Findings Our analysis has confirmed that the proposed staffing level for the MG internal functions, compare favourably to other Gas distributors and are consistent with prudent, efficient, sustainable operating practices. Synergies and operating efficiencies of the current arrangement, involving a ‘whole of business’ outsource to Jemena are maintained in the new business model. In the new business model MGH will have 92 internal full time equivalent staff (FTE) across the different functional areas. We benchmarked internal staffing level of MGH against APA Allgas, Jemena JGN, SP Ausnet in Australia. We also compared MGH against a range of European gas distribution utilities and for corporate and support functions included a range of non-utilities companies. After adjusting for differences in outsourcing level, network size (km of pipes), asset value (RAB) and customer numbers, the FTE levels for the insourced functions compare favourably to other Australian and European gas distributors, as outlined in the table below. MG (2013) Jemena MGH Jemena JGN SP Ausnet APA Allgas European benchmark (sample average) European benchmark (best practice) 0.96 0.97 0.78 0.93 3.3 1.0 0.75 FTE/100,000 customers 14 14 19 16 114 15 11 FTE/ $ bn RAB 95.9 96.9 84.1 93.5 192.4 n/a n/a The more direct comparison of the new business model with Jemena MGH and MG’s historical FTE levels from 1998 and 1999 show a reduction in FTE staffing levels. MG (2013) Multinet/ Ikon 1998 UED 1999 Jemena MGH Asset management (including HSEQ, technical compliance) 20 92 25 25 Service Delivery Contract Management 15 Included in asset management 12 10 NCC 17 Included in asset management Not directly stated, assumed 17 19 CMS 13.5 Included in asset management 22 14 IT strategy and management 5 8 6 5 Finance 8 26 12 7 Other corporate 13.5 11 11 13 Total 92 137 105 93 Our analysis has confirmed that the proposed staffing levels for each of the function areas are appropriate and that the synergies and operating efficiencies of the current arrangement are either maintained, or in some functional areas exceeded. Overall, across all internal functions the proposed structure represents a slight efficiency improvement over the current operating arrangements. The proposed staffing levels demonstrate above average
Data quality assessment of key data sources for the benchmarking Data Source Confidence Level Rational Data usage Jemena organisation charts Medium Breakdown into functional areas and FTE allocation based on SME knowledge FTE benchmarking of all functions UED 1999 organisation charts and role allocation Medium Breakdown into functional areas and FTE allocation based on SME knowledge FTE benchmarking of all functions Multinet/Ikon memorandum Medium High confidence on aggregated level but no breakdown available; used SME knowledge FTE benchmarking of some functions SP Ausnet FTE data: SME, public domain data Medium Data provision by SME (low confidence) and public data (medium confidence) FTE benchmarking of some functions Insourced/Outsourced functions for Australian gas distributors Medium SME knowledge of insourced/outsourced functions Used for determination of data comparability KPMG report “cost benchmarking APA Allgas” High Benchmarking of support function FTE benchmarking of support functions A.T.Kearney gas distribution benchmarks Medium Based on 7 samples which are adjusted for network parameters to create a normalised benchmark FTE benchmarking of some functions using normalised sample averages and best practice benchmarks Appendices Appendix 1: Selected Benchmark data – Overview of current and historical Multinet network FTE levels Multinet (2013 FTE forecast) IKON 1998 UED 1999 Jemena MGH network FTEs FTE (in-house) 92.1 137 105 93 Network Management 51.8 92 54 54 Asset Management 14.6 92 21.2 17.6 Compliance and Environmental Management 3.1 incl. in AM 2.0 1.6 HSEQ 1.7 incl. in AM 1.0 3.0 Service Delivery Management (Contract Management) 15.3 incl. in AM 12.1 10.0 NCC 17.1 incl. in AM 17.0* 18.6