Jemena is one of the major players in Australia’s energy industry, covering both gas and electricity, and transmission and distribution. We caught up with Managing Director Paul Adams, who was also recently appointed as Chairman of the Energy Networks Association (ENA) to ask him about both Jemena and his own career.
Can you tell us briefly about Jemena’s activities in gas transmission?
We operate approximately 1,500 kilometres of gas transmission pipelines and associated facilities throughout Queensland, New South Wales and Victoria.
Assets we 100% own and manage include the Eastern Gas Pipeline (EGP), the VicHub Interconnect Facility, the Queensland Gas Pipeline (QGP) and the Colongra Gas Storage and Transmission facility.
The EGP is a key supply artery between the Gippsland Basin and New South Wales and it supplies more than half the gas consumed in New South Wales. The VicHub is an interconnect facility situated at the Longford Compressor Station. VicHub enables gas to flow bi-directionally between the Eastern Gas Pipeline and the Victorian gas transmission system
The QGP links the Wallumbilla gas hub in south central Queensland to large industrial gas users in Gladstone and Rockhampton.
Jemena designed and built the Colongra Lateral Pipeline in 2008 which has been described as one of the most unique and innovative projects of its kind in Australia. This pipeline delivers gas to Delta Electricity’s 600MW gas-fired peaking power station and also stores enough gas to allow the power station to run at full capacity for five hours.
Do you think that the large LNG projects in Queensland will have a major impact on supply in New South Wales? With more gas being drawn to the north, several media reports suggest east coast prices will rise and potentially spike in the short term. If yes, do you have any views about a possible solution?
Jemena agrees with the view that the Queensland LNG projects will have an impact on domestic supply in the next few years. Domestic demand is competing with LNG exports, which in turn could result in significant reductions in gas flowing from the Cooper Basin to New South Wales. This, coupled with community concerns about coal seam gas (CSG), could impact on the development of new sources of gas supply in NSW.
The challenge – not just for New South Wales but for the whole of the east coast of Australia – is to ensure that there is access to as broad a supply of gas as possible from as many sources as possible. This way Australia can not only benefit from the export of gas to overseas markets but also continue to enjoy the competitive advantage of using natural gas in domestic markets. This means establishing efficient approval processes for gas developments and not adding onerous layers of approvals.
Jemena believes that it is important to bring the most cost-efficient delivered gas to market. We consider expanding the EGP – to increase the flows of gas from Victoria – will be a key part of meeting demand for natural gas. Jemena is working on solutions with customers to expand the EGP to enable more gas to flow north to meet any shortfall.
There has been some media comment regarding the need for a national gas grid in Australia. Do you have a view about this?
As Jemena’s gas transmission assets are on the east coast, I will confine my comments to the east coast grid.
An interconnected east coast gas transmission system would provide supply solutions to help manage current and future market changes. Specifically, there is an opportunity to introduce greater competition and efficiency to the transmission market on the east coast of Australia.
A directly interconnected east coast would not only facilitate improved and additional flows from existing basins but would also open up new sources of supply to the New South Wales market.
Gas prices are rising because of the increased costs of getting gas out of the ground and because there appears to have been a shortfall in supply for a period of time around the commissioning of the Gladstone LNG facilities.
Increasing gas supply and then bringing this gas to market is critical to bringing downward pressure to gas pricing. An interconnected east coast gas transmission system could have a key role to play in ensuring that all players in the Australian gas industry – from power generators and manufacturers to small businesses and households – are able to benefit from access to this abundant resource.
Australia has a plentiful supply of natural gas so we will need the right policies to ensure all Australians benefit from both the export of natural gas and the domestic use of natural gas.
Can you tell us briefly about Jemena’s activities in gas distribution?
Jemena owns, operates and manages the 25,000 km long Jemena Gas Network (JGN) which distributes natural gas to over 1.1 million homes and businesses in Sydney, Newcastle, Central Coast and Wollongong as well as to over 20 country centres including those in the Central West, Central Tablelands, South Western, Southern Tablelands, Riverina and Southern Highlands regions of New South Wales.
Jemena also owns 50% and strategically supports ActewAGL gas networks in the ACT.
What are some of the challenges facing you as the owner of gas network that distributes gas to 1.1 million customers?
Our major challenge is to deliver safe, reliable supply and affordable gas to our customers in the face of growing customer numbers and growing demand for gas. Each year we add about 30,000 new customer sites to the Jemena Gas Network.
As we have seen in various parts of the world, there is significant risk to supply reliability and public safety if gas networks are not replaced and well maintained.
When it comes to reliability of supply, we have succeeded in reducing gas supply interruptions over the past five years – and shown an improvement of 33%.
When it comes to integrity/safety of supply, we have been able to successfully reduce reported gas leaks on the network – with an improvement of 10.9%.
This in part reflects the fact that we are investing over $800 million over five years to upgrade/replace and extend the Jemena Gas Network. In the past five years we have laid more than 1,100 kms of new mains in New South Wales.
There is also the challenge of trying to make gas accessible to the 300,000 homes and businesses in Sydney alone which currently do not have a gas main in their street and therefore cannot be connected to the gas network.
Getting the balance right between reliability and price is always a challenge, and we will be engaging actively with key stakeholders on this as we prepare for our next access arrangement (which begins in 2015). We are very conscious of the impact that rising energy prices are having on customers, and this is particularly important in the current environment where wholesale gas price are rising significantly.
Can you tell us about Jemena’s activities in electricity?
Jemena owns and manages the Jemena Electricity Network (JEN) which delivers electricity to over 320,000 homes and businesses in north-west Melbourne. We partially own (34%) the United Energy network (UE) which delivers electricity to over 640,000 homes and businesses in south-east Melbourne and the Mornington Peninsula and 50% of ActewAGL electricity network in
There has been much media commentary about rising electricity prices. Does Jemena have a view about what can be done about this from a distributor’s perspective and the perspective of the 320,000 customers of the Jemena Electricity Network?
Jemena understands the pressure that customers are facing as a result of rising prices. The way our customers use electricity has changed significantly in the last few decades. Many customers are living in larger houses and are enjoying the use of high powered electric appliances such as big screen TVs and air-conditioners. In more recent times, quite a few customers have also been seeking out energy efficient appliances, while some have been connecting solar panels and taking advantage of once generous Government incentives. It has become a complex world for distribution businesses and customers alike.
In response to this increased complexity, Victorian network owners have invested in strengthening and smartening the network by increasing the size and amount of network equipment and installing new technologies such as smart meters. Network owners have also been faced with having to replace ageing network infrastructure to ensure customers receive safe, efficient and reliable supply. This is because parts of the original network, much of which was built in the 1960s, had reached the end of their useful life. At the same time, the significant rise in the cost of capital after the global financial crisis also had a major impact on network charges. The above factors have all contributed to increased network charges in Victoria, though not to the scale seen in other states. In Victoria, distribution charges make up about 30% of a customer bill compared with approximately 50% in New South Wales and Queensland.
From a distribution business perspective, Jemena continues to concentrate on safely and efficiently completing the smart meter roll-out (due for completion in the first half of 2014) and improving our engagement with customers to ensure our service offering is tailored to their needs. Leveraging the smart meter platform created in Victoria to benefit our customers will be an ongoing focus for our business.
There is no simple solution to the problem of rising electricity prices. However there are three things that consumers can do to reduce their impact.
First, customers can take up the opportunity of newly-available flexible time-of-use retail offers in Victoria and shift their consumption away from the more expensive peak period to off-peak periods wherever possible. Some customers who already minimise their consumption during peak periods will enjoy savings to their bill without having to change their consumption at all.
Second, if they can afford it, customers should buy energy-efficient appliances. For example, a new 7-star flat screen TV costs $980 a year less to run than a similar 1-star flat screen TV
Third, smart meters combined with web portals such as Jemena’s Electricity Outlook can help customers better understand and better manage their electricity consumption. Armed with this information, customers can choose a retail offer that works best for them. The Essential Services Commission estimates one in five households is on default tariffs, known as standing offers. Market offers are generally cheaper than default rates.
Tell me a bit about the path that led you to be MD of Jemena
During my 30-year career, I have had the privilege of working in all facets of the gas and electricity supply chain – from generation to retailing and from exploration to storage. I have also held roles in both the technical and commercial disciplines
You’ve had experience in both the technical and commercial sides of utilities. Do you think this combined perspective is important for your role now?
Definitely. You can only lead a business if you understand the issues and if you can talk the talk to all with whom you work. Put another way, as an MD you have to be able to “talk turkey” with all people inside and outside the business.
How has the energy utility sector changed during your time in it? Have any changes surprised you?
The industry has gone from being vertically-integrated from production to retailing to being horizontally-integrated where companies and people specialise in certain parts of the supply chain. There has also been a change in focus from being state-based to being able to ship and deliver energy across state boundaries. The changes haven’t really surprised me because the foundations – pipelines in gas and poles and wires in electricity are still in place.
What will energy utilities look like 30 years from now?
We have gone from a really basic internet with a green screen to having high-speed applications on your phone, in other words at your fingertips. All of these applications still have basic foundations – these are still underpinned and supported by cables. The electricity grid will therefore be a bit like an electricity internet.
The foundations – poles and wires for electricity and pipelines for gas – will still be in place but the merger of digital communication and energy delivery from a technological and environmental perspective will be a feature of the future. In 30 years, electricity networks, for example, will be used in different ways to support everything from solar panels to electric vehicles.
What do you love about energy utilities?
I love them because the safe, efficient and reliable supply of energy underpins almost everything we do in our homes and in our businesses. What we enjoy in our homes today such as cold milk from a fridge, hot water for a shower, meals cooked in minutes would have taken 50 slaves in the days of the Roman Empire to deliver. As an industry, we have sought to continuously adapt to changing customer needs by efficiently delivering safe and reliable energy.
What are you most proud of from your time in the sector?
I am proud of the fact that when there are bushfires and floods, we step up to the plate by pulling out all stops to get customers back on supply as safely and as quickly as possible. In cases like this, I find Jemena employees always go that extra distance in order to do the right thing by customers in their time of need.
All this is done by people who have no egos. They just go out and get the job done. Often it is only at times like this that the value they add to the community is realised.
What does a typical day involve
There is no such thing as a typical day in this industry, or even a typical week. When I look back over the past week for example, my activities include flying from Melbourne to Canberra and back, flying from Melbourne to Sydney and back, one conference call with someone in Singapore and another conference call with someone in China, a conversation about safety with one of our guys in the field, two board meetings as well as several internal meetings including performance reviews and a discussion with a major customer.
What is the main thing that people outside of this industry don’t understand, that people inside do?
So often those outside the industry take for granted the effort involved to deliver safe, efficient and reliable energy. Efficient supply of safe and reliable energy requires the working together of thousands of bits and pieces in a network. People only realise the value of reliable supply when it is taken away from them. The true value to customers is actually more than just energy delivery. To use electricity as an example, without the platform of the grid, customers would not be able to enjoy the benefit of solar panels or voltage stability.
What can energy utilities do better than they are doing at the moment?
In addition to continuously improving our focus on customers, and to use electricity as an example, we have to be conscious that when it comes to installing solar panels or air-conditioners, there are winners and losers.
For example, not all homes have solar panels but the cost imposed on the networks by enabling electricity to be taken back from the home to the grid, is a cost that is spread across all customers. So those who don’t have solar panels are effectively subsidising those who do.
Similarly, not all homes have air-conditioners. However, according to Productivity Commission figures, each 2kW air conditioning systems requires around $7,000 of added infrastructure investment – made up of $4,000 in distribution (in neighbourhoods), $1,400 in transmission (from the central coal-fired power station), and $1,600 in generation costs (gas- fired peakers).
Again, such costs are spread among all customers, so those without air-conditioners are effectively subsidising those with air-conditioners. As an industry, we need to do whatever we can to make sure those who are losers do not suffer any economic hardship by pricing and costing accordingly.
Do you think the role of engineers is undervalued in society today? How can that be improved?
Yes, I do. Every successful society sees inherent value in engineers. When it’s all going well, engineers are not as valued as the arts and finance professions. However, when things don’t go well in our world, more often than not we turn to engineers to find solutions to problems – and engineers are asked to step up to the plate. The value of engineers is well documented in our history – for example roads built by engineers in the time of the Roman Empire survive to this day.
Do you think the services provided by utilities can be taken for granted? Is this a bad thing, or should it be a goal for utilities?
Yes, but I don’t think it is a bad thing. Sometimes I wonder if energy is properly valued. According to the Australian Bureau of Statistics, in 2012, energy costs represented around 5% of the average gross weekly household income. The average Australian household spent $39 per week on electricity and gas for their homes.
The fact is a lot of our daily activities, which we take for granted, should be quietly appreciated. Every morning I can get cold milk out of my fridge instead of having to personally milk a cow. I can also have a hot shower and enjoy a cooked breakfast – both without having to build a fire. These are simple pleasures of modern day life that are underpinned by energy which we take for granted. For thousands of years, however, not even kings enjoyed the things we enjoy every day – such as safe, reliable and efficient energy supply – and which we often take for granted.
Is the utility sector attracting enough young people and are there good career paths available?
Yes. When I look around Jemena I see we have attracted good, first-class and highly-skilled young people. There are good career paths in the industry because it is one that continues to grow and it is one where the core of it can’t be exported offshore.
What advice would you give someone setting out on a career in the utility sector now?
I would say to any person: Get involved and give it a go rather than sitting and waiting for something to happen or expecting to be taken care of. This is a ‘doing’ industry and it is people who make things happen. So if you want to get ahead you should take every opportunity you can to make things happen.
What is the greatest challenge facing Jemena at the moment?
Helping our customers, whose businesses are sensitive to gas price rise, through the transition from current prices to potentially higher prices.
What could other utilities learn from Jemena?
Are there lessons Jemena could learn from other utilities – what are some of the others doing well?
We are all involved in industry bodies and we all have a learning culture. This means we share and exchange ideas because we are continuously striving for a better outcome for our customers
What overseas trends should we expect to see in Australia in future? What can international utilities learn from Australia?
Our regulatory frameworks in Australia are fairly robust and many overseas countries are looking to adopt our frameworks.
In Victoria, our rollout of smart meters is one of the largest of its kind and a lot of countries are watching this rollout very closely.
Worldwide, we are all seeing the trend where we are seeking to find a balance between energy affordability and environmental sustainability. This is a worldwide challenge for all of us in the utilities industry.
And finally introducing new technologies, distributed renewables and using technology to reduce cost, improve reliability and reduce environmental footprint in a coordinated, efficient manner.