Energy regulator contains Powercor spending

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The Australian Energy Regulator (AER) has reduced the amount Powercor customers will pay for the installation of Tranche 3 of crucial bushfire safety technology.

Victorian distribution network businesses must install Rapid Earth Fault Current Limiters (REFCL) following recommendations from the 2009 Victorian Bushfires Royal Commission.

These businesses apply to the AER for contingent project funding as part of their 2016-20 revenue determinations to fulfill their REFCL obligations.

AER Board Member Jim Cox said that ensuring customers pay no more than necessary for safe and reliable energy is the cornerstone of our decisions on projects such as REFCL approvals.

“We have carefully examined Powercor’s proposed spending but cannot approve their plans in full. Powercor customers have to foot the bill for this equipment, and it is only right they get the best possible value for money,” Mr Cox said.

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“Our decision involves a reduction of $21 million to better reflect the level of spending required to meet obligations relating to the prevention of bushfires.

”We also propose deferring work at Corio substation which will allow Powercor to consider the available options for this part of the project.”

Powercor applied for $164.5 million in capital expenditure for Tranche 3 of the project but the AER has determined that only $116.2 million is needed to satisfy its legal obligations.

Powercor’s contingent project application involves REFCL installation works at zone substations in Corio, Koroit, Stawell, Hamilton, Ararat, Merbein and Terang.

REFCLs can detect single phase-to-earth faults almost instantaneously and then cancel voltage on the affected line within milliseconds. This limits the voltage of a line to below the point where it can ignite a fire.

Mr Cox said the AER had listened to and carefully considered community concern around the cost of REFCL but recognised that options for businesses like Powercor to meet their obligations are limited.

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“The Black Saturday bushfires killed 173 people and following that tragedy the Victorian government mandated standards that require the use of REFCL technology. We acknowledge this is expensive technology, but the AER will only approve efficient spending,” Mr Cox said.

“I understand there has been serious community concern about cost blowouts on the REFCL project, and this is reflected in the submissions we have received on this contingent project and others.”

The AER has made six decisions to date in tranches 1, 2 and 3 on Powercor and AusNet Services REFCL contingent projects resulting in cost reductions in the order of $105 million, or 14 per cent, which translates into savings on customer bills.