Aurora Energy’s 10-Year Plan Prioritises Network Renewal for Safe, Reliable Supply

Key Areas of Network Investment

• Total planned ten-year network investment of $748.4 million
• Maintaining the accelerated pole renewal and strengthening programme for up to three more years to reach a steady-state level
• Priority on replacing poor condition, high criticality assets for safety and reliability including poles and cross arms, overhead line, zone substation switchgear and protection systems
• Renewing Dunedin’s 33 kV subtransmission cable network, as part of a broader review of the city’s network architecture
• Building capacity in the network to serve the fast-growing communities of Central Otago and Queenstown Lakes.

Aurora Energy 2018 Asset Management Plan

Aurora Energy’s Chief Executive Richard Fletcher said prioritising network renewal to provide a safe and reliable power supply to Otago was a key focus of the company’s network plans for the next decade.

“Aurora Energy’s 2018 Asset Management Plan (AMP) published today outlines Aurora Energy’s intended approach to managing its electricity distribution assets during the period 1 April 2018 to 31 March 2028. This is the first AMP to be published by the new team at Aurora Energy since the company’s separation from Delta last year.

“Past underinvestment over several decades has resulted in some network assets being in poor condition and in need of renewing. Our focus now is on bringing the most critical assets under control in the short term, while ensuring future security of supply and supporting regional growth in the long term. We are making good progress.

“As previously signalled, an increased level of investment in the network is required to stabilise network performance and to deliver the reliable service that customers value.

“We plan to sustain increased levels of network investment over the next decade to renew and maintain the existing network and install new assets to meet the needs of new developments. This year’s AMP forecasts a total of $748.4 million invested in the network over the ten-year planning period, compared to $719.4 million in the 2017 AMP.

“The planned investment is targeted at four main priorities; to keep our networks safe, address the backlog of poor condition assets, deliver a reliable service and support future growth.

“Similar to the AMPs of other electricity distribution businesses, the forecasts are more certain for the early years of the planning period. We have comprehensive plans for the first three years, focussed on addressing the backlog of renewals, priority growth projects and delivering customer-initiated works.

“Our forecasts for the remainder of the period will be further refined over the coming months, and will not be confirmed until we have consulted with our customers and wider stakeholders. We will then prepare an application for a customised price-quality path (CPP) to seek approval for our longer term plan from the Commerce Commission. Our charges for distribution lines services cannot be adjusted to reflect this plan until we have this independent approval.

Addressing Network Renewal Through Targeted Investment

“With low levels of network investment in the past, Aurora Energy’s asset fleets have deteriorated as they have aged and it is essential we address emerging risks now.

“Renewal investment is being prioritised for safety and reliability and includes poles and cross arms ($150m), overhead line replacement ($55m), underground cable replacement ($54m), distribution switchgear and transformer replacement ($72m) and zone substation equipment upgrades ($47m).

“For poles, our plan will see us continue to address the most critical work in the prioritised way this year and within three years the backlog will have been addressed and our inspection and renewal programme will move to a stable and managed state. We will continue to progressively renew Dunedin’s 33 kV sub-transmission cable network while designing for improved resilience to the city’s network architecture.

Substantial Progress Achieved, more to be done

“Over the last eighteen months Aurora Energy has significantly increased its renewal and maintenance activity, but more needs to be done. Last financial year, we spent $94 million on network renewal and maintenance, almost double the level from two years ago. We know it is not just about spending and we need to ensure that we are targeting investment where it is needed most.

“Our investment to date has seen a significant reduction in the number of poor condition poles on our network where, in the last 18 months, we have replaced or strengthened more than 5,000 of the poles that most needed attention, from our total fleet of 54,000 poles. That equates to around 10% of our wooden poles having being replaced in last 18 months; but there is more to do.

“Major network investment already underway includes a $5.6 million Dunedin CBD cable replacement project to improve security of supply to the central city and the new $13 million Carisbrook zone substation currently being commissioned that will replace the oldest substation on our network and improve electricity supply for South Dunedin suburbs.

Regional Growth to be met with Capacity Upgrades

“Our electricity network supplies the two fastest growing-regions in the country with 23% growth in customer connections in Queenstown Lakes and 17% in Central Otago over the last five years.

“Aurora Energy has been responding to the burgeoning growth in electricity demand from population increases, new residential developments and irrigation. In the last three years, new substations have been constructed to service the areas of Hawea, Omakau and Lindis Crossing (near Cromwell). Work on the latest project is nearing completion in Wanaka on the new $9 million Riverbank Road substation that will support high voltage supply for the growing township.

“To meet future growth in Central Otago and Queenstown Lakes, we are planning further investment to provide supply capacity for these expanding regions. Planned growth investments include an upgrade to triple transformer capacity at the Cromwell zone substation, a substation upgrade and feeder reinforcement for Arrowtown and substation upgrades for Queenstown and supply to local ski fields.

Emerging View of Independent State-of-the-Network Report Included

“Given the company’s major network renewal programme, we wanted independent assurance that we are targeting our proposed investments in the areas that need it most and will deliver the most safety and reliability benefits. In March of this year, in conjunction with the Commerce Commission, we commissioned Australian engineering experts WSP to undertake an independent review of our network.

“We wanted our customers throughout Otago to have confidence in what we are doing and have a clear understanding of the condition of our network assets and what this means.

“The 8-month, comprehensive review is close to completion and WSP provided Aurora Energy and the Commerce Commission with interim feedback on a number of asset fleets at the end of August 2018. The emerging view of the independent review supports our planned investment in critical areas but prompted us to make some refinements to condition and risk assessment and reprioritise some of our planned work.

“To the extent possible, we have made changes to this year’s AMP to reflect WSP’s emerging view. For example, their interim feedback to us indicated a large proportion of Aurora Energy’s cross arm fleet exceeded expected lifespan and, as a result, we have increased the planned 10-year expenditure on cross arm replacement. Their emerging view of our zone substation switchgear has helped to quantify and prioritise our switchgear replacement programme.

“Based on drone inspection sampling, WSP suggests that visual evidence indicates only a modest level of overhead conductor (wires) deterioration. We have retained a significant level of investment in planned conductor replacement of $55 million over ten years to ensure we can address all current and emerging risks.

“WSP expect to compete their final report by the end of October, which will be shared with the public in November. We will consider its findings in detail as we prepare our March 2019 AMP. In the interim we will adjust our investment plans if any significant additional risks are raised in the report.

Future Prices Subject to Commerce Commission Approval and Customer Consultation

“In New Zealand, the cost of building and maintaining electricity distribution and transmission supply infrastructure is recovered through the line charge component of consumers’ electricity bills. Aurora Energy customers currently pay some of the lowest line charges in the country at 7 cents per kilowatt hour, compared to a sector average of 9 cents.

“Delivering a safe and reliable service into the future requires that we invest more in the network. Ultimately those costs are passed on to customers through increased line charges on their power bill. Price increases related to our Customised Price Path (CPP) must first have the approval of the sector regulator, the Commerce Commission, and will be subject to extensive consultation with customers and other stakeholders. The next time the Commerce Commission will consider a reset of our lines charges will be from April 2020. Until that time we have committed to continue to invest to deliver the necessary work.

“It is important to us that we are delivering what our customers want us to deliver and that the services we provide are valued. In 2019 we will be placing a lot of focus on lifting the way we communicate what we’re doing and seeking views and comments on our longer term plans and future pricing. Where there are choices that can be made we want to ensure that our plan appropriately reflects these. We know that getting a consensus of views from over 90,000 customers is not an easy thing to do but it is our aim to at least ensure that information is made available in a meaningful way and that everyone who wants to has a real opportunity to provide comment on our plans,” said Mr Fletcher.

For more information:

Presentation slides (PDF) for media briefing on 2018 Asset Management Plan

Aurora Energy’s Report Card to October 2018 on the organisation’s progress since it was established as a new organisation.