United Energy’s distribution business generates predictable, regulated revenues. Approximately
91% of United Energy’s total revenue is regulated and includes network tariffs charged for
the use of United Energy’s distribution network and metering revenue. 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 that 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,
apply for periods of five years.
Diverse customer base
United Energy's customer base exhibits no significant customer class that could be unduly
influenced by variations in economic activity. Consumption is relatively evenly
distributed across residential, commercial and industrial users.
In January 2012, the Australian Competition Tribunal (ACT) upheld United Energy’s
appeal in respect of cost of capital, S-Factor and asset based indexation following
the AER's final decision on United Energy’s Electricity Distribution Price Review
(EDPR) for 2011 to 2015, which was released on 29 October 2010.
The final outcome of the ACT decision resulted in United Energy being awarded approximately
$50 million in additional revenues over 2013 to 2015 as compared to the AER's final
As a result, United Energy’s regulator approved tariff profile for the remainder
of the current regulatory period are shown below:
- For 2013 the price increase is CPI + 4.3%;
- 2014 price increase of CPI + 8.1%; and
- 2015 price increase of 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
In December 2008 United Energy commenced the final design and procurement stage for the roll
out of approximately 650,000 new smart meters to all customers in United Energy’s service
The roll out is expected to be completed by the end of 2013, with a total project
cost of $345 million.
The project involves replacing old-style meters with new smart meters and significantly
enhancing United Energy’s information systems to process the increased amount of data.
These smart meters can be read remotely, and allow electricity usage to be recorded
in 30-minute intervals. Benefits include the introduction of innovative, more flexible
tariff structures to reduce peak power consumption and costs and, potentially, to
provide customers with pricing information to enable them to respond to pricing
signals and reduce their overall cost of electricity.
Other benefits of smart meters can include rapid detection of outages, enhanced
monitoring of quality of supply; detection of meter tampering, remote connection
of electricity services, provision of information on network loads; more suitable
electricity pricing plans; and a point‑in‑time display of greenhouse gas emissions.
Ultimately, smart meters will become a critical piece of infrastructure supporting
United Energy’s ‘smart network’, providing automated outage detection and management, supporting
home and embedded electricity generation from solar, wind and energy storage devices.
As at November 2012 United Energy had installed smart meters at approximately 52%
of all connections across its network.
Transition of operating and corporate functions
During the period United Energy planned for the transition of its business operating model,
on expiry of the fixed price Operating Service Agreement on 30 June 2011. United Energy has
now successfully transitioned key corporate, financial and asset management functions
in-house. The transition will provide United Energy with greater control and transparency
over its operations that should result in improved customer service and network
performance and allow United Energy to optimise operating and capital expenditures.
Network operating and field maintenance functions remain outsourced, and contracts
were placed with two service providers for the provision of services for five-year
periods commencing in January 2012. The new outsourcing arrangements include incentive
and penalty arrangements under which the service providers are incentivised to improve
efficiency and network performance and allows for the benchmarking of United Energy's operating
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 distribution transformers and substations that are nearing
their capacity limits for replacement with larger units. The program aims to enhance
the reliability of supply to United Energy’s customers, particularly during periods of very
high demand on hot days.
IT infrastructure renewal
As part of the transition to United Energy’s new business model, a major project has been
implemented to secure and enhance United Energy’s information technology infrastructure and
bring major systems up to date. The project encompasses the establishment of a new
data centre, and segregation and renewal of major IT systems. The project is currently
meeting all of its key milestones and budgets and will enhance system reliability
In July 2010, the Victorian Bushfire Royal Commission released its final report.
As a result, United Energy has engaged with the AER and ESV and has adopted a number of initiatives
designed to improve the safety and reliability of its network and reduce the potential
for fire starts. Programs under way include steel conductor replacement, fitting
of vibration dampers, armor rods and spreaders as well as expansion of the scope
of vegetation clearance works.