Big Public Lighting Changes Proposed for Victorian Councils: Negotiation Time

Alexi Lynch

Negotiate (verb) /nɪˈɡəʊʃɪeɪt/ 
   A dialogue between two or more people or parties intended to reach a mutually beneficial outcome, resolve points of difference, to gain advantage for an individual or collective, or to craft outcomes to satisfy various interests.

In late September last year we held a webinar titled, "How to Change Your Street Lights: The Barriers Have Been Overcome". Given the success in Victoria where 68 of 79 councils have completed – or in the process of completing – an energy efficient street lighting changeover, it was not surprising that the webinar was over-subscribed from councils around Australia wanting to learn from a successful model. We discussed the traditional barriers to implementing energy efficient street lighting projects - costs, relationships and expertise - and how one-by-one these barriers have been removed, as we have outlined previously. A key theme that has emerged from projects throughout Australia is that the relationship barrier has fallen through strategic and respectful negotiations with Distribution Network Service Providers (DNSPs). Put simply collaboration works and fighting doesn’t.

Negotiation has lead to energy efficient lights being approved for use on networks. Negotiation has resulted in energy efficient bulk changes being delivered and contestability at all levels of the process in some jurisdictions. Negotiation has lead to reductions in maintenance charges that will save councils millions of dollars

Regulation to Negotiation

For the 2016-2020 period the Australian Energy Regulator (AER) has proposed a change to the structure of street lighting regulation in Victoria. In the past, lighting maintenance costs on electricity distribution poles and lighting on dedicated street light poles were all regulated by the AER. From January 2016, it is proposed that only those street lights on electricity distribution poles will automatically be regulated, as per the regime we’ve known up to now. Street lights on dedicated poles (largely in newer estates with underground electricity) would require a negotiated process. 

This means that in Victoria, councils would be required to negotiate with the five DNSPs for the services and charges associated with these assets or they will become price takers for these public lighting services with no regulatory oversight.

How would this Affect My Council? 

Each council would be affected in different ways, depending on how many lights are on dedicated street lighting poles. However all councils would be affected in some way. The changes would also apply to main road lights such as those that are cost-shared with VicRoads and higher-wattage lights lights (in between regulatory determinations). There would be a range of possible outcomes, primarily depending on how the negotiations play out. Councils and council groupings that can negotiate constructively with DNSPs, in a collaborative atmosphere, would be able to reach a good outcome.

If negotiations were to fail or are undertaken in a combative atmosphere then there is the potential that outcomes could be poor, leading to much higher maintenance charges into the future. This has been the experience in some Australian jurisdictions where the negotiation processes have failed and led to mediation and arbitration between councils and DNSPs that has lasted for years and, in one case, up to decades. The only people and organisations who appear to benefit from the protracting of these processes are consultants and lawyers. Councils continually lose out.

It’s probably a good time to start thinking about how these changes would affect you and think about your relationship with the DNSP and how any negotiations are going. If you have a positive and respectful relationship then things could hopefully be (relatively) easy for the next 12 months. If you have a fractious, antagonistic or belligerent relationship with your DNSP then things would likely get worse.

Is there still an Electricity Distribution Price Review (EDPR) process?

Yes. There would still be a regulated process through the Electricity Distribution Price Review (EDPR) for DNSP-owned poles that provide multiple functions. In April 2015 Ironbark was engaged by Victorian councils to undertake this on their behalf. This process is on-going.

Questions?

By now we're imaging you have a lot of questions. Certainly we've had dozens of councils ask us many critical questions over the last month: 

  • How does the EDPR process actually work?
  • What do the proposed changes mean?
  • What are the implications for councils?
  • How would negotiations take place?
  • Will councils pay more or less for street lighting services?
  • Why have these changes been proposed?
  • What does this means for LED street lighting projects?
  • What is the impact on street lighting business cases?
  • How has this sort of negotiation played out in other states?
  • What approaches have been successful in the past? 

We held two council webinars on 2nd and 9th July 2015 to inform councils of these latest changes and answer the questions above. If you missed the webinar, would like a copy of the slides and FAQ report or have any questions please email us and we'll send them through.