Background Paper – Service Level Agreement for Public Street Lighting
This matter was first raised and discussed by Local Government in 1998. This led to
the formation of the Public Lighting Steering Committee on 29 June 1998 charged with
reviewing issues and progressing options for Local Government in relation to the
deregulation of the electricity market.
Councils had concerns about the current arrangements for public street lighting as
follows:
•
•
•
•
•
•
•
•
The number of light outages and the time taken to repair such outages at any
given time
The low level of public promotion and awareness of fault reporting arrangements
The absence of penalties on the service provider for failing to promptly repair
faulty lights
Payments being required by the service provider even when the lights are not
working
The lack of contestability for maintenance
The lack of choice of light fittings, lamps and lighting standards
The perceived poor comparison of South Australian costs and standards for the
public street lighting service with other States
The disparity in target repair standards between metropolitan and country areas
There are three main product categories to which street lighting tariffs apply:
•
•
•
Standard public lighting – ETSA Utilities owns and maintains the street lighting
assets (about 88% of public street lighting is in this category)
Customer lighting equipment rate (CLER) – customers own and maintain the
street lighting assets and ETSA Utilities is responsible for lamp replacement only
(about 11% of public street lighting)
Energy-only tariffs – customer owns the assets and is responsible for all
maintenance including lamp replacements. This tariff is only available for 50W
and 100W high pressure sodium lamps (less than 1% of public street lighting)
The current street lighting tariffs are ‘bundled’ tariffs and include charges for all
components of the street lighting supply chain. The largest component of the tariff is
the distribution charges (which include maintenance charges) from the monopoly
distributor, ETSA Utilities.
As a result of Local Government lobbying and as part of the ETSA sale process, the
South Australian Independent Industry Regulator (SAIIR) undertook an inquiry into the
fairness and reasonableness of the street lighting tariffs being charged by AGL SA to
Councils.
Information provided in the SAIIR’s Final Report on Public Street Lighting Tariffs and
2nd Annual Performance Report on Regulated Electricity Businesses in South Australia
included:
•
“the SAIIR believes service levels can further improve and real costs can fall
over time. Whilst the SAIIR does not support the introduction of competition in the
provision of services on ETSA Utilities’ assets, it does recommend the
expansion of ‘energy-only’ tariffs to provide councils a greater choice in
providing street lighting services” (SAIIR (2000) p. ix)
•
The SAIIR noted that there does not appear to be any valid justification for
limiting the types of lamps for which energy only tariffs apply. AGL SA advised
that they are currently working on expanding the option of energy-only tariffs for
all lights – including the determination of the associated tariffs. This should
provide councils with a viable alternative in providing street lighting services and
should also substantially increase the competitive pressure faced by ETSA
Utilities (SAIIR (2000) p. 45). However SAIIR’s 2001 report noted that AGL SA
had not made any progress and urged it to work on this as a priority so that
expansion of energy only tariffs are made prior to the introduction of FRC in
January 2003 (SAIIR (2001) p. 28)
•
The SAIIR recommended that ETSA Utilities and the LGA, on behalf of all
councils, negotiate a ‘minimum’ service level agreement prior to FRC. The
agreement should outline the service levels that are provided under the current
street lighting tariffs. Councils could then negotiate improved levels of service
with either the retailer or ETSA Utilities post-FRC (SAIIR (2000) p. 15) The SAIIR
noted that little progress has been made on the development of a service level
agreement since the report in 2000. Given the monopoly nature of the existing
street lights owned by ETSA Utilities, the SAIIR considered that the development
of this service level agreement is a critical priority (SAIIR (2001) p. 56)
•
ETSA Utilities has a relatively high maintenance cost which is mainly
attributable to high material costs. These higher costs have been attributed to a
relatively high percentage of fluorescent lights, no bulk replacement program and
no use of contractors for lamp replacement and night patrol (SAIIR (2000) pp. 2829)
•
A cost and service standard benchmarking exercise conducted nationally
indicated that ETSA Utilities’ normalised cost should reduce by
approximately 16-17 per cent after improvements to their operating practices
and the SAIIR believes this target should be achievable with changed practices
over two years but not immediately (SAIIR (2000) p. 29)
•
The SAIIR concluded that ETSA Utilities should allocate repairs and
maintenance costs on a contributory basis between CLER (Customer
Lighting Equipment Rate) and Standard tariff categories. This would reduce
the cost allocated to CLER categories and be offset by an increase in the
standard tariff category (SAIIR (2000) p. 30)
•
The benchmarking report showed that ETSA Utilities’ per annum charges for
maintaining technical standards for public lighting including maintenance
strategy, performance reporting, purchasing contracts establishment, nonstandard lighting approvals, tariff management and asset management plans was
the highest of all the states. As this was not a large component on public lighting
costs it was accepted as fair and reasonable by SAIIR (SAIIR (2000) p. 34)
•
ETSA Utilities’ ‘pole attachments’ and ‘elevation’ charges should be
investigated further. As Councils do not make a profit from the provision of street
lighting, such lighting is seen as a ‘public good’ as distinct from the use made by
private, profit-orientated firms of ‘pole attachment’. This supports a conclusion
that ETSA Utilities should not provide ‘elevation’ at a profit for ‘public good’
lighting when it already receives a return on the stobie poles through the DUOS
charge (SAIIR (2000) p. 35)
•
The ‘regulatory bargain’ pursuant to the Local Government Act 1999 puts ETSA
Utilities in a privileged position in that it can place its assets on freehold council
2
land without incurring a charge. Any claim for additional profits, or super profits,
under a charge for ‘elevation’ needs to be offset by the regulatory benefits that
ETSA Utilities obtains, and assessed in light of the ‘public good’ arguments. Also
it can be argued the ETSA Utilities’ poles and wires detract from the visual
amenity of residential and commercial premises. The SAIIR concluded that based
on the argument that street lighting services are part of the ‘regulatory bargain’
for a distributor and part of the responsibility of the regulated return, the $13.37
pole attachment charge proposed by ETSA Utilities was excessive and was set to
$8 even though that was still at the upper limit of those charged by others in the
benchmark study (SAIIR (2000) p. 36)
•
The SAIIR experienced considerable difficulties determining the precise number
of street lights (SAIIR (2000) p. 40) serviced by ETSA Utilities. Also there is
some uncertainty over the calculation of energy usage. Currently, energy
usage is estimated by ETSA Utilities according to a range of factors – such as the
number and type of lights as well as the total operating time of street lights. The
SAIIR believes it is vital that industry participants jointly develop and agree on a
methodology for calculating energy usage. The SAIIR intends to assess this
methodology once complete (SAIIR (2000) pp. 40-41)
•
Prior to the commencement of FRC (full retail contestability) the SAIIR office will
be conducting a wide ranging review of various regulatory documents, including
the Retail Code (SAIIR (2001) p. 20)
Transport SA’s Traffic Signals and Road Lighting Report states that many Transport
SA roads are underlit when compared to the current standard and whenever a lighting
upgrade takes place, Transport SA is required to meet current standards by increasing
lighting levels on underlit roads. As 30% of the road lighting stock is 20-30 years old
and is currently due for replacement (Smith, Heather (2000?) pp. 7-8) this has
implications for Local Government due to its 50-50 cost sharing arrangement with the
State Government under the Highways Act. Councils are not convinced that it is
equitable and appropriate for them to meet 50% of this cost.
There might also be opportunities for the LGA to work with Transport SA during the
service level agreement negotiations with ETSA Utilities, because both parties have a
number of issues in common.
Issues previously highlighted for possible inclusion in a model contract include:
•
•
•
•
•
•
•
•
•
•
The need to break down (unbundle) street lighting tariff charges into component
parts eg asset provision/depreciation, maintenance and electricity consumption
Competitive energy costs, reflecting deregulated market price
Maintenance – performance standards and penalties for non-compliance with
standards
Replacement of lamps within a stipulated timeframe, including benchmarking
standards and monitoring, and reporting on the service levels achieved
Alternatives to the 80w mv lamps for the upgrade of street lighting
Compliance with Australian Standards of street lighting including responsibilities
for street lighting upgrades and street lighting design
Flexibility for Councils to organise their own maintenance if preferred
Opportunity to change tariff to energy-only tariff if preferred
Opportunity to reflect new developments in ownership
Schedules – choices of service level and pricing
3
The LGA met with representatives from ETSA Utilities recently to re-establish the
development of a Service Level Agreement
Bibliography
SAIIR (2000) Public Street Lighting Tariffs : Final Report. November 2000 SAIIR :
Adelaide.
SAIIR (2001) 2nd Annual Performance Report : Performance of Regulated Electricity
Businesses in South Australia 2000-2001. SAIIR : Adelaide.
Smith, Heather (2000?) Traffic Signals and Road Lighting at Transport SA :
Opportunities for Energy Efficiency. Transport SA : Adelaide.
4