NZ Electricity Deregulation – Commerce Commission, New Part 4 Obligations for SAIDI and SAIFI creates opportunities.

Posted by Andrew Thompson on November 5, 2012 | 0 Comments

New Zealand was one of the first countries in the world to engage in Electricity Deregulation. The separation of Lines and Retail (and Contracting) business’. Deregulation is never a single event, it is a complex and moving feast of political will, consumer (and Network…) outrage, consultation, regulation, cuts, changes and tweaks to business and financial models.

We have been intimately involved with the practical aspects of the electricity deregulation environment supporting our customers as they go through this in NZ, Australia, Canada and the USA.

As a result, embedded within products like CSC and Avalanche is functionality and in depth knowledge to support a raft of different regulatory models and related business models that each Utility elects to adopt. Meeting or exceeding the regulatory obligations and robust and justifiable operational data to support rate case demands.

Most recently we have been following the changes proposed by the NZ Commerce Commission and considering the implications on our systems to support the data capture and now quite serious disclosure obligations.

I won’t re-iterate the legal challenges to these changes, however since the August Court of Appeal decision the Commission certainly wasted no time formalising their plans for default price-performance criteria and related disclosures. The release of the Part 4 determination came down on 01 October 2012, and the substantive disclosures obligations start in March 2013.

Deregulation follows a pattern, and although NZ focussed we believe there are clear learnings from this experience for customers operating in other jurisdictions that may not be as far down the path.

Regulatory disclosure has been a factor in Utilities for years, however in our view this latest determination and particularly changes to the certifications by Directors and obligations on them and downstream systems to deliver accurate information is quite far reaching.

We expect the compliance cost of the audit function to also increase in line with the more serious certification and related penalties.

If anyone is in any doubt as to the seriousness of the obligations for directors and those responsible for collecting this data the article by Catherine Ross & Christine Southey from MinterEllison summarising the obligations, and penalties makes sobering reading.

There is a broader national theme running through this of greater corporate transparency, Director/manager accountability, and “consumer protection”. We anticipate the Commission to be rigorous in their review of the auditable data and systems used to capture that.

There will be those that take the view that the Commerce Commission will never go that far… However “Trying”, “Best Endeavours”, “I thought…..” “We were told….” are not the threshold tests. Until it is tested, we simply wont know.

In the case of Electricity networks there is a further twist in the form of the Consumer Reform bill that is currently with the Commerce select committee. It is likely that even though consumers may now be required to consider the risks of receiving supply, it will be reasonable to expect, that there will be more focus (and onus on Networks) to keep those consumers informed when supply reliability is affected.

Whilst on the face of it quite onerous, this actually presents some very real benefits and drivers to sort-out systems and underlying data. This will ensure data capture can be done; Reliably, Accurately, and in an Auditable and consistently Replicable manner for reliable year on year comparison, and greater surety of compliance. Some utilities are already doing this, and have robust underlying data, process’ and network models. Others may not.

I’ll focus on Schedule 10 in the Determination (Page 121-122) which provides the detail of what Directors must now certify in relation to network reliability and the categorisation of those statistics.

As a side note, it will be interesting to see what view is taken on re-categorisation of planned and unplanned work based around minimum 24 hour customer notification obligations. Where rescheduling planned work may trigger the obligation to either re-notify, or re-categorise the outage.

For Schedule 10, there are two key elements;

1. Accurate network connectivity between meter- transformer- switches, all the way to GXP, and;

2. Accurate capture of the times events occurred (as the customer saw it and the vent actually happened) e.g. Switch Open/Close.

After all if your connectivity is not accurate, and you aren’t capturing the time of actions accurately, SAIDI and SAIFI are unlikely to be accurate, and will vary between reporting periods.

Electricity networks are technical environments. As engineers we like order. We like things to add up. We don’t like waffly statements about binary situations, fortunately, neither does the Commission, and “about right” is not the test they are applying.

So there is a silver lining to this latest determination. We think there is considerable opportunity for Networks to actually embrace this determination and further demonstrate their engineering capabilities to create well engineered, robust data, and sound process and practice which can automate the capture of this data, whilst also supporting the expectations of their stakeholders and simplifying compliance.

Andrew Thompson

Talk to us today and learn how we can improve your business and save you money.