The Australia Energy Regulator (AER) is making important regulatory decisions in an unprecedented economic environment and is taking steps to ensure our decisions best support consumers and the market during this time.
Following consultation with stakeholders, we delayed our release of the 2020-25 network revenue determinations that were scheduled for 30 April 2020 for the following businesses: SA Power Networks, Ergon Energy, Energex, Jemena Gas Networks (JGN) and Directlink. This was to incorporate the Reserve Bank of Australia’s (RBA) short term inflation forecasts released on 8 May 2020.
The AER has considered these forecasts and will adopt the trimmed mean inflation forecasts from the RBA for the first two years of our 2020-25 network revenue determinations. In the current and unique economic circumstances, we see the use of the trimmed mean contributes to the best estimate of inflation over a ten year period due to the volatility in the CPI series.
We recognise that COVID-19 is having a significant impact on our economy and we are factoring this into our decisions. This a small example of how the AER is doing this while providing significant benefits to consumers.
This does not mean we will continue to use the trimmed mean for estimating long term inflation in future determinations. The AER recently announced a review into our approach of inflation – this review will consider what approach we may take in the future.
To incorporate this revised approach to inflation, the AER will release the 2020-25 revenue determinations on 5 June 2020. To ensure that consumers will receive any benefits from these determinations at the earliest possible time, further consultation was not possible on this aspect of our decision.
We recognise this will impact on the first annual pricing proposals for the businesses. We are working with these businesses to incorporate our revised approach to inflation in reasonable timeframes.
We acknowledge that this may affect some retailers who wish to release revised prices by 1 July 2020. We are working with network businesses to minimise the delay. Impacted retailers will receive more information on this soon.
The AER remains committed to engaging with all involved to provide the best outcome for consumers and the market.