The Australian Energy Regulator (AER) today has published its determination on Ausgrid's 2019–20 storm season cost pass through application.
The AER is required to assess pass through applications for Ausgrid in relation to storms that occurred on 26 November 2019, January 2020 and over a number of days (6–9 and 17–18) in February 2020, causing damage to its network.
The AER has determined that the November 2019, January 2020 and February 2020 storms should not be treated as a single event as there is no common underlying cause that sufficiently links these storms. Consequently, the November 2019, January 2020 and 17–18 February 2020 storms do not meet the materiality threshold under the National Electricity Rules.
The AER has determined that the 6–9 February 2020 storm constitutes a positive change event and a cost pass through amount of $26.3 million ($ nominal), after deducting control room costs of $0.7 million.
We have determined that Ausgrid can pass through this amount to its consumers through higher network charges. Of this, $19 million, can be passed through over the remaining three years of the 2019–24 regulatory control period.
We estimate that the approved cost pass through amount will add approximately $2 per year to average annual residential consumer bills, and $11 per year to average annual small business consumer bills, over the remaining three years of the 2019–24 period. However, average annual bills are expected to fall overall due to the larger estimated bill reductions under our existing 2019–24 determination for Ausgrid.
The AER is required to assess cost pass through applications in relation to pre-defined events as specified in the NER or in a revenue determination, such as nominated pass through events. A cost pass through allows a network business to recover its efficient costs, not accounted for in its current revenue determination, associated with nominated pass through events, such as natural disasters.
Network customers ultimately pay for energy infrastructure that needs to be restored and rebuilt after a natural disaster and the AER’s role is to carefully assess how businesses propose their spending. In making this assessment, the AER uses the principle that consumers should pay no more than necessary for safe and reliable energy.