Electricity Safety (Bushfire Mitigation) Amendment Regulations 2016:
Statement of Reasons
for Decision to Make Regulations
1 May 2016
Purpose
The purpose of this document is to assist the Minister for Energy and Resources in complying with guidelines made pursuant to section 26 the Subordinate Legislation Act 1994.
Page 39 of the Victorian Guide to Regulation states:
“Departments/agencies must provide reasons for the direction taken in final regulations or legislative instruments that broadly address any general issues raised in submissions. This statement of reasons must be published on the same government website used to consult on the RIS and on the VCEC’s website, and be available in hard copy format on request. In this way, the rationale for the ‘final policy position’, including any departures from the preferred option in the RIS, can be explained clearly and is readily accessible to all stakeholders.”
Background
On 23 November the Minister for Energy and Resources released an exposure draft of the Electricity Safety (Bushfire Mitigation) Further Amendment Regulations(the Regulations) and Regulatory Impact Statement (RIS). The name of the proposed Regulations has been adjusted to the Electricity Safety (Bushfire Mitigation) Amendment Regulations 2016, reflecting the new calendar year.
The public consultation period closed on 30 December 2015.
Sevensubmissions were received from the following parties:
No. / Organisation1 / NexansOlex
2 / Angus Nichols – Intercapital Group
3 / Park Orchards Ratepayers Association Inc. (PORA)
4 / AusNet Services
5 / CitiPower Pty Ltd and Powercor Australia Limited
6 / United Energy
7 / Bill Carman
These submissions identified sixteen separate issues relating to the proposed regulations, or RIS. Eight of these issues relate to the theme of technical uncertainty; eight relate to cost uncertainty. The Government commissioned independent technical experts to review these submissions and provide advice.
These experts, Mr Gary Towns and Dr Tony Marxsen, are leading authorities in network operation and protection systems with many years’ experience working in the electricity distribution sector. Mr Towns and Dr Marxsen participated in the Powerline Bushfire Safety Taskforce, formed by the Victorian Government to maximise value from Recommendations 27 and 32 of the Victorian Bushfires Royal Commission.
The following table summarises these issues asraised in submissions. It then presents the views of independent technical experts. Finally, the Government’s position is stated.
Key Theme: Technical UncertaintyIssue 1 / Rapid Earth Fault Current Limiter (REFCL) performance has not been demonstrated sufficiently (including on long rural feeders).REFCL fire risk reduction capability has been overstated in the RIS.
Independent Expert View / Rigorous research conducted over six years has demonstrated how fires are started by network faults under Code Red Day conditions. This research has shown what level of fault detection and suppression is required to prevent these fires. These levels are reflected in the proposed Regulations.
REFCL technology tested in Victoria has been developed further than in any other REFCL installation in the world in the key areas ofenhanced earth fault sensitivity, residual current compensation capability and response time and control of the energy released in confirming sustained fault location.
On some large rural 22 kV networksit may be difficult to achieve the capacitive balance necessary to reach the detection standard specified in the Regulations. This risk is expected to occur only in exceptional circumstances.
Zone substations serving large rural networks may require installation of more than one REFCL unit to meet the fault detection standard.
Government Response / The bushfire risk reduction capacity of REFCL technology, and the fault detection and suppression standards to which they comply, have been demonstrated through rigorous trials on live 22 kV networks. These trials were undertaken in close cooperation between the State Government Powerline Bushfire Safety Program and the electricity distribution businesses.
The results of the 2015 Kilmore South zone substation REFCL trials and 2015 Springvale zone substation vegetation conduction ignition tests indicate that the level of risk reduction from REFCLs stated in the RIS is achievable.
The distribution businesses should attempt to comply with the standard as stated in the Regulations. The businesses should evidence all circumstances where additional REFCL units are required at zone substations to the satisfaction of Energy Safe Victoria (ESV) and the Australian Energy Regulator (AER).
Issue 2 / Operation of REFCL sensitivity should be relaxed on non-Total Fire Ban (TFB) days.
Independent Expert View / Operating the REFCLs at fault detection levels less sensitive than the fault detection level specified in the proposed Regulations willstill provide a significant reduction in potential for fire starts. Should experience prove that the sensitivity stated in the proposed Regulations has a negative impact on supply reliability, reduced sensitivity could be considered for non-Total Fire Ban (TFB) days. If experience shows the impact of sensitive fault detection on supply reliability is not material, full applicationof the standard should be considered in the interests of public safety.
Government Response / The proposed Regulations specify that 45 codified zone substations must have the capacity to comply with the performance standards. They do not prescribehow frequently, for how long,or under what circumstances the REFCL units will be operated to these standards. Rather, it is expected that the businesses will use REFCLs to optimise both safety and reliability outcomes.
The distribution businesses will be required to specify in their Bushfire Mitigation Plans:
- the level of sensitivity settings for each REFCL;
- the periods of the year each of these levels will be met; and
- how compliance against the standards will be demonstrated.
As an interim step, the Victorian Government expects that the businesses will provide and commit to plans to progress REFCL installations to full detection and suppression capability over the shortest practicable time.
Accordingly, ESV may exercise its existing powers under Section 13 of the Regulations to grant exemptions to the standards on a case-by-case basis.
These exemptions will be considered where a distribution business:
- demonstrates practical impossibility of meeting the stated requirements at a particular zone substation;
- demonstrates any zone substation that is not fully compliant has reached its best practicable level of fault detection;
- provides a written undertaking as to how it will achieve full compliance with the Regulations within a defined period; and
- provides these details in a Bushfire Mitigation Plan.
Issue 3 / Extended REFCL operation may place the public in danger from energised un-faulted conductors.
Independent Expert View / Businesses should undertake risk assessments to guide decisions onextended periods of REFCL compensation that optimise public safety.
Government Response / The proposed Regulations specify that 45 codified zone substations must have the capacity to comply with the performance standards, not when and how these standards must be met.
The Victorian Government acknowledges that electricity distribution businesses are best placed to manage the risk of un-faulted, live phases.
The businesses are also best placed to drive further technical innovation of REFCL technology to better detect and supress a range of faults.
The distribution businesses will be required to report to ESV on how these risks will be managed.
Issue 4 / A longer rollout schedule for REFCLs beyond 2022 is required to manage undiscovered technical complexities in resonant earthing and provide distribution businesses with time to learn-by-doing.
Independent Expert View / A longer roll out of REFCLs will transfer risk from the distribution businesses to the Victorian public.
Existing approaches to asset deployment used by the distribution business maynot be sufficient to meet the REFCL roll out schedule specified in the proposed Regulations.
This risk could be controlled by:
- Extension of the rollout by two years;
- Distribution businesses adoption oftemporary dedicated organisational and commercial solutionsto achieve fasterdeployment; or
- Limited force majeure waiver discretion.
- Acceptance of progressive compliance achievement over time to the standards specified in the Regulations, providedREFCL installations have been completedby the specified dates. (This allowance should be limited to 12 months, with a further 12 months extension available if substantial progress towards full compliance has been demonstrated.
Government Response / The Government considers the seven year time frame for REFCL deployment in 45 locations is a compromise designed toachieve bushfire safety as soon as possible, whilst acknowledging practical logistical constraints in asset deployment.
The Government acknowledges the REFCL performance specifications stated in the regulations constitute a level of sensitivity and speed for network protection not previously seen in Victoria.
The Government will retain a REFCL deployment programof seven years for all 45 zone substation sites stated in the proposed Regulations. In light of the lead times required to finalise the proposed Regulations, the Government will defer the commencement of these obligations to the date of enactment of the proposed Regulations.
It is recognised that distribution businesses may encounter circumstances beyond their reasonable control in workingto comply with these proposed Regulations. Consequently, it is advised the Government will rely on the discretionary powers of ESV to vary the application of the obligations contained in the Regulations, on a case-by-case basis. Such exemptions will be granted where a business:
- Can evidence that matters beyond their reasonable control materially impacts on full compliance,
- Scopes the extent of exemption required (deviation from technical specifications, volume, and/or time frames); and
- Provides a written undertaking as to how they will ultimately achieve full compliance with the proposed Regulations within a defined period.
Issue 5 / There will be limited, reduced or no reliability improvements resulting from REFCL operation.
Independent Expert View / Challenges to the RIS reliability benefits from REFCL introduction must be evidenced before they can be accepted. International experience shows reliability of supply improvement is a reasonable expectation following REFCL installation.
Reliability benefits mayalso depend on how long REFCLs are operated in compensation mode following a network fault. This mayimpact on the degree of network hardening required for REFCL operation.
Government Response / The objective of introducing REFCLs is to reduce the risk of harm to human life and property. On these grounds alone, the cost of introducing REFCLs is justified, as stated in the RIS.
The introduction of REFCLs is still expected to deliver reliability benefits overthe long term.
Issue 6 / Operation of REFCLs should not be allowed to conflict with fault location systems recently introduced by the businesses on the networks.
Independent Expert View / This is recognised as a matter to be addressed.However, integration of existing network fault location systems with REFCLs should be given a lesserpriority than commissioning REFCLs to cut fire risk.
Government Response / The Victorian Government encourages the distribution businesses to explore all reasonable engineering solutions to integrate REFCLs into their networks to achieve the proposed deployment schedule. Decisions on REFCL operation will be the responsibility of the distribution businesses.
Issue 7 / A standard for covered conductor should be supplied in the proposed Regulations and sections of line to be replaced at end of life in codified areas be more closely defined. Clearer definitions of “electric line” and “covered conductor” should be included in the proposed Regulations.
Independent Expert View / Specification of covered conductor could be added to the proposed Regulations.
Government Response / The intention of the proposed Regulations is that, within the 33 declared areas, at any point four or more consecutive spans of an electric line are replaced, those four or more consecutive spans are replaced with covered or underground conductor.
It is the intent that 'electric line' as used in the proposed Regulations in relation to these areas has the meaning defined in the Act. It is standard practice for subordinate legislation to use terms defined in the empowering Act without repeating the definition. As there is no contrary intention in the proposed Regulations, the definition in the Act applies.
With regard to the term “covered conductor” has the common English meaning so as to include a range of suitable technologies.
It is understood that ESV will be working with the electricity distribution businesses to produce a guide on appropriate least cost technically acceptable conductor types.Consequently there appears to be no material impediment to industry interpreting the intention of the proposed Regulations, or applying them, in respect of electric line construction.
Issue 8 / Time is required to test the LoSag covered carbon core conductor for network compatibility issues and post-fault condition.
Independent Expert View / Further time to investigate LoSag issues and consideration of mature cable technology may be warranted.
Government Response / The proposed Regulations do not dictate any particular cable technology.
Key Theme: Cost Uncertainty
Issue 1 / The costs of compliance with the proposed Regulations should be borne by the wider Victorian public and not be recovered through customer tariffs.
Independent Expert View / N/A
Government Response / Under the national energy regulatory framework, electricity distribution businesses recover the costs of compliance with regulatory requirements from their customers. In the case of the proposed Regulations, this will entail significant costs for those businesses with large quantities of assets in high bushfire risk areas.
There are two potential alternatives to this arrangement:
- Enact a cross-subsidy whereby compliance costs are borne by all electricity distribution businesses (and therefore by all electricity consumers) regardless of whether their assets are in high bushfire risk locations; or
- Government funding for the deployment of the required assets.
With respect to Government funding, it should be noted that $250 million has already been supplied to the Powerline Bushfire Safety Program to undertake works such as targetted powerline replacement, and installation of backup electricity generators.
Issue 2 / The proposed REFCL rollout schedule will increase costs to consumers.
Independent Expert View / N/A
Government Response / Any additional costs which may be incurred from a seven year roll out of REFCLs must be weighed against expedited bushfire risk reduction to the Victorian community.
The AER must be satisfied that the costs of REFCL installations are what a prudent and efficient distribution business requires. To provide financial transparency, it is expected that REFCL installations will be treated as gated contingent projects within delivery tranches, subject to ongoing review.
Issue 3 / Cost benefit of REFCL technology has not been sufficiently justified.
Independent Expert View / N/A
Government Response / As demonstrated through the RIS, the 45 sites selected represent 90 per cent of bushfire risk reduction for the state. These benefits, in and of themselves, justify the cost of REFCL deployment.
Issue 4 / Costs of REFCL roll out will likely be 30per cent higher than stated in the RIS due to: 100 per cent surge arrestor replacement and other network hardening and capacitive balancing expenses.
Independent Expert View / The submissions do not provide sufficient evidence for the replacement of 100 per cent of the surge arrestors on relevant feeders in order to accommodate REFCLs.
Surge arrestor for REFCLs replacement must be done on a reasonable risk-based approach. It must not include “end-of-life” replacements.
The duration of REFCL operation will also influence the extent of surge arrestor replacement. A review of one manufacturer’s surge arrestor specifications indicates that overvoltage events (e.g. from REFCL operation) up to 30 minutes may be possible under system normal conditions.
Operating REFCL compensation for a brief period of time will reduce the amount of necessary hardening.
Cost-effective engineering options must be explored.
Government Response / The Government expects Victorian consumers will only pay efficient costs associated with installation of REFCLs onto the network.
The AER must be satisfied that the costs of REFCL installations are what a prudent and efficient distribution business requires. To provide financial transparency, REFCL deployment will be funded through the contingent projects mechanism, detailed in the National Electricity Rules. This mechanism provides the AER with a decision gateway, and allows cost benchmarking to ensure efficiency.
Consequently, all network hardening costs will need to be evidenced as necessary and dependant only on REFCL installation.
Issue 5 / Costs of powerline replacement will be higher than stated in the RIS.
Independent Expert View / New customer connections will need to have the true cost of the bushfire risk factor included.
Some further enhancements of existing infrastructure, e.g. additional lightening protection on covered conductor lines, may be necessary.
Government Response / The proposed Regulations do not dictate any particular cable technology. Any marginal increase in costs in prescribed areas must be weighed against the bushfire risk reduction benefit coming from enhancing the construction standards of powerlines in codified areas.
The Victorian Government expects costs of powerline replacement will be treated as contingent projects by the AER.
Issue 6 / Use of separate declarations by the Emergency Management Commissioner in respect of electric line construction declared areas creates uncertainty.
Independent Expert View / N/A
Government Response / The Government recognises the electric line construction declared areas are likely to be static over a reasonable timeframe. Reliance on decision by a statutory office holder creates uncertainty for the businesses, consumers and Government. Consequently, these areas will be incorporated directly into the proposed Regulations.
Issue 7 / Further extension of the powerline construction declared areas should be considered.
Independent Expert View / N/A
Government Response / Construction of new and replacement powerlines with covered or underground conductor represents the most costly of bushfire mitigation options considered by the Government in meeting Victorian Bushfires Royal Commission Recommendation 27. Consequently this option imposes significant costs on electricity consumers. For this reason use of this option has been restricted to those areas of highest consequence bushfire risk, as determined through detailed modelling and expert knowledge.
The Government recognises that bushfire risk is significant in other areas. For this reason a range of other measures are being taken to provide cost-effective and demonstrated protection to all at-risk areas. REFCLs and Automatic Circuit Reclosers (ACRs) will yield significant reductions in bushfire risk across the State.
Further, it should be noted that the proposed Regulations are creating a minimum standard for bushfire safety. The proposed Regulations do not preclude businesses taking further actions to improve safety.
Issue 8 / The proposed Regulations will force distribution businesses to adopt particular technologies from specific suppliers, imposing unit supply and cost risks and excluding alternative technology solutions.
Independent Expert View / The proposed Regulations are based on six years of rigorous trials into network ignitions under Code Red conditions. These trials were technology and product neutral.
One product is currently meets the performance standards, two others are partially compliant. It is expected that adoption of the proposed regulatory amendments will stimulate other product developers to enter the Victorian market.
Government Response / The proposed Regulations have been framed as technology-neutral performance specifications for fault detection and suppression. These specifications reflect the network protection operations required to prevent bushfire ignition under Code Red conditions. These performance standards were demonstrated by rigorous trials on live 22 kV networks.
Achieving the performance standards will require businesses to source a range of goods and services, the majority of which are available from competing suppliers. It is likely that the proposed Regulations will drive new and competing technology providers into the market.
1