Improving productivity helps consumer hip pocket

Australia’s electricity distribution and transmission networks achieved significant productivity improvements in 2016-17, helping put downward pressure on power bills, according to an Australian Energy Regulator’s (AER) benchmarking report released today.

AER Board member Jim Cox said electricity distributors have improved productivity by more than two per cent over the past two years, outpacing the wider Australian economy, while productivity in transmission networks has improved by 2.8 per cent over the past two years, albeit from a lower base.

“This turnaround is good news for consumers as a long decline in distribution networks’ productivity since 2007 has contributed to rising electricity prices.

“Distribution network costs typically account for between 30 and 40 per cent of what consumers pay for their electricity, which is why the AER has a strong focus on efficient spending by businesses in our revenue determinations.

“We know the primary driver of these productivity gains have come from networks reducing their costs to maintain and operate their networks while at the same time improving reliability. Distributors are responding to the strong incentives we’ve put in place and are delivering good outcomes for consumers” said Mr. Cox.

Electricity distributors in NSW and Queensland are now catching up with the better performing distribution networks as a result of reform programs spurred by their response to the AER’s regulatory determinations.

Consumers in NSW alone have saved $1.1 billion over the 2014-19 period due to reductions in network operating costs. Importantly, these savings will continue to be passed through to consumers in the 2019-24 regulatory period.

 “Transmission industry productivity improved by 5.8 per cent in 2017, the biggest productivity improvement over the last 12 years and the first industry increase overall since 2013,” said Mr. Cox.

The primary driver of improved productivity among transmission networks was a reduction in outages in 2017 compared to prior years.

The AER’s benchmarking reports measure how productive and efficient electricity networks are at delivering energy to consumers over time and compared with their peers.

This information helps consumers, network managers and regulators understand the efficiency of network costs and charges.

Issued date: 
30 November 2018
AER reference: 
NR 37/18
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