ActewAGL has delayed a new Molonglo substation by a year and put off upgrades to the Belconnen substation after a draft decision from the Australian Energy Regulator, which the ACT power company has described as brazen, unjustified and a threat to the reliability of the city's electricity supply.
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The substation delays are the only significant concession from ActewAGL in a 700-page rebuttal, which calls for a reversal of the regulator's draft decision to cut its operating spending by 42 per cent and capital spending by 34 per cent. ActewAGL chief executive Michael Costello is now threatening a court challenge if the decision stands, saying it would have "potentially dire consequences" for reliability, security and safety.
Mr Costello said ActewAGL would have to cut about one-third of its 600 staff immediately, on top of the 90 staff gone in the past year, and the regulator's decision took no account of the massive redundancy bill that would entail.
"It's not doable without the certainty that our reliability will completely collapse over five years and customer service will dramatically fall, and it must increase," he said. "The safety risk of the system both to our staff and the public . . . If you have to massively cut back on your maintenance, and we will, and if you haven't got money to replace capital equipment which is aging and out of date ... the system will just be much more dangerous."
ActewAGL's submission pointed to plans to replace the cast-iron "potheads" in suburban backyards. The 500 "potheads" that connect overhead lines to underground cables are to be replaced over 10 years, but the regulator says a failure rate of two potheads a year doesn't justify replacing them at a rate of 50 a year.
But ActewAGL said most of them are in backyards and in public areas, and more than 100 are classified as high to extreme risk of causing injury because they're close to areas such as schools and childcare centres. Two exploded in 2014, and in one case shrapnel had nearly hit a linesman.
ActewAGL also wants to install new hardware on poles in bushfire-prone areas in line with recommendations from the Victorian bushfire royal commission, and points to a severely split cross-arm found on a Cotter pole in March 2014 as evidence of the parlous state of parts of the network.
But the energy regulator disputed the $10.5 million ActewAGL planned to spend over five years on overhead conductors and pole-top replacement, allocating $6 million instead.
ActewAGL said the scale of the regulator's cuts to spending were unprecedented in electricity regulation in the country and described them as "bold and reckless", "extreme" and flawed.
A cut in operating expenditure from $75 million to $44 million a year set it back to 1999 levels, despite a 40 per cent increase in customer numbers. The cut to capital spending from $75 million to $54 million a year would put it back to 2007-08 levels.
The regulator had used national and international benchmarks to set the operating figure, but the work was fundamentally flawed and a gross simplification, not taking into account ActewAGL's actual circumstances, it said.
It would lead to a doubling of response times for outages, a 33 per cent reduction in planned maintenance, and a "vicious cycle" of more faults leading to still longer wait times. Cutting maintenance also risked a catastrophic failure at a zone substation as transformers were kept past their useful life.
ActewAGL has stuck by most of its requests, but scaled back its capital program slightly to $341 million instead of $372 million over five years, still much higher than the regulator's suggested $244 million.
It has delayed a new Molonglo substation by a year and put off a third transformer at the Belconnen substation longer still, but retained land acquisition for a new Mitchell substation in its program. Mr Costello said the substation would not be built until 2022.
Mr Costello said at the very least the regulator must allow cuts to be made over time.
