Energy management consultancy Energy Action Limited has welcomed the discussion around the Australian Energy Regulator’s draft determinations on network pricing for the NSW and ACT distribution and transmission businesses. These draft rulings may determine the prices that customers will pay for the network component of their electricity bill for the period from 1st July 2015 to 30th June 2019.
A conference on the draft determination is being held, after which the network businesses will have until mid-January 2015 to respond to these proposals. A final determination will then be made by the end of April 2015, and this decision can be appealed by the network businesses to the Australian Competition Tribunal. Any changes to network pricing may not take place until the appeal process is finalised and a decision made.
“We will be closely monitoring the conference and further proceedings, and naturally will be lobbying strongly for a favourable outcome on behalf of our clients,” said Energy Action’s Chief Executive Officer Mr Scott Wooldridge, “however close attention must be paid to operations to ensure customer service levels and supply are not compromised as a result of the proposed network pricing cuts.”
Under the draft determination, the regulator has significantly reduced the amount that all of the network and transmission businesses can charge customers to operate and maintain the electricity network. The distribution businesses of Ausgrid, Endeavour Energy, Essential Energy, and ACTEW had originally requested to recover a total of $20.9 billion from their customers over the period.
Under the draft determination this has been cut by 34 per cent to $13.9 billion with the reductions falling fairly evenly across each of the distribution businesses. The NSW transmission company Transgrid also had its requested revenue of $3.05 billion cut by 24 per cent to $2.31 billion.
Mr Wooldridge commented, “Our clients’ network charges have risen significantly over the past 10 years, so we are pleased that the Australian Energy Regulator has recommended a reduction in the amount that network and transmission businesses can charge these customers, as long as customer service levels and supply are not impacted.”
“We are committed to advocating for fair energy pricing on behalf of our more than 5,000 commercial and industrial customers. Although this proposal is only in its very early stages, we welcome the discussions given that network charges typically represent between 40-60 per cent of a commercial or industrial business’s total bill.”
“This draft decision represents a significant improvement for customers over market expectations, which had been anticipating network charge increases at the level of CPI or slightly lower,” Mr Wooldridge added.
In proposing the cuts, the regulator cited reductions in both the forecast capital expenditure for asset replacement and in the required level of operating expenditure. The regulator has also proposed to cut the NSW distributors’ allowed rate of return from 10.02 per cent for the previous period to 7.15 per cent and made similar reductions for ACTEW and Transgrid.