capacity ErgonISOLATED Energy COMMUNITIES is on track to meeting its (includingGENERATION geothermal, INCREASING wind and solar photovoltaic systems) is increasing as targetBY 2050 to replace all non-renewable diesel part of our commitment to reducing use in isolated communities by 2050. greenhouse gas emissions. 4.2 1,467 4.1 1,160 3.3 3.2 3.1 804 UNITS OF ENERGY OF UNITS 577 533 2011 2020 2030 2040 2050

Demand Reduced by Energy Conservation kW Renewable Energy Generation

2007 2008 2009 2010 2011 Non-renewable Diesel-fired Generation

REVIEW OF OPERATIONS LEVERAGE CLIMATE CHANGE RESPONSE ERGON ENERGY ANNUAL STAKEHOLDER REPORT 2010/11 41 REVIEW OF OPERATIONS

CuSTOMER-driven 14 Asset Management Excellence 22 Leverage Climate Change Response 32 A LeADER in Safety 42

P HiGH erformance Organisation 48

REVIEW OF OPERATIONS A LEADER IN SAFETY ERGON ENERGY ANNUAL STAKEHOLDER REPORT 2010/11 42 REVIEW OF OPERATIONS: A LEADER IN SAFETY always ready to be safe

Ergon Energy is committed to ensuring the health and safety of our people and the community. This has meant taking a critical look at our performance over recent years, and retaining a priority on building a sustainable safety culture across the business – a culture where safety is inherent in everything we do.

WORKPLACE SAFETY MEASURING UP While we recognise more work needs Ergon Energy has made significant to be done to sustain the progress HIGHLIGHTS gains in improving workplace health made this year, we are confident this and safety, evidenced by a 48% will be achieved. ■■ Lost time injuries frequency rate improvement in our Lost Time Injury Reflecting these positive results and down 48% Frequency Rate (LTIFR) for employees. the management of injuries and safe ■■ Driving positive behavioural This was a drop from 6.11 injuries per return to work, the number, duration change through safety indicator one million labour hours in 2009/10 to and cost of workers compensation 3.2 per one million hours. Our Lost claims continued to decrease – despite ■■ Ongoing safety forum with Time Injuries Duration Rate dropped an increase in the total wages and the contractor workforce from 100.9 to 62.3; this measure being WorkCover industry rate. an indicator of injury severity. ■■ Implemented a new integrated A NEW ERA OF HEALTH AND SAFETY management system These reductions saw us land on target for our key corporate safety Our Safety Management Plan for ■■ ‘No One Gets Hurt Today’ goal indicator, the All Injuries Frequency 2010-15 is steering Ergon Energy gains loyal following Rate (AIFR) for employees – with a toward a new era in safety performance. ■■ Community safety program positive move from 14.1 in 2009/10 to The plan outlines the key elements recognised as best-practice. 13.7. This indicator is particularly considered critical to the organisation challenging as it includes both LTIFR, becoming a leader in safety. as the more common industry measure, and the frequency rate for medical 2010/11 SAW A DRAMATIC DROP IN DROP IN LOST TIME INJURIES BEGINS treatment injuries. LOST TIME INJURiES TURNAROUND Efforts to build a sustainable culture, our The drop in lost time injuries has resulted Our Dangerous Electrical Event safety2010/11 management SAW A skills DRAMATIC and safety in the first signs of improvement in our all Frequency Rate (DEEFR) for employees leadershipDROP has IN LOSTsupported TIME a INJURIESdramatic drop injuriesTHE measure. DROP IN While SERIOUS the improved also improved – from 5.3 in 2009/10 to in the number of injuries requiring time managementINJURIES of BEGINS injuries and safe return to 4.9. A number of these events were away from work. workTURN has supported AROUND this, we are confident the turnaround is a sign that the actions directly related to the extraordinary 1. 2010 result adjusted due to changes in the being taken across the business are period following Cyclone Yasi. Still, we status of a number of injuries changes since the previous report. gaining momentum. are targeting further improvement around high-voltage switching, access

and polarity work practices. 6.1 14.1

Our commitment to improving our 13.7 performance against all these measures aligns with our goal to take 11.8 the organisation’s safety performance 4.3 11.2 into the top quartile of the electricity 4.1

distribution industry-recognised 8.4 benchmarks and our aspirational goal to 3.2 achieve zero injuries in our workplace. 2.0

At the Electricity Supply Industry Field Days at Wagga Wagga, Line Services Bundaberg and AIFR Operations Rockhampton challenged the best. LTIFR Here, Craig Royan and James Roberts compete in 1 the live low-voltage cross-arm change event. (p 47) 2007 2008 2009 2010 2011 2007 2008 2009 2010 2011

REVIEW OF OPERATIONS A LEADER IN SAFETY ERGON ENERGY ANNUAL STAKEHOLDER REPORT 2010/11 43 THE STATISTICS During the event there were no serious SAFETY PERFORMANCE 2010/11 2009/101 2008/09 2007/08 2006/07 injuries, despite the challenging conditions, the scale of the response All Injuries Frequency Target b 13.7 14.1 11.8 11.2 8.4 Rate – Employees ≤ 13.7 and the fact that many of the people involved had never worked in tropical, Lost Time Injuries Frequency Target b 3.2 6.1 4.1 4.3 2.0 Rate – Employees ≤ 7.6 post-cyclone conditions. Lost Time Injuries Duration Target b 62.3 101.0 56.9 58.6 18.5 Our leadership program is building on Rate – Employees ≤ 60.0 the significant investment in the Zero Lost Time Injuries Frequency Target z 2.2 0.6 1.6 0.5 2.4 Incident Process (ZIP) program. Since Rate – Contractors ≤ 1.0 2004, more than 50% of the workforce Average Cost of b $1,691 $4,520 $3,359 $5,241 $6,606 and 70% of the field workforce have WorkCover Claims completed this psychologically-based Compensable Claims b 2.9 4.3 3.2 na na program. Safety, being key to a high Frequency Rate performing team, is also embedded in Total Dangerous Electrical Target b 885 894 1,037 1,143 1,009 our workgroup leader coaching Events (DEEs) ≤ 955 program. (p 49) – Unas sisted Asset Failure (within Ergon Energy's b 374 394 342 363 378 Online safety testing has become part control) – As sisted Asset of the selection process for qualified Failure (outside Ergon z 511 500 695 780 631 tradespeople, assessing their safety Energy's control) knowledge and focus and determining Dangerous Electrical Events b 4.9 5.3 3.2 3.6 5.7 how they can support the organisation’s Frequency Rate – Employees safety goal. Community Electrical b 303 310 439 588 584 Safety Incidents New training facilities in Rockhampton and Brisbane have helped us outwork 1. 2010 result adjusted due to changes in the status of a number of injuries changes since the previous report. our commitment to safety by ensuring practical competence through As we implement this plan, we SAFETY MANAGEMENT A PLATFORM training. (p 53) will consolidate efforts to build FOR LEADERSHIP a sustainable safety culture – Throughout the year we focused on SHARING LESSONS LEARNT TO strengthening the relationship between improving our safety management ADDRESS SAFETY Ergon Energy’s broader cultural competence – as a key building block Disappointingly, our contractor lost program and our safety goals. to achieving safety leadership at time injury frequency rate performance To drive positive safety behaviours, Ergon Energy. rose from 0.6 to 2.2 with three lost time injuries occurring during the year. a new Comprehensive Safety More than 600 executive and middle Indicator (CSI) has been developed managers participated in a tailored To address this, we have been and is progressively being rolled out Safety Management and Leadership workshopping solutions with our through the business. It uses a series Program. This program is based on contractor organisations, most notably of lead (proactive) and lag (reactive) the premise that you need to be a around vehicle safety and apprentice indicators to measure a team’s safety good safety manager – delivering on management. The focus has been on performance, including, as examples, day-to-day safety activities such as collaboration – on sharing the safety the AIFR and behavioural measures hazard reporting, workplace inspections lessons learnt across our respective around incident reporting. The CSI, and incident investigations – before you organisations. This has provided the which is being monitored, is being used can be a good safety leader. opportunity to develop a safety forum, to reward those teams that perform to meet regularly with the aim of driving strongly with gold, silver and bronze “Our goal is to be a leader – to ongoing safety improvements. award plaques presented annually. (p 47) take our safety performance In our Above and Beyond employee into the top quartile of reward and recognition program (p 55), industry-recognised ‘Always Safe’ became a new award category. The selection criteria for benchmarks.” the award is based on the five Always This year’s natural disasters highlighted Safe pillars (see illustration) and the the importance of safety management in behavioural anchors (committed, ensuring that we did not succumb to the courageous and reliable) developed to pressure to get power back on quickly support the inclusion of safety as one at the risk of injuring our employees. of our SPIRIT values. (p 3) This was where, during our Cyclone Yasi These initiatives build on the response, the ‘Daily Muster’ played a recognition provided through our vital role. The safety briefing was used PowerAid program, which allows at the start of each day to drive home employees to earn points for their the importance of the safety basics, work group through positive safety such as risk assessments, fatigue behaviours, which are then converted management and incident reporting, into real charity donation dollars. (p 20) and the need to do them well.

REVIEW OF OPERATIONS A LEADER IN SAFETY ERGON ENERGY ANNUAL STAKEHOLDER REPORT 2010/11 44 We have improved the integration of the HSE IMS with other key management systems, such as our human resource and risk management systems. Made up of a range of critical standards, it provides a formal, documented approach to the way risks are managed. These reference documents cover such topics as managing audits, incidents and injuries. This achievable goal aims to help our Improvements have been made to our employees tune in to the specific safety investigations and reporting framework challenges they may face during the The Australian Stockman’s Hall of Fame Pink Ride and the supporting eSafe system. working day and beyond. in the Outback was a fitting backdrop for a $4,470 PowerAid donation to support breast cancer The Incident Cause Analysis The ‘No one gets hurt today’ message is research. Longreach Work Group Leader Mick Method (ICAM) investigation process, being supported by quarterly targeted Bicshel handed over the cheque to cancer survivor and National Breast Cancer Foundation introduced for serious incidents in safety campaigns focused on specific ambassador Sharon Cohrs. late 2008, was extended to cover less safety themes. To date these have serious ‘Class 3’ investigations. This is included manual handling, risk The contractor lost time injury helping us to look broadly at ‘local area’ management and electrical safety. frequency rate compares to the Energy and ‘whole-of-business’ factors, such These have been supported by fact Network Association’s published as communication, training, operating sheets, internal safety videos, safety 2009/10 industry average of 4.03. procedures, performance drivers, meetings and site visits. organisational culture and equipment, Ergon Energy is also continuing to work These activities aim to encourage which may result in failures and with the Electrical Safety Office (ESO) employees, supervisors and managers contribute to incidents. to drive safety improvements through to work collaboratively to reduce the the audit process. The ‘entity audit’ Improvements to the eSafe system, number of incidents and injuries conducted by the ESO resulted in Ergon used to collate our safety information associated with each theme. Energy being given full compliance in one depository, are lifting the By working with our own people to for this mandatory certification, as effectiveness of incident analysis. deliver the ‘No one gets hurt today’ well as positive feedback from the ESO The growing quality of information is message, it has gained an extremely Auditor on the knowledge of our people giving us a holistic view of our highest positive and loyal following from in the field, particularly around risk risk areas and the solutions that can employees, evidenced by our internal management. We also maintained make a genuine difference in reducing communications research survey certification to AS4801/ISO 18001 the number of safety incidents. Safety Standards. results, which found that 98% of These system improvements will employees have a good understanding The surveillance audit of last year’s support compliance with Australia’s of the Always Safe pillars and Board-endorsed five-point plan (a nationally harmonised workplace associated behaviours. summary of safety activities underway health and safety laws, due to come into Safe Work Australia Week 2010 across the business) conducted by effect in January 2012. This will see a To reinforce the importance of being external auditors in April 2011 noted uniform set of safety standards and Always Safe at peer-to-peer level we significant safety improvements as a protection for all Australian workers, supported Workplace Health and Safety result of actions completed to date and simplifying compliance requirements Queensland’s annual safety event no non-conformances. Ergon Energy’s for Ergon Energy where we have ‘Safe Work Australia’. This turned into Safety Management Plan for 2010-15 employees working outside Queensland one of the most successful events of builds on these activities. or when interstate crews are brought in its kind for us. NEW SYSTEM A FOUNDATION FOR to Queensland to work. The internal theme for the week-long IMPROVEMENT The new Work Health and Safety Bill event was manual handling, which The implementation of a new Health, 2011 will replace the current Workplace was outworked through numerous Safety and Environment Integrated Health and Safety Act 1995 and give employee-led activities aimed at raising Management System (HSE IMS) has rise to new work health and safety awareness of manual handling hazards streamlined the processes of our regulations and codes of practice specific to Ergon Energy offices safety, environment and cultural and lead to a number of changes to and depots. heritage functions. the Electrical Safety Act 2002. We are finalising our assessment of the impact Other activities included an interactive The HSE IMS was developed after of these changes on our operations and safety poster competition, which asked considerable consultation with taking action to ensure a smooth employees to develop their own employees and a major process review transition. messages around being Always Safe. to establish a single, coordinated This brought more than 50 team approach that reduces bureaucracy, ‘NO ONE GETS HURT TODAY’ entries, featuring emotive and poignant improves accountability and lays a To engender the employee commitment messages highlighting a strong strong foundation for all employees, needed for Ergon Energy to be a leader commitment to safety. managers and contractors to in safety, we launched the simple safety consolidate and improve performance. challenge ‘No one gets hurt today’ in mid 2010.

REVIEW OF OPERATIONS A LEADER IN SAFETY ERGON ENERGY ANNUAL STAKEHOLDER REPORT 2010/11 45 We also lifted engagement by Despite these fatalities and an increase COMMUNITY SAFETY CONSOLIDATES sponsoring our best safety performers in serious incidents, the actual number Since our Community Electrical Safety to participate at the premier safety of incidents has remained relatively AwarenessCOMMUNITY Plan commenced SAFETY in earnest in event, the Electricity Industry Field stable even with the increased activity 2007/08,INCIDENTS there has STABLE been aDESPITE dramatic Days, in May 2011. (see over) across the agricultural sector, as a reductionINCREASED in network ACTIVITY safety-related result of positive growing conditions incidents. This year, the number of incidents remained steady despite an FOCUS ON COMMUNITY and increases in reconstruction SAFETY RECOGNISED increase in activity across the agricultural following flooding and cyclone damage. sector and associated activity in aviation Our Community Electrical Safety Targeting major ‘at risk’ industries and transport. Awareness Plan (CESAP) was * 2010 result adjusted since the previous report. recognised as the ‘best solution to Worryingly, however, there have been an identified electrical safety issue’ increases in safety incidents in some of by Workplace Health and Safety the ‘at risk’ industries, most notably the 88 5 584 Queensland at its WorkSafe Awards in road transport industry, up 18% over October 2010. It also won the Australian the past 12 months. Smaller increases were seen in the agriculture and Marketing Institute’s ‘Marketing 439 Communications Business to aviation industries. This was balanced out by the reduction of incidents in 310

Business’ award. 303 earthmoving (down 21%) and electrical Underpinned by a detailed analysis (down 70%); these relate to electricity of annual incident data, CESAP has theft, illegal wiring and DIY activities. evolved each year to address known INCIDENTS community electrical incident problem These incidents have wide-ranging areas using awareness campaigns impacts; tragic consequences for 2007 2008 2009 2010 2011 targeted at industry sectors or extreme individuals and families, cause risk activities. This has seen community significant community disruption, INDUSTRIES AT RISK FROM ELECTRICITY electrical safety incidents halved over financial strain on employers and cost NETWORK RELATED INCIDENTS to Ergon Energy and customer impacts recent years, however, there is no room The major ‘at risk’ industries from for complacency. due to unplanned outages. a community safety perspective are In response, Ergon Energy again has road/transport, agriculture and earth Tragically, over the past year, two moving. We are building awareness in INDUSTRIES AT RISK FROM people were killed in separate incidents collaborated with a range of external these areas by collaborating with their at Cloncurry and Yungaburra when organisations such as AgForce, peakELECTRICITY bodies, participating NETWORK in industry the cranes they were assisting Canegrowers, Farmsafe, the Local specificRELATED events INCIDENTS and targeting our communication activities. inadvertently contacted overhead lines. Government Association of Queensland, A third person was killed when a roller Workplace Health and Safety, Cotton he was using to paint a large outdoor Australia, the Electrical Safety Office, sign contacted overhead powerlines. Energex and Dial Before You Dig to share strategies for reducing electrical safety incidents. We have also participated in major industry events, such as FarmFest, NQ Field Days and Agro Trend distributing more than 90,000 individual items of ‘Look Up and Live’ campaign material. These efforts have been supported by Road transport 160% our awareness campaigns, such as our Agriculture 53% ‘Look Up and Live’ overhead powerlines Earthmoving 33% safety communications, which are both Aviation 16% mass market and targeted at specific Vegetation management 15% industry groups. Building/construction/demolition 12% Our Always Safe around the Home Other 12% communications are continuing to educate households about electrical TARGETED ACTION IMPROVING SAFETY safety focus on the most frequent causes of electrical safety incidents To respond to specific health and safety – ‘Don’t Do It Yourself’ – and more concerns we also have a range of other As part of Safe Work Australia Week, we ran a general tips. activities underway. children’s colouring competition to encourage employees to talk with their families and friends While safety is our overwhelming Addressing network safety about the importance of coming home safely at priority, our goal is also to address While network safety has improved over the end of each day. Entries were received from the impact of safety on network recent years in line with network as far north as Thursday Island and west to Mount Isa. performance. In 2010/11, more than investment, we are committed to finding 65,000 customers had their supply more ways to target asset failure and interrupted through incidents where the risk of injury, both to our employees members of the community had come and the community. in contact with the network.

REVIEW OF OPERATIONS A LEADER IN SAFETY ERGON ENERGY ANNUAL STAKEHOLDER REPORT 2010/11 46 CASE STUDY: SAFETY FIELD DAYS ARE REWARDING ready to challenge the best

Our field safety champions showed their SUSTAINABILITY IN ACTION true mettle on the national stage at the ■■ Built an understanding of the lead and lag Electricity Supply Industry Field Days in indicators used in the new CSI and the May 2011. safety behaviours that drive results.

The two-day event held at Wagga Wagga ■■ Recognised teams that have not only brought together professionals from achieved an outstanding safety record, but the electricity, water, mining and rail who also do all of the proactive things to industries to test their skills in workplace ensure a safe working environment. safety and learn the latest about health, safety and the environment as it relates ■■ Maintained skill levels in critical safety With the Ergon Energy field safety day behind procedures from pole top rescue, CPR and to their everyday roles. them, our two top performing teams had their field risk management, and kept Ergon Ergon Energy’s new Comprehensive sights set on the national safety competition to be Energy informed of the latest safety Safety Indicator was used to select six of held at Wagga Wagga. They are shown here, with the judges and their fellow competitors. our highest performing teams to compete at developments and products. the earlier Ergon Energy-wide field safety day in Townsville for short-listing for this premier event. Crews from Lines Services Bundaberg and Operations Rockhampton were successful, chosen because of their professionalism, first-class performance and outstanding safety record. At left: At the national event, Line Services Teams from various companies showcased Bundaberg was awarded first place in the their expertise across a range of activities, ‘manual handling challenge’ and ‘the risk including pole-top rescues, cable jointing, assessment task’, as well as third place in ‘live live-line techniques, hazard and risk cross-arm change’. Operations Rockhampton was awarded second place in the ‘manual handling assessment, manual handling and first aid. challenge’. Here Jay Wilkins competes in one of the challenges.

These include increasing our focus on We have equipped our employees with We have continued other proactive our assets whole-of-life cycle a better understanding of ergonomic health initiatives for our employees, management (p 23), and refinements principles, which is now informing including flu vaccinations. To protect to our maintenance philosophies, decisions around the procurement our people and support our ability to which are being made possible with of tools and equipment. Through maintain services to customers improvements to data integrity. (p 51) consultation, we are aiming to ensure through the flu season, 1,545 field work schedulers appropriately balance and office employees accessed the Managing manual handling risks the requirements of the task, the skills voluntary vaccinations. Improvements to network design and experience of the crew and the standards and engineering controls are customers’ requirements. Providing also being made. As an example, this is adequate time to complete a task is being used to address manual handling seen as critical to avoiding injury. injuries in our workforce. A common misconception is that musculoskeletal It is about enabling employees to make injuries occur because employees safe choices. don’t do the right thing. Our analysis Equipping our people to be fit for work has shown, however, that in Ergon The importance of our people being in Energy the main risk factors are a physically, mentally and emotionally excessive force (including heavy lifting), healthy state – being ‘fit for work’ – has repetitive tasks and awkward postures. seen the phasing in of a comprehensive One way we are addressing this risk is drug and alcohol testing regime and by applying ergonomic principles to zero tolerance when undertaking high change the design of our padmount risk tasks. This followed a campaign the transformers to allow better access previous year to educate employees to components, including the ring about the impact of drugs and alcohol main unit. on a person’s fitness for work. At the centre of these changes to This, and our Employee Assistance network design has been the Program, which provides confidential introduction of a new participatory counselling to employees and family approach to managing manual members to address work and personal handling risks. This collaboration with challenges, is about ensuring our employees and the Electrical Trades Manual task-related incidents have been the employees can perform their duties target of much of our safety program this year. In Union has allowed us to look closely at effectively and in a manner that does the past five years, 64.5% of our workers’ how high-risk manual handling tasks compensation claims have been in this area. not threaten their own, or other’s, safety can be eliminated or minimised. or health. This support was particularly important for those personally impacted by Cyclone Yasi.

REVIEW OF OPERATIONS A LEADER IN SAFETY ERGON ENERGY ANNUAL STAKEHOLDER REPORT 2010/11 47 REVIEW OF OPERATIONS

CuSTOMER-driven 14 Asset Management Excellence 22 Leverage Climate Change Response 32 A Leader in Safety 42 PHiGH eRFORMANCE Organisation 48

REVIEW OF OPERATIONS HIGH PERFORMANCE ORGANISATION ERGON ENERGY ANNUAL STAKEHOLDER REPORT 2010/11 48 REVIEW OF OPERATIONS: HIGH PERFORMANCE ORGANISATION ready to adapt

Ergon Energy’s goal is to be a preferred employer, with a high performing, professional, values-based culture, achieving best-practice outcomes across all areas. It’s about creating an organisation that is responsive, resourceful and ready to adapt and thrive in a changing world.

Ergon Energy has around 4,700 This understanding of high employees (4,752 as at 30 June). performance is driving our people HIGHLIGHTS They work and live across the breadth strategy and initiatives to ensure our of Queensland, from the most northern employees are able and willing to meet ■■ Employee engagement and western reaches of the state to the our immediate and future challenges strengthens to 71% population centres along the coast, as head-on (especially in the area of well as in the South East corner. workplace safety). ■■ Moved towards earned value works delivery management For a full workplace profile see page 56. This will remain a focus over the coming years. It is about ensuring our ■■ Property strategy lifting This section of our report discusses people are equipped with the necessary organisational capability how we are supporting our people to leadership capability, mindset and build a high performance organisation ■■ Enabling performance competencies required to successfully – one that is resilient and adaptable, improvement through implement and embed transformational with the skills required to meet our systems, processes and behaviours, information challenges, and one that is increasingly including increasingly sophisticated ■■ information-enabled. Over 350 graduates apprentices assets and information systems. and trainees supported across The report then looks more generally A key initiative this year has been the the business at our people and environmental rollout of the Work Group Leader initiatives. ■■ SharePoint intranet helps Program; designed to enhance the employees collaborate DEVELOPING AS A HIGH engagement and overall performance PERFORMANCE ORGANISATION of our field-based teams. These roles ■■ Protected endangered species are seen as critical to the success of with corridor mapping. Ergon Energy’s cultural journey is Ergon Energy, particularly in the areas about introducing and embedding new of safety, leading our people and ways of doing things that will enable us meeting our customers’ needs. More to rise to meet our future challenges. These efforts are targeting our than 150 employees, located across We are transforming our business to performance management capability, Ergon Energy’s service area, have ensure we are efficient and effective so which is helping to address safety participated in the program – which that we can deliver on our customers’ performance. They are also helping to includes a formal education component, and stakeholders’ expectations. manage and keep talent, recognise individually tailored development plans employees and manage individual We are continuing to determine the and structured coaching. This year has performance more broadly. skills, behaviours and engagement seen the use of 360-degree feedback required to deliver high performance. from supervisors, peers and We also have been rolling out a subordinates to target their high performing teams program development plans. across the organisation to develop the team behaviour required to drive The program was introduced in early high performance. 2010 with the first graduates receiving their Diplomas of Management in The results of our employee ‘Have Your November 2010. The program is Say’ survey saw employee engagement Technology improvements are helping Sarah Callaghan and Deanna Ede improve complemented by a broader move positively to 71%, up from 67%. our customer service experience. ‘peer-to-peer’ mentoring initiative, This important measure is being used Our representatives can be navigating up as well as a range of other to track progress towards our goal of to 10 applications during a single interaction building and fostering a resilient and so a reliable operating environment is a leadership programs. service imperative. (p 51) adaptable organisation.

REVIEW OF OPERATIONS HIGH PERFORMANCE ORGANISATION ERGON ENERGY ANNUAL STAKEHOLDER REPORT 2010/11 49 It measures the extent to which employees identify being committed to the organisation, how hard they’re prepared to work and how long they will remain with the business. Our aim is to harness the positive cultural attributes displayed during our flood and cyclone response, where the organisation responded to the shared goal of power restoration for our customers with a sense of urgency, clear accountabilities and a focus on safety. This will help us build the skills and culture required to manage increasingly sophisticated networks, information systems and renewable The new $26 million complex in Mackay will bring the benefits of a centralised presence to the Mackay energy solutions. region. It features an eco-link space incorporating natural lighting and a combination of air conditioning and natural ventilation to provide an open-plan meeting area to help foster the cross-workgroup Improving our works delivery capability relations central to a high performance culture. We are targeting significant improvements in the delivery of our Improving the longer-term undertaken against the Innovation work program to lift our performance transparency of the works program Maturity Model, which enables gaps and meet future challenges. The will enable more strategic workforce to be identified, assessed and actions success of works delivery is dependent and contracting decisions and greater put in place to make continuous on all phases, from inception through flexibility when responding to improvement a part of the way execution to closure. Therefore, we emergency events or customer-related we manage the business. requests. The improvement program recognise that these improvements can Improving service deliver through only be achieved if underpinned by the is moving us toward a single approach improved facilities cultural attributes of management to using our Enterprise Resource As part of a long-term property accountability, employee responsibility System and the availability of consistent strategy, Ergon Energy is co-locating and business-wide collaboration. information for decision-making, which field and office-based employees and supports Ergon Energy’s strategic improving workplace facilities to lift our The Works Delivery Improvement asset management approach. Program is a set of related actions service delivery capability and deliver aimed at boosting our capability. ongoing operational efficiencies, as well The improvement actions are each “We’re ensuring our people as reduce leased sites. This has seen being championed by senior managers have the knowledge, tools, the delivery of major construction to ensure follow-through and provide skills and leadership they projects in Rockhampton and Mackay the potential to learn along the way. need to serve our customers this year, as well as property projects Our initiatives range from quick wins in Gladstone and Hervey Bay. designed to accelerate current works effectively and efficiently.” The new building in Mackay will delivery, through to substantial projects allow the consolidation of staff, both (such as the replacement of our works Our goal is to boost our capability while operational and office based, into one estimating tool) and improvements in maintaining a sustainable level of central location. In coming years, this the use of technology. corporate-wide performance that will help us realise greater productivity ultimately drives down costs. However, and, by facilitating improved The actions are broadly about due to the scale of our Cyclone Yasi communication among key staff, aid streamlining workflows, cutting waste response, these efforts are not yet planning and investment decisions. and unnecessary bureaucracy and reflected in this year’s operational improving performance. They are also performance measures. In Rockhampton, we undertook a major playing an important role in embedding makeover of the old power house on the the ‘new way of working’ put in place To support this work we are moving banks of the Fitzroy River to create a with the Organisational Design Review towards the use of earned value new training centre. This purpose-built in 2009. While there have been management of works delivery facility will allow us to deliver training significant efficiency gains since this performance, which will use the Cost to both our staff and apprentices and review, there are still specific works Performance Index and Scheduled to external organisations, as well as delivery gaps to be addressed. This Performance Index. These were provide office accommodation for up to work is especially important in light of introduced for our biggest projects this 70 employees who were previously the slow start in delivering some key year, which showed positive outcomes housed in a mix of temporary office aspects of the five-year works program (p 8), and will be extended to our other accommodation throughout (p 24), due to the significant impact of priority projects next year. Rockhampton. major weather events. In addition, an innovation and Our new buildings are being designed continuous improvement framework and built to a 5 Star Green Star rating and set of tools have been developed and 4.5 star NABERS (National to better sustain innovation and Australian Built Environment Rating improvement efforts. To ensure System) rating. (p 40 & 58) success, ongoing monitoring will be

REVIEW OF OPERATIONS HIGH PERFORMANCE ORGANISATION ERGON ENERGY ANNUAL STAKEHOLDER REPORT 2010/11 50 the sTATISTICS

OPERATIONAL PERFORMANCE 2010/11 2009/10 2008/09 2007/08 2006/07 Target Workforce Utilisation – 82 % 82% 81% 79% 73% ≥ 80% Operating Expenditure Target z $2,494 $2,157 $2,094 $2,120 $2,009 per Kilometre1 ≤ $2,410

1. 2010/11 calculated using the AER’s standard control services definition of operating expenditure and the 2009/10 kilometres of line (2010/11 were not confirmed at time of publication). This year’s results are not directly comparable to previous years due to definition differences between the QCA and the AER.

INFORMATION ENABLEMENT KEY TO IBM has been engaged to help HIGH PERFORMANCE deliver the program, with the goal All smiles after the asset renewal program… The Internet, with its easy access to of extracting maximum value from SPARQ’S Aka Nugawela, National Contact Centre our significant combined investment. (NCC) Team Leader Pauliene May, SPARQ’s information, is making the way we Andrew Gibbons, NCC rep Brooke Scott and communicate, navigate and research This engagement is ensuring we are Service Channels Technology Advisor more efficient. By providing ready bringing in best-practice insights Scott Merrill. from around the world. access to corporate information, it is Our service representatives can also increasingly enabling productivity Ergon Energy sees this investment as navigate up to 10 applications during a improvements. vital to our future ability to meet the single customer interaction, so the new, This is driving Ergon Energy’s vision to needs of our customers and the fast, and reliable operating environment be an information-enabled organisation broader sustainability challenges is a service imperative. in which relevant, timely and accurate our communities face. A key to the information is readily accessible to staff success of this is an easy-to-use INVESTING IN DEVELOPING OUR PEOPLE in the field or office work locations to intuitive user interface for accessing enhance decision making, business quality information. Ergon Energy’s workforce is highly skilled, with expertise across a range processes and organisational Our goal to be an information-enabled of specialist fields from electrical performance. organisation is driving our current engineering to administration, and investment in such things as the all Our focus on information enablement across the technical trades. is gaining momentum with this year’s encompassing telecommunications efforts around developing high network, ‘UbiNet’, which will underpin Our operational requirement for performing teams starting to create the future connection of a range of a high level of both technical and the capability and the ‘thirst’ for sophisticated information technologies non-technical expertise has led to information. This is seen as vital for to our electricity grid. (p 24) It also an investment of more than $28 million successful information enablement, supports the development of our in training and development over the which will be central to achieving remote observation, automated past year. modelling and economic simulation more efficient operations and asset This provided for a broad range of management, and ultimately position capability and partnership with Google, which will integrate spatial information employee training and development, the business to maintain network from regulations training, such as CPR charges to less than CPI over the into business processes, as showcased on page 52. and first aid, to advanced leadership long-term. development. Approximately 9,000 To take this forward Ergon Energy is We already are seeing how technology training courses were delivered progressing a large Information and can drive improvement across the across the year to more than 37,000 Communications Technology (ICT) business. For example, in the use of participants. In addition, more than program as a Joint Working initiative field force automation to support 3,000 online training programs were with Energex. (p 17) This will see a efficiency in our maintenance program completed, covering a broad range potential combined investment of (p 17); our earlier investment in an of topics from fire safety to risk around $240 million over the next Enterprise Resource Planning system management. Other development four years. To deliver maximum showing returns in supporting works opportunities provided included business value from this investment planning; and, the use of network coaching and secondments. we are undertaking the detailed performance data to target reliability improvements. To ensure we are able to meet the planning needed to deploy an skills requirement of tomorrow, we integrated ICT program. Technology improvements in our commenced a Training for the Future This work, known as the Business customer service area are helping initiative this year. This consists of Information and Blueprinting Program, address systemic issues and reduce a range of project initiatives that is taking the systems aspects of our employee frustrations and customer will develop a whole-of-business respective business plans to the point wait times as slower technologies training capability framework, where tightly-defined projects can be are being retired. Our National optimise training administration and recommended for approval as an Contact Centre received a technology scheduling and establish improved integrated set in late 2011, as part of an makeover this year, with 150 computers governance arrangements through integrated program of people/process/ and associated peripheral items a steering committee. systems/information change. replaced in a major deployment over a four-week period.

REVIEW OF OPERATIONS HIGH PERFORMANCE ORGANISATION ERGON ENERGY ANNUAL STAKEHOLDER REPORT 2010/11 51 CASE STUDY: AERIAL OBSERVATION SET TO DELIVER EFFICIENCIES ready to take to the skies

The first of two high-tech observation The data gathered from the flights will then aircraft is now in the air undergoing its be processed and generated into spatial final flight tests under the watchful eye models and made available to support of the Civil Aviation Safety Authority and business operations via Google Earth and Seabird Aviation. Google Maps. This data will be managed and delivered These aircraft are promising to transform from the recently launched ‘cloud-hosted’ our approach to asset management and Google Earth Builder service – Ergon potentially revolutionise aerial observation Energy, along with the United States technologies in Queensland. Equipped with Department of Defence group National laser scanners, digital cameras and flight Geospatial Intelligence Agency, are the first assist system (FAS), they have been two clients for this new technology. specially designed to be flown at higher altitudes than normal aerial observation ROAMES stands for Remote Observation aircraft, increasing the overall safety of the Automated Modelling Economic Simulation. Seabird Aviation’s Don Adams and his son Peter operation and minimising community have spent three decades developing the aircraft SUSTAINABILITY IN ACTION which will be used by ROAMES. Don is a veteran in impact, while maintaining the ability to the aviation industry and has used his experience capture high-precision data. ■■ By surveying the network from the to create a more affordable alternative to The aircraft will be used to inspect the air and using specialised software helicopters for aerial observation roles. Here he and algorithms to process the data, we is showing Chief Executive Ian McLeod one of the entire Ergon Energy electricity network planes under construction. annually commencing this year – some will in effect be inspecting the entire network every year identifying where 150,000 kilometres of powerlines. Called ■■ ROAMES could also be used to deliver vegetation is encroaching on the network. ROAMES, the venture will initially target other government cost savings and vegetation management to transform this ■■ By using spatial models to scope and broader community benefits – including important preventative asset maintenance schedule treatment of vegetation, we the development of a precision positioning activity. Through greater efficiencies in this expect to save about $44 million over five framework and improvements to the area alone, this project will save the years, and ultimately improve power state’s digital cadastre. The potential use company millions of dollars. supply reliability and community safety in and benefits of this new technology are The airborne laser scanning and regional Queensland. limited only by our imaginations. imagery capability will deliver high resolution 3D models of our network and its surrounding environment.

Developing our leaders Turning our graduates into high An additional 12 graduates are Our focus for 2010/11 included an quality employees scheduled to enter the program next ongoing investment in leadership Ergon Energy’s graduate program financial year. Fifteen Ergon Energy development, from the Work Group is continuing to provide high quality Scholarships have been awarded to Leader Program through to the employees through a three-year high performing students. graduate development program, where Senior Leadership Development Each graduate is paired with a they receive training and exposure Program. The whole-of-business business mentor to best ensure to a variety of relevant disciplines. succession program, Horizon 2 success and is completing the program Ergon Energy is currently supporting Leaders, has also continued. with accreditation from their relevant 19 recent bachelor degree graduates industry body. As well as developing A new Safety Management and in the disciplines of electrical and civil their core professional skills, the Leadership Program was deployed engineering, accounting, customer program is giving each graduate during the year, which focused on service and human resources to help exposure to a cross-section of the providing managers and supervisors them transition into professional roles business through rotational with clarity around their roles as safety within the business. Ten graduates have placements. leaders in the business. (p 44) successfully completed the program and are now in positions throughout the business, including in engineering, customer service and finance roles.

REVIEW OF OPERATIONS HIGH PERFORMANCE ORGANISATION ERGON ENERGY ANNUAL STAKEHOLDER REPORT 2010/11 52 The purpose of this role is to develop and deliver strategic initiatives that draw more attention from the A&TSI community and result in increased recruitment and retention of A&TSI employees. We also reviewed our employee value proposition to help us better understand and define what employees, potential and current, value by each segment group. This work is helping us address organisational gaps, and supporting the development of our employment brand, ultimately allowing us to attract the right talent from our Ergon Energy’s new $14 million training and development facility in Glenmore Road was officially diverse community. opened in May this year. Constructed on the site of the original Rockhampton Powerhouse, it retains many historical features including the brick façade and gantry crane in the former engine room. Retaining a representative workforce The diversity program aims to assist Recruiting home-grown apprentices DIVERSITY IN THE WORKPLACE and trainees the retention of a workforce that is Our vision is to have a workforce representative of the broader Our apprentice and trainee program diverse in thought, experience, culture community, by creating an inclusive continues to succeed, with 271 and personality – one where our supportive culture that offers flexible apprentice and 65 trainees currently diversity is contributing positively to our work choices. in the business. In 2011, 61 new overall performance as an organisation. apprentices commenced from a record A key initiative is Ergon Energy’s 2,650 applications, with another 85 due We are aiming to achieve this Women in Leadership program. The to start in 2012. Many of these recruits through our Diversity Program 2010-15, purpose of the program is to enable are from, and are now based in, the which is about ensuring the attitudes women with leadership potential to smaller towns of regional Queensland, and behaviours of our employees develop their leadership skills, which, including Biloela, Chinchilla, Kilkivan, actively create and respect an inclusive in turn, supports retention and builds Quilpie and Tully. This means they have work environment – a workplace a pipeline for future female senior not had to leave their homes to find where everyone has an opportunity managers. It also assists in attracting work and they are gaining valuable to fully participate and be valued for women to the business. skills in a good, solid trade. their distinctive skills, experiences and perspectives. The inaugural Women in Leadership We have a mix of mature-aged program came to a close this year with apprentices and teenagers straight This commitment has seen significant much praise from the six participants. from school in the program, which changes to the diversity of our Since then, a second cohort has historically achieves a 98% completion workforce over recent years (as shown commenced – 11 employees from rate. Twenty-four apprentices and in the table). It has also seen a positive across the business are now 10 trainees completed their training move in our Have Your Say employee participating in regular ‘community of this year and have continued in survey results – the scorecard for practice’ sessions, a formal leadership the business. Since 2002, Ergon questions around our diversity moved development program and mentoring, Energy has turned out more than positively from ‘amber’ in 2010 to as well as taking part in valuable 570 qualified tradespersons. ‘green’ in 2011. networking opportunities across the business. Revamping our training facilities Attracting a diverse application pool There has been a significant investment By increasing the diversity of The gender profile of our workforce is this year in our training and the applicant pool, the diversity shown on page 54 and 56. development facilities. In Rockhampton, program aims to attract and recruit a workforce that is representative Managing an intergenerational our new facility is a one-stop shop workplace for the delivery of our training of Queensland’s overall population With the age composition of our requirements, including technical, field, and our customer base. workforce changing we are facing safety, corporate and customer contact One of our target areas is the a range of intergenerational issues. training. A pole training yard will be recruitment of Aboriginal and Torres These include a ‘bubble’ of employees completed here soon. Strait Islanders (A&TSI). To better moving into retirement or wanting Our Brisbane training facilities also support these recruitment activities, to go part-time, many in critical received an upgrade, with training and a more coordinated community business roles, to higher separation rooms established at the Eagle Farm engagement approach, we have rates for staff with one to three years’ office and a new apprentice pole established a new role for an A&TSI tenure in comparison to the rest of training yard constructed at Northgate. community engagement specialist. the organisation. A new training yard built at Dalby will (p 18) While this role has a broad provide much needed additional whole-of-business perspective, it is facilities for switching training. also supported specifically by our A&TSI employment specialist.

REVIEW OF OPERATIONS HIGH PERFORMANCE ORGANISATION ERGON ENERGY ANNUAL STAKEHOLDER REPORT 2010/11 53 THE STATISTICS

OUR PEOPLE 2010/11 2009/10 2008/09 2007/08 2006/07 Number of Employees z 4,752 4,630 4,634 4,489 4,192 Employee ‘Have Your Say Survey’ Index z 20 13 na 14 13 Employee ‘Have Your Say Survey’ – Target z 71% 67% na na na Employee Engagement ≥ 70% Staff Turnover (annualised) b 6.8% 7.2% 6.6% 8.5% 13.3% Women in the Workforce z 1,197 1,132 1,138 1.071 899 Women in Upper Management b 20% 21% 13% 12% 11% Women in Middle Management z 21% 19% 20% 21% 18% Aboriginal & Torres Strait Islanders in z 77 66 57 41 24 Entry Level Positions

To support our ageing workforce, over ENGAGING WITH OUR PEOPLE Our Board of Directors continued to the year we implemented Our Future Employee engagement, through make workplace visits, most notably Focus program within our Asset meaningful consultation is critical during the emergency response to Management area. The program to our success. This is reflected in Cyclone Yasi. Following each Board includes practical intergenerational and the significant investment made in meeting, articles and updates on career transition initiatives, including employee engagement activities, strategic matters were published in our succession planning, which aim to both which aims to share information internal communication channels. support our employees and mitigate openly and honestly, listen and Early in the year, a state-wide roadshow future resourcing risks. This program respond to employee concerns and was used to communicate the strategic will soon be tailored and rolled out to celebrate success. vision for the current five-year other areas of the business. Our employee ‘Have Your Say Survey’ is regulatory period to employees. Hosted To attract a younger staff and better the key corporate feedback tool used to by executive managers, this roadshow design our workforce of the future, we understand where things are working provided the face-to-face opportunities are targeting Generation Z candidates well across the business and where needed to gain a better understanding as they finish their formal education. improvements can be made. of Ergon Energy’s strategic direction. We are including these changing age As well as showing a strong level of Modernising our communication channels profile considerations in our policies employee commitment, the survey and people-related process and indicated that our employees feel more The significant investment in our practices to mitigate these age empowered to do their jobs. The top established internal communication demographic risks. reasons they stay with Ergon Energy channels at whole-of-business, business unit and functional levels The age profile of our workforce is include ‘working in a good team’, ‘feel continued. The diverse nature and the detailed on page 56. my job is secure’, ‘working conditions compared with other organisations’ geographic spread of our business make Creating a fair and supporting and ‘I like the type of work I do’. these channels vital for our people to environment understand their role in the bigger In demonstrating our commitment to With positive results in ‘cross work picture, as well as the impact and value creating an inclusive culture, our focus group cooperation’, ‘performance of their individual and team efforts. continues to be around eliminating culture’, ‘lifestyle balance’ and ‘pay and Our employees’ growing preference for bullying, harassment and benefits’, the 78% of the workforce who a two-way dialogue is driving efforts to discriminating behaviour. took part in this year’s survey lifted the overall dashboard result from a net modernise our cross-business This year has seen the formation of a positive score of 13 to 20. communication channels. number of working groups to look at The most significant change has been prevention and effective management Despite the strength of the above the revamp of the Ergon Energy intranet of bullying and harassment. results, the survey identified room for with the new collaborative platform The working groups comprise human improvement in ‘appreciation shown to SharePoint. Its self-authoring resources staff, union representatives them’, ‘prepared to put in extra effort to technology provides each business and Sexual Harassment improve’ and employees seeing ‘effort unit with the opportunity to upload Anti-discrimination Officers (SHADO). wasted in their work group’. These on to their own sub-sites and share Of the recommendations made to results are now driving improvement information both within their own teams date, the most notable has involved plans across the business. and with the broader business. The new simplifying the workplace resolutions Building an understanding of home page of the intranet has links to model to promote early and local our strategy corporate information, including a staff resolution of issues. This model is being Ergon Energy invests significant directory, the latest news, process implemented throughout the business. resources in building employee documents, travel booking system, understanding of our corporate strategy e-Library, employee services – acting and, ultimately, greater ownership of as a one-stop-shop employee our strategic direction. information tool.

REVIEW OF OPERATIONS HIGH PERFORMANCE ORGANISATION ERGON ENERGY ANNUAL STAKEHOLDER REPORT 2010/11 54 BENEFITS TO ATTRACT AND Promoting constructive workplace RETAIN EMPLOYEES relations We aim to continue to attract and Ergon Energy continues to encourage retain high calibre employees across and promote constructive workplace regional Queensland by offering them relations with our stakeholders in our employee benefits, health and wellbeing industry unions. initiatives, achievement rewards To foster a reasonable and effective and a high performing, safe work relationship, these unions had the environment. opportunity to escalate concerns and The majority of Ergon Energy’s outwork solutions through the Ergon employees (98%) are covered by the Energy Consultative Committee, the Ergon Energy Union Collective Regional Consultative Committee and Ergon Energy’s reward and recognition program, other consultative mechanisms as Above and Beyond, is in its seventh year. It has Agreement 2008, a Federal Workplace again played an important role in defining the Agreement, which expires on 22 applicable. The frequency that these expectations of employees. Deserving employees September 2011. A number of executive committees meet varies from monthly were nominated across seven categories. and senior managers are on individual to quarterly. Charleville’s Brent Alexander and Daley Clarke, with Toowoomba’s Steve Boland, were honoured employment contracts. All of the matters of dispute this year with the Outstanding Achievement award for were resolved through workplace level saving a child from floodwaters. At the time of writing, Ergon Energy was negotiating a replacement negotiation, the grievance and disputes We have also seen the newest internal enterprise agreement that will set out settlement procedure and Fair channel, DailyMail – a daily email employees’ wages and conditions for Work Australia. bulletin keeping our employees updated the next four years. These negotiations Our blue and white collar workforces on everything from safety notices and are being undertaken in the context are represented by: the Australian operational news to job vacancies – of the Queensland Government’s Municipal, Administrative, Clerical increase in popularity with 69% of Government-Owned Corporation Wages and Services Union (AMACSU); the employees saying it is their main source Policy, which sets boundaries for wage Automotive, Metals, Engineering, of information. DailyMail supports increases in new collective agreements. Printing and Kindred Industries Union two-way communication across the They also need to take into account the Queensland (AMWU); the Association of business and, importantly, gives AER’s revenue determination for 2010 to Professional Engineers, Scientists and employees a voice through the weekly 2015, which sets the funds we have Managers, Australia (APESMA); the ‘mailbag’ and feedback mechanisms. available to run the business. (p 4) Communications, Electrical, Electronic, The other platforms for our internal At the bargaining table for the Energy, Information, Postal, Plumbing communications include: enterprise agreement there are a and Allied Services Union of Australia number of representatives, including (ETU Division); and, the Construction, ■■ Daily Musters Team Briefs – daily and Ergon Energy, union representatives Forestry Mining and Energy Union monthly catch-ups for employees held and any other nominated employee (Mining and Energy Division at a work group level that allow local representative. If an employee is a Queensland) (CFMEU). and topical issues to be discussed member of a union eligible to represent openly. them, this union automatically acts as ■■ Monthly Business Brief – a monthly their bargaining representative. bulletin uploaded to the senior However, for the first time, employees management team SharePoint site can now nominate either themselves from the Chief Executive. This brief or another person to act as their features updates on high-profile and representative at the negotiations. business-critical activities and latest performance measures. To help keep all employees up to date as we progress towards a new agreement ■■ Team Brief DVD – a bi-monthly a new dedicated enterprise agreement production available to all employees intranet site has been established. featuring Chief Executive and safety The site includes a forum for employees Area Operations Manager Charlie Casa messages, along with project updates, to discuss progress towards the new recognised the Normanton depot’s 13 years presentations and previews of Agreement, as well as regular without a lost time injury. Here he is pictured with business activities. Normanton Technical Serviceperson Rob Poulton, newsletter updates. Powerworker Ron O’Brien, TSP Paul Danaher and ■■ eConnect – a bi-monthly A4 colour Work Group Leader Graeme Regan. This result magazine, highlighting the human has been achieved despite operating across the side of business operations and Gulf in some of the toughest terrain and most variable seasonal conditions in Queensland. posted to each employee’s home.

REVIEW OF OPERATIONS HIGH PERFORMANCE ORGANISATION ERGON ENERGY ANNUAL STAKEHOLDER REPORT 2010/11 55 THE WORKFORCE PROFILE

Power Worker Technical Supervisor Electrical Para- System Administrative Professional Senior Service-person System Professional Operator or employee and Managerial Manager TOTAL Designer/ Controller Advisor Examples of Power Station Electrical Fitter Work Group Electricity Substation Network Personal Area General positions Attendant Mechanic Leader Systems Design Controller Assistant Operations Manager included in Power Worker Live Scheduler Designer Para- Network Meter Reader Manager Group these Linesperson Estimating professional Operations Business Manager classifications Team Member Technical Project Warehouse & Apprentice Trainer & Officer Civil Officer Coordinator Analyst Executive Distribution Distribution Assessor Trainee Technical Trader General Officer Customer Powerline Electricity Care Manager Systems Asset Representative Designer Inspection Auditor Year 2010 2011 2010 2011 2010 2011 2010 2011 2010 2011 2010 2011 2010 2011 2010 2011 2010 2011 2010 2011 All Employees 282 291 1,282 1268 371 367 103 98 552 574 62 63 1,071 1071 847 964 60 56 4,630 4,752

By Region Northern 133 135 494 497 143 143 34 32 234 245 30 31 393 393 348 400 18 14 1,827 1,890 Central 60 65 311 302 100 92 30 29 181 180 32 32 338 345 186 210 10 11 1,248 1,266 Southern 73 74 412 412 110 112 39 37 127 138 0 0 241 232 106 122 7 8 1,115 1,135 Brisbane 16 17 65 57 18 20 0 0 10 11 0 0 99 101 207 232 25 23 440 461

By Gender Female 3 3 6 7 4 5 6 5 43 46 0 0 815 821 247 302 8 8 1,132 1,197 Male 279 288 1,276 1,261 367 362 97 93 509 528 62 63 256 250 600 662 52 48 3,498 3,555

By Age <25 3 4 242 221 2 0 17 10 37 38 0 0 92 91 21 18 0 0 414 382 25 ≤ 35 41 43 398 410 51 53 26 28 140 156 12 9 332 325 175 205 0 0 1,175 1,229 35 ≤ 45 61 63 274 274 118 115 20 18 138 139 26 26 254 263 283 329 12 10 1,186 1,237 45 ≤ 55 87 92 245 230 132 118 24 26 142 138 18 21 248 239 257 292 35 34 1,188 1,190 55 ≤ 65 80 79 112 121 64 74 16 16 86 91 6 5 131 139 104 111 13 12 612 648 65 + 10 10 11 12 4 7 0 0 9 12 0 2 14 14 7 9 0 0 55 66

Note: These figures include permanent, fixed term, casual employees and apprentices as at 30 June not Full Time Equivalents.

Hannah Gardner, is participating in our three-year graduate development program, rotating through the customer-focused areas of the business to gain the experience she needs to develop her career. (p 52)

REVIEW OF OPERATIONS HIGH PERFORMANCE ORGANISATION ERGON ENERGY ANNUAL STAKEHOLDER REPORT 2010/11 56 In addition to meeting our Working sensitively to protect Targeting bushfire mitigation corporate responsibilities biodiversity To assist in improving the electricity towards our people, we also see With our stated undertaking being to industry’s bushfire mitigation activities protect the environment, preserve and plans, we participated in a environmental performance as biodiversity and support nature Queensland Government committee set a key responsibility and central conservation, we have delivered up to look at the Victorian Government’s to being a high performance programs in the areas of biodiversity response to recommendations from the organisation. protection, bushfire mitigation and Victorian Bushfire Royal Commission. weed control. Although the risk of bushfires in PROTECTING LOCAL ENVIRONS We have continued our powerline Queensland is lower than in Victoria, we Ergon Energy is committed to corridor mapping program to ensure are reviewing our overall strategy and leadership in environmental and minimal impact from the operation maintenance practices. This will help cultural heritage performance. of our infrastructure located in us better position ourselves to respond We promote compliant, responsible environmentally sensitive areas, to bushfires and reduce the likelihood of and sustainable environment and including national parks, state our assets initiating fires in the future. cultural heritage operating principles forests, nature refuges and world heritage areas. Ergon Energy is using improved data on and practices. Through these bushfire hazards, received from the performance drivers we aim to show Since 2006, we have carried out Queensland Fire and Rescue Service, to leadership for the benefit of current ecological surveys of 2,100 kilometres target our efforts. We have improved and future generations. of powerlines containing 190 protected hazard classification so that the specific Building cultural heritage awareness sites – only around 500 kilometres of location of an asset drives the Throughout 2010/11, we have focused line remain to be mapped by our target maintenance practices applied. of 2013. The success of this mapping in on giving effect to our pledge to be a Weed control activities increase identifying threatened species and leader in cultural heritage. This Weeds are a key area of environmental commitment, given our state-wide weeds is illustrated in the case study on page 59. concern, with their growth rates across presence, is key to recognising the Queensland accelerating after diverse cultural heritage artefacts During the year we consulted state-wide flooding and the impacts of found in our region, understanding extensively with the Queensland Cyclone Yasi. As a result, weed control when to consult with Indigenous Government to ensure the organisation activities relating to our construction representatives and, ultimately, was taking the appropriate steps to and maintenance programs increased minimising the impact of our works. protect biodiversity in areas not covered significantly this year. For greater business visibility and in our existing codes of practice for protected areas. Operationally, we are This included addressing the invasive procedural representation, as part of and potentially destructive weed ISO 14001, cultural heritage has been securing 60 hectares of protected vegetation to offset 51 hectares of Stevia ovata. Known as Candy Leaf, it embedded in the new health, safety and was identified by Ergon Energy around environment integrated management clearing required for Agnes Waters and other Wide Bay infrastructure projects. powerlines near Ravenshoe in Far system. (p 45) We have also expanded North Queensland on 2009. The the cultural heritage information and This will protect endangered and of-concern vegetation, essential treatment of the infestation, in photographic image library on our conjunction with Powerlink Queensland, company intranet to help build habitat for koalas and the vulnerable wallum froglet. Energex, Biosecurity Queensland and employee knowledge in this area. Tableland councils, was highly praised To give employees easy access to As part of protecting biodiversity, we by the regulatory authorities for its current and required heritage take measures to minimise the impact speed and effectiveness. when planning our work. On one line information from one platform, Our weed management strategy aims a dedicated data layer has been route, upon finding two plant species with a conservation status of to limit the introduction of declared created in our Geographic Information plants and priority weeds into new System. This data is being upgraded ‘vulnerable’, we were able to avoid damage to one species. Protection areas of the network and prevent the through the procurement of cultural spread of existing infestations through heritage-related data sets that cover of the other species, Rhaponticum australe (Austral Cornflower) involved risk assessment, the deployment the area across the border south of of site-specific Environmental Stanthorpe and into New South Wales relocating plants and propagating several hundred plants by Greening Management Plans and compliance where we have network assets and by with vehicle wash-down protocols. the addition of additional Indigenous Australia. Eighty of these plants were cultural heritage data sets from the established adjacent to the relocated Details of our environmental incidents Queensland Government’s Department individuals to satisfy offset obligations. are provided on page 78. of Environment and Natural Resources. Those remaining were distributed to community and school groups to raise the profile of the species and increase population numbers around the local area.

REVIEW OF OPERATIONS HIGH PERFORMANCE ORGANISATION ERGON ENERGY ANNUAL STAKEHOLDER REPORT 2010/11 57 BEST PRACTICE USE OF RESOURCES To take this strategy to maturity we are Across our business this year, we Ergon Energy is committed to its role undertaking a detailed lifecycle recovered more than 870 tonnes of in conserving the world’s resources assessment of our pole population, scrap metal, including copper, by adopting efficiency and waste specifically defect rates, to enable us aluminium and steel for recycling minimisation initiatives and, more to more accurately model requirements (compared to 800 tonnes in 2009/10), broadly, through operational and supply into the future. and more than 315 tonnes of old transformers for recycling (530 tonnes improvements and better asset We currently have 3,700 hectares of in 2009/10) – providing an economic investment decisions. forest under management and we are return of more than $2 million. very close to harvesting our first power This year the works program saw More than 369,000 litres of oil has poles. The Silver Lining Foundation, the purchase of more than 10,300 been recovered from our assets and established by the National Indigenous new poles (compared to over 5,760 in disposed of to licensed facilities. Of this, Centre for Enterprise Development, is 2009/10) and more than 2,120 approximately 100,000 litres was playing a role in the management of this transformers (compared to over processed for reuse as transformer oil. 1,600 in 2009/10) – the increase was acreage, assisting with thinning, weed partly due to the massive network control and revegetation. Targeting green star rating As part of our commitment to reducing rebuild required after Cyclone Yasi. This year we progressed negotiations our environmental footprint, our new for a number of new properties at Our use of resources is largely buildings are being designed and built various centres in South East related to the scale of our capital to the best-practice environmental Queensland and Northern New South infrastructure program, making our green-star rating. (p 40) As well as Wales to continue to diversify our demand management efforts as critical cutting our energy use, as already property portfolio. to improving resource utilisation discussed, this will help minimise our (whether materials or energy) as it Ergon Energy is also investigating the water consumption. The design features is to minimising cost pressures for our potential for recycling the large annual include building management systems customers. Demand management is at number of decommissioned power (controls lighting, cooling and air the centre of our strategic plan, core to poles that are either left in the field, ventilation); double-glazed windows; being customer-driven (p 16), asset given away or discarded as waste to energy efficient appliances; on-site management excellence (p 25) and our landfill. We are also working with solar generation; and, rainwater climate change response. (p 33) Forest and Wood Products Australia collection tanks (providing water for Following the roadmap to and the Queensland Government to gardens and toilets). test the suitability of different plantation sustainable supply The other area where we are hardwood species as power poles and Ergon Energy is looking to undertaking water management is to find new ways to improve the decay advance corporate, community, in our stand-alone generation plant. and termite resistance of the eucalypt local industry and environmental In Birdsville , we operate a small timbers that we use. sustainability outcomes through geothermal power station that provides its procurement activities. We are also undertaking detailed 80kW of power to the remote We make procurement decisions in lifecycle analysis of our power stations community – one of the few line with the principles in a sustainable to better manage these assets. low-temperature geothermal power stations in the world. It draws from a procurement roadmap developed, Improving waste management free-flowing bore, which has existed with our involvement, by an electricity As part of our day-to-day activities industry consultative committee. for more than 75 years, into the Great we manage both industry specific Artesian Basin. After flowing through This has led to the adoption of a range and general waste. In replacing of sustainable procurement business the heat exchanger and driving the overhead conductors, for example, generation process, the water is rules that are helping to support we generate waste from discarded sustainability, achieve value for money channelled into a cooling pond before conductors and cable drums holding being directed into the town’s water and reduce costs through recycling the new conductor through to food and end-of-life disposal methods. supply and lagoon. Expansion plans packaging for workers’ meals. (p 40) for the site this year led to One of the biggest resource-related Ergon Energy is moving towards extensive investigations into options challenges we face is the future reducing waste – through the for secondary water use. While no availability of timber power poles. application of the waste hierarchy options have been identified yet, More than five million timber power avoid, reduce, reuse, recycle and investigations will continue. poles are in use in Australia, and dispose – to minimise the amount demand is increasing. Ergon Energy also uses water from a of waste sent for disposal to landfill. dam filled with non-potable water from To ensure a sustainable and secure We are also considering offsets for a nearby creek for evaporative cooling power pole pipeline, we are now the waste we generate as a corporate in our solar farm in Windorah. Our growing our own renewable supply. responsibility to not only reduce diesel power stations also use water, We are doing this through our own the impact of climate change on though to a much lesser extent. native forests where sustainable Queensland, discussed earlier, but logging, and revegetation, along with also other environmental impacts. broader environmental benefits can go hand in hand.

REVIEW OF OPERATIONS HIGH PERFORMANCE ORGANISATION ERGON ENERGY ANNUAL STAKEHOLDER REPORT 2010/11 58 CASE STUDY: MAPPING PROTECTS ENDANGERED SPECIES ready to tread softly

Environmental mapping of more than SUSTAINABILITY IN ACTION

2,100 kilometres of our powerlines that ■■ The corridor mapping program to traverse our national parks, state date has identified more than 55 species forests, nature refuges and world of endangered, vulnerable and heritage areas – as part of our near-threatened flora species, as well obligations under the Queensland as 144 different weed species. Electrical Industry Code of Practice for the Maintenance of Electrical ■■ More than 95 habitat features have been Corridors in Queensland Parks and compiled, such as fallen logs, tree hollows Forests – has seen us identify and record and bird nests. Some of these are used by valuable site-specific information about endangered species, such as the Julia the plants, animals and habitats Creek Dunnart and Mahogany Glider. Through our mapping we have identified 144 different weed species from more than 1,100 requiring protection. ■■ The knowledge gained has led to the individual records of weed infestations, including adoption of best-practice standards for This data has been used to develop detailed the first Australian recording of the weed Stevia environmental management plans for each the management of natural, cultural ovata or Candy Leaf. powerline corridor. These plans proved and aesthetic values within electricity invaluable in our Cyclone Yasi response, corridors. enabling us to readily provide critical environmental information to field crews, many of whom had little experience in tropical areas prior to assisting in this response. The corridor management plans, which are linked to our Geographical Information System, list the details of rare and threatened species in each area, as well as declared weeds or plants of concern, habitat features, safe places to carry out With an estimated population of only 1,500-2,000 vehicle wash-downs and cultural heritage Mahogany Gliders left, it is vital we operate with data. They also show designated access sensitivity in their habitat areas. Between the routes, watercourses and other Cardwell Range and north of Tully, which was badly hit by Cyclone Yasi, we are helping restore environmental information. nesting boxes and feeding stations for this endangered species.

Image sourced from Wikimedia Commons.

REVIEW OF OPERATIONS HIGH PERFORMANCE ORGANISATION ERGON ENERGY ANNUAL STAKEHOLDER REPORT 2010/11 59 OUR ECONOMIC AND FINANCIAL PERFORMANCE ready to add value

Ergon Energy is delivering economic value, within a sound corporate governance framework, both through our business success and the service we deliver. We also contribute economically through local employment and purchasing, and through the support of local economic development initiatives.

Ergon Energy’s economic goals, The increase in returns recognises articulated within our strategic plan, the substantial investment made in HIGHLIGHTS are around achieving our financial the network over and above the amount targets and a commercial return on allowed for in prior regulatory periods, ■■ Strategy set to limit rises to assets by delivering operational together with the investment that will network charges efficiencies and increasing unregulated be made throughout the current revenue in areas aligned with our core period, as well as the operating ■■ Delivered above target profit business. At the same time, through our costs associated with maintaining result of $321.6 million strategic plan, we are working toward the network. ■■ Unregulated revenue growing limiting increases in network charges Ergon Energy’s main operating entity, from diverse solutions to less than CPI over the long-term. Ergon Energy Corporation Limited, ■■ Employed around 4,700 achieved a NPAT of $316.1 million, AN ABOVE TARGET PROFIT RESULT Queenslanders. $15.4 million above budget. Ergon Energy delivered above target financial results with a consolidated The financial results of our retailer, group Net Profit After Tax (NPAT) Ergon Energy Queensland Pty Ltd, of $321.6 million – above the were above expectations with an $300.7 million target agreed with NPAT of $73.9 million, primarily due the Queensland Government in our to favourable performance relative to Statement of Corporate Intent – and the industry benchmarked retail cost to an Earnings Before Interest and Tax serve. At the same time, there has been (EBIT) of $744.1 million (target of a reduction in the volume and cost of $743.6 million). This saw our Return energy purchases. on Assets increase to 8.0%. (p 63) The profit result was also supported The strength of our financial results by a commitment to meet our was achieved while delivering an efficiency targets and deliver within $830.5 million capital works program, the allowances of the regulatory $660.5 of which was to increase the determination. (p 17) capacity and improve the reliability of Following the delivery of two modular switch the network, and despite the scale of We are also growing non-regulated rooms to Northern Territory Power and Water our response to the challenges of the revenue through activities that support Corporation at a site at Katherine, our Banyo workshop received several more orders for storm season. our core business. This has included the success of our subsidiary Ergon modular switch rooms. The modular switch rooms are just one source of unregulated Our regulatory framework sets Energy Telecommunications Pty Ltd, revenue being realised by capitalising on our the revenue appropriate for the which has continued to grow its core business activity. sustainability of our operations, wholesale telecommunications services including both a return on and return with the supply high-speed data of the asset base, based on the connectivity to the mining sector. (p 64) prevailing economic conditions.

OUR ECONOMIC AND FINANCIAL PERFORMANCE ERGON ENERGY ANNUAL STAKEHOLDER REPORT 2010/11 60 ASSET VALUE GROWS WITH RETURN ON ASSETS NOW p ROFIT RECOGNISES ASSET INVESTMENT IN THE NETWORK SET NATIONALLY INVESTMENT The massive investment in the The increase in return recognises the This year’s $321.6 million profit has network over recent years, and this investment made in the network over and allowed for a $252.6 million dividend to year’s $660.5 million investment in the above what was allowed for in the prior the Queensland Government. This in network,ASSEST has ensuredVALUE GROWS we have kept pace regulatory period, and the cost of capital, part compensates the $399.3 million with WITHdemand INVESTMENT and lifted our total asset as determinedRETURN ONby the ASSESTS AER. (p 63) CommunityPROFIT Service RECOGNISES Obligation payment valueIN to THE $10.0 NETWORK billion. NOW SET NATIONALLY madeASSET by the INVESTMENTGovernment to cover the cost of supplying our customers in regional Queensland. 1,198 10.0 22.7 8.7 322 8.0 7.3 7.1 163 167 150 129 8.0 7.4 5.7 5.7 5.3 $MILLION $ BILLION $ % 2007 2008 2009 2010 2011 2007 2008 2009 2010 2011 2007 2008 2009 2010 2011 * The 2006/07 results include a significant contribution from the sale of our contestable retail operations that year.

REVENUE INCREASED WITH LIABILITIES GROW IN LINE WITH EXPENDITURE REFLECTS BENCHMARKED SERVICE FEE ASSET VALUE CYCLONE RESPONSE ErgonREVENUE Energy revenue INCREASED increased, WITH primarily ErgonLIABILITY Energy’s totalGROW liabilities IN LINE increased DespiteEXPENDITURE ependiture being REFLECTS up on last due toBENCHMARKED our retailer receiving SERVICE a more FEE cost to $6,660.0WITH ASSETmillion thisVALUE year – up $623.4 year,CYCLONE due to the RESPONSElarge scale response to reflective customer service fee. This fee is million in line with the growth in our total the storm season, efficiency gains have adjusted annually through a process that asset value. This has decreased our seen the longer-term trend relatively benchmarks the organisation’s costs gearing at 56.6%. stable despite business growth and incurred to service our customer base. escalating wages. 634 556 6,660 521 515 509 6,037 4,210 5,460 5,278 4,577 2,539 2,598 2,279 2,204 $ MILLION $ $ MILLION $ $ MILLION $ 2007 2008 2009 2010 2011 2007 2008 2009 2010 2011 2007 2008 2009 2010 2011

OUR ECONOMIC AND FINANCIAL PERFORMANCE ERGON ENERGY ANNUAL STAKEHOLDER REPORT 2010/11 61 OUR FINANCIAL STATEMENTS EXPLAINED FINANCIAL SUMMARY This section explains the key line items from our financial FOR ERGON ENERGY CORPORATION LIMITED (CONSOLIDATED) statements that contributed to our profit result, detailed on 2010/11 2009/10 2008/09 2007/08 2006/071 the previous pages, and provides the definitions and trends $million $million $million $million $million for our financial performance ratios. OUR REVENUE Where does our revenue come from? Revenue and Other Income z 2,538.5 2,203.7 2,279.1 2,598.3 4,209.6 Ergon Energy’s total revenue and other income for the year was OUR EXPENDITURE $2,538.5 million, an increase of $334.8 million compared to 2009/10. Network/Electricity Purchases b -846.2 -925.9 -1,037.7 -1,419.1 -1,903.4 Operating Expenses -634.0 -508.6 -555.7 -521.1 -514.9 Our revenue sources include energy sales of $1,516.0 million, z distribution revenue of $223.3 million from our non-retail Depreciation Expense z -314.2 -290.9 -277.8 -248.0 -251.4 customers and customer contributions towards the electricity distribution network of $112.2 million. Finance Charges z -293.7 -243.4 -223.4 -180.1 -253.9 Ergon Energy also received a Community Service Obligation OUR PROFIT payment for 2010/11. This subsidy – this year totalling $399.3 Earnings Before Tax z 450.4 234.9 185.5 230.0 1,283.7 million – is compensation from the Queensland Government for the cost of servicing our electricity customers that is not covered Tax Expense z -128.8 -68.4 -55.2 -67.1 -85.6 by the revenue collected from customers through the state’s Net Profit After Tax z 321.6 166.5 129.3 162.9 1,198.1 uniform electricity tariff schedule. OUR ASSETS Ergon Energy’s regulated revenue, for the use of our electricity distribution network, is determined by the AER, and is recovered Current Assets b 1,011.7 1,128.2 1,030.9 779.2 1,613.2 via the application of network charges to customers and Non Current Assets z 8,963.2 7,570.1 6,980.4 6,321.3 6,102.6 embedded generators connected to the network. The charges are billed to both our retail business and the retailers of Total Assets z 9,974.9 8,698.3 8,011.3 7,100.5 7,715.7 customers who have entered the contestable market in regional OUR LIABILITIES Queensland. The AER also regulates certain payments by our customers for capital contributions towards network extensions Current Liabilities b 967.1 1,035.0 777.9 659.9 1,475.5 and other services. Non Current Liabilities z 5,692.9 5,001.9 4,682.2 3,916.8 3,802.4 Total Liabilities z 6,660.0 6,036.9 5,460.1 4,576.7 5,278.0 Net Assets z 3,314.9 2,661.4 2,551.2 2,523.8 2,437.7 What are our main expenditures? Ergon Energy’s operating expenses provide a significant INVESTMENT economic contribution to Queensland. We employ around 4,700 Total Capital Investment z 830.5 806.1 844.3 841.4 806.5 Queenslanders – with total payroll costs of $531.00 million – in addition to a large contractor base – with contract payments DIVIDENDS totalling $143.3 million. Ergon Energy adheres to the State Dividends Provided For z 252.6 137.5 116.6 118.4 955.42 Purchasing Policy and encourages local sourcing. Dividends to Net Profit After Tax b 79% 83% 90% 73% 80% Operating expenses amounted to $634.0 million. This was 11.0% above budget and up $125.4 million compared to last year, largely due to the scale of response required by the storm season, most notably Cyclone Yasi. However, expenditure over the longer-term FINANCIAL RATIOS is relatively stable despite business growth and escalating wages. 2010/11 2009/10 2008/09 2007/08 2006/071 To supply our customers with electricity we incur a number of major expenses – for 2010/11 electricity purchases totalled $577.8 million and the transmission network charges paid to Return on Average Assets Powerlink Queensland totalled $268.4 million. Reflects the efficiency of our assets to generate z 8.0% 5.7% 5.3% 5.7% 22.7%3 earnings. = Earnings Before Interest & Tax/Average of opening & closing asset balances x 100.

What assets do we own? Return on Average Equity This represents the returns generated on the In 2010/11, Ergon Energy’s total asset base increased in value z 10.8% 6.4% 5.1% 6.6% 47.7% money the Queensland Government, as our by $1,276.6 million to $9,974.9 million. Property, plant and shareholder, has invested in Ergon Energy. = Net equipment are the major components of our asset base, at Profit After Tax/Average of opening & closing $8,775.5 million, which includes mostly regulated electricity equity x 100. network assets. Gearing (including reserves) Ergon Energy revalued its property, plant and equipment assets Our gearing demonstrates the prudential level to b 56.6% 59.8% 59.1% 54.3% 50.6% as at 30 June 2011, resulting in an increase of $774.7 million. which our activities are funded by owner's funds Ernst and Young were engaged to perform an independent versus borrowed funds. = Debt/Debt + Equity x 100. income-based valuation of all asset categories with the exception EBITDA to Interest Cover (times) of the isolated generation and distribution assets. Shows our ability to adequately meet the interest z 3.6x 3.2x 3.1x 3.7x 7.0x At the end of June 2011, $279.2 million was held as cash, on current borrowings. = Earnings Before Interest, consistent with normal business operations. Tax, Depreciation & Amortisation/Finance charges.

1. The 2006/07 results include a significant contribution from the sale of our contestable retail operations that year. 2. $370.6 million relates to the return of the proceeds on the sale of Powerdirect. 3. Return on average assets ratio revised based on recalculated total assets.

OUR ECONOMIC AND FINANCIAL PERFORMANCE ERGON ENERGY ANNUAL STAKEHOLDER REPORT 2010/11 62 FINANCIAL SUMMARY FOR ERGON ENERGY CORPORATION LIMITED (CONSOLIDATED)

2010/11 2009/10 2008/09 2007/08 2006/071 This commentary is not intended to be comprehensive. For full disclosures please refer to the full Annual Financial $million $million $million $million $million Statements for Ergon Energy Corporation Limited and OUR REVENUE its Controlled Entities available online at Revenue and Other Income z 2,538.5 2,203.7 2,279.1 2,598.3 4,209.6 wwww.ergon.com.au/annualreport OUR EXPENDITURE Network/Electricity Purchases b -846.2 -925.9 -1,037.7 -1,419.1 -1,903.4 What do we owe (our liabilities)? Operating Expenses z -634.0 -508.6 -555.7 -521.1 -514.9 Ergon Energy’s total liabilities increased to $6,660.0 million this Depreciation Expense z -314.2 -290.9 -277.8 -248.0 -251.4 year with funds drawn down used for our capital works programs and cash flow requirements. The largest individual liability is our Finance Charges z -293.7 -243.4 -223.4 -180.1 -253.9 interest bearing loan with Queensland Treasury Corporation of OUR PROFIT $4,314.7 million. Earnings Before Tax z 450.4 234.9 185.5 230.0 1,283.7 The second largest liability is the net deferred income tax liability of $1,345.4 million. Some of our other key liabilities include Tax Expense z -128.8 -68.4 -55.2 -67.1 -85.6 current payables due to creditors ($110.1 million), current Net Profit After Tax z 321.6 166.5 129.3 162.9 1,198.1 employee benefits ($143.9 million) and other financial liabilities ($154.8 million), mainly from hedging and trading activities. OUR ASSETS Ergon Energy’s long-term corporate credit rating has been Current Assets b 1,011.7 1,128.2 1,030.9 779.2 1,613.2 maintained at AA. This credit rating is influenced by the global Non Current Assets z 8,963.2 7,570.1 6,980.4 6,321.3 6,102.6 economic environment and its impact on the Queensland Government’s expected revenue. Total Assets z 9,974.9 8,698.3 8,011.3 7,100.5 7,715.7 OUR LIABILITIES Current Liabilities b 967.1 1,035.0 777.9 659.9 1,475.5 What was our capital investment? Ergon Energy delivered an $830.5 million capital works program Non Current Liabilities z 5,692.9 5,001.9 4,682.2 3,916.8 3,802.4 (compared to $806.1 million in 2009/10). The regulated Total Liabilities z 6,660.0 6,036.9 5,460.1 4,576.7 5,278.0 component of our capital works program was within the five-year regulatory control period allowance – this included the $660.5 Net Assets z 3,314.9 2,661.4 2,551.2 2,523.8 2,437.7 million invested in increasing the capacity and improving the INVESTMENT reliability of the network. (p 24) Total Capital Investment z 830.5 806.1 844.3 841.4 806.5 DIVIDENDS What return do we give to our owners? Dividends Provided For z 252.6 137.5 116.6 118.4 955.42 The strength of Ergon Energy’s profit result will enable the payment of significant dividends of $252.6 million in 2011/12, to Dividends to Net Profit After Tax b 79% 83% 90% 73% 80% our shareholding Ministers and through them to the Queensland Government. This payment, ultimately, benefits the people of Queensland. FINANCIAL RATIOS Dividend Policy – Ergon Energy’s dividend policy requires the 2010/11 2009/10 2008/09 2007/08 2006/071 Board to recommend, taking into account the investment return its shareholders expect, a dividend of 80% of profit adjusted for unrealised fair value gains or losses on financial instruments. Return on Average Assets This is paid on the basis of its shareholders agreeing to provide the necessary funding for approved projects, the maintenance of Reflects the efficiency of our assets to generate 3 z 8.0% 5.7% 5.3% 5.7% 22.7% Ergon Energy’s approved capital structure and the organisation’s earnings. = Earnings Before Interest & Tax/Average of opening & closing asset balances x 100. operational viability. Return on Average Equity This represents the returns generated on the z 10.8% 6.4% 5.1% 6.6% 47.7% money the Queensland Government, as our shareholder, has invested in Ergon Energy. = Net Profit After Tax/Average of opening & closing equity x 100. Gearing (including reserves) Our gearing demonstrates the prudential level to b 56.6% 59.8% 59.1% 54.3% 50.6% which our activities are funded by owner's funds versus borrowed funds. = Debt/Debt + Equity x 100. EBITDA to Interest Cover (times) Shows our ability to adequately meet the interest z 3.6x 3.2x 3.1x 3.7x 7.0x on current borrowings. = Earnings Before Interest, Tax, Depreciation & Amortisation/Finance charges.

OUR ECONOMIC AND FINANCIAL PERFORMANCE ERGON ENERGY ANNUAL STAKEHOLDER REPORT 2010/11 63 OUR CORPORATE GOVERNANCE STATEMENT ready and accountable

Ergon Energy operates within a corporate governance framework that provides a comprehensive process for managing the business with integrity and in the best interests of our stakeholders. This is supported by ethical leadership, risk assessment and performance management.

Ergon Energy’s corporate governance Ergon Energy Corporation Limited’s practices have been developed in line responsibilities under its Distribution HIGHLIGHTS with the Australian Stock Exchange Authority and the Electricity Act 1994 (ASX) Corporate Governance Principles (Qld) are to allow, as far as practical, ■■ Conducted ethics and fraud and Recommendations, as well as the connection to its supply network on fair survey Queensland Government’s Corporate and reasonable terms and to operate, Governance Guidelines for Government maintain and protect its supply network ■■ Commenced assurance map/ Owned Corporations – an overview of to ensure the adequate, economic, three-year internal audit plan our governance practices in line with reliable and safe connection and supply ■■ Reviewed the business insurance these principle follows. We follow of electricity to its customers. program ‘if not, why not‘ reporting practices Ergon Energy Queensland Pty Ltd identifying any recommendations ■■ Employee and Industrial provides electricity retail services we have not followed, explaining our Relations Plan approved for to customers in Ergon Energy’s position and how our practices accord retail area. As a Government-owned upcoming Union Certified with the ‘spirit’ of the relevant Principle ‘non-competing’ electricity retailer, Agreement to show that we understand the relevant Ergon Energy Queensland Pty Ltd issues and have considered the impact ■■ Established regular Board level can only offer customers the of our approach. Additional information diversity program reporting. government-set electricity tariffs is available online at www.ergon.com. (notified prices) as determined by au/annualreport and www.ergon.com. the QCA. au/about-us/company-information/ The activities of the subsidiary corporate-governance Ergon Energy’s other subsidiary companies are overseen by their is Ergon Energy Telecommunications PRINCIPLE 1 – LAY SOLID own boards, which in the case of Pty Ltd, trading as Nexium Ergon Energy Queensland Pty Ltd FOUNDATIONS FOR MANAGEMENT Telecommunications – a licensed AND OVERSIGHT consists of senior executives of the telecommunications carrier offering Our company structure parent company and for Ergon Energy wholesale high-speed data capacity. Telecommunications Pty Ltd directors Ergon Energy’s principal operating Nexium’s business has continued to of the parent company. companies during 2010/11 were Ergon grow its wholesale services to external Energy Corporation Limited and its commercial business during 2010/11. subsidiary, Ergon Energy Queensland It has also delivered a range of internal Pty Ltd. services for Ergon Energy’s operational communications network, SCADA Ergon Energy Corporation Limited, a network and Wide Area Network wholly Government-owned corporation, diversity project. During 2010/11, a is governed by the provisions of the change to Nexium’s Constitution was Corporations Act 2001, except as approved by the shareholding Ministers otherwise provided by the Government allowing Nexium to sell services Owned Corporations Act 1993. directly to government agencies and Government-owned corporations as a telecommunications retailer.

OUR CORPORATE GOVERNANCE STATEMENT ERGON ENERGY ANNUAL STAKEHOLDER REPORT 2010/11 64 These subsidiary Boards, which meet The Board of SPARQ Solutions Pty Ltd regularly, have adopted the Directors has a Corporate Governance Manual, Code of Conduct applicable to the Ergon which includes a Code of Conduct based Energy Corporation Limited Board and on those approved by its shareholders. applicable Ergon Energy management Detailed shareholder agreements guide and governance policies as amended the governance of this company with its from time to time. Board, comprising executives from both Ergon Energy Corporation Limited and Ergon Energy Corporation Limited is Energex Limited, who meet on a also a shareholder in a joint venture quarterly basis. with Energex Limited – SPARQ Solutions Pty Ltd, which provides The Board of Ergon Energy Information and Communication Corporation Limited Directors received a tour of facilities at Seabird Technology (ICT) solutions and services Aviation, Hervey Bay, where aircraft are being Ergon Energy’s Board of Directors is to both Ergon Energy and Energex. The manufactured to support the ROAMES project. responsible for the corporate focus of the joint venture this year has governance of the organisation. Tony Mooney who resigned in July 2010 been to continue to support the Directors of the Board are appointed was reappointed to the Board in business’s strategic priorities and help by Queensland’s Governor-in-Council, November 2010, the remaining reduce operating costs, with a focus on in accordance with the Government Directors were appointed prior to the integrating ICT into the business, Owned Corporations Act 1993, for a year in review. The Board has overall delivering effective services efficiently set term of office. This acts as a review responsibility for the management of and improving business performance mechanism for enhancing Board the company’s business and affairs. through ICT. A Business and performance, allowing new members to It delegates functions to management, Information Blueprinting Program be selected on a regular basis for their however, specifically reserves certain has been initiated to develop project expertise and ability to contribute on matters for the Board. These matters proposals and business cases for the behalf of our regional Queensland are outlined in a Board Charter and a information enablement phase of the customer base. policy document; Delegation of Powers. five-year transformation program. The Board Charter can be found on This program, discussed on page 51, our website. aims to ensure that the decisions on the systems investments are continued on page 70 business-driven, align with the business strategy and deliver maximum value.

OUR ORGANISATIONAL STRUCTURE OUR COMPANY STRUCTURE

Board of Directors EECL Committees of the Board Queensland Government Shareholding Ministers – Audit & Financial Risk Committee – Minister for Energy and Water Utilities – Operational Risk Committee – Minister for Finance, Natural Resources and Chief Executive – People Committee The Arts – AER 2010 Due Diligence Committee

Executive Leadership Team Ergon Energy Corporation Limited (EECL)

Business Units Subsidiaries

Finance & Strategic Operations – Ergon Energy Queensland Pty Ltd Asset Management – Ergon Energy Telecommunications Pty Services Ltd (Nexium Telecommunications)

Employee & Shared Customer Service Energy Sustainability & Services Market Development INDEPENDENTREPORTING Incorporated Joint Ventures

Customer & Stakeholder Corporate Governance Internal Audit, Business – SPARQ Solutions Pty Ltd Engagement Risk & Compliance

OUR CORPORATE GOVERNANCE STATEMENT ERGON ENERGY ANNUAL STAKEHOLDER REPORT 2010/11 65 the bOARD of directors

DR RALPH CRAVEN JOHN BIRD BE PhD FIEAust FIPENZ FAICD CPEng FCPA FAICD FTIA FAIST CHAIRMAN DEPUTY CHAIRMAN Independent Non-Executive Director Independent Non-Executive Director One of the industry’s most respected and For a four-year period to the end of 2007, As a Registered Company Auditor, Mr Bird in-demand figures, Dr Craven has a Dr Craven was Chair of d-cypha Trade Ltd, a provides considerable experience and professional background which company which has exclusive management direction to Ergon Energy in his role as encompasses the energy and resources rights to all Sydney Future Exchange Deputy Chairman and Chairman of the sector, commodity trading and regulatory energy-related futures and options products Board’s Audit and Financial Risk Committee, complexities, bringing formidable expertise used by participants in the Australian as well as Chairman of the AER 2010 in the international energy industry to the National Electricity Market. Dr Craven Due Diligence Committee. Mr Bird is Chairmanship. From 1995 until 1997, he was is a board member of the International also a director of Ergon Energy the CEO of the energy retailing company Electrotechnical Commission, which is the Telecommunications Pty Ltd. He was established to enable Ergon Energy’s leading global organisation that prepares formerly a Managing Partner in Brown and predecessors to enter the competitive and publishes international standards Bird Certified Practising Accountants in electricity retail markets, which in 1999 was for all electrical, electronic and related Mackay. Mr Bird is Chair of the Queensland incorporated into what is Ergon Energy technologies. Dr Craven is Chair and Labor Group of Companies and of ESI today. From 2003 until 2007, Dr Craven was independent non-executive director of Financial Services Pty Ltd and is Deputy CEO of the New Zealand Government-owned Tully Sugar Limited and non-executive Chairman of Electricity Supply Industry Transpower, which owns and manages the director of Windlab Systems Pty Ltd. Superannuation (QLD) Ltd. He previously National Grid and also operates the He is also a director of Ergon Energy served as Deputy Chairman of the electricity wholesale electricity market. He was Telecommunications Pty Ltd and a member retailer Ergon Energy Pty Ltd for a period of Executive Director of NRG Asia-Pacific, of all of Ergon Energy’s Board Committees. seven years. responsible for its investments in the Asia-Pacific region, and served Shell Coal as General Manager of its international power and energy portfolio.

Current Term of First Appointed Reappointment Date Term in Office To Date Appointment Dr Ralph Craven 1 October 2008 3 years 3 years John Bird 9 November 2006 1 October 2010 3 years 5 years Susan Forrester 1 October 2008 1 October 2010 3 years 3 years Gary Humphrys 1 October 2009 3 years 2 years Wayne Myers 5 July 2001 1 October 2008 3 years 10 years Helen Stanton 1 July 2005 1 October 2010 3 years 6 years Tony Mooney 1 October 2008 1 November 2010* 3 years 2 years

*Tony Mooney resigned 20 July 2010 and was reappointed on 1 November 2010 under the same Term of Appointment.

OUR CORPORATE GOVERNANCE STATEMENT ERGON ENERGY ANNUAL STAKEHOLDER REPORT 2010/11 66 From far left to right: Dr Ralph Craven, John Bird, Susan Forrester, Gary Humphrys, Wayne Myers, Helen Stanton & Tony Mooney.

SUSAN FORRESTER GARY HUMPHRYS HELEN STANTON EMBA BA LLB (Hons) FAICD CA GAICD BE GAICD Independent Non-Executive Director Independent Non-Executive Director Independent Non-Executive Director Originally trained as a banking and finance Mr Humphrys brings more than 35 years Ingham-based engineer Ms Stanton is lawyer, Ms Forrester brings to the Board of experience in the energy and mining an independent business improvement more than 20 years of commercial industries to the Board. A chartered consultant, specialising in strategy experience in the legal, governance and accountant, he has held senior executive implementation, business process analysis human resource areas, spanning the public roles in both the private and public sectors and change management. Previously a and private sectors. This experience was across a range of disciplines, including Senior Operations Engineer and Six gathered while in executive management finance and accounting, treasury, taxation, Sigma Leader at BHP Billiton, she has roles in corporate treasury and professional IT, procurement, risk management and had responsibilities ranging from managing services firms (legal, consulting and audit. In recent years, Mr Humphrys has major engineering projects to coordinating architecture) during which time she undertaken Board and related committee business improvement and strategy completed an Executive MBA with Melbourne roles in the water, energy, mining and health development. Ms Stanton is a member Business School, specialising in change industries. He is currently Chairman of the of the Australian Institute of Mining and management and strategy. Ms Forrester SEQ Water Grid Manager and a director Metallurgy and Australian Institute of serves as a non-executive director on the of St Vincent’s Health Australia Ltd. He is Company Directors. She chairs Ergon Boards of Shine Lawyers Ltd (where she a member of Ergon Energy’s Audit and Energy’s Operational Risk Committee serves on their Audit and Risk Committee), Financial Risk Committee, as well as the and is a member of Ergon Energy’s AER 2010 Gold Coast Parklands and the Brisbane People Committee. Due Diligence Committee. Festival Pty Ltd. Ms Forrester is the practice leader of the strategy and executive practices WAYNE MYERS TONY MOONEY of the corporate governance consultancy MAICD Independent BEd BA (Hons) FAICD Board Matters Pty Ltd. She is also a member of Ergon Energy’s People Committee and Non-Executive Director Independent Non-Executive Director Audit and Financial Risk Committee. Mr Myers is currently the Managing Director Mr Mooney brought extensive experience in of Dinorden Pty Ltd – a business consulting infrastructure, economic development, service. He has worked in the Information community engagement and regional Technology and Telecommunications government to Ergon Energy’s Board. industry for more than 30 years. Mr Myers Mr Mooney served the Townsville City Council is Chairman of Logan Development Working as an elected representative for more than Group and Australian Water (Queensland) 30 years. During his 19 years as Mayor, Mr Pty Ltd. Mr Myers is a member of Ergon Mooney oversaw a period of unprecedented Energy’s AER 2010 Due Diligence and sustainable urban and infrastructure Operational Risk Committees and Chair development which transformed Townsville of the People Committee. Mr Myers is into a booming regional centre. As Mayor, he also Chairman of Ergon Energy championed a partnership with Ergon Energy Telecommunications Pty Ltd. which helped win the bid to be part of the Australian Government’s Solar Cities Program. He previously served on the Local Government Superannuation Board and as a director of the Port of Townsville and NQ Water. He is a member of Ergon Energy’s Operational Risk Committee.

OUR CORPORATE GOVERNANCE STATEMENT ERGON ENERGY ANNUAL STAKEHOLDER REPORT 2010/11 67 OUR EXECUTIVE LEADERSHIP TEAM

IAN McLEOD JOHN HOOPER PETER BILLING FAIM BEcon (Accounting) CPA FAIM EXECUTIVE GENERAL MANAGER, CHIEF EXECUTIVE CHIEF FINANCIAL OFFICER OPERATIONS Ian McLeod is responsible for the John Hooper is responsible for managing Peter Billing is responsible for the business’s overall direction and priorities the profitability and sustainability of all operational effectiveness of Ergon Energy’s and, ultimately, for meeting the financial aspects of the business through the distribution business, including all aspects and service delivery expectations of our provision of finance, asset owner, strategy of delivering the program of work that customers, the community and our development and regulation functions. John effectively brings Ergon Energy’s asset shareholders. Since he joined the business has significant accomplishments in financial management planning to fruition. Peter in 2000, Ian has brought extensive electricity and general management. He has worked for brings a wealth of industry, leadership and industry experience to Ergon Energy: a diverse range of businesses, including change management experience from trade experience gained through management large public corporations and private roles to management. He was directly roles in the private contracting industry businesses. John is a director of Ergon involved in the transformation of the Powercor Australia and the State Electricity Energy Queensland Pty Ltd and SPARQ electricity industry in South Australia Commission of Victoria. With a strong Solutions Pty Ltd. through deregulation and the associated focus on strategy and safety, over recent organisational restructuring. Peter is years Ian has been instrumental in the NEIL LOWRY committed to the regional Queensland development and delivery of Ergon Energy’s BEng GradDip Mgmt RPEQ community; he is on the boards of a number customer service, energy conservation, of regional development bodies and Energy demand management and asset excellence E XECUTIVE GENERAL MANAGER, Skills Queensland. objectives. Ian is a director of Energy Supply ASSET MANAGEMENT Association of Australia and is Chairman of Neil Lowry is responsible for Ergon Energy’s PHILIP KEOGAN Ergon Energy Queensland Pty Ltd and asset management strategy and network BA (Hons) and GradDipAppFin F Fin SPARQ Solutions Pty Ltd. performance, as well as for defining the E XECUTIVE GENERAL MANAGER, program of work across the distribution business to maximise the efficient and ENERGY SUSTAINABILITY AND effective management of its assets. MARKET DEVELOPMENT Neil has extensive engineering, operational, Philip Keogan is responsible for leading retail, customer service and management the development and deployment of Ergon experience, having worked in the Queensland Energy’s non-traditional ‘smart’ network and electricity industry for more than 36 years. ‘beyond the meter’ energy solutions. Philip’s Neil is very active in the Central Queensland focus is on finding sustainable ways to community with a long involvement in provide our customers with a dependable, training and education. affordable electricity supply into the future. He brings considerable product development and strategic investment experience to Ergon Energy’s management team, gained from a career with senior positions in a number of leading infrastructure service providers, including Jemena and Optus.

OUR CORPORATE GOVERNANCE STATEMENT ERGON ENERGY ANNUAL STAKEHOLDER REPORT 2010/11 68 From far left to right: Ian Mcleod, John Hooper, Neil Lowry, Peter Billing, Philip Keogan, Mal Leech, Roslyn Baker, Justin Fitzgerald, Graeme Finlayson, Peter Effeney

MAL LEECH JUSTIN FITZGERALD PETER EFFENEY GradDipBusAdmin BEng MComm GradDipStats BBus MAMI BEngHons BSc MBA GAICD E XECUTIVE GENERAL MANAGER, E XECUTIVE GENERAL MANAGER, CEO SPARQ SOLUTIONS EMPLOYEE AND SHARED SERVICES CUSTOMER AND STAKEHOLDER Peter Effeney is the Chief Executive Officer Mal Leech is responsible for shared services ENGAGEMENT of SPARQ Solutions, Ergon Energy’s and ‘people-related’ functions including Justin Fitzgerald is responsible for Information and Communications health, safety and environment, human customer and other stakeholder Technology (ICT) joint venture with Energex. resources, industrial relations, training engagement, promoting customer and His responsibility on the executive leadership and development, organisational stakeholder understanding and insights team is to ensure that Ergon Energy’s ICT development, change management and throughout the business and championing strategy and the ICT services that SPARQ program management of business the brand and corporate reputation. Solutions provides are aligned with the improvement initiatives. Mal Leech has more Justin brings extensive industry knowledge business’s strategic priorities and deliver than 11 years’ industry experience following and a strong appreciation of stakeholder maximum value. Prior to leading the a career in management consulting, human expectations to Ergon Energy’s strategic formation of SPARQ Solutions, Peter held resources and engineering. challenges and social responsibility various management, engineering and ICT agenda, especially in the area of disaster roles within Ergon Energy. ROSLYN BAKER management and the business’s response BCom MBA GAICD to climate change. Justin is a director of Ergon Energy Queensland Pty Ltd and E XECUTIVE GENERAL MANAGER, SPARQ Solutions Pty Ltd. CUSTOMER SERVICE Roslyn Baker is responsible for service GRAEME FINLAYSON strategy and delivery to customers, including BA(Hons)/LLB(Hons) MBA the operations of our major customer GENERAL COUNSEL AND COMPANY interface, the National Contact Centre; and for Ergon Energy’s franchise retail SECRETARY operations in the National Electricity Market. Graeme Finlayson is responsible for Roslyn has considerable business and managing the requirements of the Ergon customer service experience. She was Energy Board, providing risk management previously Chief Executive Officer of the and legal services and monitoring the high Australian Technical College North level compliance functions across Ergon Queensland and has held numerous senior Energy. Graeme joined Ergon Energy in 2008 positions representing the business sector, and brings with him broad-ranging private establishing franchise networks and within and public sector experience. Graeme has petroleum retailing. held senior in-house commercial legal roles and worked with some of Australia’s top national law firms. In addition to his formal qualifications as a company secretary, Graeme has held senior executive positions, operational roles and directorships in some of Australia’s largest and fastest growing organisations, including Queensland Rail and the Gold Coast City Council.

OUR CORPORATE GOVERNANCE STATEMENT ERGON ENERGY ANNUAL STAKEHOLDER REPORT 2010/11 69 Senior management performance Investment Review Functions The Directors of Ergon Energy The Board sets Key Performance For the development and prioritisation Queensland Pty Ltd are executives of Indicators (KPIs) for the Chief Executive, of investment programs the ELT the Ergon Energy group and are not which link to the strategic objectives of is supported by internal approval independent as assessed against ASX the organisation; these are formulated processes, including the Investment Best Practice Recommendation 2.1, based on the Statement of Corporate Review Committee (IRC) and the further the role of the Chairman and Intent. (p 8) The Board then reviews Network Investment Review the Chief Executive Officer is exercised the performance of the Chief Executive Committee (NIRC). by the same individual. While the Board and the group based on the has a number of committees, discussed The IRC operates at a business-wide, achievement of these KPIs. During in detail in this statement, it does strategic level to ensure an appropriate the reporting period, a performance not have a nomination committee as balance between asset investments, evaluation of senior executives was the Directors are appointed by customer service, product and asset conducted in accordance with this Queensland’s Governor-in-Council, research and development and process. This process cascades in accordance with the Government business change within the investment down through the organisation. Owned Corporations Act (1993). portfolio. The NIRC facilitates the Representing Ergon Energy efficient and effective management of Board performance The importance placed on maintaining all network asset-related capital and The Board reviews its own performance an in-depth understanding of our operating expenditure in accordance and that of the Committees of the Board operations, and being able to represent with the Asset Management Plan. at least every two years to ensure they regional Queensland, is also reflected are working effectively. This includes by the commitment of the Board and PRINCIPLE 2 – STRUCTURE THE overall board performance, roles, management to visiting different BOARD TO ADD VALUE functions, relationships, process and parts of Ergon Energy’s service area. All of the Directors of the parent continuing improvement, as well as the During 2010/11 visits were made to company and Ergon Energy role of the Board in setting direction Queensland’s Wide Bay and Burnett Telecommunications Pty Ltd, including and monitoring achievement of region, Mackay, Townsville and the Chairman, are non-executive strategic objectives. directors. The independence of Toowoomba with visits to Mackay Sugar, The ongoing provision of timely and Directors is assessed by the Board Racecourse Mill, Hay Point, Louisa relevant information to the Board is of against the five criteria listed in the Creek, Cherbourg community, Wondai critical importance in enabling the ASX Corporate Governance Principles Silver Lining Nursery, Kingaroy depot, Directors to effectively discharge their and Recommendations. When making Hervey Bay new depot site and Seabird duties in accordance with the the assessment, materiality is judged Aviation. These trips have allowed requirements under the Government on a case-by-case basis by reference engagement with Ergon Energy’s Owned Corporations Act 1993 and the to each Director’s individual employees and business partners, Corporations Act 2001. The structure, circumstances. All of the Directors as well as with local community format and content of the board are considered by the Board to representatives. agendas presented to the Directors for be independent. The Executive Leadership Team consideration and decision, and the The Executive Leadership Team (ELT) To assist with the discharge of board paper format, quality, content is profiled on page 68. There has only Directors’ duties, the Board has and timeliness of issue is reviewed on been one change this year. With the established committees to consider an ongoing basis with a formal review departure of Jim Chisholm, Philip and respond to particular issues faced conducted on an annual basis. by Ergon Energy, many of which Keogon was recruited from outside the A performance review of the Board and are around regional Queensland organisation to the position of Executive its members was undertaken in June sustainability challenges, such General Manager, Energy Sustainability 2009. The review supports the systems as workplace health and safety, and Market Development. in place to ensure that the Board is community safety, environmental delivering best practice outcomes for In line with the cultural goals set for matters, disaster management and the business. The report by the the organisation, this year the ELT other people issues, such as Equal consultants engaged to conduct the has had a focus on developing as a Employment Opportunities. high performing team. They have also review concluded that “the Ergon Board been focused on realising the value The Audit and Financial Risk appears to be a functioning group of from the changes made as a result Committee, Operational Risk individuals all of whom have of the Organisation Design Review Committee, People Committee and experience, expertise and talents to in late 2009, to better enable the the AER 2010 Due Diligence Committee bring to bear on the decision-making business to efficiently and effectively each operate according to a charter. processes at Ergon.” The report also deliver benefits to its customers, These charters are summarised, along detailed other areas of strengths and shareholders and community, now with a statement of the key activities listed some key areas for improvement. and in the future. undertaken by each committee during Further workshops were held with 2010/11, where the committees the consultants during 2010/11 to The Chief Executive Officer of SPARQ are discussed in this statement. progress implementation of the Solutions has remained a member of The membership of each committee recommendations from the 2009 the ELT. Representation at this level is and the number of meetings attended performance review. ensuring that technology solutions are by each Director, while in office, are fully integrated with Ergon Energy’s shown in the table following. strategic imperatives.

OUR CORPORATE GOVERNANCE STATEMENT ERGON ENERGY ANNUAL STAKEHOLDER REPORT 2010/11 70 Access to quality advice The Board of Ergon Energy has a Board Ergon Energy’s employees are expected The Directors’ Code of Conduct Charter and a formal Directors’ Code to act appropriately and practice ethical provides for each Director to have the of Conduct and Conflicts of Interest behaviour. This expectation comes right to seek independent professional Guidelines to assist with these directly from the Board and is advice at the company’s expense, governance objectives. supported by our continuing focus on embedding corporate values in the subject to the prior approval of the The Corporations Act 2001 applies to employee Code of Conduct Standards. Chairman. The Board has the authority Ergon Energy Corporation Limited and Our code, which applies to all to conduct or direct any investigation the other companies in the group. employees, is available on the intranet required to fulfil its responsibilities Accordingly, the statutory duties of and is reinforced regularly, is intrinsic and has the ability to retain, at the Directors apply and the Board follows to our learning and development company’s expense, such legal, normal procedures for the disclosure programs, such as the Management accounting or other services, of Directors’ standing interests and Foundations and other leadership consultants or experts from time material personal interests, and how to development programs, as well as the to time as it considers necessary deal with them. The Board reviews the Leadership Capability Centre that was in the performance of its duties. register of Directors’ interests at each established to objectively assess the meeting and all new declarations of The company has entered into a Deed behaviour of developing managers. of Access and Indemnity with each interest by Directors are brought to Director, giving them right of access the attention of the other Directors. We have also continued to operate the FairCall Service, established in 2003, to all documents that were provided Code of conduct and integrity to them during their term in office, and mechanisms as a means by which staff, contractors and members of the public can report for a period of 10 years after ceasing Ergon Energy has updated its policies unethical conduct, breach of corporate to be a Director and to indemnify them in line with legislation that has given policy – such as the Code of Conduct to the extent allowed by law in respect the state’s Crime and Misconduct – or suspected fraud. The service is of certain liabilities that they may incur Commission (CMC) the power to fully supported by the business, is as a result of, or by reason of, being investigate suspicions of official independently operated and reflects a Director. misconduct. The Integrity Act 2009 the principles embodied in the Public that came into force on 1 January 2010 PRINCIPLE 3 – PROMOTE ETHICAL Interest Disclosure Act (2010), also requires chief executives of AND RESPONSIBLE DECISION-MAKING Whistleblowers Protection Act (1994) government-owned corporations to and various whistleblowers’ protection Ergon Energy embraces ethical notify the CMC of official misconduct. standards, ensuring fairness to business practice as a fundamental The updated policy documents include all concerned. part of the organisation’s culture. It is the Fraud and Official Misconduct critical to supporting our corporate Policy, Employees Code of Conduct All allegations lodged using the FairCall values and, therefore, to realising our Policy, Employees Code of Conduct Service are referred to the Manager strategic plans and, ultimately, our Standards Procedure and Reportable Internal Audit for investigation and, vision. The Board and management are Conduct Guidelines. These changes where these are substantiated, committed to conducting all business were communicated to staff through appropriate disciplinary measures activities legally, ethically and with our internal communication channels. are applied. During the year, four strict observance of the highest allegations were received, but after A Fraud Risk Assessment was standards of integrity and propriety. investigation, no disciplinary measures undertaken across the company to To meet this commitment, sound were required. corporate governance practices and identify key fraud risk areas and policies have been adopted by the Board highlight areas for potential control The Manager Internal Audit is also and implemented at all levels of improvements. the liaison officer for referring any management. Each Director is expected suspicions of official misconduct to the to have regard for these practices and CMC and overseeing any investigations policies in the performance of their and reporting the results of the duties as a Director of the company. investigations to the CMC.

BOARD COMMITTEE MEMBERSHIP AND MEETING ATTENDANCE

Board Meetings Audit & Financial AER 2010 Due People Committee Operational Risk Committee Diligence Committee Risk Committee Attended Held Attended Held Attended Held Attended Held Attended Held R Craven 20 21 6 7 2 2 5 5 4 4 J Bird 21 21 7 7 2 2 1 1 S Forrester 20 21 2 4 4 5 T Mooney 12 13 0 1 1 2 G Humphrys 21 21 7 7 4 5 W Myers 19 21 1 2 5 5 3 4 H Stanton 21 21 2 2 4 4

OUR CORPORATE GOVERNANCE STATEMENT ERGON ENERGY ANNUAL STAKEHOLDER REPORT 2010/11 71 Supporting Diversity REPRESENTATIONS The lodgement of the Australian Ergon Energy also has a Diversity Financial Services Licence report to the Australian Securities and Policy, which is implemented through Auditor Board of Directors the diversity program as a part of Investment Commission was overseen Ergon Energy’s People Strategy, to by the committee and it endorsed the support an inclusive workplace culture. certification that during the financial Details on the measures and our Audit and Financial Risk Committee year Ergon Energy has complied with achievements related to diversity representation to the Boards all the financial requirements under its can be found on pages 53–54. licence and the requirements relating to trigger points. As part of the Board appointment Chief Executive and Chief Financial process shareholding Ministers consult Officer representation to the AFRC, the The committee reviewed the broadly across government, including Boards and the Auditor independence of the external auditors the Queensland Government Office of and were satisfied that the provision Women, which maintains a register of of non-audit services, during the year, women as suitable board candidates. Management representation to the Chief by the Queensland Audit Office or Financial Officer its delegate was compatible with the PRINCIPLE 4 – SAFEGUARD INTEGRITY general standard of independence of IN FINANCIAL REPORTING auditors imposed by the Corporations Our Auditing process is structured to ensure Act 2001. Ergon Energy has a robust structure to financial integrity, financial risks, regulatory independently verify and safeguard the reporting and compliance issues are subject to Against the background of government audit and review from the business through the integrity of our financial reporting, as announcements and delays on the well as a comprehensive external and Audit and Financial Risk Committee to the Board, with external review. The hierarchy of introduction of an Emissions Trading internal audit process. (p 75) representations made to and by the committee, Scheme and/or a Carbon Price, the as part of the process to adopt the financial Audit and Financial Risk Committee accounts and Directors’ Report, is shown in the Committee focused its attention on The Audit and Financial Risk diagram above. the valuation of the portfolio of hedge Committee operates under a formal contracts held by the retailer Ergon charter approved by the Board, which When reviewing the statutory financial Energy Queensland Pty Ltd. The basis is available on our website, and accounts the committee received for valuation of carbon was confirmed receives reports from the executives, the following assurances from the by the external auditors as having been as well as independent external external auditors; appropriately addressed. auditors. It approves and monitors “Our audit procedures were focused The committee reviewed and endorsed Ergon Energy’s in-house internal on those areas of activities that are the energy trading strategy which audit program to provide ongoing considered to represent the key audit provides the framework for electricity assurances on financial integrity, risks and focus areas identified in our hedging with a strategic objective of financial risks, regulatory reporting audit strategy document and through limiting the financial risk of and compliance issues. discussions with management during participating in the electricity Committee’s focus in 2010/11: The the course of our audit. We are satisfied wholesale market. annual internal audit plan was approved that these key areas of focus have been addressed appropriately and are The Regulatory Reporting Statements by the committee who requested that a prepared for lodgement with the AER three year rolling internal audit plan be properly reflected in the consolidated financial report.” were reviewed by the committee and prepared to gain further assurance it provided a representation to the that the key material risks within the The external auditors undertook an Board that the committee had organisation were subject to audit assessment of internal controls and received all necessary management or review where appropriate and reported to the committee that during representations, made all appropriate necessary. Consultants were engaged the performance of our controls testing enquiries of management and was to prepare an assurance map certain control deficiencies were satisfied that the Directors’ summarising by functional area, the noted which have been reported to Responsibility Statement in respect key strategic and corporate risks and management. None of these are to the preparation and content of the detailing the level of assurance cover considered to be significant in nature Regulatory Reporting Statements provided/required. The assurance and as such we have not identified any could be signed. map is being used to identify and material weakness in internal controls prioritise potential areas for review relating to the prevention and detection An overview of the various corporate and audits for inclusion in a three-year of fraud and error which would impact governance processes and mechanisms rolling audit plan. upon our ability to provide our opinion used in SPARQ Solutions, our ICT services provider, was considered by The committee reviewed the on the financial report. No matters relating to fraud concerning either the committee to form an opinion that statutory financial accounts for the the provision of these services were Ergon Energy Group and the supporting employees or management has come to our attention. being appropriately managed in the management representation letters and interests of Ergon Energy. recommended that the Board adopt the financial accounts and Directors’ Report.

OUR CORPORATE GOVERNANCE STATEMENT ERGON ENERGY ANNUAL STAKEHOLDER REPORT 2010/11 72 Management actions in response to PERSPECTIVE FOR CONSIDERING ENGAGEMENT STRATEGY findings from an ethics and fraud survey conducted to provide a foundation to promote strong corporate HIGH Media governance, financial probity and COLLABORATE ethical practices were endorsed by MAINTAIN the committee. CONFIDENCE With the passing of the Integrity Act Elected Customer Representatives Representatives 2009, which extended coverage of the Crime and Misconduct Commission

(CMC) to government-owned (project/Ergon) corporations from 1 January 2010, Community Services the committee received regular Groups reports from the Manager Internal MEDIUM Large Suppliers Customers Audit on the matters referred to the CMC and noted that the number of SME matters referred remained low and MONITOR & RESPOND Customers

that none were considered by the CMC ABILITYINFLUENCETO to be significant enough to warrant its KEEP INFORMED investigation. These were dealt with Future on the basis of advice to the CMC of Generations Residents/ Landholders internal investigations managed by internal audit. LOW PRINCIPLE 5 – MAKE TIMELY AND LOW MEDIUM HIGH BALANCED DISCLOSURE LEVEL OF IMPACT (project/Ergon on stakeholder) Stakeholder engagement Our primary stakeholder groups are broken down into specific subgroups or individuals who could Broadly, our stakeholders are our potentially be impacted by our activities or could affect our ability to serve our customers. Our corporate customers, the communities we work stakeholder engagement framework is being used to systematically identify those stakeholders relevant in and serve, our employees (including to particular business challenges based on their ability to influence business outcomes and the level of impact that our activity could have on a stakeholder group. The framework helps us to assess the issues representative unions – see page 55), and implications and ensure an appropriate level of engagement. our government shareholders, the regulators, our suppliers and industry associates. One of the key principles It also helps us better define our Ergon Energy also has established of our Stakeholder Engagement Policy corporate social responsibility and policies that cover our communication is that all our stakeholders have a right support our stakeholders’ social, obligations to the Government around to be informed about our activities in economic and environmental goals. our performance targets, public safety, a timely and accurate manner and to It is this understanding that has helped probity, occupational health and safety, be engaged. define the content of this report and employment practices, privacy and the perception of the materiality of environmental protection. Our commitment to this principle has the challenges we face. (p 7) The The business has established dedicated led this year to the application of the prominence that affordability has in our teams to manage government and accountability principles contained in strategic and operational plans (p 15-19) regulatory relationships and to respond the global AA1000 Stakeholder and the energy conservation/demand to reporting requests. Engagement Standard, namely management customer partnerships inclusivity, materiality and that we are developing (p 33-39) are just In line with the continuous disclosure responsiveness, to enable our two of many examples we have provided obligations that apply to listed stakeholders’ collective participation throughout this report that demonstrate companies under the ASX Listing Rules, in identifying issues and finding how our stakeholders are shaping and we ensure that our shareholding solutions. This is increasing the driving our business decisions. Ministers are kept informed regarding discipline given to determining the level Government shareholder reporting any information concerning the of disclosure appropriate to the issues business that may be material in The Board and the executive engage we face and the degree of involvement nature. desired by our stakeholders. with the Queensland Government via regular briefings and through the Strategic planning and reporting cycle By clearly understanding our reporting regime prescribed by the Our strategic planning framework is stakeholders’ needs and expectations Government Owned Corporations Act covered here particularly as it relates we are better able to make informed (1993). This ensures that the operation to the Statement of Corporate Intent decisions, deliver on our business and strategic direction of the business and the Network Management Plan, priorities, grow our business and is consistent with the Government’s as the key documents that cover Ergon maintain our ‘licence’ to operate. energy policy and generally meets the Energy’s performance commitments expectations of our shareholder. to its stakeholders.

OUR CORPORATE GOVERNANCE STATEMENT ERGON ENERGY ANNUAL STAKEHOLDER REPORT 2010/11 73 ANNUAL STRATEGIC PLANNING AND REPORTING CYCLE

ENVIRONMENTAL STRATEGIC PLAN CORPORATE PLAN BUSINESS UNIT MONTHLY QUARTERLY ANNUAL PUBLIC SCAN PLANS REPORTS REPORTS REPORTING SUITE

What are our What is the most What are our How does each To keep the To keep our These documents stakeholders' appropriate specific corporate business unit Executive and shareholders aim to keep expectations? strategic direction priorities and plan to support Board informed informed of how our broader What issues do to adopt over the performance the delivery of the of how we are we are performing stakeholders we face? long-term? measures for the Corporate Plan, performing in each key result informed of our next five years? both over the against targets and area against performance and The Corporate coming year and major issues. targets and the future challenges. Plan and longer-term? issues we are Statement of facing. Corporate Intent are negotiated at Statement of shareholder level and approved by Corporate Intent the Board. Ergon Energy’s one- year performance agreement with our shareholders – including performance targets and our Employment and Network Management Industrial Relations Plan. Plan This document is tabled in Parliament with the A public document – corresponding Annual published annually – that Report. details the distribution network’s capability and key challenges and Network Vision Drives Numerous Plans: our strategic response, - Asset Management Plan including details of our - Network Augmentation Plans five-year augmentation - Summer Preparedness Plan and performance - Network climate change related plans, etc. improvement plans.

Our Strategic Plan, which is reviewed The Network Management Plan (NMP) A key objective of the Right to annually, aligns with other long-term is a rolling five-year plan, prepared in Information Act 2009 is the planning documents, including the accordance with section 2.3 of the implementation and maintenance of Network Vision, to provide an Queensland Electricity Code. It is a the ongoing process of the release overarching framework to guide the public document that is published of information into the public domain business and the formulation of its online annually to detail how Ergon in accordance with government annual performance commitment Energy will manage and develop its expectations and legislative obligations. and network plans. Ergon Energy network with the objective of delivering The information released is available uses a strategic planning model an adequate, economical, reliable and at http://www.ergon.com.au/about-us/ that corresponds to the regulatory safe connection of electricity supply to right-to-information control periods. 2010/11 saw the our customers. The NMP also reports commencement of a new regulatory on the previous year’s network PRINCIPLE 6 – RESPECT THE RIGHTS control period with the AER’s performance to our stakeholders in OF SHAREHOLDERS Queensland Distribution Determination more detail than this report. Ergon Energy respects the rights of for 2010/11 to 2014/15 forming the shareholding Ministers as the ultimate Right to information foundation for the next five years. owners of the business. We are With the passing of the Right to committed to not only complying with Ergon Energy documents its corporate Information Act 2009 and the legislative requirements and policies performance commitment for each Information Privacy Act 2009, a Right to as determined by the Queensland financial year within its Statement of Information and Privacy Officer was Government but demonstrating our Corporate Intent (SCI – see summary appointed to manage applications for commitment to go beyond them through p 8). As a government-owned information and the publication of the application of contemporary corporation, this document is in non-personal information which is governance practices. effect our performance agreement, considered to be of significant interest which outlines our corporate objectives, to the wider public. This role is also The Board has approved a Disclosure strategies and targets for our responsible for ensuring the processes to Shareholders Policy and a shareholding Ministers – the Minister for collection and managing personal Communications Strategy Guideline for Energy and Water Utilities and the information complies with the National which embodies these commitments. Minister for Finance, Natural Resources Privacy Principles as prescribed in the We work in a collaborative fashion with and The Arts. These commitments Privacy Act 1988 (Cth). our shareholding Ministers to deliver form the basis of our quarterly the best outcomes for the business. shareholder reporting. The Chairman and Chief Executive have regular meetings with shareholding Ministers and their representatives, as part of a broader government engagement program, to ensure there is active dialogue throughout the year.

OUR CORPORATE GOVERNANCE STATEMENT ERGON ENERGY ANNUAL STAKEHOLDER REPORT 2010/11 74 Directions and notifications The primary objectives of Ergon External and internal audit Under Part 10 of the Government Energy’s risk management and Ergon Energy submits to a number of Owned Corporations Act 1993 the compliance frameworks are to: external audits in pursuit of world-class reserve powers of the shareholding practice and, in some cases, to gain or ■■ facilitate the achievement of the Ministers provide that they may in the organisation’s corporate objectives retain the certification we need to do public interest notify Ergon Energy, as a and strategies business, such as Quality Assurance government-owned corporation, of a ISO 9001 certification for our public sector policy that is to apply to ■■ validate and confirm that the overall Transmission and Project Services. the corporation (section 114) and may strategic direction of the business Other audits we regularly undergo also give a written direction to Ergon is appropriate include Australian Standard 4801 Energy (section 115) or a direction to ■■ identify business priorities and Occupational Health and Safety, amend the Statement of Corporate allocate resources effectively Electrical Safety Legislation, Intent (section 108): and efficiently International Customer Service Standards and Environmental Standard ■■ In June 2011, a direction was made by ■■ assist in discharging legal and ISO 14001. Many of these provide the Queensland Government under regulatory requirements and meeting external assurance of the performance section 108(4) of the Government the expectations of stakeholders statements made in this report. Owned Corporations Act 1993 ■■ identify and maximise opportunities requiring Ergon Energy to modify the for growth and diversification. Ergon Energy’s annual accounts and 2011/12 draft Statement of Corporate financial statements were audited by a Intent to the effect that the impact of To give effect to its risk management representative of Deloitte Touche the Australian Competition Tribunal and compliance commitments, Ergon Tohmatsu (Deloitte), as delegate of the decision on gamma of May 2011 Energy has established policies on Auditor-General of Queensland, to meet should be removed from Ergon these and other areas (e.g. Health and government and regulatory reporting Energy’s Pricing Proposal for 2011/12, Safety and Environment) and requirements. The scope of our internal and as a result, the Benchmark Retail implemented a risk management audit function covers all of Ergon Cost Index Final Decision (BRCI) for framework based on the Joint Energy’s operations, either directly 2011/12. The impact was that we did Australia/New Zealand Risk or through auditors contracted by the not seek to recover the additional Management Standard: AS/NZS ISO organisation or its subsidiaries. $40.9 million in revenue arising from 31000:2009, and a compliance program Our internal audit function helps us the decision. based on the Australian Compliance Standard AS 3806:2006. In developing accomplish our objectives by bringing ■■ In June 2011, a direction was made these policies, elements and attributes a systematic, disciplined approach to by the Queensland Government under of the Committee of Sponsoring evaluate and improve the effectiveness section 115 of the Government Owned Organisations Internal Control of risk management, control and Corporations Act 1993 requiring Framework and Enterprise Risk governance processes. The Ergon Ergon Energy not to make a cost Management Framework have been Energy Internal Audit Charter is pass-through application to the AER drawn on where appropriate. established by the authority of the in respect to the 2010/11 financial Ergon Energy Audit and Financial Risk impact of the natural disaster Ergon Energy has also developed a Committee. In addition, we conduct a (approximately $41.8 million). Standard for Corporate Risk number of operational audits to assess Ergon Energy did not receive any Management, Corporate Risk the risks and adequacy of processes notifications under section 114 of Management Guideline and Corporate and controls over assets, systems the Government Owned Corporations Risk Assessment Tables. The standard and activities. Act 1993. sets out the principles that Ergon Energy must follow to achieve effective This year’s plan included audits of PRINCIPLE 7 – RECOGNISE AND risk management, emphasises and vegetation management, pole MANAGE RISK provides guidance on how risk inspections, recruitment, selection and induction processes, obsolete stock and Risk management activities management should be implemented and compliance and integrated into Ergon Energy sponsorship and corporate hospitality. These reviews focused on documenting Ergon Energy recognises that effective through the creation and continuous and testing key controls including risk management and compliance improvement of a framework and management and approval processes. frameworks are necessary to meet describes a process for managing risk. Other audit reviews covered specific the expectations of our shareholding The guideline supports the standard risk areas such as cultural heritage, Ministers, customers, the community by providing practical guidance on how Renewable Energy Certificates and and other stakeholders. Critical to to implement the risk management the Franchise Energy Risk Policy. this is that our Directors and process referred to in the standard. management are able to demonstrate The tables provide uniform risk an understanding of the business management criteria to support risks and compliance obligations consistent risk-based assessments and that these are being efficiently in Ergon Energy and are to be used and effectively managed. in conjunction with the Standard and Guideline.

OUR CORPORATE GOVERNANCE STATEMENT ERGON ENERGY ANNUAL STAKEHOLDER REPORT 2010/11 75 The Manager Internal Audit reports for Committee’s focus in 2010/11: Workshops were conducted to review administrative purposes to the General Safety for employees and members of the Corporate Risk Profile and Business Counsel/Company Secretary but the public remained a major focus of Unit Risk Profiles. The Corporate Risk retains unrestricted access to the Chief the committee. It endorsed the adoption Profile contains the key risks that have Executive to discuss any matter relating of a single comprehensive safety the potential to significantly affect the to the finances or operations of Ergon indicator which includes a mixture of achievement of Ergon Energy’s vision, Energy. Internal Audit also ensures its lead and lag indicators combined with objectives and strategies. The key risks independence by reporting to the Audit weightings to provide a single number are subject to regular review by the and Financial Risk Committee on for comparing safety performance committee. Risk appetite statements progress against the Internal Audit Plan across the business. The use of the are being developed to document the and resolution of issues raised in indicator will enable the business to level of risk that the company will reports. The Manager Internal Audit gauge where it is at on its safety accept for risks included in the also has access to the Board of journey. (p 44) Reports on class 1 Corporate Risk Profile and Business Directors through the Audit and incidents were reviewed and lessons Unit Risk Profiles. Financial Risk Committee Chair. learnt from these incidents and actions The committee reviewed regular taken to improve behavioural safety During the year the development reports on the effectiveness of the performance issues. Reports were of an assurance map/three-year systems for monitoring compliance also received on the progress on the internal audit plan also commenced for with legislation and regulations with proposed harmonisation of Australia’s 2011-2014 with a focus was on ensuring particular emphasis on key risk areas, workplace health and safety laws and that key corporate risks are addressed including; electricity industry legislation the impacts that this will have on the and audit efficiency and effectiveness workplace health and safety, company’s operations. (p 45) is maximised . environmental protection, employment The committee endorsed a and equal opportunity, trade practices, AER 2010 Due Diligence Committee whole-of-business management plan the Government Owned Corporations The AER 2010 Due Diligence for meeting Minimum Service Act 1993, Corporations’ Law, privacy, Committee assists the Board to fulfil Standards (MSS) and Service Target consumer protection legislation, native its corporate governance and oversight Performance Improvement Scheme title and cultural heritage, and responsibilities by reviewing and (STPIS) targets during the 2010-15 development and planning legislation. reporting to the Board on the due regulatory term. diligence process conducted in relation The oversight of risk management was to the preparation and outcomes of The introduction of emerging extended through the review of the the regulatory proposal submitted to technologies, such as smart grid, insurance program to determine an the AER. distributed generation and storage appropriate level of risk transfer in the technologies, that will add complexity to form of insurance cover, and the level of Committee’s focus in 2010/11: the distribution network was reviewed risk retention through deductible limits An analysis of the Distribution by the committee. These technologies and self insurance for selected asset Determination handed down by the will bring with them both opportunities categories and public liability. AER was reviewed by the committee for improvements to the way the together with a report on lessons Risk management activities distribution network provides learned from the preparation of the and compliance customers electricity requirements but Regulatory Proposal and areas for During 2010/11, the following risk also will bring some risks that will need potential improvement with the next management and compliance activities to be managed. regulatory re-set. were undertaken by Ergon Energy: The company’s Operational Resilience The committee endorsed the initiation ■■ Risk Management Framework: Framework was reviewed by the of an application for a merits review and A review was undertaken by committee. This included Disaster and judicial review proceedings to challenge management and reported to the Emergency Management Plans, aspects of the AER Final Distribution Board on the effectiveness and Disaster Management Exercises, and Determination. efficiency of Ergon Energy’s risk Memoranda of Understanding for management framework for Operational Risk Committee Mutual assistance with Energex. managing its material business risks The Operational and Risk Committee Following Cyclone Ului (Category 3) in and to support the assurances assists the Board in its response to March 2010, the committee provided by the Chief Executive Officer business and operational risks and commissioned an external review into and Chief Financial Officer, in oversight responsibilities in relation to Ergon Energy’s preparation and accordance with section 295A of the health and safety, including community response in relation to cyclone events. Corporations Act 2001, that the safety, as well as environmental risks The improvement actions implemented framework is founded on a system of and exposures, and insurance and following the review assisted in risk management and internal control claims management. preparing the company to deal with the and that the system is operating impacts of and the restoration efforts effectively in all material respects in required for severe Cyclone Yasi in relation to financial reporting risks. February 2011. ■■ Insurance Program: The review of Ergon Energy’s 2010/11 Insurance Program was undertaken to ensure cost effective coverage of the organisation’s insurable risks.

OUR CORPORATE GOVERNANCE STATEMENT ERGON ENERGY ANNUAL STAKEHOLDER REPORT 2010/11 76 This was particularly relevant in ■■ National Energy Customer The most notable compliance matters light of the natural disasters across Framework (NECF): Ergon Energy during 2010/11 included: the state. has participated in the detailed ■■ Compliance with the Electricity development of the Ministerial ■■ Risk Profiles: Ergon Energy’s Industry Code (the Code): While there Council on Energy’s NECF, through Corporate Risk Profile and Business was an improvement on the previous discussions at both state and national Unit Risk Profiles were reviewed and years result, which was a significant level. NECF is a national framework, updated. As part of this process a achievement considering the summer regulated by the AER, covering the review of the organisation’s Corporate of natural disasters, Ergon Energy’s non-economic aspects of energy Risk Profile and risk management network performance for 2010/11 was retail sale and distribution connection and compliance frameworks was unfavourable for one of the six and supply, including consumer performed to align the risk profiles Minimum Service Standards (MSS) protection. The Queensland with Ergon Energy’s Corporate Plan categories that it is required to meet Government has decided that the and Business Unit Plans. under clause 2.4.2 of the Code (as set majority of the NECF reforms will be ■■ by the QCA). Ergon Energy views its Risk Appetite and Risk Assurance: introduced in Queensland on 1 July MSS performance very seriously Work commenced on developing risk 2012. NECF involves the creation of a and will continue to use its best appetite statements for key risks new National Energy Retail Law, endeavours to achieve performance included in Ergon Energy’s Corporate National Energy Retail Rules, National levels that are as close as possible Risk Profile which will set the level Regulations and amendments to the to these service expectations. (p 31) of risk Ergon Energy is prepared to National Electricity Rules. These On 16 November 2010, the QCA issued accept in pursuing its corporate instruments will replace many of the Ergon Energy with a Warning Notice objectives and strategies. The work on state-based obligations to which pursuant to section 120Q of the risk assurance focused on developing Ergon Energy is currently subject, Electricity Act 1994 (the Act) following the risk assurance map to show the including as contained in the the failure by Ergon Energy to meet assurance activities performed in Queensland Electricity Industry Code, five of its six MSS limits in 2008/09 relation to key corporate risks and Electricity Act 1994 and Electricity and again in 2009/10, largely due to also assist with the development of Regulation 2006. a three-year internal audit plan. safety-initiated operating constraints. ■■ Performance against the Service ■■ Ergon Energy has exceeded last Energy Trading Performance: Target Performance Incentive year’s Service Level performance Performance has been consistent. Scheme: On July 1, 2010 the AER under the Electricity Industry Code. As a measure of hedge performance, introduced a new set of service A significant amount of work has also being the realised Long-Term Energy performance targets through the been done to ensure our customer Procurement (LEP) position, we Service Target Performance Incentive service activities are in accordance produced an end-of-year position of Scheme (STPIS). Under the Scheme, with the Code. Subsequent auditing, $2.0 million negative, compared to the AER applied reliability measures both independently and internally, 2010 when the year ended $0.9 million to Ergon Energy relating to unplanned has identified a high level of code positive. Steady improvements have outages (including service fuse and compliance in areas such as been made to the risk management beyond outages for individual disconnection processes and around energy trading. Of note, a deal customers) as well as a customer application of Guaranteed Service capture system project is nearing service target specifically in relation Levels. There has also been a completion and is expected to be to National Contact Centre telephone sustained improvement in service finalised in 2011. This project will answering performance. If Ergon order completion for activities, such improve the quality and timeliness of Energy performs better than its as new connections and special data and support efficient reporting targets in a financial year it earns a meter reads. The average completion on risk matters to all levels of reward in the form of an incremental YTD was 99.2% compared to 98.7% in management, including the Board. revenue increase two years after the 2009/10. The result was achieved In addition, we have renewed contracts actual performance is reported. despite the reported impact of for generation for the isolated Mount Conversely, if actual performance is natural disasters. Isa-Cloncurry network. worse than STPIS targets a financial ■■ Increasing Market Participation: penalty is incurred. The reward or Ergon Energy has managed penalty for each year (in aggregate increasing activity in the National across the STPIS parameters) is Electricity Market. More than 4,000 currently capped at 2% of Ergon distribution customers are now with Energy’s regulated revenue. other retailers and there are 21 retail For 2010/11, this equates to about participants in regional Queensland. $27 million that could be earned, While this may be small compared to or returned to customers through a the customer base, it has increased revenue reduction in 2012/13. significantly during the last year. Based on the final audited service performance statistics for 2010/11 ■■ Harmonisation of Workplace Health and Safety Laws: Work is being an annual revenue adjustment will undertaken to ensure compliance as occur in the 2012/13 financial year. the laws come into effect. (p 45)

OUR CORPORATE GOVERNANCE STATEMENT ERGON ENERGY ANNUAL STAKEHOLDER REPORT 2010/11 77 ■■ Renewable Energy and Gas ■■ Environmental Compliance: Ergon Energy has maintained a Electricity Certificates: Ergon Energy Ergon Energy continued to maintain focus on contaminated sites with met its liability for Renewable Energy certification of its Environmental arrangements for managing and Gas Electricity Certificates (RECs Management System to AS/NZS ISO contaminated land assessment and GECs). In April 2011, Ergon Energy 14001 in 2010/11. This year Ergon and remediation reviewed and lodged its 2010 calendar year Liability Energy implemented a new Health, updated. A comprehensive list has Self Assessment Report by the due Safety and Environment Integrated been developed to assist prioritising date. Ergon Energy Queensland met Management System to better affected sites. Evaluation and 100% of its liability for GECs that were streamline the processes of our remediation is under way at surrendered to meet its 2010 GEC safety, environment and cultural several locations. compliance requirements. Our heritage functions and improve their Ergon Energy has worked compliance requirements are integration with the business. cooperatively with DERM to manage equivalent to the purchase of 15% of (p 45) changing statutory obligations, our customers’ energy requirements Ergon Energy’s incident management particularly in the areas of: from Queensland gas-fired framework classifies incidents using responding to consultation requests generation. Ergon Energy Queensland a four-level scale. For environment or regarding a number of proposed was also liable for RECs that were cultural heritage impacts, a Class 1 statutory declarations and strategies; surrendered on 14 February 2011 incident is a major impact involving a negotiations regarding approval to meet its 2010 franchise load REC sensitive environment or a breach of processes and obligations under the compliance requirements. cultural heritage legislation resulting Nature Conservation Act 1992 and EEQ is also liable under the in significant financial penalties. Sustainable Planning Act 2009; Small-scale Renewable Energy A Class 4 incident is classified as a development of the Queensland Scheme for small-scale generation minor localised impact, requiring Government Biodiversity Offset certificates under theRenewable minimal or no remediation. Policy; and active participation in the Energy (Electricity) Act 2000 and the departmental simplification of the accompanying Renewable Energy A total of 141 incidents with an regulatory framework project. (Electricity) Regulations 2001. Ergon environment or cultural heritage Energy has met the first two quarters impact were reported. Of these, 11 ■■ Customer Privacy: We are continuing of liability, purchasing the required were Class 3 and 130 were Class 4 to protect the privacy of personal volume in the traded market. impact. Ergon Energy had no information collected and used during incidents resulting in a Class 1 or 2 ■■ Safety Prosecutions and our operations in accordance with the environment or cultural heritage Infringement Notices: In 2010/11 National Privacy Principles (NPPs) impact and there have been no Ergon Energy received one fine contained in the Privacy Act 1988 breaches of the Environmental relating to a prosecution under the (Cth). All of the repositories that hold Protection Act requiring enforcement Electrical Safety Act 2002 and one our customer data are governed by action by the Queensland fine relating to a prosecution under strict data security systems and Government’s Department of the Workplace Health and Safety Act procedures to protect the personal Environment and Resource 1995. No convictions were recorded information from misuse and loss Management (DERM). in relation to the incidents. Ergon and from unauthorised access, Energy received one infringement modification or disclosure. During 2010/11, we received seven complaints notice and fine from the Electrical ENVIRONMENTAL INCIDENTS Safety Office in relation to an relating to customer privacy matters. OurENVIRONMENTAL most frequent environmental INCIDENTS Six were unfounded and the remaining electrical safety incident. incidents involve birds, bats and small animals,2010/2011 such as snakes, contacting one was resolved. ■■ Personal Injury Claims: In 2010/11 our powerlines. Ergon Energy received three Personal PRINCIPLE 8 – REMUNERATE FAIRLY Injury Claims from external parties AND RESPONSIBLY and Ergon Energy staff and Ergon Energy recognises that to attract contractors under the Personal and retain the people necessary to Injuries Proceedings Act 2002 and deliver on the company’s strategic plan paid an amount of $307,354. We also and achieve its vision, salaries and received four WorkCover common salary packaging must be competitive, law claims from staff and paid out flexible and performance orientated. $925,000 in damages in the financial year. At the time of publication, As part of our Human Resources Policy, five common law claims remained we have a remuneration framework in progress. considered to be attractive by both prospective and current employees. Fauna management 61% This policy is designed to attract high Oil & fuel management 46% calibre employees, retain employees, Soil management 4% incorporate current industry Vegetation management 13% benchmarks and ensure employees Waste management 4% are aware of what they need to do Air emissions 3% to contribute to team and Other 8% organisational goals.

OUR CORPORATE GOVERNANCE STATEMENT ERGON ENERGY ANNUAL STAKEHOLDER REPORT 2010/11 78 The remuneration strategy involves the The Employee and Industrial Relations ENTERTAINMENT AND HOSPITALITY allocation of at-risk payments based on Plan for the upcoming year was In furthering Ergon Energy’s business performance at the company, business endorsed by the committee. The 2011/12 interests and working to achieve its unit and individual level. Details of plan outlines the organisational corporate goals, from time to time remuneration to non-executive philosophy for managing our people, for entertainment and hospitality is Directors and executives are reported managing industrial relations and for provided to employees, clients, in the Annual Financial Report negotiating the next round of the Union customers and community groups. (available online), consistent with the Certified Agreement to replace the Reasonable limits have been observed requirements of Australian Accounting current agreement which expires in during 2010/11 for aggregate event Standard AASB 124. The eligibility of September 2011. (p 55) It also defines expenditure and expenditure per executives for an at-risk or variable the ‘people’ elements critical to the head, taking into account the nature component is directly linked to both the delivery of organisational objectives of the event. overall performance of the company including the resources, skills and and their individual efforts against a culture required to execute the At the request of shareholding range of key indicators. This is in line corporate strategy, including the Ministers the Statement of Corporate with the performance agreement made competencies needed to support Intent includes information on through our Statement of Corporate strategic priorities. Corporate Entertainment and Intent. Any at-risk payment is Hospitality. For 2010/11, the following The committee endorsed managements contingent upon the Board’s entertainment and hospitality expenses actions to improve the Have Your Say assessment of the company’s overall over $5,000 were: Survey results for the three key performance and, consistent with the elements of employee engagement provisions of Ergon Energy’s Executive EVENT NAME INVESTMENT namely ‘empowered’, ‘appreciated’ Remuneration Guidelines, their Southern Employee Christmas $9,100 and ‘committed’. approval of the payment of ‘at risk’. Function – Toowoomba (Dec 2010) Regular reports were reviewed on the Directors are remunerated separately Brisbane Employee Christmas $6,020 progress around the delivery of the from the executive. Directors’ Function – Brisbane (Dec 2010) diversity program and endorsing plans emoluments, as a Board or committee Central Employee Christmas $12,628 to overcome barriers to meeting its member, are set by the Queensland Function – Rockhampton objectives. The diversity program is (Dec 2010) Government, while reimbursement was based on a commitment to attract Far North Employee Christmas $8,036 made for expenditure incurred in and recruit a workforce that is Function – Cairns (Dec 2010) performing their roles as directors of representative of Queensland’s overall North Employee Christmas $5,428 the company. Executive directors do not Function – Townsville (Dec 2010) population/Ergon Energy’s customer receive additional payment for their role base through increasing the diversity as director of a company. Non-executive of the applicant pool and creating a directors of the company do not recruitment strategy that is attractive participate in any variable reward or to more applicants from under at-risk plan and are not eligible for represented groups. retirement benefits other than for statutory superannuation. The Human Resources Quarterly People Committee Report provided the committee with relevant information to review matters The People Committee assists the on employee engagements and Board in developing a strategic, separations, turnover, leave accruals, long-term and sustainable approach on absenteeism and rehabilitation. The issues relating to people working for committee endorsed a strategy to Ergon Energy and fulfilling the Boards reduce the level of excess accrued oversight responsibilities in relation to leave as a means of managing the remuneration, performance work/lifestyle balance of employees. management, industrial relations, employee engagement, organisational A review was undertaken of Training culture and learning and development. and Development strategies and activities based on four key focus areas; Committee’s focus in 2010/11: safety in training, quality training and The committee reviewed the Chief development, efficiency and Executive’s performance and received effectiveness and customer service reports on performance reviews of with the objective of developing a highly senior executives. It also endorsed the skilled and competent workforce. remuneration and benefits program designed to ensure that the remuneration and benefits offered to employees remain relevant to the updated company strategy and emerging market conditions.

OUR CORPORATE GOVERNANCE STATEMENT ERGON ENERGY ANNUAL STAKEHOLDER REPORT 2010/11 79 ABBREVIATIONS

A&TSI A boriginal and Torres GECs G as Electricity Certificates NPPs N ational Privacy Principles Strait Islander GIS G eographic Information System NPAT N et Profit After Tax AEM A dvanced Electronic Meters GRI G lobal Reporting Initiative NIRC Network Investment ABS A ir Break Switch GUSS G rid Utility Support Systems Review Committee AER A ustralian Energy Regulator GSL Guaranteed Service Level NMP N etwork Management Plan ASX A ustralian Stock Exchange QCA Q ueensland Competition Authority HSE IMS Health, Safety and Environment BRCI Benchmark Retail Cost Index Integrated Management System RECs Re newable Energy Certificates CESAP Community Electrical Safety ICAM Incident Cause Analysis Method RFDS R oyal Flying Doctors Service Awareness Plan ICT Information and Communications SPI Scheduled Performance Index CSI C omprehensive Safety Indicator Technology STPIS S ervice Target Performance CPI C ost Performance Index ISO International Organisation Incentive Scheme CMC C rime and Misconduct Commission for Standards SHADO S exual Harassment CARE C yclone Area Reliability IRC Investment Review Committee Anti-discrimination Officers Enhancement program KPIs K ey Performance Indicators SWER S ingle Wire Earth Return DERM Department of Environment and LEP L ong-Term Energy Procurement SCI S tatement of Corporate Intent Resource Management MSS M inimum Service Standards SME s ubject matter experts EBIT E arnings Before Interest NABERS National Australian Built SCADA S upervisory Control and and Tax Environment Rating System Data Acquisition ESO Electrical Safety Office NECF N ational Energy Customer ULDA U rban Land Development Authority ELT E xecutive Leadership Team Framework

INDEX

account payment options 17 distribution business, 4, 60, 64 network, quality of supply 26 affordability, electricity 7, 10-11, 13, 15-19 electricity network, reliability 7, 10, 12, 30-31, 77 air conditioner use 23, 33-34 dividends 61-63 network, spatial 11, 26, 51-52 apprentice / traineeships / 52-53 efficiencies, operational 10-11, 13, 17, 49-51 representation graduates electric vehicles 38 operating expenses 61-63 asset base 3, 61-63 electricity, Ergon Energy’s 40-41, 50, 58 profit 10, 60 asset management 11, 22-31 use of property strategy 40, 50, 58 excellence emissions greenhouse gas 40-41 purpose, our 3 awards received 21, 46, 47, 55, inside employee development 51 -53 regulatory environment 4, 10, 13, 20, 45, 77 back cover employee engagement / 7, 36-37, 44-45, 47, renewable energy 16, 37-38, 40-41, 58, 78 biodiversity, protecting 57, 59 communications 49-50, 54 research and development / 11, 24, 25-26, 32-41, 64 Board committees 71, 72, 76, 79 employee harassment 54 new technologies anti-discrimination Board of Directors 65-68, 70 resources, use of 57-58 employee, diversity 7, 13, 53-54, 72 bushfire mitigation 57 retail business, electricity 4, 60-62, 64 employee, remuneration 55, 78-79 capital investment, network 24-25 , 61-63 revenue 61-63 carbon price, future 7, 10, 36 employee, 55 representation / relations right to information 74 climate change response 7, 13, 32-41 risk management employees / workforce 3, 7, 49, 62 75-77 community engagement, 33-39 profile safety, community electrical 7, 13, 46 energy conservation employees, Indigenous 53 safety, workplace health 7, 10, 12, 13, 42-47 community engagement, 7, 18, 19 and Indigenous employees, 53-54 intergenerational service area, our 3, 5 community engagement, 18 major infrastructure employees, women 53 shareholding Ministers 3 community project support 7, 20, 35-36 energy trading performance 77 social media, use of 21 Community Service 61, 62 entertainment and 79 solar energy 20, 37-38 Obligation payment hospitality stakeholders, our 2, 73-74 companies, operating 3, 64-65 environmental performance 7, 30, 32-41, 57-59, 78 (engagement / reporting / rights) complaints management 21 ethical decision making 71 Statement of Corporate executive leadership team 68-70 8-9, 74 corporate governance, ASX 64-79 Intent principles of good external and internal audit 75 storm season inside front cover, 11, cost of electricity / tariffs 4, 16 financial performance 60-63 preparedness/response 12, 13, 27-29, 37 credit rating 62 financial reporting 62, 72 strategic objectives 8-Sep cultural heritage protection 57 generation, electricity 4, 24, 25, 40-41, 58 strategic planning and 73-74 customer experience 20-21 guaranteed service levels 21, 77 reporting cycle customer privacy 78 high performance 12-13, 48-59 sustainability / corporate 2, 5, 7, 13, 19, 39, 47, 52, customer, energy use 23-24, 33-34 organisation responsibility 58, 59, 70 customer, hardship 18 information and 13, 51-52, 65 transmission network 4 communication technology customer, insights/research 14, 20-21, 33-34 vegetation management 11, 30, 52 insurance program 76 customer-driven priority 14-21 vision & values, our 3 investment review functions 70 customers, helping them 13, 17-19, 33-39 waste management 58 save leadership development 44, 49, 52 water, use of 58 Customers, our 3-6, 15 liabilities 61-63 weed control 57 demand for infrastructure 7, 11, 23-25 load control 26 workforce, profile 56 demand management 11, 13, 16-17, 19, 34-36 network statistics 5 works delivery 11, 50, 20, 25 demand, peak 23-24 network, health of / 23, 27, 52 inspection directions and notifications 75

ABBREVIATIONS AND INDEX ERGON ENERGY ANNUAL STAKEHOLDER REPORT 2010/11 80 ready for a record summer season

BOM advice Condamine River “above average 200- peaks in Warwick 4.46m 220,000 90% 23 days KEY SERVICE CENTRES at tropical cyclone Brisbane River CYCLONE plus homes and of customers after the event It was a summer of The recovery effort after Cyclone Cairns activity this 600mm peaks. business are have power power is restored Yasi was the biggest deployment season...” of rain fell unprecedented natural 109 Lake Street 7.9m. ANTHONY without power. restored in the to all of the of electrical workers in across northern fi rst week. homes and disasters, with record CAIRNS QLD 4870 Burnett River 13-14 JANUARY The Category 2 Australia’s history – ensuring 8 DECEMBER and central system crosses 3 FEBRUARY businesses safe peaks in fl ooding and the largest by the end of the fi rst week that Queensland Mundubbera and the coast near to reconnect. Townsville (Registered Offi ce) cyclone in living memory more than 90% of the homes and over four days. Gayndah. Bowen. 22 Walker Street 10,500 25 FEBRUARY causing devastation businesses impacted had their Ergon Energy’s TOWNSVILLE QLD 4810 UP TO 27 28 DECEMBER homes and across much of power back on. DECEMBER Brisbane billing 15,300 3.2m businesses and travel homes and 8,950 Queensland. For some customers however, Mackay peak reached experience power service providers businesses are residents are it didn’t end once the power Ergon Energy’s Annual Stakeholder at Myall Creek, following Ergon At least half the total area 23 Cemetery Road interruptions as a fl ooded. without power. was switched back on. In the Dalby. Energy’s of our state was affected by WEST MACKAY QLD 4740 Report 2009/10 maintained Silver Our Brisbane- result of the fl oods Facebook site for heavy rainfall and fl ooding, aftermath of these disasters, we benchmarking standard in the based offi ces and 30 JANUARY 20 DECEMBER this season. restoration which began in early spring. received record numbers of calls Rockhampton IT support offi ces Australian Reporting Awards. updates. from customers experiencing are evacuated. By December, entire towns were Cnr Fitzroy and Alma Streets submerged, some repeatedly hardship. We expanded our ROCKHAMPTON QLD 4700 8 FEBRUARY customer assistance program 12-14 JANUARY 25% as the weeks went on. All up, at This report is printed on certifi ed to ensure we could help during of Ergon Energy’s least 10,500 customers had their Maryborough carbon neutral paper stock. power switched off at different this diffi cult time. For more employees live in the 97-99 Adelaide Street times simply for fl ood-related about our Cyclone Yasi response While evacuations MARYBOROUGH QLD 4650 communities safety reasons. see pages 28–29. are underway, crews impacted by the The summer of 2011 is one that Toowoomba are dedicated to disaster. After Cyclone Yasi crossed the Queenslanders will never forget. Cnr South and Hampton Streets disconnecting the coast in February more than 220,000 customers had lost It reminded us of what it means TOOWOOMBA QLD 4350 power to ensure power – a third of our entire to be ready to respond, and community safety. customer base. In the worst that, by working together as a Brisbane Response to Cyclone affected areas the network had community, we can truly rise 61 Mary Street Anthony fast-tracked to be rebuilt from the ground up. to the challenge. BRISBANE QLD 4000 in readiness for the arrival of Cyclone Yasi. ERGON ENERGY ANNUAL STAKEHOLDER REPORT REPORT STAKEHOLDER ANNUAL ENERGY ERGON ANNUAL STAKEHOLDER REPORT 2010/11 “Our storm season response... is one of the clearest examples in the company’s history of our people truly demonstrating their commitment to our vision of

2010/11 being a world-class, customer-driven energy business.”

Ian McLeod Chief Executive

ANNUAL STAKEHOLDER REPORT responsive. resourceful. ready. 2010/11