The Federal Court has upheld the Australian Competition Tribunal decision to set aside key aspects of the Australian Energy Regulator’s (AER) original 2014-2019 revenue determination for NSW and ACT Networks.

By law, the Tribunal cannot overturn decisions unless it results in a better outcome for customers.

The relevant energy networks will work closely with the AER following the Federal Court’s decision.

Energy Networks Australia Chief Executive Officer John Bradley welcomed the independent confirmation that the original decisions could be improved to ensure sufficient funding for sustainable services.

“While the decisions still need to be analysed, New South Wales electricity businesses do not expect a price shock or material impacts on customer bills,” Mr Bradley said.

“The energy networks initiated these appeals to ensure they can meet customer needs, to keep the lights on, energy reliable and to manage bushfire and other safety risks.

“Australia has a high quality, expert energy regulator in the AER and the oversight of the Competition Tribunal provides quality assurance to protect customers’ interests.

“Energy networks and their customers both want to achieve lower prices while maintaining the safe, reliable and secure electricity service that customers value.

“The Competition Tribunal and the Federal Court have played a key role in ensuring a careful balance in their robust independent decisions.”

Mr Bradley said customer bills would not be impacted in the short term by the Federal Court decision and regulatory changes would allow phasing in over five years.

“The decisions still need to be implemented by the AER and businesses. However, Endeavour Energy expects network charges to remain steady, Ausgrid expects it may lead to a small increase for its customers of 1.5 per cent a year for five years, and Essential Energy indicates it is unlikely to impact the current regulatory period to 2019,” Mr Bradley said.

“The AER has estimated an average NSW household could save up to $77 per annum by switching to the average market deal.”

Networks will not be passing on the costs of taking part in this review process, and cannot do so by law.

The NSW and ACT Networks appealed parts of the AER’s original revenue decision in order to maintain vital customers services and to ensure that customers and workers are safe.

The appeals were made through the Australian Competition Tribunal. This appeal process is known as limited merits review.

The AER then applied to have the Tribunal’s findings reviewed by the Federal Court which handed down its decision in mid-May.

Ausgrid also welcomed the Federal Court decision to support the Australian Competition Tribunal’s findings, stating that the decision would allow them to fund and operate a safe and sustainable electricity supply for customers, while providing a fair return to our shareholders.

The result shows the Limited Merits Review mechanism is an important check and balance built into the regulatory framework.

Essential Energy’s Chief Executive Officer, John Cleland, said Essential Energy respects the Court’s decision and will work with the AER in finalising the 2014-19 determination.

“Our long-term objective has always been to transition to a more streamlined, cost-effective business model that continues to deliver a safe, reliable and efficient electricity network for our customers,” Mr Cleland said.

“Essential Energy will continue to work collaboratively and cooperatively with the AER, our customers and other stakeholders to ensure the determination is re-made in the most efficient timeframe possible to provide clarity for our customers.

“We are critically aware of the potential impact this decision could have on regional and rural communities and will continue to work closely with stakeholders as we reform the business to keep downward pressure on real network charges for customers.”

The Federal Court decision comes more than two years after the AER issued Essential Energy’s 2014- 19 regulatory determination on 30 April 2015, reducing operating expenditure by 30 per cent, revenue by 25 per cent and capital expenditure by seven per cent with retrospective effect from 1 July 2014.

Essential Energy appealed the AER’s benchmarking methodology for operational expenditure and elements of the Weighted Average Cost of Capital (WACC) calculations. After a merits review hearing in late 2015, the ACT set aside the AER’s 2014-19 regulatory determinations on 26 February 2016. The AER subsequently applied to the Federal Court for a judicial review of the Tribunal’s decision.

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