Consumers benefit from increasing productivity: AER benchmarking report

Increasing productivity by many Australian electricity network businesses will place downward pressure on consumers’ power bills.

The Australian Energy Regulator (AER) has today released its annual benchmarking reports for electricity distribution and transmission networks which shows that the productivity of distribution networks improved in 2016.

Benchmarking is used by the AER to measure the relative efficiency of electricity networks and is one of the tools the regulator uses when deciding on the maximum revenue a network can recover from consumers through electricity bills.

Transmission and distribution network charges make up approximately half of a household electricity bill and the AER’s benchmarking reports provide consumers with information on the drivers of these costs.

“At a time when energy affordability is a serious concern, it is more important than ever that consumers have confidence that the AER is carefully examining all aspects of network costs.

“Benchmarking provides consumers, investors and the governments that set the regulatory standards for networks with the necessary information about the ongoing efficiency of these businesses. Increasing efficiency in the networks puts downward pressure on network charges, which benefits consumers,” said AER board member Jim Cox.

The report shows that industry-wide productivity of distribution networks increased by 2.7 per cent in 2016.

This increase was primarily the result of an 8.0 per cent decrease in operating expenditure and slower growth in capital inputs. The improvements are most marked for ActewAGL (ACT), Powercor (Vic), Energex (QLD), Essential Energy and AusGrid (NSW) and SA Power Networks.

Transmission network productivity continued its long-term decline in 2016, with the report finding a 2.7 per cent fall, primarily due to lower network reliability and growth in operating expenditure and capital inputs.

“The AER’s annual State of the Market Report for 2017 noted that as a result of the current round of AER decisions, regulated distribution network revenues are forecast to fall by 13.5 per cent, decreasing the electricity network charges paid by consumers in their household bills,” said Mr Cox.

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 do not set the prices consumers pay.

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: 
1 December 2017
AER reference: 
NR 39/17
AER Media 0466 409 921