Pilots and Trials Work Stream

Transcription

1 National Smart Metering Program Pilots and Trials Work Stream Pilots and Trials Retail Impact Reporting Framework Version number: Version 1.0 Status: Author Final Dianne Shields Date published 16 December 2009 File name NSMP_Pilots_RetailImpactReporting_V1.0.doc

2 Table of Contents 1 DOCUMENT CONTROL VERSION CONTROL APPROVAL REFERENCES INTRODUCTION BACKGROUND PURPOSE OF THIS PAPER APPROACH REPORTING TO THE MCE RETAIL REPORTING FRAMEWORK REPORTING THE BENEFITS REPORTING THE COSTS... 8 APPENDIX A GLOSSARY File Name: NSMP_Pilots_RetailImpactReporting_V1.0.doc Page 2 of 15

3 1 Document Control 1.1 Version Control Version Date Description Amended by /11/2009 First draft Dianne Shields 0.2 1/12/2009 Amended to incorporate additional costs estimated by EMCa Dec09 Base line version 0.2 approved by NSSC on 16 Dec09 Dianne Shields Harry Koller 1.2 Approval Authorised by Signature Date NSSC Program Director Signed in PDF version issued document as WORD file so companies may add their own assumptions (with no signature) 16 Dec References The following documents are referred to in this document. Document Name Pilots and Trials Working Group Terms of Reference 1.1 Pilots and Trials 2008 Status Report to the Ministerial Council on Energy NERA, Cost Benefit Analysis of Smart Metering and Direct Load Control Overview Report for Consultation (Phase 1) NERA, Cost Benefit Analysis of Smart Metering and Direct Load Control Overview Report for Consultation (Phase 2) Version December February 2008 File Name: NSMP_Pilots_RetailImpactReporting_V1.0.doc Page 3 of 15

4 2 Introduction 2.1 Background The NSSC established the Pilots and Trials Working Group (PTWG) to assist in the coordination of pilots and trials of smart metering infrastructure and to provide a forum for the sharing of results and optimising of learning. 1 Part of this sharing of information is to exchange information regarding business cases for the rollout of smart meters to small customers. To facilitate information collection and sharing on a consistent basis, the NSSC considered that the PTWG develop a common reporting format with standard criteria for comparability to improve the quality of information sharing and collaboration across jurisdictions Purpose of this paper The purpose of this paper is to present reporting frameworks that can be used by distributors, retailers and consumer representatives to report on the actual costs and benefits derived from the various pilots and trials of smart metering that are occurring in various jurisdictions. In line with the objective set by the NSSC, the frameworks aim to establish a common reporting format so that information reported is reported on a consistent basis and is thus comparable across pilots and trials. The reporting frameworks provide a guide for those involved in pilots and trials of smart metering on the type of information that should be collected from the results of the pilots and trials and the form in which this should be reported to the PTWG and the NSSC. 2.3 Approach The reporting frameworks draw on the results of the cost-benefit analysis commissioned by the MCE. The MCE engaged a team of consultants, lead by NERA Consulting, to undertake a cost-benefit analysis of the roll out of smart meters. The national cost-benefit analysis found that many of the benefits associated with smart metering arose from the core functions required of a meter if a meter was to be considered a smart meter. These core functions were energy measurement and remote reading. The cost-benefit analysis also assessed the incremental costs and benefits arising from the addition to the core functionalities of another 23 functions that smart metering made possible. The reporting frameworks request stakeholders to report the results of their pilots and trials business cases against the costs and benefits of the core and incremental functions identified by the national study. The cost and benefits identified by the national study were classified as: network benefits and costs; retail benefits and costs; and consumer benefits and costs. 1 The NSSC has agreed that the following definitions of pilot and trial should be used. A pilot means the testing of the integrated smart meter infrastructure on an end to end basis across nominated classes of consumers on a temporary basis. The length of a pilot would be agreed on a case by case basis depending on the scope of the pilot. A trial means the testing of one or more components of the smart meter infrastructure to gauge its performance under specified conditions. A trial would specify which components of the infrastructure were to be tested and the reasons for the test. The length of a trial would be agreed on a case by case basis. 2 NSMP, Pilots and Trials 2008 Status Report to the Ministerial Council on Energy (Version 1.0), page 5. File Name: NSMP_Pilots_RetailImpactReporting_V1.0.doc Page 4 of 15

5 As a result, a reporting framework has been developed for each classification to facilitate the reporting of costs and benefits against the costs and benefits identified by the national study. The national study also assumed four different scenarios for the roll-out of smart metering, of which one was a distributor-led roll out. The distributor-led roll out scenario has been used to establish the reporting frameworks. 2.4 Reporting to the MCE The MCE has stated that they will review the progress of the pilots and business cases annually, starting in June A review of findings, including any resulting revision in the cost and benefits for each jurisdiction or specific businesses, will occur by June 2012, at which point MCE will further review jurisdictional deployment plans and any requirement for further analysis. The information collected using the reporting frameworks set out here will facilitate the NSSC s reporting to the MCE. 3 Retail reporting framework The retail reporting framework draws upon the impact studies undertaken by KPMG and EMCa. 3 This paper provides a detailed list of the assumptions used by KPMG and EMCa that were not available in summary form in the NERA overview report. 3.1 Reporting the benefits KPMG identified the following major benefits for retailers from smart metering: 1. Business efficiencies, including reductions in bad debts 2. Lower hedging costs from improved forecasting and reductions in peak whole energy demand 3. Reductions in working capital The reporting framework requests stakeholders to report benefits of smart metering identified from their smart metering business cases against the range of network benefits of smart metering identified by KPMG. 3 KPMG 2008 Cost Benefit Analysis of Smart Metering and Direct Load Control, Workstream 3: Retailer Impacts Phase 2 Consultation Report, March and EMCa 2008 Cost Benefit Analysis of Smart Metering and Direct Load Control, Workstream 6: Transitional Implementation Costs, Phase 2 Consultation Report: Assessment of National and Jurisdictional Costs File Name: NSMP_Pilots_RetailImpactReporting_V1.0.doc Page 5 of 15

6 Retail benefit identified Overview of the methodology employed by KPMG to estimate the network benefits Value of the benefit arising from the pilot and trial business evaluation Method of calculation of the benefit Assumptions made benefit per annum annual benefit per customer (or NMI) Business efficiencies Lower hedging costs KPMG estimated that there would be reductions in retailers recurrent operating costs from: 1. Declines in the process costs of bad debts of $0.10 per customer 2. Reductions in bad debts of $0.50 per customer 3. Savings of perhaps $1.70 per customer per annum from data validation and settlement, automation of certain processes that reduced labour costs and savings in management time from better information. Wholesale load forecasting KPMG noted that the Victorian retailers indicated that the benefit from improved wholesale forecasting accuracy of $1m-$10m. KPMG thought that these benefit might relate to better purchasing practices and risk management, product development, financial reporting and capital requirements. If the same savings were available in other jurisdictions, KPMG estimated that savings could be in the order of $0.40-$4.10 per customer per annum. Demand side response Retailer may reduce the amount they need to hedge if more cost reflective tariffs lead to a demand side response. Using information from the customer impacts assessment, KPMG estimated hedging cost File Name: NSMP_Pilots_RetailImpactReporting_V1.0.doc Page 6 of 15

7 Retail benefit identified Overview of the methodology employed by KPMG to estimate the network benefits Value of the benefit arising from the pilot and trial business evaluation Method of calculation of the benefit Assumptions made benefit per annum annual benefit per customer (or NMI) Working capital Customer communications reductions for all jurisdictions of between $12.2m and $55.2m per annum depending upon the functionality of the meter (for example, whether or not the meter has DLC). KPMG considered that there would be a reduction in transactions costs associated with hedging of between $240,000 and $1.1m per annum depending upon the functionality of the meter. Using information provided by Victorian retailers, KPMG estimated the savings from reductions in working capital of $1.30 per customer per annum if the savings anticipated in Victoria are available in other jurisdictions. If smart metering lead retailers to commence monthly billing, this could produce an additional reduction in working capital of $8.50 per customer per annum. KPMG noted that Victorian retailers were expecting reductions in the cost of high bill enquiries ($0.425m per annum) and Ombudsman complaints ($0.207m). KPMG believed that this would translate into a saving of $0.25 per customer per annum if the same savings were available in all jurisdictions. File Name: NSMP_Pilots_RetailImpactReporting_V1.0.doc Page 7 of 15

8 3.2 Reporting the costs KPMG and EMCa estimated the costs to retailers of smart metering. KPMG estimated the non-systems related operating cost impacts on retailers, concluding that costs would arise from the transitional costs incurred during a rollout of smart metering and from increases in recurrent costs over the longer term. The transitional costs included customer communications, call centre costs and other costs. The recurrent costs related to IT operational costs and customer communication costs. EMCa investigated the capital cost impacts on retailers system costs including the impact on Meter Data Management Systems and handling new and increased market transactions. EMCa also investigated the costs of strategic initiatives that retailers might initiate because of smart metering. The reporting framework requests stakeholders report the costs of their pilots and trials business evaluation against the costs identified by KPMG and EMCa. File Name: NSMP_Pilots_RetailImpactReporting_V1.0.doc Page 8 of 15

9 Retailer costs identified Overview of the methodology employed by KPMG and EMCa to estimate retailer costs Value of the cost arising from the pilot and trial business evaluation Method of calculation of the cost Assumptions made RECURRENT COSTS - TRANSITIONAL Customer communications Call centre costs KPMG were of the view that customer communications costs were likely to increase because retailers would need to explain the: 1. Nature of the changes being brought about by the roll out of smart meters 2. Timing of those changes and keep customers informed about ongoing developments 3. Likely implications for customers and assist them in preparing for the changes 4. Communicating the new tariffs that retailers develop KPMG believed retailers incurred costs of around $10.30 per annum per customer for customer communications. The rollout would increase these costs by $2 per customer per annum. KPMG expected significant increases in call centre costs from smart metering: 1. To deal with questions about the roll-out and the implications for customers 2. To address customer queries as they start to receive their bills KPMG assumed retailer call centres costs were around $6.70 per annum per customer, assuming a call centre cost per annum annual cost per customer (or NMI) File Name: NSMP_Pilots_RetailImpactReporting_V1.0.doc Page 9 of 15

10 Retailer costs identified Overview of the methodology employed by KPMG and EMCa to estimate retailer costs Value of the cost arising from the pilot and trial business evaluation Method of calculation of the cost Assumptions made cost per annum annual cost per customer (or NMI) Other receives up to 2 calls per customer per year. During the roll out KPMG estimated these costs would increase to $8.50 per annum per customer with the number of calls received by the call centre increasing by 20%, or up to 2.4 calls per customer per year. KPMG considered that there would be increases in other costs during the transitional period, including areas such as IT operational, billing, and dealing with regulatory requirements, customer complaints, and general management time devoted to the rollout. KPMG assumed costs of around $2 per customer per year. RECURRENT COSTS OVER THE LONG TERM IT operational Customer communications These costs relate to the cost of managing and operating the IT infrastructure the retailer has. To estimate these costs, KPMG took 15% of the additional capital costs estimated by the Transitional Impacts Workstream. No further detail is provided by KPMG. KPMG believed that call centre costs would be higher over the long term because retailers will have more tariffs and more complicated tariffs that need communication to customers if they are to be effective. KPMG assumed that communications costs would increase by 5% over the long term, or $0.50 per customer per annum. File Name: NSMP_Pilots_RetailImpactReporting_V1.0.doc Page 10 of 15

11 Retailer costs identified Overview of the methodology employed by KPMG and EMCa to estimate retailer costs Value of the cost arising from the pilot and trial business evaluation Method of calculation of the cost Assumptions made cost per annum annual cost per customer (or NMI) CAPITAL COSTS - TRANSITIONAL Meter Data Management EMCa believed that smart metering would require retailers to manage increased meter data volumes and a change to meter data formats. EMCa anticipated that investment to manage system impacts would be required in Market Gateway, Middleware, MDMS, SDR, CIS/CRM, Energy Trading and integration to corporate finance systems. EMCa estimated the cost impact at between $7.5m and $11.25m per retail business using industry input and estimates across expected impacted systems undertaken by EMCa. In estimating the cost, EMCa assumed that retailers would engage MDPs to undertake meter data validation and thus invest less in MDMS. New and additional market transactions $m per retailer To realise the benefits of smart metering for existing and new services, EMCa expected that new and enhanced market transactions will be required. Additionally, EMCa expected that the move from batch to real-time transactions and implementation of daily interval meter data would increase the data volumes retail businesses File Name: NSMP_Pilots_RetailImpactReporting_V1.0.doc Page 11 of 15

12 Retailer costs identified Overview of the methodology employed by KPMG and EMCa to estimate retailer costs Value of the cost arising from the pilot and trial business evaluation Method of calculation of the cost Assumptions made cost per annum annual cost per customer (or NMI) are required to manage. EMCa anticipated that retailers would need to invest in their Market Gateway, Middleware and CIS/CRM systems to manage the system impacts. EMCa estimated this cost at between $1.5m and $2.25m per retail business, using input from industry and estimates across expected impacted systems undertaken by EMCa. $m per retailer CAPITAL COSTS - STRATEGIC INITIATIVES Hedging EMCa expected that the availability of half-hourly consumption data would allow for improved forecasting of mass-market retail load providing opportunities for improved hedging. To deliver this functionality, EMCa anticipated that retailers would invest in Energy Trading systems, namely forecasting applications, hardware and application integration to the MDMS. EMCa estimated that the cost of the investment would range between $0.5m and $0.75m per retailer. The estimate was based on industry input, vendor estimates and estimates across expected impacted systems undertaken by EMCa. File Name: NSMP_Pilots_RetailImpactReporting_V1.0.doc Page 12 of 15

13 Retailer costs identified Overview of the methodology employed by KPMG and EMCa to estimate retailer costs Value of the cost arising from the pilot and trial business evaluation Method of calculation of the cost Assumptions made cost per annum annual cost per customer (or NMI) HAN-based initiatives $m per retailer EMCa anticipated that HAN-based initiatives will require new business processes and message types and thus investment will be required in Market Gateway, Middleware and CIS/CRM systems. EMCa estimated this cost at between $1m and $1.5m per retailer based on industry input and estimates across expected impacted systems undertaken by EMCa. (Cost per system estimates were not provided by EMCa.) File Name: NSMP_Pilots_RetailImpactReporting_V1.0.doc Page 13 of 15

14 Appendix A Glossary The following acronyms are in the NSMP Glossary. AEMC AER AMI AS B2B BPRG BPPWG BRDRG BRWG CATS COAG DNSP DRET EEEC ENA ERAA ESC FRC FRMP HAN IEC IHD LNSP MCE MRG MSATS MTWG NCRE NEL NEM NEMMCO NEO NER NSMP NSSC NT Australian Energy Market Commission Australian Energy Regulator Advanced Metering Infrastructure Australian Standard Business to Business B2B Procedures Reference Group (as established under the IEC) Business Processes and Procedures Working Group AMI Business Requirements Definition Reference Group Business Requirements Working Group Consumer Administration and Transfer Solution Council of Australian Governments Distribution Network Service Provider Commonwealth Department of Resources, Energy and Tourism (also referred to as RET) Equipment Energy Efficiency (E3) Committee Energy Networks Association Energy Retailers Association of Australia Essential Services Commission Full Retail Contestability Financially Responsible Market Participant Home Area Network Information Exchange Committee (as established under section 7.2A.2 of the Rules) In-home Display Local Network Service Provider Ministerial Council on Energy (established under the COAG) Metrology Reference Group (established under the RMEC) Market Settlement and Transfer Solution Metering Technology Working Group National Consumer Roundtable on Energy National Electricity Law National Electricity Market which excludes Western Australia and Northern Territory National Electricity Market Management Company National Electricity Objective (as set out in section 7 of the NEL) National Electricity Rules National Smart Metering Program National Stakeholder Steering Committee (RET Smart Metering program) Northern Territory File Name: NSMP_Pilots_RetailImpactReporting_V1.0.doc Page 14 of 15

15 PwC PTWG RET RIS RFP RMEC RP RPWG RWG SCO SM SMCN SME SMI SMMS SMWG SWIS TOR TRWG WA WAIMO WEM WIGS WG PricewaterhouseCoopers Pilots and Trials Working Group Commonwealth Department of Resources, Energy and Tourism Regulatory Impact Statement Request for Proposal Retail Market Executive Committee Responsible Person Retail Policy Working Group (as established under the MCE) Regulation Working Group Standing Council of Officials (as established under the MCE) Smart Metering Smart Metering Communication Network Subject Matter Expert Smart Metering Infrastructure Smart Metering Management System Smart Metering Working Group (as established under SCO) South Western Interconnected System in Western Australia Terms of Reference Technical and Regulatory Working Group Western Australia Western Australian Independent Market Operator Wholesale Electricity Market (Western Australia) Wholesale Inter-connector Generator and Sample Working Group File Name: NSMP_Pilots_RetailImpactReporting_V1.0.doc Page 15 of 15