NSW electricity distributors Ausgrid, Endeavour Energy, and Essential Energy have submitted their revised five year plans for safe, reliable, and affordable network services to the Australian Energy Regulator.
Chief Executive Officer of Networks NSW, Vince Graham, said the proposals set out plans for the three electricity distributors to continue to safely improve their productivity and efficiency.
“These five-year plans are a balanced approach to reforming our electricity networks and reducing pressure on consumers’ bills, while maintaining a safe and reliable power supply,” Mr Graham said.
“Our customers have told us that electricity needs to be more affordable – but most are not prepared to accept poorer service, more blackouts, or increased safety risks to staff and the community.”
“These are sensible plans to keep the average annual network price rise for residential customers to around inflation, while ensuring the networks remain safe, reliable, and financially sustainable for the long term.”
Since July 2012, Ausgrid, Endeavour, and Essential Energy have been undertaking sweeping reforms initiated by the NSW Government that have achieved $3 billion in savings. Under the revised proposals submitted by the three networks, combined operating and capital expenditure will reduce by 37 per cent across the three businesses compared to the previous five years.
“This is a responsible way to reform the distribution networks and deliver progressive improvement to productivity and efficiency for the benefit of the customers we serve,” Mr Graham said.
“In contrast, the draft determination from the AER in November 2014 cut revenue by $6.5 billion or 27 per cent over the five year period, including a 66 per cent real reduction to capital investment compared to the previous five years.”
“The AER’s draft decision is based on assumptions, modelling, and processes that are critically flawed. The AER’s Draft Determination would require immediate job cuts of 4,600 employees, or 37 per cent of the workforce across these three networks.”
“Programs to manage vegetation to reduce the risk of blackouts and bushfires would also need to be cut by up to $460 million over the next four years. The AER’s draft decision, if implemented, would seriously compromise our obligation to provide safe and reliable services to our customers.”
Mr Graham said the AER had failed to undertake any risk assessment around the impact of its draft decisions. Concerns about the networks’ ability to manage bushfire risk if the AER’s cuts are implemented have also been raised by the NSW Commissioners for Fire & Rescue and the Rural Fire Service.
The networks’ revised proposals for the 2014-19 period accept some aspects of the AER’s draft determinations and have incorporated these measures as part of their existing and effective reform processes. However, the AER’s draft decision relies heavily on a new econometric model to benchmark distributors’ performance, which was not published by the required deadline of 30 September 2014.
“We believe the methodology used in the benchmarking report is seriously flawed, and its late publication limited opportunities for all stakeholders to properly assess its findings,” Mr Graham said.
“We urge the AER to carefully review our revised proposals in light of our shared objectives under the National Electricity Rules to deliver safe, reliable and affordable electricity for our customers.”
The Australian Energy Regulator will now seek further public comment on the revised proposals before handing down its final determination before 1 May 2015.