1. Network Regulation Rule Change Proposals AEMC Public Forum George Maltabarow Managing Director Ausgrid

2. 2 I’ll talk about: Role of the AEMC and the National Electricity Objective Experiences under the previous framework - and how it failed Benefits of the new framework – examples of how it’s working Why Ausgrid believes the case for change has not been made.

3. 3 National Electricity Objective & moving goal posts AEMC rightly focuses on: - efficiency - transparency - predictability - certainty Framework - Moving Goal Posts - Last two resets – two different sets of rules - Now a third set of rule changes proposed - Framework must be stable, mature, predictable

4. 4 Previous framework – under investment Unguided Regulators: IPART kept prices artificially low at the cost of the safety & reliability Actual capex vs assumed annual average annual cost of replacing network ($M, 2008-09 real) Network under-investment Actual Capex Replacement cost Catch-up expenditure

5. 5 Circuit Breaker Failures - Mason Park STSS 132kV Air Blast Circuit Breaker Failure, Mason Park STSS, 2006 Cracks in Circuit Breaker

6. 6 Hosing down North Sydney Zone The Sunday Telegraph, 17 October 2004, page 1

7. 7 Major failures 11kV Circuit Breaker Failure, Matraville Zone, 2001 132kV Transformer Bushing Failure, Milperra Zone, 2003

8. 8 Benefits of the framework Maintenance average unit costs reduced by approx 4% In 2005, 108 11 kV feeders overloaded. Now there are 44. 12% drop in no. of blackouts from equipment since 03/04. Average number of blackouts on rural power lines halved since 2003/04.

9. 9 AER already has powers Information asymmetry - AER required more detailed information - now can’t use it - rule change not the answer Substitution Ausgrid (NSW)- AER cut: - $460M in capital funding, and - $360M in operating costs - Tribunal upheld AER’s decision

10. 10