United Energy

 

www.unitedenergy.com.au

United Energy's electricity distribution network covers 1,472 km2 of south-east Melbourne and the Mornington Peninsula

The distribution network transports electricity from the high voltage transmission network to residential, commercial and industrial electricity users.

United Energy's distribution area is largely urban and, although geographically small (about 1% of Victoria's land), serves around 25% of Victoria's population.

DUET holds a 66% interest in United Energy.

Snapshot
Interest 66%
Revenue ($ million) 467
EBITDA ($ million) 318
Regulatory reset date:
Smart Meter
Distribution
1 January 2014
1 January 2016

Revenue streams

United Energy’s distribution business generates predictable, regulated revenues. Approximately 91% of United Energy’s total revenue comes from network tariffs, charged for the use of United Energy’s distribution network and for the use of the transmission grid. The tariffs are levied on electricity retailers, who pass these costs on to their customers. Growth in network tariff revenue is driven by volume growth and regulated network tariff charges. Other revenue comes from services which  United Energy provides to its customers, such as relocating assets at the request of our customers, extending existing distribution networks, providing public lighting to local council areas, and access charges for the use of electricity distribution poles to telecommunication companies.

The regulatory price determinations, which regulate the majority of these revenues, are undertaken by the Australian Energy Regulator (AER) and apply for periods of five years.

Diverse customer base

Energy consumption in United Energy’s distribution area is evenly spread across residential, commercial and industrial users, making United Energy less vulnerable to variations in energy use in any one of these markets. 

Regulation

United Energy’s current regulatory period covers 2011–2015.

In 2012, United Energy successfully appealed the AER’s 2011 final pricing determination, resulting in United Energy being awarded around $50 million in additional revenue, spread across the remaining three years of the current regulatory period. As a result, United  Energy has the following regulator-approved annual tariff increases:

—   2013 CPI+ 4.3%
—   2014 CPI+ 8.1%, and
—   2015 CPI+ 8.1%.

The next regulatory reset date for United Energy’s access arrangement is 1 January 2016.

Smart metering – Advanced Meter Infrastructure (AMI) program

United Energy is rolling out smart meters to all 650,000 customers on its network.

The project involves replacing old-style meters with new smart meters that are able to be read remotely and allow electricity usage to be recorded in 30-minute intervals. The business has also had  to significantly upgrade its information systems to process the increased amount of data that it is now receiving.

To date, all of the IT and communications infrastructure has been successfully deployed, allowing for accurate and timely meter reading. As at 31 July 2013 United Energy had completed approximately 69% of the meter roll-out program. Practical completion1  of the roll-out is expected to occur by the end of calendar year 2013.

From 1 July 2013, United Energy introduced variable tariff pricing arrangements, with peak and off-peak pricing now available. Combined with an enhanced understanding of their energy consumption provided by the smart meter technology, customers will now be able to modify their energy usage patterns to manage their energy charges.

Smart meters also provide valuable information regarding specific network load on a more granular level, than has previously been available. This will assist United Energy’s asset management team to manage overall demand, allowing for more targeted approach to capital expenditure investment and optimise the replacement  of transformers on the network.

Ultimately, smart meters will become a critical piece of infrastructure supporting United Energy’s ‘smart network’ strategy, providing automated outage detection and management, supporting home and embedded electricity generation from solar and energy storage devices.

United Energy customers can access their energy usage via a secure internet portal called “Easy Energy” accessible via either PC or smartphone. The web-based portal allows customers to track daily, weekly and seasonal electricity consumption. Photovoltaic connected customers are able to view their savings and the system also provides the necessary information to support consumers in making decisions regarding their consumption and retailer offerings.

United Energy is working with a number of service providers to  ramp up the rate of meter installation, with completion of the roll-out targeted in the first half of calendar year 2014.

1. Practical completion where UE anticipates each customer in their network will have been visited by an installer and will either have a new AMI meter installed or have a plan in place to do so.

Distribution system augmentation project

To address the growth in peak demand in the region, United Energy has embarked on a major program to enhance the capacity and reliability of the distribution system. The project has identified and replaced distribution transformers and substations that were nearing their capacity limits as a result of the high penetration of air-conditioning units throughout the network over recent years. The program aims to enhance the reliability of supply to United Energy’s customers, particularly during periods of very high demand on hot days.

This significant capital expenditure program saw United Energy’s regulated asset base (RAB) increase by 9% during the 2013 financial year, with the business on track to achieve a 6% compound annual growth rate in its RAB over the current regulatory period. The growth in the United Energy’s RAB and associated approved tariff increase, will be a driver of Group revenue and earnings growth over the next few years.

Bushfire prevention

United Energy continues to work closely with the AER and Energy Safe Victoria to implement recommendations that came out of  the 2009 Victorian Bushfire Royal Commission final report. The business has adopted a number of initiatives designed to improve the safety and reliability of its network and reduce the potential for fire starts. Programs underway include steel conductor replacement, fitting of vibration dampers, armor rods and spreaders as well as expansion of the scope of vegetation clearance works in high bushfire risk areas.

Operational overview

 
Year to 30 June 2013 Year to 30 June 2012
Network connections
Small (residential & unmetered) 593,588 586,404
Medium size business 55,651 54,600
Commercial & industrial 3,173 3,427
Total 652,412 644,431
Electricity load - GWh
Small tariff 2,929 2,954
Medium tariff 1,443 1,485
Large tariff 3,589 3,695
Total electricity load 7,961 8,135
Distribution network statistics*
SAIFI (number of interruptions) 1.1 1.1
MAIFI (number of interruptions) 1.3 1.1
SAIDI (minutes) 123 107
Occupational health and safety
Lost time injuries 3 3
Environmental
Scope 1 CO2e emissions   4,206 t

* Does not include Excluded Events as defined by the AER.

Financial summary

$ million
Year to 30 June 2013 Year to 30 June 2012
Distribution revenue 335 317
467 467 441
EBITDA 318 276

Credit ratings

Rating levels as at period end were:

S&P BBB (stable outlook)
Moody's Baa2 (stable outlook)