Hon Paul Llewellyn


Response to initial PLUG letter

29 August 2007

Plantagenet Line Upgrade Group
310 Healy Road
NARRIKUP WA 6326

Dear Group members

Re: Proposed Kojonup to Albany Transmission Line

Thank you for your correspondence outlining your concerns with Western Power's proposed Kojonup to Albany transmission line.

I share your concerns regarding Western Power's corridor selection process for the proposed line, including the flaws in their notification and consultation processes outlined by you. I also note your concern about the likely high environmental and economic impacts of the Western Power's route options and the process of weighting sustainability criteria. I am involved in similar discussions regarding proposed transmission lines in other parts of the South West Region

Earlier this year I wrote to the Minister for Energy and also met with the Economic Regulation Authority (ERA) regarding Western Power's decision-making process for the proposed Muja to Wellstead transmission line. I have raised the matter of Western Power's legal obligation to properly investigate alternative solutions to building transmission lines. I recently raised these issues and community concerns in the standing Committee on Environment and Public. Affairs, which as a consequence will be holding a hearing on the matter on 26th September.

The South Coast Power Infrastructure Working Group, of which I am a member, is investigating sustainable solutions to the power supply and network problems in the Denmark-Walpole area and is working to ensure the community is effectively involved in the decision making process. We are considering a range of local power generation and demand-side management solutions for the area.

I encourage your community to continue efforts to take charge of the consultation process and would be happy attend a community or group meeting as my Parliamentary schedule allows.

As Member for the South West Region my focus is on seeking the best technical solution for the region and which offers the greatest benefit for the community on environmental, economic and social terms. We do not want communities or landowners to be set against each other; rather we want to find feasible power solutions that are sustainable and regionally beneficial.

Thank you for bringing your group's concerns to my attention and I hope we can continue to communicate on these matters.

Yours sincerely



Paul Llewellyn MLC
MEMBER FOR SOUTH WEST REGION


Response to Paul from Minister for Energy

GOVERNMENT OF WESTERN AUSTRALIA
MINISTER FOR ENERGY, SCIENCE AND INNOVATION

Our ref: 006727

Paul Llewellyn MLC
PO Box 541
DENMARK WA 6333

Dear Paul,

Further to your conversation with my policy adviser Brett Sadler, I understand that you have asked some questions pertaining to a number of issues. In regard to your request for a map of the SWIS, please find a number of printed copies attached. Please note that Western Power does not have a map including major roads and transmission and distribution lines.

In relation to your other questions Western Power has provided the following information:

  • Indicative cost of a substation on the Collie to Wellstead 220kV transmission line to service Broomehill, Borden and Gnowangerup

The estimated cost of constructing a 220kV zone substation on the proposed line to Wellstead would be approximately $12 million. This cost estimate is dependent on the configuration of, and number of transformers at, the zone substation. It is likely the existing distribution network would need to be reinforced in order to use the additional capacity provided by a new zone substation. Network studies would be required to determine the extent and cost of such reinforcements To provide significant benefit to towns such as Broomehill, Borden and Gnowangerup, the zone substation would need to be constructed in the vicinity of these towns.

  • Regulatory Test and New Facility Assessment Test provisions of the new Access Code

The "Regulatory Test" is contained in chapter 9 of the Electricity Networks Access Code 2004. The test requires the service provider (in this case Western Power) to submit a "major augmentation proposal" to the ERA before it can undertake any transmission project to a value in excess of $15M and any distribution project to a value in excess of $5M.

The preamble to the chapter is copied below for reference.

{Note: The regulatory test applies only to proposed major augmentations. It applies to a proposed major augmentation whether the service provider proposes to under-take the proposed major augmentation:
  1. in order to provide covered services, but not specifically in relation any particular project; or
  2. in relation to a project involving the generation of or consumption of electricity.

The regulatory test cannot require a project involving the generation or consumption of electricity to be located in a particular place or to be altered in any other way. The regulatory test can only affect what network augmentations are undertaken in order to accommodate the project.}

The objectives of the test are to:

  • Ensure that before Western Power commits to a major augmentation that it properly assesses all options to ensure it maximises the net benefit of the proposed investment.

  • At the same time Western Power must minimise delays to the project, administrative costs and any barriers to entry for generators and consumers.

"Net benefit" is defined as a net benefit (measured in present value terms to the extent that it is possible to do so) to those who generate, transport and consume electricity, having regard to all reasonable alternative options, including the likelihood of each alternative option proceeding.

The regulatory test must be used for ail major augmentations but it is worth noting that the process can be slightly different for projects that are undertaken in response to general load growth, as distinct from major projects that are undertaken to connect new major developments to the network.

In the case of general load growth the regulatory test is designed to ensure that the most efficient outcome is achieved. Such an outcome could include one of several network solutions, or an alternative solution such as generation or demand management. Where there is a view by Western Power that a non-network solution such as remote generation could most efficiently meet the requirements of customers, it would be the responsibility of the ERA to request the Independent Market Operator (IMO) to undertake a process to procure such a service. It is not Western Power's responsibility to undertake this process but the costs of such an installation would have to be included in the revenue that is recovered by Western Power from network customers.

In the case of particular projects, such as Grange Resources, requiring connection to the network, it is the decision of the project proponent as to whether they require on-site generation or a network connection, or indeed both. Where they require a network connection it is up to Western Power to design a solution to meet the company requirement. The regulatory test would simply ensure the chosen network solution is the best that will meet the requirements of the project.

New Facilities Investment Test:

The "New Facilities Investment Test, (NFIT)" is contained in section 6.52 of the Electricity Networks Access Code 2004. The test requires the service provider (in this case Western Power) to ensure that any augmentation to the network meets the NFIT, and thus ensures the ERA will include the augmentation in Western Power's regulated asset base.

Any major augmentation must meet both the "regulatory test" and the "NFIT".

To meet the NFIT a new asset investment must satisfy the following:

  1. 1 It is to be efficiently constructed at the lowest sustainable cost, and it must meet at least one of the following:
    • The new revenue generated from the network augmentation recovers the cost of the investment, or
    • The new facility provides a "net benefit" to users of the network that justifies higher network tariffs, or
    • The new facility is required to maintain the safety and reliability of the network.

In Summary, for Grange Resources:

  1. It is up to the project proponents to compare power supply options for their project. They will, no doubt, seek comparative costs for the various options available including on-site generation and connection to the network.
  2. If they select the network connection, Western Power will be required to make a Regulatory Test Submission to the ERA for their assessment.
  3. If a network connection is chosen, Grange Resources can contract with any Retailer to purchase power and that contract can require some or all of the power to be sourced from renewable energy. This is a commercial decision for the company and Western Power would have no input into that process.

I hope this information is helpful.

Yours sincerely

FRANCIS LOGAN MLA
MINISTER FOR ENERGY


Correspondence to Economic Regulation Authority

Paul Llewellyn MLC
South West Region
21 December 2006

Lyndon Rowe
Economic Regulation Authority
PO Box 8469
Perth Business Centre
WA 6849

Dear Mr Rowe,

RE: PROPOSED MUJA TO SOUTHDOWN 220,000 V TRANSMISSION LINE AND ENERGY SOLUTIONS FOR THE GREAT SOUTHERN REGION

I recently convened a meeting with the purpose of finding a power supply solution for the Great Southern Region, and of resolving community dissatisfaction with the proposed new power line from Muja to Wellstead to power the proposed Grange Resources project (See attached letter of 20 November 2006). The meeting was attended by representatives from all major stakeholders:

  • Grange Resources
  • Western Power
  • Beacons Consulting International
  • Great Southern Development Commission
  • WA Local Government Association
  • Communities affected by the proposed line
  • Hon John Bowler MLA's office, and also
  • Dr Graham Jacobs MLA, Member for Roe.

The meeting discussed a number of suggestions including:

  • Alternative transmission and generation arrangements, to the proposed dedicated/exclusive line for Grange resourceS, that could more efficiently meet current and future regional needs.
  • To bring forward the scheduled 2011/2012 upgrade of the Kojonup-Albany power line and to increase that upgrade to a 220kv line, if necessary. To upgrade transmission from Albany or Mt Barker to Wellstead to supply Grange Resources and any other consumers along the south coast.

It was resolved at the meeting that we should closely examine:

  1. The operation of the regulations under the Electricity. Networks Access Code 2004 with specific regard to the proposed, Grange Resources project at Wellstead;
  2. The practical implications of bringing forward the assessment of the Kojonup to Albany line as an alternative to Western Power's proposed alignment; and
  3. Ways to overcome any institutional and administrative barriers to finding an integrated solution for the power needs of the Great Southern Region.

The meeting also resolved that I should arrange a meeting with the Minister for Energy and the regulating authority so that the regulatory requirements and implications for options can be fully discussed.

For this purpose I request a joint meeting to include:

  • The Office of the Minister for Energy;
  • The Office of Energy;
  • The Economic Regulation Authority;
  • Western Power;
  • Grange Resources; and
  • Beacons Consulting International.

Prior to this meeting I request as a matter of urgency, clarification on:

  1. The application of the "Regulatory Test" as contained in Chapter 9 of the Electricity Networks Access Code 2004;
  2. The application of the "New Facilities Investment Test (NFIT)" in section 6.52 of the Electricity Code; and
  3. The procedure for the implementation of the Tests,
specifically in relation to the application by Grange for connection to the SWIS and Western Power's proposed line, and in the context of achieving an integrated regional planning solution for the Great Southern Region.

The meeting will be set for a date in either late January or early March, 2007. Elizabeth Gauci from my office will contact you to confirm the date and other details.

Yours sincerely

Paul Llewellyn MLC
MEMBER FOR SOUTH WEST REGION