AER releases determination on Ergon Energy's solar bonus scheme pass through application

On 4 November 2013 the AER received a pass through application from Ergon Energy, the electricity distributor for most of regional Queensland. The pass through application relates to higher than forecast feed–in tariff payments made during the 2012–13 regulatory year. These payments were made under the Queensland Government’s Solar Bonus Scheme. The AER assessed Ergon Energy's pass through application in accordance with clause 6.6.1 of the National Electricity Rules and the determination currently applying to Ergon Energy. We have determined that the positive pass through amount is $84 million, as proposed by Ergon Energy.

Retail electricity prices are determined under Queensland legislation. Under these arrangements, retail electricity customers in Ergon Energy’s distribution area pay a uniform tariff based on the network costs of Energex in the state’s southeast corner. Consequently, this pass through decision will not directly affect customers in Ergon Energy’s distribution area.

Background

Under the Solar Bonus Scheme, owners of solar panels are paid by retailers for electricity they supply to the network. Retailers recover these payments from the relevant distributor. In this case the distributor is Ergon Energy.

When the last regulatory determination for Ergon Energy was made in 2010, both Ergon Energy and the AER significantly underestimated the rapid uptake of solar panels. It was understood at the time that there was uncertainty around the accuracy of those forecasts. In determining the amount Ergon Energy would be required to recover for feed-in tariff payments, the AER accepted forecasts submitted by Ergon Energy subject to inclusion of a true up mechanism. Consequently, Ergon Energy’s regulatory determination also includes a cost pass through mechanism for Solar Bonus Scheme costs. Under this mechanism, Ergon Energy may apply to the AER to pass through to its customers any costs above the allowance already included in the determination. However, under Queensland’s uniform tariff policy the pass through amount does not impact on customers. Rather, Ergon Energy customers pay retail electricity prices equivalent to those paid by Energex customers.

For the 2012–13 regulatory year, the AER approved in its determination in 2010 a Solar Bonus Scheme allowance of around $3.5 million. Actual costs incurred by Ergon Energy in 2012–13 were much higher. In its cost pass through application to the AER, Ergon Energy proposed a positive pass through amount of $84 million.

This is not the first time the AER has been required to assess a proposed cost pass through submitted by Ergon Energy for the Solar Bonus Scheme. For the previous (2011–12) regulatory year, the approved pass through value was $27.8 million. For 2010–11, the approved pass through amount was $4.8 million.

Sector: 
Segment: 
Issued date: 
29 January 2014
AER reference: 
AC 004/14
Contact: 
Mr Chris Pattas, General Manager - Network operations AERInquiry@aer.gov.au