Increasing opportunities for new technologies

Where Western Power can demonstrate that a proposed solution is the most economically prudent and efficient, and the ERA agrees with Western Power’s business case, this expenditure should be included in Western Power’s regulated asset base or operational expenditure and recovered from customers through reference tariffs.

Proposed changes to the Access Code will:

• provide clarity that investments should consider the overall net benefit for end-use customers;
• remove bias for investments made through regulated capital and/or operational expenditure;
• ensure that Western Power accounts for market costs, including costs emerging in the Wholesale Electricity Market (WEM) due to network issues, when assessing net benefits;
• facilitate greater use of alternative options (such as DER) in lieu of network investment, where efficient; and
• promote investment decision transparency while minimising regulatory compliance costs.

The DER Roadmap identifies the opportunity to enhance the processes through which third party service providers can deliver non-network services (defined as ‘alternative options’ in the Access Code) to Western Power that help alleviate network issues and receive a revenue stream in return.

To complement the changes to the NFIT, a suite of additional measures is proposed to enhance Western Power’s obligations to consider alternative options and provide opportunities for third party service providers. These measures include:

• requiring Western Power to produce a Network Opportunity Map, an alternative options strategy and vendor register;
• a model Alternative Option Service contract;
• the introduction of a Demand Management Innovation Allowance for Western Power; and
• a review of D-Factor arrangements for in-period submissions.

The provision of electricity services and maintenance of the network in regional and rural areas of the State is commonly expensive due to sparse populations, comparatively low electricity consumption, and long distribution lines susceptible to damage.

Recent advances in small-scale electricity generation and battery technologies present an opportunity for stand-alone power systems to replace electricity distribution lines in locations where it is more cost efficient than traditional network infrastructure.

Recent changes to the Electricity Industry Amendment Act 2020 enables Western Power to invest in and earn regulated revenue in relation to new technologies, specifically stand-alone power systems and distribution connected storage. Proposed changes to the Access Code will ensure the cost of these new technologies can be recovered through regulated tariffs.

Multi-function assets are those that can be utilised to provide both regulated network support services and other services.

These assets have become increasingly relevant as technology has evolved. For example, distribution-connected storage might now be used for both network purposes and provide unregulated (for the purposes of the Access Code) essential system services and/or energy arbitrage services.

Proposed Access Code changes will enable the sharing of benefits from multi-function assets, to ensure that:

• the network service provider is incentivised to increase the use of the existing network; and
• a share of benefits of this increased utilisation are passed through to end-use customers, who ultimately pay for the shared network.

The Whole of System Plan (WOSP) will identify the best network investment options, or ‘priority projects’, from a system-wide perspective in terms of solution, size and timing to achieve reliability and security requirements at the lowest cost. As it performs a similar function to the regulatory test and NFIT, there is an opportunity to streamline both tests to incorporate findings from the WOSP.

For WOSP projects identified as a ‘priority project’, Western Power will not be required to undertake a regulatory test and the ERA will only review the unit costs of expenditure. For other projects, Western Power may rely on the WOSP for inputs to the regulatory test.

Chapter 12 of the Access Code requires covered networks to develop Technical Rules, governing the design, construction and operation of electricity networks, as well as the standards for connecting to the network. Western Power (the only covered network in the SWIS) is the only party that can submit a change request for its Technical Rules.

Proposed changes to the Access Code will allow any person to submit a proposal to amend Western Power's Technical Rules, for the consideration of the ERA. A suite of other Access Code changes will facilitate the development of processes to accommodate public submissions, including appropriate technical support for the ERA in considering change proposals. It is expected that the new process will also improve the responsiveness of the Technical Rules to changes in the energy sector, such as technology advancements.

Further information on the detailed design of the Technical Rules change management process is available here.