Consultation paper Review of Guaranteed Service Levels to apply in Queensland from 1 July 2020 February 2018
Queensland Competition Authority 2018 The Queensland Competition Authority supports and encourages the dissemination and exchange of information. However, copyright protects this document. The Queensland Competition Authority has no objection to this material being reproduced, made available online or electronically but only if it is recognised as the owner of the copyright 2 and this material remains unaltered.
Contents SUBMISSIONS Closing date for submissions: 30 March 2018 Public involvement is an important element of the decision-making processes of the Queensland Competition Authority (QCA). Therefore submissions are invited from interested parties concerning its assessment of Guaranteed Service Levels to apply in Queensland from 1 July 2020. The QCA will take account of all submissions received within the stated timeframes. Submissions, comments or inquiries regarding this paper should be directed to: Queensland Competition Authority GPO Box 2257 Brisbane Q 4001 Tel (07) 3222 0555 Fax (07) 3222 0599 www.qca.org.au/submissions Confidentiality In the interests of transparency and to promote informed discussion and consultation, the QCA intends to make all submissions publicly available. However, if a person making a submission believes that information in the submission is confidential, that person should claim confidentiality in respect of the document (or the relevant part of the document) at the time the submission is given to the QCA and state the basis for the confidentiality claim. The assessment of confidentiality claims will be made by the QCA in accordance with the Queensland Competition Authority Act 1997, including an assessment of whether disclosure of the information would damage the person s commercial activities and considerations of the public interest. Claims for confidentiality should be clearly noted on the front page of the submission. The relevant sections of the submission should also be marked as confidential, so that the remainder of the document can be made publicly available. It would also be appreciated if two versions of the submission (i.e. a complete version and another excising confidential information) could be provided. A confidentiality claim template is available on request. We encourage stakeholders to use this template when making confidentiality claims. The confidentiality claim template provides guidance on the type of information that would assist our assessment of claims for confidentiality. Public access to submissions Subject to any confidentiality constraints, submissions will be available for public inspection at the Brisbane office, or on the website at www.qca.org.au. If you experience any difficulty gaining access to documents please contact us on (07) 3222 0555. i
Contents Contents SUBMISSIONS Closing date for submissions: 30 March 2018 Confidentiality Public access to submissions THE ROLE OF THE QCA TASK, TIMING AND CONTACTS I i i i III 1 INTRODUCTION 1 1.1 What are GSLs? 1 1.2 Review requirements 2 1.3 Stakeholder feedback 4 2 GUARANTEED SERVICE LEVELS 5 2.1 GSL Performance of Energex and Ergon Energy 5 2.2 Should the GSL arrangements be changed for the 2020-25 regulatory period? 6 2.3 Competition in metering and related services 7 2.4 Costs and benefits of changing the GSL arrangements 8 2.5 How should the GSL arrangements be determined for the 2020 25 regulatory period? 8 APPENDIX A GSL REGIMES IN OTHER JURISDICTIONS 9 Australian Capital Territory 9 Australian Energy Regulator 10 New South Wales 10 South Australia 11 Tasmania 11 Victoria 12 ii
The Role of the QCA Task, Timing and Contacts THE ROLE OF THE QCA TASK, TIMING AND CONTACTS Role of the QCA The Queensland Competition Authority (QCA) is an independent statutory body which promotes competition as the basis for enhancing efficiency and growth in the Queensland economy. The QCA's primary role is to ensure that monopoly businesses operating in Queensland, particularly in the provision of key infrastructure, do not abuse their market power through unfair pricing or restrictive access arrangements. Task The Electricity Distribution Network Code requires the QCA to review Guaranteed Service Levels (GSLs) and GSL payments to apply to Energex and Ergon Energy at the beginning of the five-year regulatory control period beginning on 1 July 2020. Timing The QCA's indicative timetable for this review is shown below. Consultation paper released 15 February 2018 Submissions on the consultation paper due 30 March 2018 Draft decision released 29 June 2018 Submissions on the draft decision due 3 August 2018 Final decision and amended Electricity Distribution Network Code released 19 October 2018 Gazettal of amended Electricity Distribution Network Code 30 November 2018 Revised GSLs take effect 1 July 2020 Contacts You can register your interest in this review by subscribing to the QCA's electricity alerts at www.qca.org.au/subscribe. Enquiries regarding this project should be directed to: Attention: Electricity Team Tel (07) 3222 0555 www.qca.org.au/contact-us iii
Introduction 1 INTRODUCTION The QCA is releasing this consultation paper as part of our third review of Guaranteed Service Level arrangements. Under the Electricity Distribution Network Code, 1 we are required to review the arrangements to apply to Energex and Ergon Energy prior to the start of every regulatory period. The next regulatory period commences on 1 July 2020. 1.1 What are GSLs? Guaranteed Service Level (GSL) payments provide some financial recognition to customers who have received poor reliability or service from their distributor. They were initially implemented in 2005, in response to recommendations made in July 2004 by the Electricity Distribution and Service Delivery review panel. 2 The Electricity Distribution Network Code (the Code) requires distributors to meet targets for their quality of service to customers. 3 These targets relate to the frequency and duration of customer outages as well as things like the timeliness of connections, reconnections and notices of planned interruptions. Individual small customers may be eligible for GSL payments when distributors fail to meet these targets. The current GSLs and payments are set out in Table 1. If a distributor breaches a GSL they are required to pay the GSL amount, which has remained fixed since 2015, to the customers up to the annual limit (cap) of $416 per customer per year. This limit does not apply to GSLs paid for wrongful disconnections. 1 Clause 2.3.19 of the Electricity Distribution Network Code. The Code is available on the QCA website. 2 The panel's detailed and summary reports are available on Queensland Parliament's online tabled papers website. More information on the history of GSLs is available in section 1.2.2 of the QCA's discussion paper for the 2014 review, available on the QCA website. 3 See clause 2.3 of the Electricity Distribution Network Code for more information on these targets. 1
Introduction Table 1 Current GSLs, thresholds and payments GSL Threshold GSL payment Wrongful disconnection When disconnection wrongful under the electricity legislation 4 $142 Connection Connection not provided by the agreed date $57 per day Reconnection Reconnection not provided within the required time $57 per day Hot water supply Failure to attend to customer s premises within the time required $57 per day Appointments Failure to attend appointments on time $57 Planned interruptions Notice of a planned interruption to supply not given $28 (residential customers) $71 (small business customers) Reliability interruption duration Reliability interruption frequency CBD feeder: duration >8 hours Urban or short rural feeder: duration >18 hours Long rural or isolated feeder: duration >24 hours 5 Number of interruptions in a financial year (a customer is not entitled to more than one interruption frequency GSL payment in a financial year) Energex: CBD and urban feeders, 10; short rural feeder, 16 Ergon Energy: urban feeder, 13; short rural, long rural and isolated feeders, 21 $114 $114 Source: Electricity Distribution Network Code, clauses 2.3.3 to 2.3.9. 1.2 Review requirements 1.2.1 Electricity Distribution Network Code The Code requires the QCA to review the GSLs and GSL payment amounts to apply at the beginning of each regulatory control period. 6 The next regulatory control period commences on 1 July 2020. The purpose of the review is to determine whether the current GSL arrangements remain appropriate and whether any changes should apply from 1 July 2020. The Code does not provide any explicit requirements or limitations on our review. However, it does provide some information on the intended nature of GSL arrangements; the scope of the 4 'Electricity legislation' is defined under the Electricity Distribution Network Code, section 6.1, as meaning the Electricity Act 1994 (Qld), Electrical Safety Act 2002 (Qld), Electricity National Electricity Scheme (Queensland) Act 1997 (Qld), National Energy Retail Law (Queensland) Act 2014 (Qld), and regulations, standards, codes, protocols and rules made under those Acts. 5 Definitions of 'CBD feeder', 'urban feeder', 'short rural feeder', 'long rural feeder' and 'isolated feeder' are in the Electricity Distribution Network Code, section 6.1. 6 Electricity Distribution Network Code, section 2.3.19. More information about our previous reviews is available on the QCA website. 2
Introduction Code is to 'set guaranteed service levels which require a distribution entity to provide a payment to a small customer where those service levels are not met'. 7 As our review is being conducted under the Code we must also consider the objective of the Code, which is to promote efficient investment in, and efficient use of, electricity services for the long-term interests of Queensland customers about: (a) price, quality, reliability and security of supply of electricity; and (b) the reliability, safety and security of the Queensland electricity system. 8 The various factors outlined in the Code objective, such as price, reliability, safety and security may need to be balanced against each other. For example, improved service reliability may be desirable in some cases but not if the cost outweighs the benefit to customers. 1.2.2 Consultation process Before amending the Code, the QCA must prepare a draft of the amendment and engage in the consultation process prescribed by the Electricity Regulation 2006 (Qld) (Electricity Regulation). 9 The Electricity Regulation requires the QCA to prepare, publish and give to any potentially interested person, an 'interim consultation notice' about the proposal to amend the Code. 10 A copy of the notice is on our website, and its publication was advised by email to subscribers to the QCA's electricity alerts. The notice also: refers to this consultation paper being available on the QCA website, and available for inspection at the QCA's office states that the consultation period for written submissions on the consultation paper ends on 30 March 2018. The Electricity Regulation also requires the QCA to prepare, publish and give to any potentially interested person, a 'final consultation notice' about the proposal to amend the Code. 11 The notice must state where the draft report may be inspected, and a 'final consultation period' during which anyone may make written submissions to the QCA about the draft report. 12 Table 2 below shows the indicative timetable for completing the consultation steps set out in the Electricity Regulation. 7 Electricity Distribution Network Code, section 1.1.2(a). 8 Electricity Distribution Network Code, section 1.1.1. 9 Electricity Act, section 120PA(1). The QCA does not consider that any of the exceptions in section 120PA(2) to the consultation requirements in section 120PA(1) apply to Code amendments for the regulatory period beginning 1 July 2020. 10 Electricity Regulation, sections 222F(1) and 222H(1). 11 Electricity Regulation, section 222L(3). 12 Electricity Regulation, section 222L(4). 3
Introduction Table 2 QCA's indicative timetable for GSL review Step Indicative date Consultation paper released 15 February 2018 Submissions on the consultation paper due 30 March 2018 Draft decision released 29 June 2018 Submissions on the draft decision due 3 August 2018 Final decision and amended Electricity Distribution Network Code released 19 October 2018 Gazettal of amended Electricity Distribution Network Code 30 November 2018 Revised GSL guidelines take effect 1 July 2020 As per the indicative timetable, we intend to publish the final decision on the review in October 2018. We have nominated this date to continue our practice of completing GSL reviews in advance of Energex and Ergon Energy submitting their regulatory proposals to the AER. For its 2020 25 review, the AER recently issued a new 'framework and approach' decision for Energex and Ergon Energy; the decision states that the distributors' submissions for the 2020 25 review will be due on 31 January 2019. 13 A final decision on our GSL review in October 2018 will give Energex and Ergon Energy sufficient time to include operating expenditure for GSLs in their submissions to the AER. We may, however, extend the timeline to complete the review, having regard to the content of submissions received on the consultation paper and/or the draft report. Should the timeline be extended, we anticipate the distributors would be able to reflect any changes in GSL arrangements in the course of the AER review process. 1.3 Stakeholder feedback We invite stakeholders to give us feedback, via written submissions, on the consultation questions in this paper. We will consider the feedback in submissions to this paper, and our draft decision, along with other relevant data when making our final decision. You can make a submission via our website, before the consultation period closes on 30 March 2018. We will publish all non-confidential submissions on our website. 14 13 See section 1 of AER 2017, Replacement of framework and approach 2020 25: Energex, Ergon Energy, SA Power Networks and Directlink, December, available on the AER website. 14 http://www.qca.org.au/submissions. 4
Guaranteed Service Levels 2 GUARANTEED SERVICE LEVELS Customers receive GSL payments as an automatic credit to their electricity account when they experience customer service or supply reliability which is inferior to the GSL standards. GSLs are not intended to provide an economic incentive for the networks to improve reliability and customer service performance, or to provide full compensation for impacted customers. The AER's Service Target Performance Incentive Scheme is the key scheme for achieving this. 15 Rather, GSL payments are a means of providing some financial recognition of poor service experienced by customers. 2.1 GSL Performance of Energex and Ergon Energy 2.1.1 Energex Figure 1 presents the breakdown of GSL payments Energex has made to customers each year for the period 2013 14 to 2016 17. 16 During this time Energex made 29,383 GSL payments at a total cost of $2.05 million. Most of the GSL payments made by Energex were for interruption duration (57%) and insufficient notice of planned interruptions (29%). Figure 1 Energex GSL payments by category, 2013 14 to 2016 17 100% 90% 80% 70% 60% 50% 40% 30% 20% 10% 0% 2013-14 2014-15 2015-16 2016-17 Interruption frequency GSL Interruption duration GSL Notice of a planned interruption to supply not given Failure to attend appointments on time Failure to attend premises concerning loss of hot water supply Reconnection not provided within the required time Connection not provided by the agreed date Wrongful disconnections 15 For more information on the STPIS, see the AER website. 16 See section 2.2.1 (Figure 1) of QCA 2014, Review of Minimum Service Standards and Guaranteed Service Levels to apply in Queensland from 1 July 2015, final decision, June for a breakdown of Energex's GSLs for 2006 07 to 2012 13. 5
Guaranteed Service Levels 2.1.2 Ergon Energy Figure 2 presents the breakdown of GSL payments Ergon Energy made to customers each year for the period 2013 14 to 2016 17. 17 During this time, Ergon Energy paid a total of 39,081 GSL payments at a total cost of around $2.56 million. Most of the GSL payments made by Ergon Energy were for interruption duration (52%) and insufficient notice of planned interruptions (33%). Figure 2 Ergon Energy GSL payments by category, 2013 14 to 2016 17 100% Interruption frequency GSL 90% 80% Interruption duration GSL 70% 60% 50% 40% 30% 20% 10% 0% 2013-14 2014-15 2015-16 2016-17 Notice of a planned interruption to supply not given Failure to attend appointments on time Failure to attend premises concerning loss of hot water supply Reconnection not provided within the required time Connection not provided by the agreed date Wrongful disconnections 2.2 Should the GSL arrangements be changed for the 2020-25 regulatory period? This review considers whether the existing GSL arrangements remain appropriate for the 2020 25 regulatory period, including the level of payments, thresholds and maximum annual cap for individual customer payments. Table 1 in section 1.1 sets out the GSL arrangements applying during the current regulatory period, including payment amounts and the thresholds which trigger payment to customers. 2.2.1 GSL arrangements in other jurisdictions While there are some different GSLs in other jurisdictions, the way the GSL requirements are applied and the value of the GSL payments made to customers are similar to the arrangements in Queensland. 17 See section 2.2.1 (Figure 2) of QCA 2014 for a breakdown of Ergon Energy's GSLs for 2006 07 to 2012 13. 6
Guaranteed Service Levels Most GSL arrangements in most states, including Queensland, focus on connection performance, the timeliness of services, reliability of supply and the provision of notice to customers for planned interruptions. The levels of GSL payments are generally similar to those in Queensland, ranging from around $20 to $60 for failing to meet various customer service standards and between $50 and $360 maximum payments for excessive duration or frequency of interruptions. Table 3 illustrates the various GSL arrangements currently applied in Queensland and in other jurisdictions. Table 3 GSL arrangements in Queensland and other jurisdictions 18 GSL parameter Jurisdiction Qld ACT NSW Victoria Tas' SA AER a Notice of planned interruption Timeliness of new connections Wrongful disconnection Hot water complaints Missed scheduled appointment Reliability - Interruption duration Reliability - Interruption frequency Reliability - frequency of momentary interruptions Timely repair of faulty streetlights Yes Yes Yes Yes Yes Yes Yes Yes Yes Yes Yes Yes Yes Yes Yes Yes Yes Yes Yes Yes Yes Yes Yes Yes Yes Yes Yes Yes Yes Yes Yes Yes Time to respond to complaints Telephone answering Time to respond to notification of a problem Yes Yes Yes Yes a. The AER s Service Target Performance Incentive Scheme includes a GSL payments scheme that applies in states that do not have a jurisdictional GSL payments scheme. This scheme was developed based on the GSL payments schemes in each of the jurisdictions. 2.3 Competition in metering and related services On 1 December 2017, the Australian Energy Market Commission's (AEMC) rule change for expanding competition in metering and related services commenced. 19 The AEMC rule change required the QCA to amend the Code to ensure it reflected the new rules. The QCA considered the amendments to chapter 5 of the Code principally to extend its application to metering 18 See Appendix A for more information on GSL arrangements in other jurisdictions. 19 For more information, see the AEMC website. 7
Guaranteed Service Levels coordinators to be uncontroversial as they sought to align terminology and concepts with those in the AEMC determination, and did not introduce competition in metering into isolated networks under chapter 5 of the Code. The AEMC rule change introduces a retailer-initiated planned interruption. The amended Code retains the previous GSL obligation arising from a lack of notice for a planned interruption by a distributor, but did not extend this requirement to the newly-introduced retailer-initiated interruption. As a result customers will not be eligible for a GSL payment where a retailer fails to provide sufficient notice of a planned interruption. Amendments to extend the GSL requirement to retailers were not made in December 2017 as it would impose some additional regulatory burden on retailers, and may therefore be controversial. In addition, the QCA had no evidence at the time that the issue was significant enough to require regulation. 2.4 Costs and benefits of changing the GSL arrangements Under the current framework for revenue regulation by the AER, the cost of GSL payments incurred by distributors is recovered through regulated network charges as an operating expense. While GSLs do contribute to distributor total costs, and therefore electricity prices, GSL payments typically represent a relatively small impact. In terms of benefits to customers, the primary concern regarding GSLs is that the payment levels provide appropriate financial recognition of the poor service experienced by some individual customers, rather than providing full compensation for the impacts of outages. 2.5 How should the GSL arrangements be determined for the 2020 25 regulatory period? GSL payment levels have remained constant since they were last set in 2014. In the 2014 review we maintained the value of GSL payments in real terms by increasing them in line with inflation. Payment levels, and the annual payment cap, 20 were escalated to account for the effect of inflation up until the middle of the next regulatory period so that, on average over the next regulatory period, the nominal GSL payment, and cap, would be equal to the real value in the original legislation (as at 1 January 2005). The GSL payment amounts were fixed at this level for the duration of the period. Consultation questions (1) Are the current GSL arrangements suitable for use in the next regulatory control period? What reason(s), if any, are there for changing the current GSLs in the Code for 2020 25? (2) Are the threshold triggers for payment of GSLs still appropriate? (3) Are the values of GSL payments still appropriate for the next regulatory period or should they be adjusted? If so, how should they be adjusted? (4) Is the annual cap on GSLs for individual customers still appropriate or should it be adjusted? If so, how should it be adjusted? 20 Payments for wrongful disconnection are uncapped. 8
Appendix A GSL regimes in other jurisdictions APPENDIX A GSL REGIMES IN OTHER JURISDICTIONS Australian Capital Territory Table 4 Australian Capital Territory payment amounts Parameter Threshold Amount ($) Customer connection times Responding to complaints Response time to notification of problem or concern Planned Interruptions to Utility services Unplanned Interruptions to Utility services If a Customer s Installation is: (a) physically connected to the electricity Network, the gas Network, the water Network or the sewerage Network; and (b) a Customer is entitled to supply of the relevant Utility Service, service under the Utilities Act or National Energy Retail Law (ACT), the relevant Obliged Provider must provide those services: (c) on the same day as the request is made if the request is made before 2:00pm; or (d) by the end of the next Business Day if a request is made after 2:00pm, otherwise, on a day agreed between the Customer and the Obliged Provider. An Obliged Provider, upon receiving a Complaint from a Customer or Consumer, must: (a) acknowledge the Complaint immediately or as soon as practicable; and (b) respond to the Complaint within 20 Business Days. An Obliged Provider notified of a problem or concern with the Obliged Provider's Network must: (a) if the notification relates to damage to, or a fault or problem with the Network which is likely to affect public health, or is causing, or has the potential to cause, substantial damage or harm to a Person or property, respond as soon as practicable and in any event within six hours; or (b) in all other cases, respond within 48 hours; and (c) resolve the problem or concern within the time specified in the response. Gas and Electricity Distributors must give at least four Business Days notice of a Planned Interruption to a Utility Service to each Premises that will be affected by the interruption. The notice must: (a) specify the reason for the interruption and the expected date, time and reasonably anticipated duration of the interruption; and (b) provide either: i. a business hours telephone number for inquiries; or ii. a 24-hour telephone number for inquiries. 3) A Gas or Electricity Distributor or Utility undertaking a Planned Interruption to a Utility Service must take all steps that are reasonable and practicable to ensure that the duration of the interruption: (a) does not exceed the expected duration set out in a notice given to the Premises; and (b) in any event, does not exceed 12 hours. When an Unplanned Interruption occurs, a Utility or Electricity Distributor (as the case may be) must take all steps that are reasonable and practicable to restore the supply of the relevant Utility Service to affected Premises as soon as possible and, in any event, within 12 hours. $60 (max $300) $20 $60 per day to a maximum of $300 $50 $20 Source: Independent Competition and Regulatory Commission, Consumer Protection Code, July 2012. 9
Appendix A GSL regimes in other jurisdictions Australian Energy Regulator Table 5 Australian Energy Regulator GSL payment amounts Parameter Threshold Amount ($) Frequency of interruptions Duration of interruptions Total duration of interruptions Level 1 Level 2 Level 3 9 or more interruptions (CBD and urban feeder) 15 or more interruptions (rural feeders) 12 hours or more (CBD and urban feeder) 18 hours or more (rural feeders) 20 hours or more 30 hours or more 60 hours or more $80 $80 $100 $150 $300 Streetlight repair More than 5 days $25 New connections Connection after the day agreed (per day, maximum $300) $50 Notice of planned interruptions Less than 4 days (excluding weekends or public holidays) $50 Source: AER, Electricity distribution network service providers service target performance incentive scheme, November 2009. New South Wales Table 6 New South Wales GSL payment amounts Parameter Threshold Amount ($) Interruption duration Single interruption longer than 18 hours. $80 per claim (max $320) Interruption frequency More than four interruptions, each of five hours duration within a financial year. $80 per claim (max $320) Connection on an agreed date Connection service not provided on or before the date agreed $60 per day (max $300) Faulty streetlights Failure to repair faulty street lighting on or before the date agreed $15 Source: Essential Energy, Guaranteed Service Level Scheme. 10
Appendix A GSL regimes in other jurisdictions South Australia Table 7 South Australia GSL payment amounts Parameter Threshold Amount ($) Frequency of supply Duration of supply interruption >9 and 12 interruptions >12 and 15 interruptions >15 interruptions >12 and 15 hours >15 and 18 hours >18 and 24 hours >24 and 48 hours >48 hours $100 $150 $200 $100 $150 $200 $405 $605 Timeliness of appointments No more than 15 minutes late $25 Promptness of new connections Within 6 business days $65 per day (max $325) Timeliness of street light repairs (urban) Timeliness of street light repairs (country) Within 5 business days Within 10 business days $25 per 5 business day period $25 per 10 business day period Source: Essential Services Commission of South Australia 2017, SA Power Networks' Guaranteed Service Level (GSL) Scheme, fact sheet, March. Tasmania Table 8 Tasmania GSL payment amounts Parameter Threshold Amount ($) Frequency of Outages Duration of Outages Urban, High Density Commercial, Critical Infrastructure Higher Density Rural Lower Density Rural Urban, High Density Commercial, Critical Infrastructure Higher Density Rural Lower Density Rural 10 13 16 8 hours 16 hours 8 hours 16 hours 12 hours 24 hours $80 $80 $160 $80 $160 $80 $160 Source: Office of the Tasmanian Economic Regulator 2012, Guaranteed Service Level (GSL) Scheme, guideline, July. 11
Appendix A GSL regimes in other jurisdictions Victoria Table 9 Victorian GSL payment amounts Parameter Threshold Amount ($) Annual duration of unplanned interruptions Level 1 Level 2 Level 3 20 hours or more 30 hours or more 60 hours or more $120 $180 $360 Duration of individual interruption (where customer has experienced 20 hours or less of unplanned interruptions in the year) CBD or urban feeder Rural feeder More than 12 hours More than 18 hours $80 $80 Annual frequency of unplanned interruptions Annual frequency of momentary interruptions Level 1 Level 2 Level 3 Level 1 Level 2 More than 8 More than 12 More than 24 More than 24 More than 36 $120 $180 $360 $30 $40 On time for appointments More than 15 minutes late $30 New connections Not by the date agreed $70 per day (max $350) Public light repair Not within 2 business days of notification $25 Source: Essential Services Commission 2015, Review of the Victorian electricity distributors Guaranteed Service Level payment scheme, final decision, December. 12