TRANSGRID REVISED REVENUE PROPOSAL An independent review main report on capex and op¢  PB...

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  • TRANSGRID REVISED REVENUE PROPOSAL

    An independent review

    Prepared for

    PB Quality System:

    Document Reference: AER_Revised_TG2009Reset_Main_V8_0.doc

    Report Revision : 8_0

    Report Status : Final - (2159327)

    Prepared by :

    C Brennan, J Thompson, M Walbank, E Mudge

    Reviewed by : V Petrovski

    Approved by :

    Date Issued : 23 April 2009

    Over a Century of Engineering Excellence

    Quality Management System Certified to ISO 9001: 1994

  • PB TransGrid revised revenue proposal An independent review

    AER_Revised_TG2009Reset_Main_V8_0.doc April 2009 Page ii

    TABLE OF CONTENTS

    SECTIONS

    EXECUTIVE SUMMARY………………………………………………………………………………………..1

    1. INTRODUCTION.......................................................................................................................9

    1.1 BACKGROUND TO THE REVIEW ..................................................................................9

    1.2 PROJECT OBJECTIVE...................................................................................................9

    1.3 REPORT STRUCTURE ................................................................................................10

    2. REVIEW OF REVISED FORECAST CAPEX ..........................................................................11

    2.1 DUMARESQ-LISMORE 330 KV LINE PROJECT ..........................................................11 2.1.1 Revised Proposal ...........................................................................................11 2.1.2 PB review.......................................................................................................13

    2.2 COOMA 132 KV SUBSTATION REPLACEMENT PROJECT.........................................16 2.2.1 Revised proposal............................................................................................17 2.2.2 PB review.......................................................................................................18

    2.3 BEACONSFIELD 132 KV GIS SUBSTATION REPLACEMENT PROJECT....................25 2.3.1 Revised proposal............................................................................................25 2.3.2 PB review.......................................................................................................27

    2.4 WILLIAMSDALE 330/132 KV SUBSTATION PROJECT ................................................31 2.4.1 Revised proposal............................................................................................32 2.4.2 PB review.......................................................................................................32

    2.5 INSTRUMENT TRANSFORMER REPLACEMENT CAPEX...........................................35 2.5.1 Revised proposal............................................................................................36 2.5.2 PB review.......................................................................................................37

    2.6 APPLICATION OF COST ESTIMATING SCOPING FACTORS .....................................39 2.6.1 Revised proposal............................................................................................39 2.6.2 PB review.......................................................................................................40

    2.7 APPLICATION OF LABOUR AND MATERIAL ESCALATORS ......................................43 2.7.1 Revised proposal............................................................................................43 2.7.2 PB review.......................................................................................................44

    2.8 APPLICATION OF COST ESTIMATING RISK FACTORS .............................................46 2.8.1 Revised proposal............................................................................................46 2.8.2 PB review.......................................................................................................48

    2.9 RECOMMENDATIONS .................................................................................................53

    3. REVIEW OF REVISED CONTINGENT PROJECTS................................................................54

    3.1 RESUBMITTED CONTINGENT PROJECTS.................................................................54 3.1.1 CBD and inner metro area supply...................................................................54 3.1.2 Gadara/Tumut load area.................................................................................56 3.1.3 Orange 330/132 kV substation........................................................................57 3.1.4 Reactive support at seven sites ......................................................................58

  • PB TransGrid revised revenue proposal An independent review

    AER_Revised_TG2009Reset_Main_V8_0.doc April 2009 Page iii

    3.1.5 QNI upgrade – line series compensation project .............................................60 3.1.6 Victorian interconnector development .............................................................62

    3.2 CLARIFICATION OF PROJECT TRIGGERS.................................................................64 3.2.1 Hunter Valley – Central Coast 500 kV line ......................................................64 3.2.2 Yass – Wagga 500 kV double circuit line ........................................................65 3.2.3 Bannaby – Yass reinforcement.......................................................................66 3.2.4 New Richmond Vale 500/330 kV substation....................................................66

    4. REVIEW OF REVISED FORECAST OPEX.............................................................................69

    4.1 BACKGROUND INFORMATION...................................................................................69

    4.2 NO SIGNIFICANT CHANGE TO AGE MIX OF ASSETS................................................70

    4.3 NEW EQUIPMENT DEFECTS ......................................................................................72 4.3.1 TransGrid opex model details .........................................................................76

    4.4 NEW EQUIPMENT WARRANTY...................................................................................77 4.4.1 Average maintenance costs............................................................................78 4.4.2 Non-recoverable costs....................................................................................79

    4.5 CONCLUSIONS............................................................................................................82

    Appendix A - Terms of reference

    Appendix B - Walleroo-Williamsdale 330 kV transmission line and substation

    In preparing this report, PB has relied upon documents, data, reports and other information provided by third parties including, but not exclusively, TransGrid and the Australian Energy Regulator as referred to in the report. Except as otherwise stated in the report, PB has not verified the accuracy or completeness of the information. To the extent that the statements, opinions, facts, information, conclusions and/or recommendations in this report are based in whole or part on the information, those conclusions are contingent upon the accuracy and completeness of the information provided. PB will not be liable in relation to incorrect conclusions should any information be incorrect or have been concealed, withheld, misrepresented or otherwise not fully disclosed to PB. The assessment and conclusions are indicative of the situation at the time of preparing the report. Within the limitations imposed by the scope of services and the assessment of the data, the preparation of this report has been undertaken and performed in a professional manner, in accordance with generally accepted practices and using a degree of skill and care ordinarily exercised by reputable consultants under similar circumstances. No other warranty, expressed or implied, is made.

  • PB TransGrid revised revenue proposal An independent review

    AER_Revised_TG2009Reset_Main_V8_0.doc April 2009 Page 1 of 83

    EXECUTIVE SUMMARY

    As part of the AER’s assessment of TransGrid’s revised revenue proposal for the regulatory period 2009 - 20141, PB Strategic Consulting (PB) has been engaged to review certain aspects of the revised proposal. Specifically, the matters are associated with the revised forecast capital expenditure (capex), operational expenditure (opex), and the contingent project drivers and their triggers and include:

    a) the reassessed project scope and costs of the:

    Dumaresq-Lismore 330 kV line project

    Cooma 132 kV substation replacement project

    Beaconsfield West 132 kV GIS replacement project

    Williamsdale 330/132 kV substation

    b) the arguments raised in relation to:

    the instrument transformer replacement program

    the scoping factors, and the extension of the findings on detailed sample project reviews to the remainder of the forecast capex allowance

    the application of the weighting of the escalators over a fixed 5-year period

    the application of cost estimation risk factor

    whether the scope and revised triggers for the contingent projects are reasonable, objective and verifiable

    the defect maintenance level and costs on new assets and how this has been incorporated in the forecast opex allowance.

    PB’s review has been conducted with due regard to the NER, particularly chapter 6A, and PB’s complete terms of referenc