Victorian electricity distribution businesses have received significantly reduced payments under the F-factor scheme in 2017-18 compared to the previous year.
The F-factor scheme is a Victorian Government initiative that provides financial incentives to Victorian electricity distribution businesses to minimise the number of fire starts within their networks.
If the number of fire starts rises, the networks are required to pay a penalty, and if it falls, distributors may receive an incentive payment.
The Australian Energy Regulator (AER) received fire start reports from the distributors for the 2017–18 reporting period. These reports have been validated by Energy Safe Victoria (ESV).
The penalty or reward rates under this scheme range from around $1.48 million per fire start in high risk areas on code-red days to $300 in low risk areas on a low fire danger day. The scheme therefore provides very strong incentives in the form of rewards or penalties to networks to reduce the number of fire starts in high fire danger zones and times.
For the 2017–18 reporting period, incentive payments vary from around $5,000 for the mostly urban network United Energy to around $995,000 for Powercor with a large rural network.
Distributors will only continue to receive a payment where they make sustained and continuous improvements in fire start performance. Once improvements are made, the benchmark fire start targets become tighter in future years.
Based on ESV’s validation of the reports, the AER has determined the incentive payments to the distributors for the 2017–18 period in accordance with clause 9(4) of the F-factor scheme Order 2016. These payments take the form of adjustments to the distributors’ regulated revenues for regulatory year 2020.