The Australian Energy Regulator (AER) has endorsed TasNetworks’ transmission revenue proposal for the 2014-19 regulatory period.
TasNetworks CEO, Lance Balcombe, said the AER’s draft decision on TasNetworks’ revenue proposal put further downward pressure on prices for all Tasmanian electricity consumers.
“The AER’s figures show a $46 drop in residential power bills for 2014-15, a $10 drop in 2015-16, and rises less than CPI for the following three years,” Mr Balcombe said.
“Our customers want predictable and sustainable pricing, and a safe and reliable network. Our transmission revenue proposal supports those outcomes.”
Mr Balcombe said the TasNetworks’ transmission revenue proposal includes significant reductions in capital expenditure, operating expenditure, and the rate of return, compared to the previous regulatory period. This is in part due to prudent network investment in previous years. It also reflects proposals by TasNetworks to drive further efficiency.
“We are a customer focused business. We are setting ourselves challenging targets and taking practical steps to deliver lower prices,” Mr Balcombe said.
“Over the last two years Tasmanian transmission charges were $37 million less than we were permitted to recover. Charges dropped again this year, as a result of our lower proposal.”
“Unlike in NSW and the ACT, where the AER has released draft revenue decisions imposing large cuts to revenue, the AER has supported TasNetworks’ proposal in all material respects. This will see continued reductions in transmission costs in Tasmania, while still maintaining a safe and reliable transmission service.”
Energy Networks Association Chief Executive Officer, John Bradley, welcomed the acceptance of TasNetworks’ proposal, but questioned the large cuts to ACT and NSW: “Customers have been fed up with electricity price increases and do expect to see network costs falling but we also need to avoid impacts on other customer priorities.”
“In NSW and ACT, the AER would cut distribution operating expenditure to a level not seen in 10 to 13 years – it seems implausible that this can be achieved without customer impacts.”
“If implemented, these funding cuts put at risk key consumer outcomes relating to safety, maintenance and outage response times.”
“While consumers should expect a strong regulatory regime which drives real efficiency benefits, unsustainable funding cuts would inevitably be service reductions in disguise.”
“It would be a high risk approach to an essential service,” Mr Bradley said.
Mr Bradley said the draft decisions threaten to change the risk profile of network operations and service delivery, and deliver short term price reductions at the expense of ongoing service outcomes for consumers.
“In some distribution businesses, the proposed decision would require the removal of thousands of staff, less vegetation management, slower responses to outages, and less frequent inspections and maintenance.”
“The AER is not a technical or safety regulator and it’s not clear the due diligence has been done to assure consumers that network safety, public safety, outage response times, and customer service will be maintained.”
Mr Bradley said it was important the final regulatory outcome encouraged investor confidence in stable, evidence-based regulation.
“Australian energy consumers rely on future investment to ensure new customers can be connected and assets can be replaced to maintain security and reliability,” Mr Bradley said.
He said electricity consumers would ultimately pay more for electricity if networks were prevented by the AER from prudent funding of operations, maintenance and reinvestment.
“Consumers don’t benefit from underinvestment and extreme cutbacks in maintenance, vegetation management or inspections.
“We have seen underinvestment in reliability in some States result in rushed and heavy-handed interventions by State governments mandating expensive reliability standards.
“Consumers end up paying more under this kind of ‘roller-coaster’ regulation where underspending is followed by higher cost catchup spending and political intervention.”
“The ENA looks forward to more balanced final decisions that are in the long-term interests of electricity consumers,” Mr Bradley said.