From the director…
Welcome
to Pipes & Wires #64. I’ve decided to try a slightly different format of
grouping articles under broad headings such as “Economic regulation” and
“Public policy” to make people’s specific interest areas easier to find.
This issue is dominated by
regulatory determinations (of which 3 are from New Zealand) and public policy
issues (of which 2 are from the United States). As always comments are welcome,
so until next month … happy reading.
About Utility Consultants
Utility Consultants Ltd is a
management consultancy specialising in network utility asset and regulatory
strategy. To be sent a detailed profile of recent projects, pick
this link.
NZ – matters requiring attention
Review of information disclosure regime
The Commerce Commission intends to
issue a consultation package on the information disclosure regime in late
November 2007 in anticipation of the revised Requirements being available in
late March 2008. Read
the full notice.
Proposed change to ODV disclosure date
The Commerce Commission does not
intend requiring electricity lines businesses to undertake a full ODV update as
at 31st March 2008, but proposes instead that this be deferred until
31st March 2009. Read
the full notice.
Submissions on the Vector and Powerco draft decisions to authorise
control
The Commerce Commission will
receive submissions on the above paper until midday on 12th November
2007 – refer full article below (“NZ – gas under pressure”).
Submissions on the Transpower draft decision not to declare
control
The Commerce Commission will
receive submissions on the above paper until Friday 9th November
2007 – refer to full article below (“NZ – draft decision on Transpower”).
Requirement to facilitate connection of distributed generation
The Electricity
Governance (Connection of Distributed Generation) Regulations 2007 came
into force on 30 August 2007. Key features of the Regulations
are as follows…
·
The requirement to establish a process by which generators can
apply to a lines business to connect generation.
·
Setting out regulated terms and conditions for connecting
distributed generation if the generator and lines business cannot agree on
acceptable terms.
·
Establishment of a default dispute resolution process.
·
Defining the pricing principles that a lines business must apply
when setting connection charges.
·
Setting maximum fees for processing connection applications and inspecting
prior to commissioning.
For more information or just to
chat about how your company can comply, pick here.
Requirement to implement a public safety management system (PSMS)
The Electricity Amendment Act
2006 and the Gas Amendment Act 2006 both spell out the requirement for Safety
Management Systems. These Acts set out what any Regulations made under the
respective Acts must include and what it may include. If you
would like further information or simply to chat about how a PSMS might work
for you, pick here.
UK – updated gas distribution price proposal
Introduction
Pipes
& Wires #60 introduced OFGEM’s initial proposal on the gas distribution
price controls that will apply to National
Grid, Northern Gas Networks, Wales & West Utilities, Scotland Gas Networks and Southern Gas Networks for the
five year period from 1 April 2008 to 31 March 2013. This article briefly examines
OFGEM’s updated proposal.
Key features of the updated proposal
Key features of the updated
proposal in comparison with OFGEM’s initial proposal are…
|
Parameter |
Industry totals |
||
|
Initial proposal |
Updated proposal |
Final proposal |
|
|
OpEx |
£598.0m |
£628.0m |
|
|
Growth CapEx |
£328.2m |
£319.2m |
|
|
Renewal CapEx |
£654.0m |
£678.0m |
|
|
Opening asset value |
|
£11,715.2m |
|
|
Post-tax WACC |
4.2% |
4.2% |
|
OFGEM expects to release its
final proposal in December 2007. Pipes & Wires will complete the above
table and make further comment when that proposal comes to hand.
NZ – gas under pressure
Introduction
Earlier this month the Commerce
Commission released its Draft Decisions Paper on the Authorisation for the
control of gas distribution services by Powerco and Vector for the period 25
August 2005 to 30 June 2012. This article very briefly recaps the Gas control Inquiry
and what Authorisation means, and then examines the Commission’s stance on WACC
in the latest paper.
The Gas Control Inquiry
In April 2003 the Minister of
Energy formally instructed the Commission to inquire into whether gas transmission
and distribution prices should be controlled. In November 2004 the Commission
reported the following…
·
That the prices of NGC Distribution, NGC Transmission (both since
acquired by Vector), Wanganui Gas and Maui Developments Ltd should not be
subject to control (although they legally could be subject to control under s52
of the Commerce Act 1986 due to limited competition).
·
That the prices of Powerco and Vector (Auckland) should be subject
to control (via an Order In Counsel made under s53 of the Act) because they
were both earning significant excess returns.
In reaching these conclusions the
Commission indicated that the excess returns charged by Powerco and Vector
(Auckland) were significant enough to outweigh the costs of control, but in the
other cases the costs of control would be almost as great as the excess returns
hence there was little public benefit from control. Hence in July 2005 the
Minister announced a decision to declare Control of Powerco’s and Vector’s
(Auckland) gas distribution activities. This took effect on 25 August 2005.
Legal framework for authorisations
The legal framework for
authorisation of prices for controlled goods or services is set out in s70 to
s74 of the Commerce Act 1986. In particular s70 permits the Commission to
authorise any component of revenue, prices or quality standards using whatever
approach it considers appropriate.
The Commission’s draft decisions of October 2007
Key features of the Commission’s
draft decisions include…
·
Adoption of a post-tax nominal WACC of 9.14% which will increase
to 9.33% from 2008. This is at the 75% of the WACC range, but the Commission
considers this to be appropriate in light of the need to maintain investment.
·
Upon commencement of the Authorisation, Powerco would need to
reduce its prices by 42% and Vector by 15% to be followed by reduction of CPI –
2% per year for the remainder of the control period.
The Commission furthermore believes
that its analysis may have understated the returns being made.
The Commission’s stance on WACC
The latest paper includes a
lengthy discussion of WACC component parameters which are fairly common to most
pipes & wires determinations however the key focus of this discussion
begins at paragraph 1,039 wherein the Commission recognises that the
consequences of underinvestment can be more severe than overinvestment, and
that correspondingly the consequences of underestimating WACC may be more
serious than overestimating.
The commission believes that it
would be more appropriate to adopt a WACC from the higher end of the range than
to overestimate the component parameters, and has accordingly adopted the 75th
percentile which will be as follows…
·
9.14% for the period 25 August 2005 to 30 June 2008.
·
9.33% for the period 1 July 2008 to 30 June 2012.
In closing, it is interesting to
note the Commission records at paragraph 1,096 that its decisions must be made
in light of the prevailing statutory framework which presumably includes the s26
Notice of August 2006 in regard to incentivising investment in
infrastructure.
Next steps
The Commission will receive
submissions on the draft decisions paper up until midday on 12th
November 2007 and has arranged a conference for the week beginning 3rd
December 2007.
NZ –
draft decision on controlling Transpower
Introduction
Earlier this month the Commerce Commission released its Draft
Decisions and Reasons for Not Declaring Control of Transpower. This article
briefly examines the background to the Commission’s post-breach investigation
and then considers the reasons for not declaring control.
Background
As a result of two threshold breaches in 2003
and 2004 and an announcement in November 2005 to increase transmission prices
on 1 April 2006 the Commission published its intention to declare control of Transpower’s transmission services
under Part
4A of the Commerce Act 1986. Transpower’s board subsequently expressed a
preference for resolving the post-breach inquiry with an administrative
settlement. The Commission in turn agreed to delay a control decision only if
Transpower suspended the price increase planned for 1 April 2006 (which it did
do).
After a drawn out process of considering
settlement offers from Transpower, the Commission has reached a draft decision
not to declare control.
Transpower’s
settlement offer
Transpower has proposed the following three
price-related thresholds (which would replace the existing price path
threshold)…
·
A
revenue requirement threshold applicable from 1 July 2007 to 30 June 2011 which
would require Transpower to demonstrate that it has applied a set of principles
in deriving its annual revenue requirement for the purpose of setting prices
“for those services that fall within the definition of specified services”.
·
A
CapEx threshold applying to non-Part F CapEx (ie. CapEx that doesn’t need to be
approved by the Electricity Commission under Part F of the Electricity
Governance Rules) for the year ending 30 June 2008 of $120.7m. The
threshold will be annually reset for any subsequent CapEx in these categories.
·
A
new system operator services threshold covering Transpower’s agreement with the
Electricity Commission
until either 30 June 2011 or the role is materially changed.
Transpower also proposed that the existing
quality threshold continue in its current form.
Basis
of the decision not to declare control
The Commission’s draft decision not to
declare control of Transpower is based on the view that meeting the objectives
of s57E of the Commerce Act 1986 could be better achieved by accepting and
implementing Transpower’s settlement offer. Specific reasons proffered by the
Commission include…
·
The
settlement approach avoids most if not all of the costs of control.
·
A
voluntarily agreed settlement generally has a better chance of meeting the s57E
objectives than an enforced arrangement.
·
The
Commission recognises the importance of encouraging investment in quality of
supply and is keen not to distort those investment signals by imposing any
external restraints.
·
The
Commission recognises the need for regulatory stability and consistency,
particularly in regard to the settlement with Unison.
Next
steps
The Commission will receive
submissions on the above paper until Friday 9th November 2007 after
which it will form a final view. The Commission anticipates that a conference
will not be necessary.
NZ – Supreme Court dismisses Unison appeal
Introduction
Most of remember Unison’s recent price control woes that
Pipes & Wires analysed extensively. Perhaps lesser known, and perhaps also
less visible, was Unison’s judicial challenge that the Commerce Commission has acted
inconsistently with Part
4A of the Commerce Act 1986. The Supreme Court recently ruled against Unison,
and it is this ruling that forms the basis of this lengthy article.
Background
The legal framework for
electricity lines price control in New Zealand is set out in Part 4A of the
Commerce Act 1986. In particular, s57E sets out the purpose of Subpart 1 of
Part 4A which is to “promote the efficient operation of markets directly
related to electricity distribution and transmission services through targeted
control for the long-term benefit of consumers by ensuring that suppliers…
·
Are limited in their ability to extract excessive profits.
·
Face strong incentives to improve efficiency and provide services
at a quality that reflects consumer demands.
·
Share the benefits of efficiency gains with consumers, including
through lower prices.
The process of judicial review
The process of the judicial
review has been as follows…
·
In May 2004 Unison initiated a judicial review against the
Commerce Commission arguing that the Commission had set the thresholds in a
manner that was inconsistent with the purpose and requirements of the
legislation.
·
In November 2005 the High Court dismissed Unison’s application.
·
In December 2006 Unison appealed to the Court Of Appeal. Although
the Court of Appeal found that the initial threshold (set on 31 March 2003 to
retrospectively cover the period 8 August 2001 to 31 March 2004) had been set
in breach of the Act’s requirements the Court of Appeal refused to grant Unison
any relief in respect of that unlawfulness and dismissed the appeal. The Court
of Appeal also found that the revised threshold (to apply from 1 April 2004)
was in fact lawful.
·
In June 2007 Unison appealed that decision to the Supreme Court
which the Supreme Court subsequently dismissed in mid-September 2007.
The issue at stake
The core of Unison’s request for
a judicial review was that both the initial and revised thresholds were
unlawful. Unison argued the following…
·
That the Commission’s statutory powers to set thresholds had not
been used in accordance with the statutory purpose of promoting the efficient
operation of markets for electricity distribution services as set out in the
Act.
·
That the thresholds set by the Commission do not comply with the
statutory requirements for thresholds.
The various courts’ rulings
The various courts’ rulings are
as follows….
|
Court |
Ruling |
|
High Court |
·
That the purpose statement (s57E) was
expressed in language consistent with an approach involving encouragement and
persuasion. ·
Concerned that Unison’s view of the
attributes each threshold must consider gave priority to the means rather
than the end. ·
Satisfied that the Commission had sought to
establish a regime that gave effect to the stipulated purpose. ·
Believed that the Commission had the
discretion to exclude a profit adjustment on the basis that it could create
hardship for some lines businesses, and would slow down the implementation of
the regime. ·
Part 4A did not have to be read as
requiring thresholds based on profits. |
|
Court of Appeal |
·
Recognised that the Commission had a wide
discretion as to how it set thresholds, and that it did not have to achieve
all 3 aspects of s57E at once. ·
Accepted that the Commission might be able
to achieve the purposes in numerous ways. ·
Concluded that the initial threshold had
not provided a filter that attempted to identify obvious candidates for
control when the Act clearly envisaged that there would be some filtering at
the threshold stage. ·
Pointed out that the initial thresholds may
not have correctly identified an inefficient and high charging lines
business, and would there be inconsistent with the objectives of s57E. |
|
Supreme Court |
·
That the Commission’s chosen approaches to
setting both the initial and revised thresholds were lawful. |
Finance – what is an acceptable equity beta ??
Introduction
One of the key parameters in
determining any business’ cost of capital is the riskiness of its returns
compared to the return of a diversified portfolio. This article examines the
recent decision by the Essential Services
Commission (ESC) in the Australian state of Victoria to adopt an equity
beta of 0.7 rather than 1.0 in its recent draft determination of the gas
distribution tariffs that will apply to Envestra,
Multinet, SP AusNet and Envestra Albury
(cross-vested from NSW to Victoria) for the third control period from 1 January
2008 to 31 December 2012, thereby implying that the equity in a gas
distribution business is at less risk than the equity in a well diversified
portfolio.
What exactly is the asset beta and equity beta ??
Beta is a measure of the
riskiness or volatility of a business’ returns compared to the return on a
diversified portfolio – it is defined as the covariance of the assets returns
with the returns on a diversified portfolio of assets. This is termed the asset
beta. The logical extension of the asset beta is the equity (or levered) beta
which adds the risk associated with financial leverage (gearing) to the risk
associated with market volatility. Most Australian regulators including the ESC
assume 60% debt and 40% equity.
Typically a business that has
high ratio of fixed to variable operating costs will have a high asset beta,
with the logical extension being that high fixed financing costs associated
with debt will further increase the risk of the equity.
So just how risky is a pipes & wires business ??
At face value it would seem that
a pipes & wires business would have a very low risk of volatile returns,
because afterall the customers are supposedly captive and they just keep paying
their bill month after month with little alternative. This, of course, ignores
such risks as stranding, by-pass, fuel substitution and volume throughput which
all suggest that a pipes & wires business is not as low risk as perhaps thought
(for completeness it is to be noted that the ESC does not consider asset
stranding).
Analysis of the asset betas from
various regulatory determinations over the last decade does suggest a broad
agreement among regulators that an equity-funded pipes & wires business has
about 40% to 50% of the risk of a well diversified portfolio (ie. an asset beta
of 0.4 to 0.5) whilst the pipes & wires businesses themselves estimate
their asset betas to be between 0.45 and 0.6. When the impact of debt-funding
is included, equity betas of between 0.75 and 1.0 (and in one extreme case 1.2)
are estimated by regulators around the world, whilst the businesses themselves
estimates are between 0.88 and 1.12 and mostly clustered around 1.0 (assuming
of course, 60% debt and 40% equity).
So despite the ranges of these
estimates, the age old differences between regulators and pipes & wires
businesses over betas (and indeed many other parameters) are very much apparent,
and perhaps especially more so when the impact of debt-funding is considered.
The ESC’s view
In the draft decision document,
the following equity betas were proposed by the three gas distributors…
|
|
Range |
Point value |
|
Envestra |
0.90 –
1.10 |
1.0 |
|
Multinet |
0.80 –
1.10 |
1.0 |
|
SP AusNet |
0.80 –
1.10 |
1.0 |
The three distributors cite many
regulatory determinations and academic reports to support their estimates, and
indeed all but a few recent Australian determinations include an equity beta of
1.0 (adjusted for the ESC’s standard gearing of 60%). However after many pages
of analysis of previous determinations and examination of market return observations
the ESC concluded that an equity beta range of 0.5 to 0.8 was appropriate and
than 0.7 is an appropriate point estimate.
Disclaimer
Publication of this article in
Pipes & Wires does not necessarily represent Utility Consultants agreement
or otherwise with the ESC’s conclusions.
US – California heats up (again)
Introduction
Between policy lurches and heat
waves, California’s power industry never seems far from the news. In what seems
to be an annual event the Cal ISO recently
issued a plea to turn down the air con and restrict heavy appliance use as the
state’s capacity margin dipped below 7%. This article briefly examines some of
the policy and regulatory frameworks in California in an attempt to figure out
why rolling blackouts seem to be an annual event.
Background
Pipes & Wires #53 briefly
examined the July 2006 heat wave in which California’s demand reached a record
50,270MW. As temperatures once again soared in late August 2007 and demand
exceeded forecasts by about 1,000MW, the Cal ISO issued a Stage 1 emergency and
PG&E, SoCalEd
and SDG&E experienced rolling blackouts.
Why blackouts – year after year
It would seem that California
continually runs a tight reserve capacity margin. A little bit of research
indicates that this capacity margin has diminished over the last 20 years to
alarming levels. I guess this begs the question of why is nobody building more
capacity … is there a price signaling problem, is it a structural regulation
problem, is it an energy policy problem, are there city planning problems or
what ??
Now I’m not going to pretend that
I can solve California’s energy woes in a few simple paragraphs, but a couple
of broad points do come to mind….
·
As I recall the initial deregulation (Assembly Bill 1890) in 1996
capped retail rates and created a wholesale market but encouraged vertically
integrated generator-retailers to both sell all energy into and buy all energy
from the market. Hence it was difficult to use the natural hedging effect of
generation (which seems to have incentivised some utilities to sell their
generation plant).
·
When Arnold Schwarzenegger became Governor of California he wryly
commented that it seems easier to build a new energy regulator than a new power
station.
·
California’s public policy makers are understandably still raw
about the Enron saga. Their fear of any
private involvement in power would make private utilities hesitant to invest.
·
If the California market is similar to other markets around the
world, there is probably no mechanism for incentivising investment in peak
capacity.
That’s just my thoughts …. If
I’ve got it wrong I’d be happy to hear from you.
Europe – Spain may have broken anti-trust laws
Introduction
The ink has barely dried on ENEL’s and Acciona’s
takeover of Endesa and already the accusations
have started that the Spanish government has breached EC rules by imposing
protectionist conditions on the deal. This article briefly examines the nature
of those accusations to set some context for future analysis.
The accusations
The EC has formed a preliminary
view that …
·
That the CNE violated Articles
28, 29, 43 and 56 of the EC Treaty (which prohibits measures that restrict free
movement of goods, services and capital between member states, and the freedom of
establishment in member states) by doing the following…
·
Wanting authority to block the deal if it proved to be against
Spain’s national interests.
·
Wanting the right to intervene in the company’s management if the
CNE believed that the new owners were not acting in Spain’s best interests.
·
Demanding an annual disclosure from ENEL if any part of its
strategy could effect Spanish assets, interests or national security.
·
That the Spanish government violated Article 21 of the EC Merger
Regulation by attempting to impose conditions on a merger in contravention of
the exclusive jurisdiction of the EC , and which the EC
had already ruled on.
So … the on-going battle between
national interests and EC-wide interests continues !! Pipes & Wires will
make further comment as this matter proceeds.
NZ – funding the three wets
Introduction
Funding of water, drainage and
sewage services has always been a contentious issue that seems very hard to get
on a fully cost-reflective footing. The slightest hint of installing water
meters raises tempers even further. This article examines the conclusions
reached by the recent New Zealand
Rates Inquiry in regard to funding water, drainage and sewage services.
Background
Concern over increasing rates was
one of a number of issues that prompted the establishment of an inquiry into
local body financial affairs and management. The three member panel, of which
Pipes & Wires reader Graeme Horsley was a member, undertook to examine
these issues and report back to the Minister of Internal of Affairs by the end
of July 2007.
The inquiry’s conclusions for the three wets
The panel’s report is by
necessity long (and should be read in its entirety before forming any strong
views) but is written in a very friendly and readable style. Its key
conclusions in regard to the three wets are…
·
That councils should exercise greater restraint with forecast
CapEx, including consideration of demand reduction measures to avoid increases
in capacity.
·
Reducing the extent to which depreciation is funded from rates.
·
Making greater use of debt to fund long-life assets.
·
Introducing volume-based charges for water and sewage.
·
The 15 year period for public private partnerships be extended for
water and sewage.
·
A contestable infrastructure equalization fund be established to
fund the development and maintenance of essential water, sewage and drainage
infrastructure
The expected next steps will be
for the Minister to either accept or reject the inquiry’s findings. Pipes &
Wires will make further comment as this occurs.
US – rethinking energy policy in Ohio
Introduction
With a keen eye on the future Governor Ted Strickland released his
Energy, Jobs & Progress Plan a few weeks ago. This article considers
whether Strickland’s Plan is something that the Ohio energy sector can embrace
and be fairly paid for, or whether the Plan is disconnected from commercial
reality.
Background
Ohio deregulated its power
industry in 1999, ostensibly to put downward pressure on retail prices through
competition. The original deregulation bill included a 5% discount on
generation to allow the market to develop, however that competition never
developed because new entrants couldn’t compete. A further concern is the
impending expiry of rate stabilization plans for AEP,
FirstEnergy and Duke at the end of 2008 and for Dayton Power & Light at the end of 2010.
Strickland cites the expiry of rate stabilization plans in Illinois and
Maryland where electric rates increased 55% and 72% respectively, presumably
with the view that much of Ohio’s rust-belt industries would become
uncompetitive if electric rates jumped sharply (and makes reference to the now
infamous tape recording of two Enron traders).
Strickland’s Energy, Jobs & Progress Plan
Strickland’s Plan sets out the
following 3 objectives…
·
Ensure affordable and
stable energy prices to protect Ohio consumers and existing Ohio jobs.
·
Attract energy jobs
of the future through an Ohio advanced energy portfolio standard.
·
Safeguard Ohio families by empowering
consumers and modernizing Ohio’s energy infrastructure.
The Plan takes a middle-ground
approach to regulation which includes a market-based pricing option that would
be contingent on the development of an efficient, open and competitive market.
It would also require 25% of Ohio’s power to be generated by advanced
technology by the year 2025.
In all fairness to Strickland,
the launch of the Plan does go on to imply the need for educating consumers
about the best times to use energy, which not surprisingly looks toward
transparent time-of-use tariffs.
So
how does Strickland’s Plan stack up ??
The principles of keeping jobs in Ohio’s
energy-intensive industries and protecting consumers are undoubtedly noble and
Strickland is to be commended for giving priority to these outcomes. But will
these outcomes be subsidised by utility shareholders through mandated electric
rates that are less than the cost of service ?? There does seem to be an
expectation that Ohio’s incumbent utilities will develop the new technologies,
which will obviously not be cheap. Whether the OPUC will allow those costs to
be recovered from consumers remains.
Notwithstanding the final retail rate
determinations by the OPUC it seems that Strickland’s Plan might well steer a
well thought out strategy.
Europe – splitting lines & energy
Introduction
Separation of lines and energy to
ensure unbiased energy markets is certainly not new, so it may be surprising
that the EC has taken so long to consider it. This article considers the EC’s
recent adoption of the third package of legislative proposals that includes the
separation of lines and energy.
Background
Formation of a single transparent
European energy market has been one of the key objectives set in place by
directive EC1996/92 which was subsequently replaced by directive EC2003/54.
However concern had arisen that the benefits of competition and deregulation were
not emerging fast enough, with the remaining level of vertical integration
being identified as a key factor.
The proposal
The third package of legislative
proposals inter alia proposes
separation of production (generation) and supply from networks in one of two
approaches…
·
A preferred approach of ownership separation.
·
A less preferable approach of operational separation wherein
utilities can remain vertically integrated but must relinquish all operational
control of networks to an independent system operator.
Promoting network investment
One of the issues raised by the
EC is that a vertically integrated utility may have an incentive to withhold
investment in networks that could provide an advantage to competing generators
or suppliers whilst biasing network investment toward its affiliated generators
and suppliers. While this may well have some truth it would seem unreasonable
to blame lack of reinvestment solely on vertical integration because many other
jurisdictions that have long since separated lines and energy still seem to
lack reinvestment.
No doubt we will see a flurry of
deals if the preferred approach of ownership separation is implemented.
Mergers,
acquisitions & take-overs
UK water – a clarification
Last months article on the
possible sale of Southern Water
indicated that regulatory concern may arise if Macquarie Bank became
involved in more than one water utility. This statement may have led readers to
believe that any concern over consolidation of ownership was simply a
regulatory concern when it is in fact a legal matter addressed by s70 of the
Enterprise Act 2002. This section requires any merger of water entities having
a turnover greater than £10m to be referred by the Office of Fair Trading to the Competition Commission.
Utility Consultants apologies for this error.
Global infrastructure – reader response
Is our infrastructure in crisis,
just groaning or is it mostly fine?? Pick the link to tell me your view on the
general condition of infrastructure in your country and the sector(s) you work
in. All individual responses will remain strictly confidential, however I would
like to summarise the results for a conference paper in November.
·
Groaning
CapEx – general interest stuff
Getting the CapEx right in the infrastructure sectors
This presentation was made at the
NZIGE Spring Technical Seminar earlier
this month. If you’d like a copy, pick here.
Renewals – (half) the hidden side of CapEx
I’m expecting to present this paper
at the Electricity Networks Asset Management Summit in November on the broad
topic of asset renewals. To pre-order a copy of this paper (to be delivered
after the event) pick here.
PAS 55 – the emerging standard for asset management
To find out more about improving
your asset management activities through adopting the emerging global standard
for asset management PAS 55-1:2004 pick here
or call Phil on +64-7-8546541, or to request a Slide Show on implementing PAS
55-1 pick here.
Website promoting best practice CapEx
Utility
Consultants is pleased to announce the release of a specialist website
dedicated to promoting best practice CapEx policies, processes and planning in
the infrastructure sectors.
HR
Forbes Mackay – father of Sydney electricity
As part of a series on electrical pioneers,
this article examines the life and times of H R Forbes Mackay who was the
second city electrical engineer in Sydney, Australia from May 1908 to October
1939.
The
early years
Forbes Mackay was born in 1871 in Scotland.
Little is known of his early life, so little in fact that no obvious record of
his first names seems to exist, nor even when he arrived in Australia. He did
however seem to have a reputation as a “dour Scot”.
The
beginning of electricity in Sydney
The Sydney Municipal Council created its
Electricity Department in 1904 with 5 engineering staff supported by trades and
technical staff. After only 2 years the Department began to steadily grow with
the appointment of a Power Station Superintendent and a Wires Superintendent. A
point of note is the dual (possibly read as “blurred”) accountability of the
City Electrical Engineer – daily supervision was by the Town Clerk whilst
control of the role was vested in the Electric Lighting Committee of Council.
Forbes
Mackay takes the helm
Forbes Mackay assumed his duties in May 1908
when the electricity department was only 4 years old, and further staff
appointments followed – a Mains Engineer and New Works Engineer in 1909, a Test
Branch in 1910 and a Substation Engineer in 1911. It seems staff numbers grew
rapidly to about 1,300 by 1923 and to about 2,000 by 1935 which inevitably
required successive moves to larger offices and depots.
Scandal
ensues
In 1927 the Council was dismissed and
replaced by 3 appointed Commissioners. Soon afterwards an investigation into
the letting of a contract for the Bunnerong Power Station boiler plant in 1926
was conducted which subsequently escalated into a Royal Commission. One of the
key outcomes of the Royal Commission was a jail sentence for Silas Maling,
Forbes Mackay’s immediate deputy. Forbes Mackay himself was twice exonerated of
any wrong-doing.
However this Royal Commission also sadly
revealed that corruption had been occurring back as far as at least 1913 when
it was found that Mr Woolf, the superintendent at Pyrmont Power Station had
been taking bribes from a certain coal supplier. It also appears that after
Woolf retired in 1922 Maling began pocketing most of the bribes himself.
The
later years
After retiring in October 1939 Forbes Mackay
briefly practiced as a consulting engineer before being appointed the chief
censor for communication in NSW in December 1939. Sadly there was only one
“later year” because only a year later Forbes Mackay died in October 1940 at the
age of 69.
Forbes Mackay appears to have been the
longest serving city electrical engineer, with only one successor (C.E.Ranger)
serving more than a few years.
Conference papers
Utility Consultants has recently
presented the following conference papers which are available upon request…
·
“Tariff
control of Pipes & Wires utilities – where is it heading??” – presented
at the NZIGE Spring Technical Seminar,
October 2006.
·
“Setting
service levels for utility networks” – presented at the Electricity Network
Asset Management Summit, November 2006.
Conferences & events
·
West Africa Power Industry Conference
– 19th – 21st November 2007 (Abuja).
·
Electricity
Network Asset Management Summit – 20th to 21st
November 2007 (Wellington).
·
Inaugural
Advanced Metering Summit – 27th November 2007 (Auckland).
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are not intended as specific legal, consulting or investment advice, and are
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