7 Steps to Councils' Stunning $6 Million Maintenance Savings
Paul Brown and Alexi Lynch
In the space of 2 weeks, a group of Victorian councils have just worked collaboratively to save up to $300,000 annually in street lighting maintenance (OMR) costs on new LED lights. This could be as much $6 million in savings over the life of the new efficient lights, on top of the 77% energy savings.
How to Save Councils $6 million in 45 Minutes
OK, so it may have been more like a 60-minute workshop, but after introductions and formal welcomes we only really had 45 minutes...
SP Ausnet developed their maintenance (OMR) pricing for the newly approved 18W LED in mid May 2014. The charges were $29.34 for the Central Region and $30.90 for the North & East Region. Councils in the SP Ausnet area – led by La Trobe, Baw Baw, Wellington, Maroondah, Banyule, Yarra Ranges, Casey, East Gippsland, Knox and councils in the Goulburn Broken Greenhouse Alliance – got together for a workshop on Thursday 12th June to investigate ways to advocate for a lower OMR, along with the MAV and Ironbark.
The workshop was fast-tracked thanks to Scott McKenry from the Eastern Alliance for Greenhouse Action (EAGA) and Nelly Belperio from Maroondah who took the lead and facilitated the workshop and provide a meeting space at Maroondah, as well as a clear determination from La Trobe and Baw Baw to move swiftly.
At the workshop we outlined the differences between SP Ausnet’s offer with other DNSPs (Distribution Network Service Providers), identified the preferred outcomes for councils (inclusions and exclusions) and then negotiated with SP Ausnet under the banner of the MAV.
The next week councils received the following response from SP Ausnet:
"Since the publication of the SP AusNet annual Operation Maintenance and Replacement charges for the 18W LED lights SP AusNet has undertaken some further work jointly with Council's (through the MAV and Ironbark Sustainability) and Sylvania with regard to the warranty on lighting components, an upgrade to the Photo Electric cell installed with the luminaire to a 20 year life, and a review of the appropriate service standards. This has resulted in a further review of the charges for these lights... Following the changes the 2014 annual charge will reduce to $20.06 for Central and $21.63 for North & East..."
This is a price reduction of approximately $9-10 compared to the original offer and would save approximately $20,000-300,000 in the first year alone. Ironbark are now building these costs into our business case analysis, and will assess any additional future costs based on the assumptions used by SP-Ausnet.
The most important factor in the success of this process was a willingness to openly discuss pricing from both council and importantly SP AusNet. SP Ausnet worked hard to get a better outcome for councils including going back to the manufacturers and reviewing their assumptions. Hats off need to go to SP Ausnet and their staff who have shown a willingness to work together for an honest, transparent and productive discussion around inclusions and exclusions to the price.
This is a win-win scenario as SP Ausnet have managed to negotiate better outcomes for them (i.e. longer warranty periods and less maintenance) and as a result have managed to pass savings onto councils.
A Model to Replicate
Unfortunately the history of local government advocacy for lower maintenance costs is littered with many unsuccessful attempts through regulatory processes (the Australian Energy Regular price reviews) and other informal process. In short, councils often work very hard and spend a lot of their time and money with minimal results!
So when we occasionally see an exceptional outcome like this and we think it’s worth celebrating, promoting and learning from. Here’s why this process was a stunning success:
- Dedicated and knowledgeable council staff, many of whom have been around street lighting for a long time.
- Credibility of a unified voice through the Municipal Association of Victoria (MAV), the legislated peak body for Victoria’s 79 councils
- Strong and collaborative existing relationships with key stakeholders – especially the Distribution Network Service Provider (DNSP) who manage the network and in this case were willing to discuss the issues and come to an agreement that was beneficial for both them and councils.
- A working understanding of how maintenance works and how the DNSP and AER’s maintenance "cost build-up" models work
- The right type of engineering and regulatory advice during the council workshop to ensure the process was based on a technical understanding of how lights work and are maintained
- Data. Evidence. It’s no good saying "we want the prices to be lower because we think they’re too high". You need to have the supporting evidence – as opposed to anecdotal hearsay to back you up.
- Focusing on achievable outcomes and not getting bogged down in theory.
Congratulations to Scott, Nelly, Fiona, Ben, Paul, Raymond, Raj, Sam and Jo.
What frequently takes councils decades has just been completed in a matter of weeks.