Freshly branded distributor SA Power Networks is an industry leader in reliability, safety and cost reduction. Energy Source & Distribution talked with CEO Rob Stobbe about dealing with peak demand issues while making efficient investment decisions.
In a fiery August speech targeted at “gold plating” utilities making inefficient capital investments, Prime Minister Julia Gillard name-dropped ETSA Utilities. It could have been a cringe-worthy moment for the South Australian distribution network, rebranded SA Power Networks in September, but the company was being singled out by the Prime Minister for all the right reasons.
“ETSA is building on its early success with a more sophisticated suburb-scale trial of the practical technologies, operating arrangements and cost structures,” Ms Gillard said in praise of the network, even as she blamed states and the energy industry for rising electricity prices.
As tensions between industry and government continue to heighten through talk of major energy reform, good news stories involving energy networks rarely make it on a national stage. For SA Power Networks CEO and Energy Networks Association board member Rob Stobbe, the praise was justified.
SA Power Networks is a distribution network that stretches across South Australia, comprising thousands of kilometres of powerline and hundreds of substations. The utility was purchased by Cheung Kong Group in 1999 when then state industry was privatised.
Despite having a strong brand name, the key reason for the September rebrand was to clarify to customers the company’s role in the electricity sector.
“We’re clearly indicating that we’re focused on the South Australian community and South Australian customers,” the 55-year-old executive told Energy Source & Distribution.
“Even though we do some work in other states as well, our primary focus is on South Australia. And given that we do operate power networks, that makes it quite clear what our role is in the whole chain, if you like.”
Even as a public blame game takes place around network pricing, Mr Stobbes is not trying to hide the company’s identity, with a major advertising campaign in state media promoting the brand change.
“We believe we have a very positive story here in South Australia in terms of our distribution network. We’re more than comfortable identifying ourselves as the manager of those networks here in South Australia,” he said.
Pricing is a very keen issue for customers feeling the strain of electricity prices, especially those in a lower socio-economic band. According to Mr Stobbe, the state distributor has been a leader in this space, with the second lowest distribution prices in Australia.
“If you look at prices since privatisation in particular, our distribution prices have come down around 16 per cent in real terms over that period. And as a percentage of the bill, I reckon we’ve come down from about 48 per cent of the bill to just below 30 per cent of the bill,” he said.
“So in terms of South Australia, the distribution charges have actually come down in real terms and are also a lot lower percentage of the bill than what they were while they were in government hands.”
The utility is testing demand management strategies as part of their capital works program over the next five years in a bid to reduce peak demand issues. As South Australia hasn’t mandated advanced metering infrastructure in residential properties, the utility is testing smart meters and remote compressor control technology in selected suburban sites.
Through these tests they have the ability to control compressors in air conditioners, the major driver of electricity usage. They can turn the compressor off for 5-15 minutes an hour as the fan keeps going, providing a 30 per cent reduction to their cost during peak demand periods without customers noticing.
But that’s just a small component of their overall envisioning strategy, presented to the industry last year at ENA’s Smart Networks conference.
The utility has a future operating model up to 2026 identifying the key impacts demand-side technologies will have on the network, and the likely impact on the business operations.
“Smart metering is just one very small component of that to be honest. In terms of our smart grid strategy, it’s a component of our future operating model. (The) focus is on improving reliability through network automation, so we’re investing quite heavily in this area with a complete rebuild of our operations centre,” Mr Stobbe said.
SA Power Networks has commenced the implementation of a distribution management system using Schneider Electric’s Telvent, which will form the foundation of their future smart grid capability. It will look at monitoring technology that gives real-time information about what’s happening on their network – predicting and addressing potential faults before they happen.
“And where faults still do occur, obviously that technology will point our problem areas and enable us to restore those a lot more quickly and cheaply. So that’s probably the component that’s really the focus at the moment. And at the same time we’re also implementing improved feeder automation to significantly improve customer service in terms of reliability and restoration times as well,” Mr Stobbe explains.
A significant network capacity upgrade program is also underway. Their capital program for this current five-year reset period is about $1.8 billion dollars; 100 per cent more than it was in the previous five years. This includes upgrading major connection points with ElecraNet in the Barossa Valley and Whyalla; country substations such as Kapunda, Mylor and Port Broughton; and also large metropolitan substations such as Panorama, Burnside and Kilburn. They are also updating their fleet of transformers to ensure they are ready to maintain capacity around the network and upgrading large customer connections.
The network is meeting reliability requirements at the lowest cost possible without overspending on their CAPEX (capital expenditure), in stark contrast to the “gold plating” alluded to by the Prime Minister in August.
“I found that comment a bit insulting to be quite honest, the gold plating, given what we are doing here in South Australia. Having said that, we’ve got a very strong record of maintaining our reliability with efficient investment. And if you look at the AER’s sort of state-wide benchmarking on reliability CAPEX and OPEX (operational expenditure) cost, that’s reflected in there,” he said.
“In terms of reliability, we’ve been number one or number two in reliability for quite a number of years now. Our reliability is at 99.98 per cent and you can say, ‘Okay are you doing that at a cost?’ If you look at both CAPEX and operating cost on a state-wide basis, in terms of CAPEX we have the leader in all indicators in terms of our capital program when compared to the other states. So we’re got the lowest CAPEX per customer number, per energy distributed, or peak demand, whichever one you want to look at. We are the lowest and our OPEX is either lowest or second under those same categories.”
Reducing network expenditure directly feeds into Mr Stobbe’s personal interest in making electricity more affordable for those in lower socio-economic bands, which he hopes to achieve through peak demand management, controlling utility costs and charging arrangements. A north Adelaide trial will see a cross-section of customers charged based on their capacity needs, in the hopes of shifting costs away from lower to medium-to-high level income groups. He is also interested in greater female participation in the industry, especially in the trades.
With more than 30 years experience in the utilities infrastructure arena, and having held senior management positions in electricity, water, gas and telecommunications sectors both in Australia and overseas, Mr Stobbe brings a significant range of experiences to the role. Having started in the corporate world as a mail boy before working his way up to CEO, he has a “pretty good feel” for what it’s like at all levels of the organisation, and can relate well with employees. Gazing back, he can recall the time when the director of finance at the state water company came to visit his floor while he was a base-grade clerk.
“He would move from floor to floor and said hello to everybody… it made such an impression on me on what that could do for an employee. So I make sure myself and the management team get to one of the depots across the state every couple of weeks to meet with the employees to talk about where the business is going and get further ideas on how to improve the business,” he said.
Having worked as a senior executive in a number of large businesses, leaving each one’s operations and finances significantly improved afterwards, Mr Stobbe has a simple word of advise for electricity executives looking to improve their utility.
“If you really want to bring improvements into a business, just go and ask the employees, because they know how to do it a lot better. It’s really giving them the opportunity to provide those ideas, and for us to listen and implement, and that’s what I’ve always been focused on,” Mr Stobbe said.
“My whole focus is on the employees and actually getting them to improve the business. So, they know how to do it, management just has to get out of the way and let them do it. That’s always been my focus and that’s always delivered good results for the business.”
The Australian Energy Market Commission (AEMC) recently released its draft rule determination regarding the definition of reference and rebateable services. The draft followed the Australian Energy Regulator’s (AER) draft rule change proposal in late 2011.
Mr Stobbe said the draft is a balanced response by the AEMC, and many of the more contentious reforms proposed by the AER “quite rightly” weren’t supported.
“The AER does have more discretion, and I think as long as that discretion is used wisely, I have no problems with it at all to be honest. But equally, I think its important that they do have the necessary skills and capability within the AER to utilise this additional discretion that they have,” Mr Stobbe said.
ENA will be assessing each of the changes outlined by the AEMC to ensure they align with the National Electricity Objective and the National Gas Objective, and to ensure that under-investment does not occur. Mr Stobbe, an ENA board member, said the priority is for discretion to be used wisely.
“They do have to regulate quite a few businesses in a number of areas and it’s quite a significant task for a group like that,” he said.
“Even for something as simple as benchmarking, we have no problem with them doing… I suppose, how crude will it be? Will it take into account different operating environments of the different businesses discretion is utilised? It’s pretty hard to comment on it. I think there’s no harm giving it discretion as long it is used wisely.”