On 13 January 2020, the AER made a final decision in relation to tranche three of Powercor's contingent project application.
In its application, Powercor sought $164.5 million ($real, 2015). Our decision is to approve a capex of $116.2 million ($real, 2015) for the following reasons:
- We have deferred the consideration of the funding arrangement for REFCL works at Corio Zone Substation to the 2021–26 EDPR process because Powercor has not examined all viable options to ensure that consumers do not pay more than necessary under the REFCL program. Powercor’s application sought $27.3m for Corio.
- Further, we have reduced proposed capex by $20.9m on the following elements to what we have assessed as a more prudent and efficient level:
- Labour contents for Surge arrestors replacement, HV Regulators modification, and design and procurement
- The need for a spare ground fault neutraliser (GFN)
- Plant hire cost
- SCADA protection and control and communications cost
- Works associated with Terang (TRG) zone substation.
Background
On 22 August 2019, Powercor submitted an application to the AER seeking a determination, with respect to the Victorian State regulatory requirement to install Rapid Earth Current Fault Limiters (REFCLs), that funding for a contingent project be approved and their maximum allowed revenue be adjusted in accordance with clause 6.6A.2 of the NER.
On 1 May 2016, the Electricity Safety (Bushfire Mitigation) Amendment Regulations 2016 (Amended Bushfire Mitigation Regulations) came into effect in Victoria. The amended regulations require Victorian distributors to install REFCLs at designated zone substations. The purpose of the REFCL devices is to reduce the risk of a bushfire caused by a fallen powerline. Powercor is required to meet a defined quota of zone substations with operational REFCLs by 1 May 2019 with an additional quota to be operational by 1 May 2021 and the remaining designated zone substations fitted with REFCLs by 1 May 2023.
This contingent project application seeks funding for the third (and final) tranche of REFCL installations and associated works for the following zone substations:
- Ararat
- Corio
- Hamilton
- Koroit
- Merbein
- Stawell
- Terang
The installation of REFCLs will necessitate other capital replacement and upgrade works across the distribution network. Powercor's application seeks funding of expenditure for both REFCL installation and consequent works.
Submissions in response to Powercor's contingent project application closed on 27 September 2019.