14 April 2004 Commerce Commission ODV Handbook Counties Power Presentation

Counties Power Trust owned Electricity Lines Business In Franklin area 2,200 sq km 31,000 customers

Counties Power supports the Adoption of a standard, relatively accurate, and easy to use ODV handbook

Disincentives exist to create lower Overall cost networks Certain changes need to be made in order to prevent perverse outcomes

Reducing total cost to the customer should be encouraged At present no incentive for ELB to optimise the total cost as seen by the customer ELB and Transpower costs treated in isolation

Counties Power 110kV substation – reduced total cost to customer yet CP “penalised” Specific provision should be made in handbook for “Total Transmission Solution”

Short valuation planning periods encourage sub-optimal solutions with high future remedial costs Electrical infrastructure assets have high capital value and long lives

Short valuation planning periods encourage sub-optimal solutions with high future remedial costs Short-sighted and impractical to separate valuation planning periods and engineering planning periods

Short valuation planning periods encourage sub-optimal solutions with high future remedial costs Valuation planning periods should align with optimum life cycle engineering planning periods i.e. encourage optimal solutions

Energy Efficiency loses out under industry structure and ODV Rules In ELB energy losses are typically 5- 8% of total energy supplied Several techniques exist to reduce energy losses (reduce wasted energy) No incentive exists for ELBs to reduce energy losses (as these cost money and there is no reward for ELB)

Techniques to reduce energy losses Select an economic conductor size Increase the Voltage –Increase the distribution voltage from 11kV to 22kV and the energy losses are reduced by 75% for a given load and conductors

Implications of reducing energy losses CP believes that using sound economic techniques it would be very practical to achieve an energy loss reduction of at lease 1% of total Nationally; 1% of say 37,000 GWh at say 4c per kWh = $15M / year At 0.3kg of CO 2 per kWh, 1% of 37,000 GWh  a reduction of 100,000 tons of CO 2 emission per year.

Industry mechanism required With so much at stake a mechanism should exist within the industry to require effective loss reduction techniques to be employed Capital Cost of loss reduction techniques must be explicitly allowed for in ODV rules ELBs and TPNZ must be called on to demonstrate a design philosophy that seeks to optimise life cycle costs including notional cost of future energy losses

Summary Handbook to recognise assets that result in reduction of total cost (ELB + TPNZ) to end use customers. Imperative that valuation planning periods are in line with engineering planning periods. Capital cost of energy loss reduction techniques must be recognised.