Project Summary

Every five years, Endeavour Energy works with customers and stakeholders to prepare investment plans to build, operate and maintain a vast electricity network. That plan is reviewed by the Australian Energy Regulator (AER), which considers feedback and then decides the final revenue we can recover from customers to fund our operations. These costs make up about 30% of the average residential or small business electricity bill, so it’s vitally important that every dollar we spend aligns with our customers’ priorities. Together with our key stakeholders and customers, and working closely with the AER to undertake a ‘Better Resets’ approach as part of its strategic priorities, we have used this opportunity to reinvigorate our Asset Management Systems and use it as the foundation for customer centric plans.

Project Description

Project Objective and Scope

Endeavour Energy started this project with a clear objective, develop a customer centric regulatory proposal for FY24-29, ensure that what we propose is what we plan on delivering and embed the process as BAU (Business as Usual) to keep our AMS (Asset Management System) evergreen. No small order.

We manage a $7.7 billion ($FY24) regulated electricity distribution network for 1,080,000 customers in households and businesses across an area spanning Sydney’s Greater West, the Blue Mountains, the Southern Highlands, the Illawarra and the South Coast of NSW.

Endeavour Energy Network

This is a diverse asset base, operating in a wide variety of conditions, servicing customers with different background and preferences, including the most culturally and linguistically diverse communities in Australia. Meanwhile, the critical investments we are planning for the next 5-year regulatory period (FY24-29) need to support our support our regions, facilitate the energy transition, and deliver our purpose of powering communities for a brighter and affordable future. We are doing this while responding to the economic volatility and cost of living pressures our customers are currently facing.

Endeavour Energy Corporate Strategy and Strategic Pillars

Network Performance

Endeavour Energy Network

Best Practice Asset Management Principles

The regulatory proposal is incredibly broad and covers all asset management functions at Endeavour Energy. For our regulatory proposal, we would submit over 4000 pages of supporting evidence from our AMS.

Asset Management System

Define the Narrative

Including members of our Board, Executive and leadership teams, we collaborated widely with stakeholders using our historical cost, risk tolerance and network performance to understand their values and how we should reflect them in this regulatory period.

Cost to service our customers

Network performance

Stakeholder and customer influence on aspects of our AMS

Customers indicated that while they were comfortable with existing costs, there was a difference between the network performance that we monitored, and their lived experience, which included the impact of Major Event Days, such as bushfires and storms.

Customer Investment Themes and Core Trade-offs

Modelling our investments

Most of Endeavour’s capital expenditure consists of the replacement of existing assets (Repex) and the augmentation of our network to meet increasing growth and demand (Augex), which require different modelling techniques. To enable trade-offs between different investments, we apply a common Value Framework to all capital investments, converting probabilistic events (benefits or consequences) into an expected financial value outcome. Similarly the majority of our operating expenditure (Opex) maintains this vast network and risk tolerance.

Augex. Demand forecasting is used to identify potential Augex investments by clearly identifying the trigger, quantifying the magnitude of need and its sensitivity other factors. For Augex investments all credible options are thoroughly explored so the risk of not supplying customers can be compared to estimated project costs and the impact on network utilisation.

Decision framework for augex investments

Impact of investment timing on augex investments

Repex investments are identified with our Asset Risk model to determine the optimum replacement timing for all credible investment options and balance our appetite for risk with our customer’s willingness to invest.

Impact of Asset Management Strategy on Repex investment levels and network risk

Future grid investments look to support the uptake of customer choices in new net-zero technologies with key sensitivity analysis to a rapidly changing environment.

Valuing customer export curtailment and scenario analysis

Document our investments and refresh our Asset Management System

The improvements made across our modelling processes have been reflected across our Asset Management System. This included strategies that provide clear line of sight between network performance objectives defined in our Network Business Strategy and performance measures monitored within our Growth Servicing Strategy and Asset Class Plans.

Line of sight between network objectives and targets

Historical network perofrmance and forecasts

The line of sight has been crucial in considering a network view of asset management, where although an asset’s performance is decreasing or risk is growing, this may be within our targets. This has allowed us to defer investments in a way that reduces our capital expenditures while minimising our overall risk profile.

Asset risk forecast across the network

Replacement volumes and triggers

Submitting a compelling regulatory proposal

To generate our FY24-29 plan we used our Investment Decision Support Tool to adjust the timing of all the credible investments we had identified to fit within our capital constraints.

Assembling the Regulatory Proposal

Critically, this submission needed to reflect our customers value and align with all our previous engagement.

Embed

Lastly, we have embedded this process into our BAU so as we engage with customers and stakeholders, we continue to take them on our asset management journey, and they become as invested in the energy transition as we are.

Key initiatives leading to the proposal

Degree of originality and ingenuity of solution

As one of only two DNSPs (Distribution Network Service Provider) selected for the Better Reset pathway to the Reg submission, Endeavour Energy have pioneered a novel approach to network investment. Our Asset Resilience investments highlight this through; meaningful engagement with customers, resilience investments to address climate change and, establishing an innovation fund based on our robust Investment Decision Making governance.

Customer Engagement

Endeavour engaged with customers as we explored our response to climate change. They provided guidance on the level of responsibility we had in addressing climate change, narrowing our scope. Later during Deep Dives into specific actions we’d explored, they influenced the level of investment we have proposed for FY24-29.

Customer views on responsility for climate change actions.

Customer Deep Dive into resilience

Physical Risks of Climate Change

Endeavour Energy have integrated climate change into our asset risk models to fully capture the risk of climate change across all asset management decisions. We have considered the vulnerability of each asset class to climate events and translated complex climate temperature scenarios hazard specific escalation factors that could be applied consistently across all network assets.

Integration of climate change escalation factors into existing asset risk models

Innovation Fund

We have established an innovation fund to invest in innovative technologies that address emerging risks. We understand that not all innovation is successful and have established investment governance that provides the flexibility to respond to the rapidly shifting challenges of the energy transition while giving our customer groups a seat at the table.

Innovation investment pipeline and governance

Project Management

Endeavour Energy needed to develop a project plan that would support meaningful engagement with our customers while meeting fixed deadlines imposed by the regulator. This created a unique challenge where, to make our engagement tangible, we needed to share early estimates with customers, while acknowledging that they would change as our forecasts evolved and their preferences were incorporated into our proposal.

Forecasts matured over time

To meet these requirements our project plan prioritised activities to support customer engagement, such as top-down modelling to provide an expenditure envelope, AMS documentation to explain how we develop forecasts, strategies to explain why we needed to invest, and Asset Class / Area Plans demonstrate where we would target investments.

Project Timeline

For each workstream evaluated the skills needed to complete the proposal requirements, augmented the teams with secondees to address skill gaps and prioritised effort against asset classes and areas that would be used in stakeholder engagement.

Project planning to align skills to critical areas

Benefits and Value

Value across the organisation

The AMS we’ve developed is supported by a robust set of tools that allows us to follow our own methodologies and respond to challenges in real time. During the development of this proposal, we were able to compare the value of investments across our network, allowing us to model trade-offs for our customers and show them the real impact of risk and performance decisions on their bills. Our AMS will be a critical enabler as we respond to emerging challenges over this reg period.

Benefits for the community

We are focused on delivering outcomes that meet our customers’ long-term interests at a cost they find affordable. Our customers told us they cared about reliability, resilience, sustainable growth, and customer choice. When they read our Proposal for the FY24-29 period they can see proposed services and investments that they have influence, giving them confidence that they have a role in the energy transition.

Translating investments into community benefits

Contributions by team

As part of our “regulatory reset” we have undertaken a collaborative partnership model to develop a proposal that delivers the outcomes that customers want and value in the most affordable manner. We have undertaken our most ambitious engagement program with customers and their advocates, integrated with our Asset Management System and Value Framework to achieve this balance. In collaboration with our customers and stakeholders along the way, we have strived to improve the efficiency and robustness of our engagement process for Endeavour Energy, our customers, stakeholders, and the Australian Energy Regulator. The success of this program is highlighted by the active engagement of our leaders across various fields of expertise who actively engaged with each other, key stakeholders, and customers in an open, collaborative, commercial and engaging way. As an overall, Endeavour Energy has been highlighted as leading the industry in both engagement and strategic positioning, which gives future value to Endeavour Energy to support future plans and opportunities as a trusted partner, while also providing revenue certainty in a rapidly changing energy environment.Colin Crisafulli
Head of Network Regulation – Endeavour Energy

Endeavour Energy has conducted its longest and most comprehensive engagement program to ensure it is customer focused. We have been single-minded in our focus on the customers’ interest. At a foundational level, that means affordability, whilst maintaining a safe, resilient, reliable electricity network, servicing the growth of our communities, and increasingly facilitating new customer energy choices.In doing so, we have adhered to the principle of balance. Endeavour Energy is proposing future investments that appropriately balance our customers’ future priorities with a sharp focus on affordability for all customers. We plan to efficiently deliver the clean energy future that our customers want including smart meters, batteries, electric vehicles, and rooftop solar that will enable customers to generate, store, share and sell back electricity into the market. We are also responding to a changing climate and increasing weather extremes to improve community resilience. We are delivering this transformation while enabling extraordinary growth in our regions as Greater Western Sydney transforms into a hub of industry and innovation to support the new Western Sydney International Airport.Guy Chalkley
CEO – Endeavour Energy

Endeavour Energy has a strong governance framework in place and a sound process for deciding which projects are executed… [they have] taken a balanced approach to justifying expenditure.Customer Representatives
Regulatory Reference Group

General Comments

Endeavour Energy is supporting Australia’s fastest growing region, Western Sydney, and enhancing our network to support a once in a generation change as we transition towards a Net Zero future. The Asset Management challenges that we are solving are unprecedented in scale and complexity, and we need to take our customers on the journey with us. While the project was Asset Management team engaged with experts across Endeavour. To achieve this, we needed a diverse team, willing to honestly acknowledge our strengths and weaknesses to work together.

A diverse and inclusive team

Endeavour Energy is an Equal Employment Opportunity (EEO) employer, and we encourage diversity within our organisation. Diversity and inclusion makes our organisation better, safer, stronger and more competitive. We are proud of our differences and are committed to actively shaping our workplace into one that is inclusive and where individual contributions are valued.

Contributors to Endeavour Energy’s Reg Proposal

The reg proposal is a strategic pillar for Endeavour Energy and requires a diverse range of skills to deliver, from detailed energy modelling and investment planning through to customer engagement. As a major employer in Western Sydney, we are proud that our team reflects the Cultural and Linguistic Diversity of the community we support. It’s important to look outside of your own backyard with our partners bringing knowledge and insights from distributors across Australia.

Invest in our asset management capability

On our Asset Management journey, we’ve recognised that we have gaps and regularly partner with consultants and technology providers to uplift our capability. We adopted a partnership model with KPMG as our System Capex consultants, creating a relationship where we are equally invested in the outcome. We didn’t treat them as contractors delivering to a scope, instead we deeply integrated them into our team where we worked shoulder to shoulder solving problems. They bring experience form other industries and, as critical friends, they aren’t afraid to ask us tough questions that help us understand why we work the way we do and push us to create a best practice Asset Management System.

Core team consists of experts who have a deeper focus on the reg proposal, consultants and internal secondees. Focus on knowledge sharing and capability uplift.

Experts with limited involvement in the project remain embedded in their current roles and provide ad-hoc support through a single point of contact

Team structure to promote knowledge transfer and capability uplift

Supporting our asset management talent

The steering committee leading the capex stream of the reg project have been with Endeavour Energy for an average of 15 years, with over half starting their careers with us as graduates. This is reflected across Endeavour with retention of 7.6% – within Asset Management our team say they value:

Internal Secondments. Asset Management is a broad discipline, so we provide opportunities for team members to move between business functions for secondments. To meet the needs of this project, we drew on six secondees who have returned to their original roles with a greater appreciation for asset management.
Connected Working. Our team have the flexibility to work from anywhere across our regional footprint with the technology to support collaboration in-person and remotely.
Culture. Our leaders have created a safe-to-fail culture that encourages the team to work on wicked problems like the energy transition – challenges that can only be solved with diverse teams that are passionate about creating value for our community.

References

Endeavour Energy – Regulatory Proposal 2024-2029 Overview

Endeavour Energy – Regulatory Proposal 2024-2029

Endeavour Energy – Customer Panel Outcomes

Endeavour Energy – Stakeholder Deep Dive 2

Endeavour Energy – Draft Proposal

Our full regulatory proposal journey can be found at:

Your Power, Your Future, Your Say | Your Say Endeavour Energy