Terry Effeney: Empowering customers

Energex CEO, Terry Effeney talks to Energy Source & Distribution about the need for improved network efficiency and asset management as south-east Queensland’s power demands continue to peak.

With the Australian Energy Regulator’s final distribution determination for Queensland’s DNSPs released in early May, state-owned distributor Energex has finally begun the transition from the Queensland Competition Authority.

Years of consultation, papers and research will culminate in the network’s large individual and commercial customers, about a third of its total load, switching their tariff to a kV.A-based pricing system in July. Challenged by the regulator to design a tariff which balanced revenue generation while providing appropriate price signals to customers, Energex engaged in a major consultation phase before determining its new target power factors. With equity as an underlying pricing principle for all its customers, Energex hopes a new era of price distribution will usher in more efficiencies and reduce demand.

This transformation in the regulatory and pricing process comes at a critical juncture in the distributor’s history. Despite early 2010’s summer temperature being milder than the previous year’s dramatic heat wave, Energex still saw record peak demand. Starting from the Sunshine Coast and flowing south to Brisbane, the southern Ipswich corridor and on to the New South Wales border, 120 new connections are added to its 1.3 million customer base each day, the equivalent of a 30,000 plus new connections or the size of regional city being added each year. Energex has seen a 33 per cent customer increase over the last decade and a 99 per cent increase in power demand on its $8 billion worth of assets, with increased air conditioner, pool pump and electrical device usage has placed further strain on the load.

Taking the helm of the regulated business in 2007, Energex CEO and Queensland-born Terry Effeney is wary of being drawn into a cycle of spiralling asset investment as the distributor attempts to reduce the peak of its summer load. Mr Effeney’s vision is for the better utilisation of existing assets which integrate conventional transmission, distribution and generation supply-side solutions with a range of energy efficiency, demand response, renewable generation, and storage device technologies, all the while decarbonising the network.

“The problem we have at the moment is this peakiness of the load is (telling us) the utilisation of those assets is going the wrong way,” Mr Effeney explains to Energy Source & Distribution from his Brisbane office.

“Our peak demand versus average consumption is saying that we are having to put more assets into the system to deliver effectively a lesser growth in kilowatt hours. Consequently, the average price can only go one way, and that’s upwards. What we have been focusing on is how do you turn this around, to say, ‘How can we utilise these assets a whole lot better?’ When you look at the average utilisation of these assets, there are a lot of assets which aren’t used other than during periods of peak load.”

Having worked with powerlines and power tools since the early 1980s, Mr Effeney’s 30-odd years in the industry provides him with perspective on the issues he and his management team face. Studying as a cadet engineer and starting his professional career with the Capriconria Electricity Board, later to become Ergon, he progressively made his way through a range of operational and engineering roles, becoming Ergon’s chief operating officer before moving to Energex.

“I’ve seen a lot of major development occur across that period but (am) now seeing the most challenging (ones) the industry is facing, certainly in the time that I’ve been in it. And that is that the price of energy, which historically had been going down for a whole range of reasons, is now, for a whole range of reasons, heading back up again,” Mr Effeney says.

“Really, the price of energy has come down in real terms over the last 30-odd years because we had progressively worked on this model of bigger generation, bigger transmission, economies of scale and those kind of things. Progressively driving efficiencies in the model.”

However, the dual issues of air conditioning saturation and aging assets have fundamentally changed the utilisation of Queensland’s assets. Since becoming CEO, Mr Effeney has concentrated on Energex handling its steadily growing customer and asset base and ensuring the right projects and processes are in place for the future.  The route to lowering demand growth, improving efficiencies and increasing power ouput involves investing heavily in distribution management systems that allow for tracking and control of the network and facilitating customer choice, particularly in low-voltage areas.

“If you can understand what’s going with those assets you can work those assets harder, because at the moment we don’t really know a lot about that, we’re fairly blind to that,” Mr Effeney says.

“Unless customers ring us up when they’ve got problems, we don’t have a lot of visibility. So the first thing we are working on is getting visibility out there in the system so that you can tune up your own network and get better value out of that network.”

Energex’s proposed Distribution Management System (DMS) will manage the electricity distribution network to deliver improved electricity supply restoration times. One of DMS’s applications will be a service call management, which replaces the paper-based identification of electricity network and can more accurately predict the exact location of a network fault. Mr Effeney believes his network must fundamentally change in the near future to accommodate better use of distributed management and a range of renewable resources for a better network utilisation outcome. While focused on delivering much needed capacity, he also understands the key issues surrounding the continued building of assets in order to just address peak demand.

“The systems built over the last 50 years were built with a particular view about how customers will use energy. You now put a 21st century paradigm about ‘e-economy’ and the whole digitisation of the system and you look at what our system was designed to do, and it was never designed to meet the requirements of a digital economy. You have to change the way you think about how to use a conventional supply network and how to integrate it with 21st century technologies to get the right kind of outcomes here.  The integration of distributed energy resources and storage devices at the point of application will be key,” Mr Effeney explains.

Improved storage capabilities will have a crucial role to play in this new distributed system, as long as it can be developed and integrated into the system in a useable fashion.

“One of the really interesting things about storage, whether it be vehicles or other kinds of storage, is that a lot of the renewables you are looking at, whether they are solar, wind or other things, tend to have some level of intermittency. The whole point is that you need storage to take that intermittency out.

“Sometimes the wind’s not blowing, sometimes the sun’s not shining. The problem with that then is that unless you can store that energy and use it, you basically have got to be building other generators or other distribution systems etc. to be online to accommodate that and that becomes a costly exercise. But if you can store that energy, and use it across the 24 hours in an appropriate way and optimise its use with the conventional system, then you’re really starting to come up with this concept of the smart grid or smart network.”

While smart network technologies have been possible for years, the challenge for distributors has been understanding customer perception in order to effectively influence their behaviour. Energex is working with the Queensland Government to promote awareness of electricity peak demand and energy conservation through  energy conservation communities. These will help residents in local communities actively adopt energy efficiency methods in the home as a means to reducing energy consumption and reducing demand on the electricity network during peak times.

“(We are focusing) on the key issues that the industry is facing, particularly around the price of energy and the need to decarbonise the industry. They’re the two big elephants. And the other elephant that is sitting there…is the ability to accommodate the 21st century lifestyle of people, their expectations, the kind of houses and services they expect. They almost call for uninterrupted supply, you can’t get out of your garage or get into your house with security systems if your power’s not on.”

Rewarding customers for energy efficiency and demand management through appropriate pricing tariffs has been a major goal for Energex and it is currently investigating a range of programs to find the best solution.

“It’s really about empowering customers to make a choice. For some people they  wouldn’t have a clue what they’re paying for their energy bill and it might be a relatively small part of their disposable income. Yet for other people it may be a significant part of their disposable income or it might be important to them because of their environmental views. We should be providing a range of products and services to those kind of customers that reward them for making good energy choices. At the moment this isn’t what is typically happening.

“It’s about trying to work out what that sustainable, least-cost solution is going to be and what we can do in terms of tuning up our systems. How will customers respond to particular opportunities and signal? And I don’t think we know that yet. We’re trying to see what works and what doesn’t.”

The planned testing of a reward-based tariff structure will allow Energex to put controls on air conditioning, pools and household devices and enable them to determine how different customers segments respond to the incentive or tariff structure.

“Let’s reward people who want to make energy efficient decisions or demand management decisions. We’ve set some targets over the next five of trying to get at least 144 MW out of the system which otherwise would have come into the system as a result of that,” he says.

The opt-in program will introduce electronic meters into households within a chosen south-east Queensland community. While Victoria’s recent smart meter rollout involved settlements, live communications, remote reconnects and disconnects, Energex’s series of tests will be used purely to determine how the system will best work.

The company has been actively involved with councils and social groups in order to understand their issues and circumvent pricing concerns. It has also begun a campaign explaining the meaning of ‘peak’ and how customers can, or can’t, contribute to it. The first part of the campaign involved television commercials, receiving an extraordinarily high level of post-communication recognition. The second stage, for public release later this year, will explain how customers can contribute to reducing peak.

“What we want to do is take all the kinds of learnings from all the kinds of discussions with these energy conservation communities…what works and what doesn’t work. (Then) work through these reward-based tariff trials, (see) what the customers respond to and what they don’t respond to, and then try and roll those programs more broadly out across. What we’re doing is just being really careful about our programs and implementation and making sure we are addressing community concerns. How do you look after pensioners? How do you look after the disadvantaged? How do you look after people who can’t make choices? What do you mean by prices are going to up?

“This is about how do you more fairly distribute the pie. You have to recover certain amounts of revenue; the question is what’s the right and fairest way to recover that revenue that sends the right signals to customers, rewards people that want to make good decisions about energy conservation or demand management (and) to some extent, exposes people who don’t want to make those decisions and want to use large amounts of energy. (It) exposes them in the sense to the consequences of their energy decisions.”

Another issue facing customers is confusion over the role of Energex and Queensland’s retailers. Since the introduction of full retail competition in 2007, Energex made the decision to maintain communication with customers as it saw the relationships for demand management and energy conservation as an important part of its future.

“I think we are still working through with the retailers how this whole triangular relationship works. What’s our relationship with the customer look like, what’s our role to the retailer look like and ultimately from the retailer to the customer. How does this whole thing work? I think that is still maturing,” he says.

“So there’s lots of discussions going on because ultimately, the channel to the customer is predominantly through the retailer. And tariff structures and things like that are retail tariffs so we can signal certain things through to the retailer, but ultimately the bill and a lot of the interaction still happens between the retailer and the customer. So we have to be clear about what the role of the distributor is in that particular model and also be cognisant of what the retailer wants and what the customer wants. You’ve got to get that model right. You’ve got to be win-win-win for all the various players.”

While distribution technologies and customer engagement offer an incredible opportunity to transform the network by reducing peak loads, Mr Effeney is concerned that if it is not integrated properly, it has the potential to backfire.

“In my view when you start talking about smart grids, how do you integrate this kind of new technologies and opportunities with a conventional network in a least cost way? To meet the customer’s requirements but mitigate, to the extent possible, the price impact of all of that. (If) you get that wrong and you don’t integrate that technology properly, the cost of these things could be a whole lot more then they need to be.”

“So we’ve got to be really careful the way we integrate this new technology is at least cost, because otherwise you can end up building extra capacity to accommodate it.”

By responding to key issues of decarbonisation, pricing and interaction with customers, Energex is looking to position itself as an industry leader.

“Hopefully I’ve made a difference at Energex since I’ve been here. To be driving that agenda which is saying, ‘Not only do we need to be doing the things we are doing now well, but really casting our minds forward to what we need to look like in 10 or 20 years’. (Making sure) we are doing the things now in preparation for that.”

As Queensland’s population continues to boom and energy issues threaten to worsen, the father of three can’t find fault with living and working in Brisbane.

“What’s not to love? Brisbane is a fantastic city for living in, but also it’s a fantastic place to work. The challenges that we’ve got, the opportunities that we’ve got here in the industry is really good. So, that mix of a great place to bring up the family and really interesting energy environment with the growth and the challenges and all of those things make it a pretty rewarding place to be.”  


Energy conservation communities

Understanding how customers respond to new technologies and energy price signals will be an important part of a distributed energy future. Energex is currently working with Sunshine Coast communities such as Sippy Downs and Mooloolaba on a range of demand management programs.

Energex CEO, Terry Effeney is developing energy conservation and demand management systems by working with communities on their air conditioner controls, pool pumps and other devices for the hottest days of the year.

“(We are) supplying these houses with devices which properly turn off these devices. You think it’s turned off, but it’s not, it’s actually still sitting there sucking energy out of the system,” Mr Effeney says.

“One of the things that we’ve been working with the community on is air conditioning issues, for example. Because not only are there education issues which says be responsible during hot days, we’re also working on (a device) where we can switch the compressor in the air conditioner at  particular times. It doesn’t turn the air conditioner off, it just changes the duty cycle in the compressor.

“Also, working with (customers) to put low energy lighting into houses. Just trying to work on those kinds of design with communities to inform them when we then have to provide infrastructure to those new areas like, Bells Creek and Palmview.”

With an expected 70,000 people moving into those areas over the next 10 years, Energex is trying to learn how to interact with communities to design a lower carbon footprint and infrastructure design that can be applied to new subdivisions.

“We can substantially take load out of the system at that particular point in time. That means we can then build less capacity into the system, we can control these things.”

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