9.1 The Board’s Strategic Directions 2016-2020 May 2016
Tabled paper 1883
Tabled Papers for 12th Assembly 2012 - 2016; Tabled Papers; ParliamentNT
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4.3 Threats (and opportunities) The chart below (Figure 4.1) indicates the key external factors that will influence Power and Water over the next five years. These external developments represent both threats and opportunities for the Corporation. There is the real threat that entering the Australian Energy Regulator's (AER) revenue determination regime (due in FY20) will leave Power and Water exposed to material price reductions if the Corporation does not proactively reduce costs and improve capital expenditure efficiency. It is assumed that the AER will be able to identify Power and Water's relative inefficiency and act accordingly. Capital expenditure will also be reviewed for appropriateness by the AER and, if authorised projects exceed budget, there is a risk that the increased costs could be unrecoverable through revenue (becoming a direct financial cost). Entering the AER regulatory regime therefore poses financial risks to the Corporation. The negative impact could be as high as $20Mpa based on current Corporation financials. This estimate allows for the unique operating conditions for the Corporation including scale and geographic disadvantages. Figure 4.1: External threats (and opportunities) Over the medium to longer term, the power industry is subject to external pressures associated with emerging technologies, including power storage and alternate generation capacity. This will have implications for the levels, timing and flows of power across networks. This will also challenge power companies' ability to recover fixed costs, technically maintain the network, and work with its customers to maintain optimal financial and operating performance. While the impact may occur with different timing and impacts in the Northern Territory, it is inevitable that change will occur and that Power and Water will need to respond. Darwin region water supply is strongly influenced by climate, including the seasonal nature of rainfall in the wet/dry tropics and the forecast impacts of climate change. More rapid growth than first forecast means Power and Water must develop water sources on a greater scale than was previously planned. It is estimated that the Manton Dam upgrades will come at a cost of $150M, and the cost of planned future dam sites are estimated to be in the $200M-$500M range. FY16 FY17 FY18 FY19 FY20 Power Networks Annual pricing Proposal (to FY19) AER Framework & Approach Decision Regulatory Proposal toAER, AER Draft, Decision, Final Determination on revenue and network prices AER revenue allowance and network prices commence Water & Sewerage Annual Pricing Orders (thru FY20) Potential for National Regulatory regime Potential need for new water supplies e.g. dam Gas Supply Index - lchthys JV Startup Jemena NEGI CAL2018Q3 operations - NT gas market to wider east coast aas markets System Control Full Market Operations Commonwealth Carbon Scheme Establishment of TEMO on 1 July 2017 New entrants full retail contestability System operations to AEMOandAER? Remote Operations 3 year initial DCLGS Agreement - Financial Performance Management; U50/ CSO minimisation Decisions req'd on delivery & contract models & consolidation of all NFP services find. water/sewerage) tolES. 2 x 1 Year extension THE BOARD'S STRATEGIC DIRECTIONS 2016-2020 15
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