Approval of Victorian network tariffs for 2015

The Australian Energy Regulator has approved electricity network tariffs for the Victorian distributors CitiPower, Powercor, Jemena Electricity Networks, AusNet Services, and United Energy, for the period 1 January 2015 to 31 December 2015.

These distribution businesses charge customers for the use of their poles and wires to get electricity from high powered transmission lines to household and commercial customers. Their costs also include a component for their use of these transmission lines.

Retail bills paid by customers cover the costs of wholesale energy, transport through transmission and distribution networks, and retail services. Network tariffs represent around 40 per cent of the total cost of supplying electricity to residential customers in Victoria.

“The AER assessed these proposals for compliance with the 2010 to 2015 distribution determination price controls so that only approved costs are recovered from consumers as required by the National Electricity Rules," AER Chair Paula Conboy said.

The increases in network charges for 2015 are larger than those approved last year. The differences are mainly caused by increases in costs for the use of the transmission network - reflecting previous under-recovery of costs - and bonuses the companies have received for overall improved reliability of their services.

“Overall we estimate final retail bills will increase by about 4 per cent on average in 2015 as a result of these network tariff increases. When increased charges for smart meters are also included, bills increase by nearly 5 per cent.” Actual charges will vary based on a customer’s distribution area and their consumption profile (see table below).

“Customer bills are affected by a range of factors including how much electricity households actually use, the plans they are on, and individual retailer charges. All else being equal, for a household with an average annual bill of around $2,100, using single peak rates, the new network rates would mean an annual increase of around $53 for people living in the south east region and around $144 for those living in outer north east region. This includes the recent impact of smart meter charges.”

The changes in electricity charges in Victoria have been relatively steady. In the past four years, Victorians have seen electricity price rises, due to increasing network costs (excluding smart meters charges) averaging just over 3% per year. This is significantly less than increases seen in other parts of Australia.

The AER's approved network tariffs are available at www.aer.gov.au.

Business Typical Residential Network tariff increase, $ per year Network tariff increase, per cent per year Increase in retail tariffs, per cent per year*
Estimated impact of approved network tariffs on residential customers for 2015, assuming full retailer pass through
CitiPower 114 21 5
Powercor 132 18 6
Jemena 59 7 3
AusNet Services 144 15 7
United Energy 53 8 3

Note: based on annual residential bill of $2,100.
Network tariff is single rate peak only.
Retail impact assumes full network tariff pass through, all else equal.
Includes AMI charge impact

Background

Many factors influence how a consumer’s electricity bill will vary. Individual impacts will differ based on the network tariff to which the customer is assigned, consumption patterns and retailers approach to pricing.

Distribution network tariffs represent around 40 per cent of the total cost of supplying electricity to residential customers in Victoria. The assessment of the impact of network tariffs for 2015 is based on an estimated average annual consumption of 6 500 kWh, and a yearly bill of $2,100.

The AER only regulates network tariffs. This is an annual compliance check to ensure that proposed revenues for the upcoming year are no more than permitted under the price controls set by us in 2010.

We have no role in approving or assessing retail tariffs which are competitively provided in Victoria.

Sector: 
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Issued date: 
19 December 2014
AER reference: 
NR 28/14