Capex overview - Replacement

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  • Replacement Capital Expenditure

    Capital Expenditure Overview

    April 2015

  • Capex Expenditure Overview: Replacement Capital Expenditure

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    Table of contents

    1. Overview and background ................................................................................................................................. 8

    1.1. Key Messages ................................................................................................................................................... 8

    1.2. Nature and categorisation of Replacement expenditure ................................................................................. 10

    1.3. Compliance obligations .................................................................................................................................... 11

    1.4. Asset Management Framework ....................................................................................................................... 12

    1.5. Structure of this document ............................................................................................................................... 13

    2. Historic and forecast Replacement Capex ...................................................................................................... 15

    2.1. Forecast Replacement Capex ......................................................................................................................... 15

    2.2. Variances in forecast and actual capital expenditure ...................................................................................... 15

    3. Prudent holistic approach to maintaining reliability .......................................................................................... 18

    3.1. Introduction ...................................................................................................................................................... 18

    3.2. Stakeholder / consumer engagement .............................................................................................................. 18

    3.3. Declining performance of 85% life-expired assets ......................................................................................... 20

    3.4. Developing a prudent holistic response ........................................................................................................... 22

    3.5. Compliance and safety-driven capital expenditure .......................................................................................... 23

    3.6. Outcomes for customers .................................................................................................................................. 24

    4. Overview of forecasting methodology, inputs and assumptions...................................................................... 26

    4.1. Introduction ...................................................................................................................................................... 26

    4.2. Overview of forecasting methods .................................................................................................................... 26

    4.3. Key assumptions .............................................................................................................................................. 27

    4.4. Unit costs ......................................................................................................................................................... 28

    4.5. Cost escalation ................................................................................................................................................ 28

    5. Repex modelling .............................................................................................................................................. 29

    6. Explanation of forecast expenditure ................................................................................................................ 32

    6.1. Introduction ...................................................................................................................................................... 32

    6.2. Poles ................................................................................................................................................................ 33

    6.3. Pole top structures ........................................................................................................................................... 34

    6.4. Overhead conductors ....................................................................................................................................... 35

    6.5. Underground cables ......................................................................................................................................... 36

    6.6. Service lines ..................................................................................................................................................... 37

    6.7. Transformers .................................................................................................................................................... 38

    6.8. Switchgear ....................................................................................................................................................... 41

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    6.9. SCADA, network control and protection systems ............................................................................................ 43

    6.10. Zone substation primary assets ....................................................................................................................... 45

    6.11. Other Programs ............................................................................................................................................... 47

    7. Meeting Rules requirements ........................................................................................................................... 52

    7.1. Capital expenditure objectives and criteria ...................................................................................................... 52

    7.2. Opex-capex substitution .................................................................................................................................. 53

    7.3. Incentive schemes ........................................................................................................................................... 53

    8. Supporting documentation ............................................................................................................................... 55

    Appendix - When do assets start to become unreliable?........................................................................................... 57

  • UE Capex Overview Paper- Replacements FINAL 28 April CONFIDENTIAL 5

    Approval and Document Control

    VERSION DATE AUTHOR

    1.0 30 April 2015 United Energy

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    Glossary

    Abbreviations

    ABC Aerial Bundled Cable

    ACR Automatic Circuit Re-Closer

    The Act Electricity Safety Act 1998

    ALARP As Low As Reasonably Practicable

    AMI Advanced Metering Infrastructure

    AOC Actual Outturn Costs

    CAIDI Customer Average Interruption Duration Index

    CBRM Condition Based Risk Management

    CCTV Closed Circuit Television

    CESS Capital Expenditure Sharing Scheme

    Code Victorian Electricity Distribution Code

    DFADCAA Distribution Fault Application Data Collection and Analytics

    DPRP Doncaster Pillar Replacement Program

    DRMCC Dynamic Rating Monitoring and Control Communications

    EPA Environment Protection Authority

    ES&L Environmental, Safety & Legal

    ESMS Electricity Safety Management Scheme

    ESV Energy Safe Victoria

    HVABC High Voltage Aerial Bundled Cable

    IT Information Technology

    LCS Asset Class Life Cycle Strategy

    LiDAR Light Detection And Ranging

    LVABC Low Voltage Aerial Bundled Cable

    MAIFIe Momentary Average Interruption Frequency Index

    OMSA Operational and Management Services Agreement

    OT Operational Technology

    RCGS Remote Control Gas Switch

    REFCL Rapid Earth Fault Current Limiter

    RQM Reliability and Quality Maintained

    SAIDI System Average Interruption Duration Index

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    Abbreviations

    SAIFI System Average Interruption Frequency Index

    STPIS Service Target Performance Incentive Scheme

    SWER Single Wire Earth Return

    TOC Target Outturn Costs

    VCR Value of Customer Reliability

    ZS Zone Substation

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    1. Overview and background

    1.1. Key Messages

    The purpose of this document is to describe and explain our forecast Replacement capex for the forthcoming regulatory period. The other categories of capital expenditure (namely, Augmentation, IT and Communications, Connections and Non-network General) are explained in separate overview documents. Together, these sub-category overview documents and the supporting papers that underpin them, demonstrate that our total capital expenditure forecast complies with the Rules requirements an