Access arrangement final decision: Envestra's Queensland gas distribution network

The Australian Energy Regulator has issued its final decision on Envestra's access arrangement proposal for its Queensland gas distribution network for 1 July 2011 to 30 June 2016. The arrangement sets out the tariffs and terms and conditions for access to Envestra's pipeline.

The AER has not accepted Envestra's access arrangement which proposed an average increase in network charges during the access arrangement period of 11.7 per cent per year.

A typical residential customer's annual bill is $460 in Queensland. The increases approved by the AER would result in such a customer's annual bill increasing on average by $24 each year. This increase would have been $37 each year if Envestra's proposal had been adopted unchanged.

Overall, the AER's final decision will result in an increase in distribution network charges from 1 July of 12.5 per cent, and an average increase of around 8.0 per cent in subsequent years. These increases are driven by higher financing costs than in the previous five year period, which account for around a quarter of the increase in tariffs. The remainder is largely due to higher allowances for depreciation, capital and operating costs.

Distribution network charges make up approximately 60 per cent of the retail tariffs paid by gas customers. The effect of the AER's decision on retail tariffs is an increase of around 7.5 per cent as at 1 July 2011. Increases in subsequent years would average around 4.8 per cent per annum.

“In its draft decision the AER approved some aspects of Envestra's proposed capital and operating expenditure programs, but did not consider some elements to be adequately justified, such as the significant mains replacement program," AER chairman Andrew Reeves said.

“Envestra's revised proposal incorporated some aspects of the AER's draft decision, but submitted further arguments in favour of higher allowances in other areas such as unaccounted for gas costs and capital overheads.

In making this final decision, the AER took into account advice from independent experts and submissions from interested parties.

Envestra's Queensland network delivers gas to approximately 84 000 residential customers in and around Brisbane and a number of regional centres including Ipswich, Rockhampton and Gladstone. The network also supplies around 3 000 commercial and industrial customers.

The final decision and related documents are available on the AER website.

An inflation rate of 2.55 per cent per annum was assumed in the calculation of the nominal price impacts above.

Issued date: 
17 June 2011
AER reference: 
NR 007/11
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