AusNet Services (SP AusNet) - AMI budget and charges determination 2012-15

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Commencement date: 
28 February 2011
Effective date: 
1 January 2012

Overview

In 2006, the Victorian Government decided to roll out advanced metering infrastructure (AMI), or 'smart meters', to all Victorian residential and small business electricity customers. The regulatory arrangements relating to the roll out are set out in a November 2008 Order in Council (OIC) made under the Electricity Industry Act 2000 (Vic). The OIC prescribes the time frame for the roll out, as well as the new regulatory framework and the AER's responsibilities associated with the AMI roll out.

On 31 October 2011, the AER released its final determination on the 2012-15 budget and charges applications for the Victorian DNSPs. In its final determination for SP AusNet, the AER concluded that in relation to certain expenditure, SP AusNet had substantially departed from the commercial standard that a reasonable business would exercise in the circumstances. The AER considered SP AusNet should have reconsidered its decision to proceed with its AMI rollout using WiMAX communications technology. Following a legal challenge to this decision, by SP AusNet, the Australian Competition Tribunal required the AER to revisit certain parts of its decision in April 2012.

The Tribunal agreed with the AER that a reasonable business in SP AusNet’s circumstances would have undertaken a thorough reconsideration of its communications solution when it realised that its original cost estimates had blown out. However, the Tribunal required the AER to examine the cost of changing to another technology, including whether switching costs would have been incurred if SP AusNet had changed technology. The amount of funds under consideration for the communications technology amounted to $72.2m.

The AER made its revised determination on 4 February 2013. The AER found that a reasonable business in SP AusNet’s circumstances would have switched communications technology in early 2011. However, the AER found that the allowance it originally approved for 2011 would have been more than sufficient to cover the costs of switching to the alternative technology in that year. The AER considered customers should not pay more for cost overruns because of SP AusNet’s choice of communications technology. The AER denied SP AusNet the $72.2m it had sought.

In March 2013, SP AusNet sought review of the AER’s decision in the Tribunal, claiming the AER’s decision was based on material errors of fact.

The AER is responsible for decisions made under the OIC from 1 January 2009 to 31 December 2015 following the transfer of functions from the Essential Services Commission of Victoria (ESCV). This includes the Budget and Charges Determinations for the 2009-11 budget period and the 2012-15 budget period. After 31 December 2015, AMI will be regulated by the AER under the National Electricity Rules(NER).

On 4 August 2014, SP AusNet was rebranded as AusNet Services.