AER issues final decisions for Queensland

The Australian Energy Regulator has issued final decisions on the revised revenue proposals submitted by the Queensland electricity distribution businesses Energex and Ergon Energy.

The final decisions are expected to reduce the amount consumers pay for electricity in Queensland. As a result of these reductions, customer bills are expected to fall on average by 6.5 per cent or $95 per household over the 2015-2020 regulatory period. The final decisions include the savings that were applied from 1 July 2015, with a small adjustment over the next four years to accommodate a slight change between the preliminary and final decisions.

“The AER’s role is to ensure that consumers pay no more than necessary for the safe and reliable delivery of electricity by setting the maximum overall revenue these monopoly businesses can recover from customers,” AER Board Member Jim Cox said.

The expected final savings in Queensland are slightly less than expected in the preliminary decisions, primarily due to changes in underlying interest rates impacting the cost of capital and further assessment of operating expenditure since the preliminary decisions were released in April.

“Our goal in regulating the networks is to create incentives for these monopoly businesses to spend efficiently and to share the benefits of efficiency gains with consumers over time. The Queensland networks, which contribute about 42 per cent of an average Queensland household’s electricity bill, have improved their operating efficiency in recent years,” Mr Cox said.

“However, we consider there are further efficiency gains to be made and shared with consumers, and this determination locks in those efficiency gains until 2020. Overall, the average bills for residential and small business customers across Queensland will be lower over the next 5 years than they were in 2014─15.”

Network business Business revised revenue proposal AER final decision Network revenue percentage difference Expected total bill reduction for average household over 2015─20
Estimated electricity bill impacts 2015-20
Energex $7874 million $6600 million ─ 16.2 per cent $95
Ergon Energy $7798 million $6295 million ─ 19.3 per cent $95

Note: ($ Nominal). Due to the Queensland Government uniform tariff policy, Ergon Energy’s residential customers’ bill impact will mirror that of Energex.

Extensive consultation had occurred since the preliminary decisions were released, including the submission of revised proposals by the networks as required under the regulatory regime for monopoly networks.

The AER has not accepted the revised revenue allowances proposed by Energex and Ergon Energy, in part due to our decision to apply a lower rate of return and corporate tax allowance, consistent with our rate of return guideline and recent market trends. We have also factored in recent falls in electricity demand and flat demand forecasts over the regulatory period, meaning less investment is required to provide a safe and reliable supply of energy.

The AER established an expert panel including consumer advocates to advise on how revenue proposals meet consumer expectations. The Consumer Challenge Panel (CCP) assists the AER to make better regulatory determinations by providing input on issues of importance to consumers.

Further information on the CCP and Better Regulation program, including our assessment approaches, can be found on the AER website. More detailed information for each of the final decisions can be found in the separate fact sheets for each business.

Issued date: 
29 October 2015
AER reference: 
NR 18/15