AER draft f-factor amount determination and explanatory statement for 2014

On 24 June 2015, the AER released its Draft F factor amount determinations and explanatory statement for the Victorian distributors for the 2014 calendar year for consultation.

Based on independently audited reports from distributors, we calculated the following financial penalties/rewards, as shown in the table below. This is based on the incentive rate of $25,000 per fires more/less than the relevant benchmark targets. The distributors’ annual allowable revenues for 2016 will be adjusted by the relevant pass-through amounts. If the amounts are confirmed in the final determinations, the adjustments will range from a $2.2 million penalty for United Energy to a $1.9 million reward for AusNet Services. As a result, there will be a small change in network tariffs for 2016.

We note that United Energy reported significant increases in fire starts in 2014 from 2013, which was significantly above their benchmark targets. CitiPower, Powercor and Jemena reported slight decreases in their fire starts in 2014 from 2013, but they are still above the target level. AusNet Services reported a similar number of fire starts as in 2013, which was about 30 per cent below the target level.

Note: numbers in brackets represent negative numbers, indicating penalties for exceeding the relevant fire start targets in 2014.

The outcome of this determination will be reflected in distributors’ network charges for 2016.