Australian power utility Energex has submitted an application to the Australian Energy Regulator to seek a A$127 million fund for the five-year period from 2010 to 2015 to meet the rising electricity use on hot summer days.

The application to the AER for the 2010-2015 financial period also includes a $6.46 billion program of network building projects to meet the rapidly growing need for electricity in South East Queensland and $1.8 billion over the five years to operate and maintain the local power grid.

The five-year funding proposal will for the first time be determined by the AER following a shift from State to national assessment system designed to standardise funding processes across the country. Previously funding approval for electricity companies in Queensland was assessed by the Queensland Competition Authority.

During the five-year funding period, ENERGEX is proposing to increase network capacity by a further 40 percent; build 56 new zone and four bulk supply substations; improve network reliability by around 12 percent; maintain and enhance safety, service delivery and operations of the electricity network to standards expected by South East Queenslanders.

The investment in the development and operation of the ENERGEX network continues the delivery of ENERGEX’s commitment to the implementation of the Somerville Report recommendations around increased capacity, improvements in reliability of supply, and improved response capabilities.

ENERGEX Chief Executive officer Terry Effeney said the demand management strategy flows from a joint program currently being implemented by ENERGEX and regional Queensland electricity provider Ergon Energy approved in the recent State Budget.

Mr Effeney said ENERGEX’s demand management strategy involved the implementation of a suite of concurrent, coordinated initiatives designed to target one of the biggest challenges facing electricity companies around the world – significant growth in peak period power use.

“Based on historical weather patterns and power use trends, ENERGEX estimates that peak electricity demand in South East Queensland will rise by 71 per cent over the next decade (increasing from 4347 megawatts in 2007 to as much as 7454MW in 2018),” he said.

“This forecast increase builds on significant power demand trends in previous years with electricity use on hot, summer days rising by between five and seven per cent each year over the past five years, while last summer’s peak power use was close to 11 per cent higher than the previous summer.

“Much of this additional demand for electricity is being driven by soaring use of air conditioning with the number of homes with aircon rising from less than 25 percent just over 10 years ago to close to 70 per cent. More than 30 percent of South East Queensland houses, units and apartments have two, three or more air conditioners … and this trend is certainly growing.”

Effeney said the increased use of air conditioning was exacerbated by the coincidental use of other domestic energy appliances, such as such as flat-screen televisions and personal computers.

In ENERGEX’s submission to the AER, an assessment of this peak demand highlights poor utilisation of the electricity network with the top 11 percent of load occurring for less than one per cent of the year.

“ENERGEX is required to ensure that there is capacity in the system to meet peak times but this means that hundreds of million of dollars worth of ENERGEX’s network assets sitting relatively idle for use on just those few days – actually for just a few hours on those days – when the power use goes through the roof,” said Effeney.

“The rest of the year this equipment is hardly needed. On current trends in the next few years this figure will soar above $1 billion and of course this flows through directly to everyone’s power bills.

“Electricity customers expect that ENERGEX will plan, build and maintain an electricity network to meet this rising demand, but it is also incumbent on organisations to adopt financially and environmentally sustainable business practices to reduce where possible the impact on network electricity prices.”

Effeney said that a main objective of ENERGEX’s demand management strategy for 2010-15 was to achieve better utilisation of network assets so that ultimately benefits can be passed to electricity customers through efficient network prices that reflect the real cost of customer demand.

Included in the AER submission, ENERGEX has set a target of achieving real peak demand reductions over the next five years totalling 144 megawatts by the end of the 2014-15 financial year from current demand forecasts.

“To put that into perspective 144MW is about the equivalent of a quarter of the power used on the Gold Coast on a normal summer day,” he said.

“Obviously reductions in demand of this size will benefit the greater community and ENERGEX believes the proposed demand management strategy is necessary for future sustainability of the network.”

Calculations by ENERGEX on the impact of its AER submission are that the average impact on notified electricity prices will be around six per cent a year over the five years of the regulatory period.

The AER will hold a public forum on the regulatory proposals submitted by ENERGEX and Ergon Energy in Brisbane on August 3 at which the applications will be detailed and an opportunity for interested parties to ask questions.

The AER is expected to release a draft determination regarding ENERGEX’s submission in late November before a final determination is published by the AER in April.