Ausgrid - Cost pass through - Storm season 2019-20

Sector: 
Segment: 
Status: 
Commencement date: 
24 March 2020
Effective date: 
1 July 2021
Contact: 
AER General Inquiries AERInquiry@aer.gov.au
AER reference: 
AER201766

Overview

On 16 December 2020, the AER released its decision on a positive cost pass through application received from Ausgrid. The application relates to unanticipated operating and capital expenditure costs incurred by Ausgrid as a consequence of 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.

We have determined that Ausgrid can pass through this amount to its consumers through higher network charges over the remaining three years of the 2019–24 regulatory control period. The resulting revenue impact totals $19 million for the 2019–24 period - that is: $6.3 million for 2021–22; $6.3 million for 2022–23; and $6.4 million for 2023–24. This largely reflects the recovery of pass through operating expenditure, with pass through capital expenditure being mostly recovered over future regulatory control periods.

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.

Background

On 31 July 2020, Ausgrid submitted a positive cost pass through application to the AER under clause 6.6.1(a) of the NER. In its application, Ausgrid claimed the storms caused $37.6 million in damage to its network in the 2019–20 regulatory year.