NEW SOUTH WALES

Transmission Annual Planning

Report 2014

1 │ NEW SOUTH WALES TRANSMISSION ANNUAL PLANNING REPORT 2014 CONSUMER SUMMARY

Message from the Managing DirectorTransGrid is adapting and enhancing its business operations to become more responsive to the changing energy environment so that we can continue to provide a safe, reliable and economically efficient transmission service to NSW, the ACT and the National Electricity Market.

The electricity industry is in a time of transformation. The last five years have seen a shift towards renewable sources of generation, smarter ways of managing peak demand for electricity, adoption of energy efficiency initiatives and energy storage technologies becoming more affordable. Consequently, the electricity supply chain of the future will look very different to that of the past.

TransGrid is shaping the transmission network of the future and has committed to responding to the changing environment by altering the way we plan, operate and maintain our network. We will also align our business priorities with the changing needs of electricity consumers to ensure robust and sustainable solutions.

The Transmission Annual Planning Report documents the process and outcomes of TransGrid’s Annual Planning Review. This summary has been developed to provide an overview of TransGrid’s key planning initiatives with a particular focus on:

• our commitment to more effective consumer engagement;• identifying non-network options; and • condition based renewal of assets nearing the end of their

serviceable lives.

TransGrid’s proposed asset renewal program comprises the most economic combination of replacement and refurbishment options for transmission equipment reaching a condition that reflects the end of its serviceable life. The program is essential to ensure the continued safety of staff, contractors and the public and to maintain a reliable electricity supply.

In recent years, significant price rises have occurred for electricity consumers. TransGrid understands that electricity is an essential service and that consumers should pay no more than necessary for their electricity supply. On average, the cost of transmission makes up approximately 11% of an average electricity bill for homes and small businesses in NSW.

We acknowledge that every dollar counts and in recognition of this, TransGrid has established a comprehensive consumer engagement program to give consumers a voice in the development of our business plans.

I believe that consultation is key to TransGrid’s future. As a transmission service provider, our continued role in the electricity supply chain depends on our capacity to be responsive to change. We must consider and take into account the opinions and preferences of our customers, and be ready and willing to adapt to new ways of operating our business.

In delivering the 2014 Transmission Annual Planning Report, we invite you to share your views with us and take part in a robust discussion which will help shape the transmission network of the future. We look forward to your valuable feedback.

Peter McIntyre Managing Director

July 2014

About TransGridTransGrid owns and operates the main high voltage electricity transmission network in NSW and the ACT, connecting generators, distributors and major end users.

TransGrid’s role is to deliver a safe, secure and reliable network through efficient maintenance, proficient operation of assets and sensible investment.

Our network comprises 96 bulk supply substations and more than 12,900 kilometres of high voltage transmission lines, which equates to about the distance of a return flight from Sydney to Singapore.

As part of TransGrid’s ongoing commitment to ensure consumer input into our planning process, we are consulting on the Transmission Annual Planning Report. This aims to ensure the document complies with the requirements of the National Electricity Rules while meeting the ongoing needs of stakeholders. A forum will be held in August 2014 and afterwards TransGrid will conduct a survey about the detail provided in this report. We will also publish a summary of the outcomes of the feedback received. This will help inform our 2015 report. Stakeholder forums throughout the state will also be held, outlining our plans. To get involved in this consultation, visit our engagement website – www.yoursaytransgrid.com.au

Yass

Yanco

Griffith

Buronga

Broken Hill

FinleyDeniliquin

Darlington Point

AlburyHume

Cooma

Munyang

Snowy Adit

Queanbeyan

Tumut

Murrumburrah

Cowra

Kangaroo ValleyMarulan

GullenRange

Panorama

Molong

Orange

Beryl

Parkes

Forbes

Wellington Bayswater Liddell

Dapto

Muswellbrook

Tamworth 330

Armidale

Dumaresq

Lismore

Tamworth 132

Gunnedah

Narrabri

Moree

Inverell Glen Innes

Tenterfield

Koolkhan

Coffs Harbour

Nambucca

Kempsey

Port Macquarie

Taree

Balranald

Coleambally

Murray

Upper Tumut

Lower Tumut

ANMJindera

Guthega

132 & 330

Avon

Wagga 132Burrinjuck

Wag

ga

330

Red Cliffs

Dederang

Wodonga

Bulli CreekMudgeeraba

Uranquinty

Gadara

Capital Wind Farm

RaleighDorrig

o

Wollar

Macksville

Boambee South

Bannaby

Wagga North

8E 8C

8M 8L 96L

Directlink

967

89

96R

96T966

87

96C

96H

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96M

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968

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990

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970

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9W79W6

9W2

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9R6

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Manildra94H

OrangeNorth

949

Williamsdale

978 97D

Stroud

Hawks Nest

Mudgee

Ilford

Burrendong

Geehi

Blowering

Murrumbateman

Casino

99P

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Canberra

Jindabyne97L

9C8 96

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Morven

99Z

17

Mt P

iper

132

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3J

Herons Creek

11

INSETto Tomago

Wallerawang

Mt Piper500/330

INSETEraring

Vales Point

Regentville

SydneySouth

Liverpool

Vineyard

Ingleburn

to Bannaby

to Bayswater

to Liddell

Haymarket

Macarthur

toWallerawang

KempsCreek

Munmorah

Tuggerah

SydneyEast

NewcastleWaratah West

SydneyNorth

to Daptoto Avon

Beaconsfield West

5A1 5A232 31

8281

9496

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8295

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MountColah

Mount Druitt

Brandy Hill

Tomago9C5

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HolroydSydney West

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9C6

NEW SOUTH WALES TRANSMISSION ANNUAL PLANNING REPORT 2014 CONSUMER SUMMARY │ 2

TransGrid’s revenue comes from electricity bills, and comprises around 11% of the average electricity bill for NSW homes and small businesses.*

Our network

GENERATION

DISTRIBUTION

COMMERCIAL & INDUSTRIAL BUSINESS CONSUMERS

RESIDENTIALCONSUMERS

DIRECT CONNECTCUSTOMERS

TRANSMISSION

TransmissionSubstation

Power Transformers

Power StationSolar FarmWind Farm

DistributionSubstation

TransGrid’s role in supplying electricity TransGrid’s network carries bulk electricity from generators through high voltage transmission lines, underground cables and substations. The high voltage electricity is then converted to low voltage electricity suitable for household consumption at substations closer to power users Distribution networks such as Ausgrid, Endeavour Energy and Essential Energy deliver electricity through smaller poles and wires to more than 3 million homes and businesses throughout NSW and the ACT.

*As at end of July 2014, excluding carbon price.

3 │ NEW SOUTH WALES TRANSMISSION ANNUAL PLANNING REPORT 2014 CONSUMER SUMMARY

Australian Energy Market Commission (AEMC)

Makes and amends the National Electricity Rules and provides market development advice to governments

Australian Energy Regulator (AER)

Regulates the energy markets and networks under the national energy market legislation and rules

Australian Energy Market Operator (AEMO)

Operates the energy markets and systems and delivers planning advice in eastern and south eastern Australia

Facilitating the National Electricity MarketTransGrid’s network is interconnected to QLD and VIC, providing a strong electricity system that makes interstate energy trading possible. The NSW transmission system forms the backbone of the National Electricity Market.

About Our 2014 Transmission Annual Planning Report The Transmission Annual Planning Report is a key output from the NSW Annual Planning Review, the central vehicle by which TransGrid provides an assessment of the capabilities and constraints of our network for the upcoming 10 year period.

The report documents the process and outcomes of the review and provides advance information to market participants, consumers and other interested parties on the nature and location of capabilities and emerging constraints in TransGrid’s transmission network. It also includes information on the status of our network plans and projects as they evolve from need identification to completion.

The Transmission Annual Planning Report is one of a number of channels through which TransGrid provides information pertinent to transmission and distribution planning in the National Electricity Market.

The 2014 Transmission Annual Planning Report includes:

• outcomes of the annual planning review including planning analysis of network capabilities and constraints, and potential solutions within a 10 year planning horizon;

• completed, committed and planned projects; • energy and demand forecasts;• network replacement projects; and• opportunities to collaborate with providers of non-network solutions.

This information also forms an input to the preparation of the National Transmission Network Development Plan produced by the AEMO.

This summary is intended as an introduction to the key initiatives that are detailed in the full report.

ENERGY AND DEMAND FORECASTSTransmission network planning requires detailed planning, analysis and modelling by engineers. TransGrid’s state based energy and demand forecasts are prepared by AEMO, with extensive input by TransGrid. The key economic, price and demographic projections underpinning these forecasts are available from AEMO’s website. TransGrid also receives forecasts from connected distribution networks to assist in localised network planning.

NSW Energy ForecastsNSW energy consumption is forecast to increase by an average annual rate of 0.4% for the next 10 years. The main drivers of this growth are population and state income. This is partially offset by growth in rooftop PV solar, energy efficiency and electricity price. The following chart shows the historical trend and energy projections for NSW. TransGrid’s forecast based on the medium scenario.

NSW Region Energy Projections

NS

W R

egio

n E

nerg

y (G

Wh)

40,000

45,000

50,000

55,000

60,000

65,000

70,000

75,000

80,000

85,000

90,000

2023

/24

2022

/23

2021

/22

2020

/21

2019

/20

2018

/19

2017

/18

2016

/17

2015

/16

2014

/15

2013

/14

2012

/13

2011

/12

2010

/11

2009

/10

2008

/09

2007

/08

2006

/07

2005

/06

Estimate

AEMO 10% POE MediumActual AEMO 50% POE Medium

AEMO HighActual AEMO LowAEMO Medium

NSW Peak DemandThe peak demand projections in the full report indicate that summer maximum demand is forecast to increase at an annual average rate of 1.2% and winter maximum demand at 1.1% for the next 10 years.

TransGrid is a State Owned Corporation and like all other Australian electricity transmission network service providers, its operations are overseen by the Australian Energy Regulator. The Australian Energy Market Commission and Australian Energy Market Operator also have significant roles in the regulation and operation of the National Electricity Market.

NEW SOUTH WALES TRANSMISSION ANNUAL PLANNING REPORT 2014 CONSUMER SUMMARY │ 4

NSW Region 2013 Summer Demand Projections and Actual DemandsN

SW

Sum

mer

Pea

k D

eman

d (M

W)

9,000

10,000

11,000

12,000

13,000

14,000

15,000

16,000

17,000

18,000

2023

/24

2022

/23

2021

/22

2020

/21

2019

/20

2018

/19

2017

/18

2016

/17

2015

/16

2014

/15

2013

/14

2012

/13

2011

/12

2010

/11

2009

/10

2008

/09

2007

/08

2006

/07

2005

/06

AEMO 10% POE MediumActual AEMO 50% POE Medium

AEMO HighActual AEMO LowAEMO MediumNSW Region 2013 Winter Demand Projections and Actual Demands

NS

W W

inte

r P

eak

Dem

and

(MW

)

9,000

10,000

11,000

12,000

13,000

14,000

15,000

16,000

17,000

18,000

2023

2022

2021

2020

2019

2018

2017

2016

2015

2014

2013

2012

2011

2010

2009

2008

2007

2006

NON-NETWORK AND DEMAND MANAGEMENT OPTIONSTransGrid is committed to assessing non-network options alongside network solutions to address network constraints where it is feasible and cost-effective to do so. By taking this approach TransGrid can defer or avoid significant capital costs associated with network investment and deliver benefits to consumers through lower transmission costs.

In our planning we consider demand management solutions such as load curtailment or shifting, embedded generation, energy efficiency and energy conservation measures wherever these factors reduce load on the network. Non-network options are considered on an equal footing with network options when planning the network and applying the AER’s Regulatory Investment Test for Transmission (RIT-T).

Building upon previous projects undertaken in the 2009/10 to 2013/14 regulatory period, TransGrid plans to target its demand management innovation activities for the next five years in the areas of collaboration, market understanding and development, and technology trialling.

OPENING UP OUR PLANNING PROCESSESTransGrid understands that energy consumers are interested in its operations in terms of the prices they pay for electricity, their access to electricity when and where they need it and the financial, environmental and community impacts of our infrastructure.

We understand the importance of working with the community to find the most appropriate and holistic electricity solution, so TransGrid has established a new comprehensive consumer engagement program, thus giving consumers a voice in the development of TransGrid’s plans.

In opening our planning processes we have redefined the way in which we engage with the community on capital works programs to improve how we plan and deliver projects to communities. Conversations with the community will start in the early planning stages, when a need is identified to address an energy problem, and give communities a say in the development of TransGrid’s plans.

Our new stakeholder engagement process is proactive and transparent. It is based on meaningful, open and honest engagement; focuses on listening to feedback; incorporating and addressing stakeholder views in our business plans; and responding to and acting upon stakeholder feedback.

Identity Need

Decision Gate 0: Planning Funds

Approval

Regulatory ConsultationStakeholder Engagement

Network Support Consultation

Community Consultation

Planning & Environmental Approvals

Stage 1: Identify Need

Stage 2: Review Options

Stage 4: Implement Solution

Stage 3: Planning Detail

Compile Program

Evaluate Options

Develop Project

Establish Contract

Deliver Project

Finalise Project

Decision Gate 1: Project

Commencement

Decision Gate 2: Project

Determination

Decision Gate 3: Financial & Contractual

Commitment

THE NETWORK PLANNING PROCESS

5 │ NEW SOUTH WALES TRANSMISSION ANNUAL PLANNING REPORT 2014 CONSUMER SUMMARY

COMPLETED, COMMITTED AND PLANNED DEVELOPMENTS*

Recently completed development Completed works from 2012/13 to 2013/14:

Project Location Purpose Status

Construction of short sections of 330 kV line NSW Mid North Coast Increase the capacity of the transmission system to meet present limitations

Completed

Installation of 132 kV transmission line between Tarro and Essential Energy’s Stroud substation

NSW Mid North Coast Increase the capacity of the transmission system to meet present limitations

Completed

Connection of Essential Energy’s Heron’s Creek substation to TransGrid’s Taree-Port Macquarie 132 kV line

NSW Mid North Coast Maintain reliable supply to Lew/Laurieton area with backup

Completed

Installation of control devises on existing equipment NSW New England Northern Tablelands

Power quality control Completed

Wallerawang substation replacement NSW Central Tablelands Condition based replacement to maintain reliable supply

Completed

Installation of a cable link between Beaconsfield West & Haymarket substations

NSW Inner Metropolitan Sydney

Maintain reliable supply Completed

Replacement of shunt reactors at Murray switching station & Yass substation

NSW Snowy Mountains Maintain voltage control and relieve constraints on the Canberra to Kangaroo Valley 330 kV transmission line

Completed

Connection of Gullen Range Wind Farm to a new switching station

NSW Southern Tablelands Connecting renewable energy to the network

Completed

Transformer & reactor replacement program

NSW Central Tablelands, New England Northern Tablelands, North West Slopes, Inner Metropolitan Sydney, and Snowy Mountains.

Condition based replacement to maintain reliable supply

Completed

Replacement of secondary system at Tumut substation

NSW Riverina Condition based replacement to maintain reliable supply

Completed

MAINTAINING THE SYSTEM Some of TransGrid’s assets were built during the establishment of the transmission network in the 1950s and 1960s and are now reaching the end of their serviceable lives. TransGrid has set prudent assessment standards to ensure that the long term interests of consumers are at the forefront of the network planning decision making process. We propose an asset renewal program comprising of replacement and refurbishment based on condition and forecast need. We consider this program as essential to ensure the safety of staff, contractors and the public, and to maintain a reliable electricity supply.

TransGrid’s asset management system has been independently reviewed against the newly released international standard ISO55001. As a result of that review TransGrid is expecting to attain full certification later this year to ensure international best practice asset management standards continue to be achieved.

NETWORK DEVELOPMENT TransGrid is proactive in its response to the changing energy landscape. As energy usage patterns change, TransGrid will continue providing a level of reliability that consumers are satisfied with at the most efficient cost.

We undertake comprehensive planning and analysis processes to assess network capabilities and identify the areas of the network where limitations are expected to emerge in the future. These limitations could be addressed with non-network and/or network solutions.

The energy and demand forecasts form a fundamental input to this process in identifying the areas of the network that require investment. Planning and development of the network is undertaken on a cyclical and needs basis to ensure that transmission service delivery to our customers is cost-effective, environmentally responsible, responsive to changing requirements and meets the jurisdictional, contractual and national electricity rules obligations.

NEW SOUTH WALES TRANSMISSION ANNUAL PLANNING REPORT 2014 CONSUMER SUMMARY │ 6

Committed developmentsCommitted and underway network solutions, which have financial and contractual commitments; are under development; and have passed Decision Gate 3 of TransGrid’s Network Investment Process:

Project Location Purpose Status

Orange substation replacement NSW Central West Condition based replacement to maintain reliable supply

CommittedDue Q2 2017

Western Sydney Supply substation, line & cable installations (with Ausgrid)

NSW Sydney CBD & Western Sydney

Maintain reliable supply UnderwayDue Q3 2014

Munmorah Power Station 330 kV generator disconnection

NSW Central Coast Retirement of power station UnderwayDue Q3/4 2014

Upper Tumut switching station rehabilitation NSW Snowy Mountains Condition based replacement to maintain reliable supply

UnderwayDue Q1 2015

Murray–Guthega 132 kV line remediation

NSW Snowy Mountains Remediation to restore capacity to maintain reliable supply

UnderwayDue Q4 2014

Cooma substation replacement NSW Snowy Mountains Condition based replacement to maintain reliable supply

Underway Due Q4 2015

Yanco substation refurbishment NSW South West Condition based replacement to maintain reliable supply

Underway Due Q3 2015

Capacity upgrade of Yass–Bannaby 330 kV & Gullen Range–Yass 330 kV lines

NSW Southern Tablelands Maintain reliable supply UnderwayDue Q4 2014/Q1 2015

Transformer replacement at Newcastle, Griffith & Yanco substations

NSW Hunter & South West Condition based replacement to maintain reliable supply

UnderwayDue Q4 2014

Capacitor Bank replacement at Canberra, Yass & Orange substations

ACT, NSW Southern Tablelands & Central West

Maintain adequate power transfer capability

UnderwayDue Q4 2014–Q2 2017

Upcoming planned developmentsProposed network solutions which have completed the regulatory process but are not yet committed projects or are exempt from the regulatory process:

Project Location Purpose Status

Remediation of Wallerawang to Sydney South/Ingleburn 330 kV lines

NSW Central Tablelands and Sydney South

Meet quality of supply requirements Proposed

Establishment of Wallaroo switching station and associated 330 kV line connections

NSW Southern Tablelands and ACT

Meet jurisdictional reliability requirements in the ACT

Proposed

Installation of switchbays at Sydney West and Williamsdale substations

NSW Western Sydney and Southern Tablelands

Meet electricity distributor requirements

Proposed

Quality of supply monitors at 13 strategic customer connection points

Various Assist in meeting national electricity rules requirements

Proposed

Condition based replacement of assets nearing the end of its serviceable life

Various Maintain reliability Proposed

Installation of monitors to record real time line capabilities

Various Monitor weather conditions & conductor temperature to improve short-term forecasting

Proposed

* This is not a complete or definitive list and further information is contained in the Transmission Annual Planning Report 2014 chapters 6 and 7. The regulatory consultation process is underway for the Queensland – NSW Interconnector (QNI) transmission capacity project.

NETWORK CONSTRAINTSAs part of its Annual Planning Review, TransGrid has identified a number of possible constraints for their planning and consultation including:

Constraints expected within five years• Supply to the Gunnedah/Narrabri area;• ‘Powering Sydney’s Future’ supply to the Sydney Inner

Metropolitan area;• Sydney South – Beaconsfield network capacity;• Supply to the Beryl/Mudgee area;• Connection of Ausgrid’s new subtransmission substation

in the Munmorah/Doyalson area;• Condition of Munmorah, Vales Point, Canberra, Burrinjuck

and Wagga substations;• Condition of Wallerawang – Orange North 132 kV line; and• Snowy to Sydney network capacity.

Constraints expected within five to ten years

• Tamworth and Armidale 330 kV Switchyards;• Hunter Valley – Tamworth – Armidale 330 kV

system capacity;• Voltage control in Northern NSW;• Supply to the Forster/Tuncurry area; and• Capacity of Marulan – Avon, Marulan – Dapto,

and Kangaroo Valley – Dapto Lines.

DISCLAIMER

The New South Wales 2014 Transmission Annual Planning Report, the Outline and the Consumer Summary are prepared and made available solely for information purposes. Nothing in these documents can be or should be taken as a recommendation in respect of any possible investment.

The information in these documents reflect the forecasts, proposals and opinions adopted by TransGrid as at 30 June 2014 other than where otherwise specifically stated. Those forecasts, proposals and opinions may change at any time without warning. Anyone considering these documents at any date should independently seek the latest forecasts, proposals and opinions.

These documents include information obtained from AEMO and other sources. That information has been adopted in good faith without further enquiry or verification.

The information in these documents should be read in the context of the Electricity Statement of Opportunities and the National Transmission Network Development Plan published by AEMO and other relevant regulatory consultation documents. It does not purport to contain all of the information that AEMO, a prospective investor or Registered Participant or potential participant in the NEM, or any other person or Interested Parties may require for making decisions. In preparing these documents it is not possible nor is it intended for TransGrid to have regard to the investment objectives, financial situation and particular needs of each person or organisation which reads or uses these documents.

In all cases, anyone proposing to rely on or use the information in these documents should:

1. Independently verify and check the currency, accuracy, completeness, reliability and suitability of that information;

2. Independently verify and check the currency, accuracy, completeness, reliability and suitability of reports relied on by TransGrid in preparing these documents; and

3. Obtain independent and specific advice from appropriate experts

or other source.s.

Accordingly TransGrid makes no representations or warranty as to the currency, accuracy, reliability, completeness or suitability for particular purposes of the information in these documents. Persons reading or utilising the New South Wales 2014 Transmission Annual Planning Report, the Outline and the Consumer Summary acknowledge and accept that TransGrid and/or its employees, agents and consultants shall have no liability (including liability to any person by reason of negligence or negligent misstatement) for any statements, opinions, information or matter (expressed or implied) arising out of, contained in or derived from, or for any omissions from, the information in these documents, except insofar as liability under any New South Wales and Commonwealth statute cannot be excluded.

Copies of the Transmission Annual Planning Report for 2014 are available from TransGrid:

180 Thomas St, Sydney NSW 2000 PO BOX A1000, Sydney South NSW 1235 T (02) 9284 3000 | F (02) 9284 3456

© State of New South Wales through TransGrid 2014.

All rights reserved.

ABN 19 622 755 774

www.transgrid.com.au