The f-factor scheme is a Victorian Government initiative that provides financial incentives to Victorian electricity distribution businesses (the distributors) to lower the number of fire starts on their networks in Victoria. If the number of fire starts rises, the networks are required to pay a penalty.
The Australian Energy Regulator (AER) has received fire start reports from distributors for the 2016–17 reporting period, which have subsequently been validated by Energy Safe Victoria. For this reporting period all distributors have achieved results better than their respective benchmark targets.
This scheme complements the new safety measures implemented by the Victorian Government and provides distributors with an incentive to enhance safety outcomes. Under the scheme, the networks which have reduced the number of fire starts relative to their long-term targets receive an incentive payment.
Conversely, if networks report a higher number of fire starts relative to their targets, they face penalties or reduced revenues which are returned to customers. There is no cap on the penalties that can be imposed on a distributor under this scheme.
In the 2016-17 reporting period, incentive payments vary from around $43,200 for the small, predominantly urban network CitiPower, to $4.64 million for the large predominantly rural network Powercor.
The incentive rate ranges 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.
Distributors will only continue to receive a payment where they make a sustained and continuous improvements in fire start performance. Once improvements are made, the benchmark fire start targets are tightened in future years.
Using this data, the AER has determined the relevant incentive payments to the networks over the 2016-17 period (these payments take the form of adjustments to the networks’ 2019 regulated revenue amounts) in accordance with clause 9(4) of the f-factor Scheme Order 2016. The following links provide: