AER completes Australia’s largest Value of Customer Reliability survey

New Australian Energy Regulator (AER) survey results indicate customers’ appetite to pay for energy reliability remains similar to AEMO’s 2014 results despite increased public attention on reliability in recent years.

Today the Value of Customer Reliability (VCR) survey results reveal the dollar value customers in the National Electricity Market (NEM) and Northern Territory place on energy reliability under different conditions.  

AER Chair Clare Savage said the VCR is an important factor that will help inform decisions on energy infrastructure including investment in poles and wires networks.  

“We know that energy affordability and reliability are key issues for Australian households and businesses.

“Customers should pay no more than necessary for safe and reliable energy and the VCR review will help energy businesses identify the right level of investment to deliver reliable energy services to customers,” said Ms Savage.  

The AER’s review found that while there are some differences, VCR values remain similar to the 2014 results:

  • Residential customers continue to value reliability and have a preference to avoid longer outages, and outages which occur at peak times (defined as 7am‑10am and 5pm‑8pm). However, residential values are lower in 2019 than in 2014 with the exception of customers in suburban Adelaide.
  • Business customer VCRs are higher than residential customer VCR’s, likely due to the impact outages have on business operations.
  • Agricultural and commercial customers VCR’s are lower than the 2014 results.
  • Industrial customers VCR’s are higher than the 2014 results.
  • Overall, the NEM wide VCR is higher in comparison to 2014. This increase is primarily driven by industrial customers who consume a significant proportion of total energy.

Ms Savage said that this is the largest VCR study ever conducted in Australia with over 9,000 residential, small business and industrial energy customers, Australia-wide, completing the survey, with almost 7,500 from residential customers.

“Our methodology underwent an extensive consultation process that began in October 2018. While the results remain on trend with values produced by AEMO in 2014, it’s important to note the two data sets cannot be directly compared due to differences in methodology.

“These results will feed into a range of electricity reliability and network planning processes including the design of market reliability standards and incentives on network businesses to deliver reliable energy services.

“Importantly, VCR is not a single number but a collection of values across residential and business customers, which need to be applied depending on the context in which they are being used.  

“The AER will work with industry to support the correct interpretation, application and implementation of the data,” said Ms Savage.

2019 VCR values

Residential customers VCRs by state/territory – comparison to AEMO 2014 VCRs
  Northern Territory New South Wales Queensland South Australia Tasmania Australian Capital Territory Victoria
AER 2019 residential VCR ($/kWh) 18.31 25.85 23.76 30.31 16.96 21.38 21.43
AEMO 2014 residential VCR ($/kWh) real $2019 N/A 28.57 27.38 28.95 30.78 N/A - included as part of NSW 26.66
Business customers VCRs by business sector – comparison to AEMO 2014 VCRs
  Agriculture Commercial Industrial
AER VCR 2019 business VCR ($/kwh) 37.87 44.52 63.79
AEMO 2014 business VCR ($/kWh) real $2019 51.34 48.16 47.45
Very large business customers (sites with peak demand greater than 10MVA) by business sector
  Services Industrial Metals Mines
VCR ($/kwh) 10.54 117.99 19.86 35.16

Background

The previous VCR review was undertaken in 2014 by the AEMO. In December 2017, COAG Energy Council proposed a rule change to give formal responsibility for determining VCR to the AER.

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.
Sector: 
Issued date: 
18 December 2019
AER reference: 
NR 33/19
Contact: 
AER Media 0466 409 921 media@aer.gov.au