Five years, $4.6bn for ageing grid

Whatever the findings of Michelle Shepherd's report into summer power outages, due to be delivered today, Western Power will be embarking on a massive capital investment program.

Baldivis, Roleystone, Kelmscott and the City of Canning were among the areas hit by the outages, which affected 34,000 households and businesses.

Ms Shepherd, who is a commissioner of the Australian Energy Market Commission, had been tasked with delivering her report to Energy Minister Bill Johnston by March 14.

The report comes at a critical time for government-owned Western Power, which must replace and modernise an ageing network

About $4.6 billion is to be invested in the network in the five years to 2027, according to documents submitted to regulators in recent weeks for its access arrangement review.

That’s up 29 per cent on the previous five-year period.

It highlights the battle for utilities to achieve high levels of safety and reliability without excessive costs or gold-plating of the network.

Western Power’s regulatory submissions and network infrastructure reporting show the pressure will grow in the decade ahead.

Large parts of the network were built during big growth periods for the state in the second half of the 20th century.

About 55 per cent of the utility’s distribution assets will reach the forecast end of their lives by 2031.

A handful of numbers show the scale of work required across the grid.

As at June 2020, about 27 per cent of the 332 power transformers in service were either in poor or bad condition, needing replacement or refurbishment due to age and other factors.

About 180,000 power poles, or 31 per cent of the wood poles in the system, are older than 40 years, and more than 100,000 in that group required treatment.

There are also about 20 substations projected to exceed 95 per cent utilisation during peak periods by 2031, including at Byford, Maddington and Henley Brook.

Western Power’s investment program is targeted to resolve some of these challenges, with half of the capex earmarked for asset replacement and renewal.

Only $1.1 billion is to be used for growth projects.

But the plan will have to be approved by the Economic Regulation Authority, which will want a tight leash on spending to keep power prices down and stop waste.

Mr Johnston’s view is that the ERA should have a greater focus on keeping the network reliable.

He wrote to the ERA in February expressing concern the regulator does not apply the same value to reliability as the wider community when it calculates allowances for Western Power.

Part of Western Power’s strategy is to use new technology on the network.

The government entity plans to roll out 4,000 standalone power systems by 2031, with the first 1,861 to cost $330 million.

Standalone power systems are independent generation and storage units, which can operate disconnected from the main grid.

They can be used to serve customers at the fringes of the grid, particularly through the Wheatbelt, replacing the need for long powerlines to each individual property.

In the metropolitan area, Western Power will spend $685 million to underground about 875 kilometres of powerlines.

A third option is to enable private investment into the network, either for transmission lines linking new power generation projects or to build, own and operate replacement parts of the grid.

Outages

The ageing network gives context to the debate about power outages over summer.

Several industry sources who spoke to Business News confirmed Western Power’s position that hot weather and high demand pressure around Christmas would have contributed to the outages.

There was an expectation it could get worse as equipment ages and the network faces increased demand from electric vehicles.

With temperatures over 40 degrees and a potential bushfire risk, Western Power said it also had delays fixing those outages.

Responding to Western Power’s regulatory submission, the ERA said reliability performance had generally been above benchmark.

“While … Western Power has generally exceeded reliability performance over the past five years, the average nature of the data may mask parts of the system that are underperforming,” the ERA said.

But the ERA also notes that transmission outages, major event days, force majeure events and planned outages were excluded from the measurement standard.

“This could mean that what is being measured could be different from what customers are experiencing,” the ERA said.

It’s also not the first time the company has been under pressure for network investment.

A parliamentary inquiry in 2012 and regulatory rulings following bushfires put pressure on Western Power to improve its management of wooden poles, with the ERA indicating more than $1 billion was spent on treating the poles in the five years to 2017.

The company’s investment program in that period added substantially to state debt.

Western Power has projected borrowings of $8 billion by June, according to the state budget.

Chief executive Ed Kalajzic announced he would leave the role on March 9.