Tasmanian distributor reduces budget and secures reliable supply

Aurora Energy reduced its capital and operational budgets expenditures by more than $54 million, the Tasmanian distributor and retailer announced in December 2011. Its financial results show operating costs $21.5 million under budget and overall capital expenditure $33 million below budget.

Aurora’s energy and distribution businesses have undergone considerable change over the past 18 months, with some parts of the business now unrecognisable from their prior state, Aurora Energy CEO Dr Peter Davis said.

Its energy business, which incorporates the Tamar Valley Power Station, wholesale energy trading and retail activities, is targeting a reduction in operating costs of $14 million a year and potential productivity gains of more than 20 per cent.

The company’s distribution business is targeting a 3 per cent a year cumulative reduction in operational expenditure and $20 million a year cut to capital spending.

Redundancies have been made as part of the savings, with almost 300 positions dropped since the start of the 2010-11 year.

Aurora Energy also met supply reliability performance measures across all categories for the first time in 2010-11, indicating the success of the company’s five-year $588 million program of work on Tasmania’s network.

In a report submitted to the Tasmanian Economic Regulator, the Tasmanian distributor advised it had met the standards set in relation to frequency and duration of electricity supply outages in all five categories – critical infrastructure, high-density commercial, urban and regional centres, high-density rural and lower density rural.

Dr Davis said that although trends in supply reliability were best measured over several years, the data for Aurora’s electricity distribution system in 2010-11 was welcome.

“It is very pleasing to have met the standards set by the regulator for the frequency and duration of outages across all categories,” Dr Davis said.

“Our customers measure Aurora’s performance against their own experiences with outages, so it is pleasing to have met the challenging reliability standards set by the regulator,” he said.

Aurora Energy is assessing the impact of the Australian Energy Regulator’s (AER) recent draft determination on its proposed network expenditure for five years beginning in mid-2012.

The draft determination, which was made public by the AER in November 2011, proposes further reductions in expenditure on Tasmania’s electricity distribution network, on top of the increases flagged by Aurora earlier in 2011.

The AER recently took over responsibility for regulating Aurora’s revenue from the Tasmanian Economic Regulator and the first five-year regulatory period under the new national regime will take effect on July 1, 2012.

The final determination by the AER, expected in April 2012, will shape Aurora’s expenditure on building and maintaining its network over the period.

Aurora Energy has identified priority projects for future upgrade work, including substations, energy supply to hospitals and inner-city capacity.

Major investments on Hobart’s eastern shore are needed, including the establishment of a new zone substation at Howrah, adding a third transformer at the Bellerive Zone Substation, reinforcement in the Rosny area and new sub-transmission lines from the Mornington Terminal. Reinforcements to Hobart’s CBD supply are also needed, and the distributor predicts the need for high and low-voltage capacity and security in the Launceston CBD due to growth in load.