The Australian Energy Regulator (AER) has issued draft decisions on the revenue proposals submitted by ACT and NSW distribution and transmission businesses starting on 1 July 2015. The draft decisions apply to:
- one electricity distribution business in the ACT (ActewAGL),
- three electricity distribution businesses in NSW (Ausgrid, Endeavour Energy and Essential Energy),
- one gas distribution business in NSW (Jemena Gas Networks), and
- two electricity transmission businesses in NSW (TransGrid and Directlink).
Transmission networks transport power over long distances, linking generators with load centres. Distribution networks transport electricity from points along the transmission network to a customer’s premises, criss-crossing urban and regional areas in the process.
These draft decisions form part of the AER’s consultation process and have been made on the basis of information provided by the businesses, extensive consultation with consumers, and the AER’s own analysis. The AER will make its final determinations in April and May 2015 after further consultation including submissions from the businesses, consumers, and other stakeholders.
The draft decisions propose the revenue amounts that these businesses can recover from customers through network charges. Up to 50 per cent of a consumer’s energy bill can be attributed to the cost of delivering electricity through the transmission and distribution networks.
“Our draft decisions propose lower allowed revenues for transferring electricity and gas, which, if implemented, should result in lower energy bills for end users in the ACT and NSW” AER Chair Ms Paula Conboy said.
“We have not accepted the revenue allowances proposed by any of the ACT and NSW gas or electricity businesses. In part, this is 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.”
Through its Better Regulation program, the AER developed a number of guidelines aimed at delivering an improved regulatory framework focused on the long term interests of consumers. The guidelines set out how the AER will determine the rate of return that electricity and gas network businesses can earn on their investments. The guidelines also explain how the AER will assess expenditure proposals from regulated businesses, and how the right incentives will encourage efficient spending by businesses.
“We have applied our new guidelines to better forecast how much network businesses should need to spend,” Ms Conboy said.
“This is the first time we have made a draft decision under the new National Electricity Rules and National Gas Rules.”
“Under the new rules we must be satisfied that energy businesses are providing their services as efficiently as possible. We balance the requirements of a safe, stable and reliable network against the price pressures facing consumers.”
The AER has also established an advisory panel including consumer advocates that advises the AER on how pricing 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 can be found on the AER website.
A more detailed appendix for each of the draft decisions is attached. A separate fact sheet can also be found for each of the seven businesses.