AER’s draft decision for AGN focused on price stability

South Australian consumers will benefit from stable prices if the Australian Energy Regulator’s (AER) draft decision on Australian Gas Networks (AGN) 2021-26 access arrangement is implemented.

AER Chair Clare Savage said that the regulator supported most elements of AGN’s proposal.

“AGN undertook extensive consumer engagement in developing its proposal. We applaud this award winning approach and AGN’s open mindedness.

“AGN proposed a number of customer-led step ups in operational expenditure, including additional support for vulnerable customers and improvements to customer data. We support the programs in principle, but note that there may be overlap with existing programs and scope for AGN to absorb costs. We are seeking further information before making a final decision.

“AGN proposed substantial spending on its mains replacement program. We have not accepted the proposal in its entirety because the South Australian Safety Regulator did not endorse it. The SA Safety Regulator considers that the program could be undertaken over a longer period of time,” said Ms Savage.

The AER invites submissions by 17 February 2021 and the final decision is due by 30 April 2021. The draft decision supports most elements of AGN’s proposal and represents an overall reduction of $107.9 million (9.5 per cent) compared to what AGN proposed.

If approved in the final decision, AGN is expected to recover $1028.5 million from consumers over the 2021–26 period and consumers would see savings upfront in the first year, before prices stabilise over the remaining four years.

In its draft decision, the AER estimates that average annual bills for AGN’s consumers would reduce by $76 for residential consumers and $744 for small business consumers in the first year, ending 30 June 2022, of the 2021–26 period.  After this, bills are expected to increase by $15 for residential consumers and $145 for small businesses consumers in each of the remaining four years of the 2021–26 period.  

Although the AER draft decision approved 17 per cent less capex than that proposed by AGN (largely due to proposed mains replacement spending), the quantum of net capital expenditure the AER did approve, a total of $478.8 million, is significant.

This is a draft decision and is subject to change due to a range of factors including the economic impacts of the COVID-19 pandemic and submissions received through consultation.

About the AER

The Australian Energy Regulator (AER) works to make all Australian energy consumers better off, now and in the future.

  • We regulate electricity networks and covered gas pipelines, in all jurisdictions except Western Australia. We set the amount of revenue that network businesses can recover from customers for using these networks.
  • We enforce the laws for the National Electricity Market and spot gas markets in southern and eastern Australia. We monitor and report on the conduct of energy businesses and the effectiveness of competition.
  • We protect the interests of household and small business consumers by enforcing the Retail Law. Our retail energy market functions cover New South Wales, South Australia, Tasmania, the ACT and Queensland.
  • We drive effective competition where it is feasible and provide effective regulation where it is not. We equip consumers to participate effectively, including through our Energy Made Easy website, and protect those who are unable to safeguard their own interests. We use our expertise to inform debate about Australia’s energy future.
Issued date: 
27 November 2020
AER reference: 
NR 44/20
General enquiries – AGN(SA) 2021-26 Access arrangement