Price stability for TasNetworks customers: AER

Tasmania’s energy consumers could see a small increase in network charges in return for greater value in services under the Australian Energy Regulator’s (AER) draft 2019-24 revenue determination for TasNetworks.

This is the first decision by the AER that covers both the transmission and distribution networks of TasNetworks. Previously these reviews were undertaken separately and at different times.

Under this draft decision, TasNetworks will recover $2095.8 million from consumers over the 2019-24 regulatory period, 4.4 per cent less than it proposed. This would see an increase in network charges of 1.8 per cent above 2018-19 levels, on average, over the 2019-24 period.

AER board member Jim Cox said Tasmanian consumers had told the AER that affordability is their major concern. Accordingly ensuring consumers pay no more than needed for the poles and wires that deliver their electricity is the central principle of this draft determination.

“At a time when energy affordability is a key concern for all households, the AER has worked with TasNetworks and a wide range of stakeholders to make a determination that focuses on the efficient use of consumer’s money.

“We have taken TasNetworks proposals and rigorously tested them to determine efficient spending – spending that will ultimately be recovered from consumers. We’ve involved those consumers in the process as much as possible to help ensure that their money is spent where it is actually needed,” said Mr Cox.

Proposed spending on capital intensive asset replacement programs is a key point of difference between the AER’s draft determination and TasNetworks proposal.

Detailed AER analysis demonstrates that efficient spending will allow TasNetworks to deliver safe and reliable power to customers, but at a lower level than what TasNetworks has sought– the AER has allocated $473.4 million for asset replacement, 29 per cent lower than TasNetworks’ proposal.

“TasNetworks’ approach to risk drives higher investment and ultimately higher costs to consumers. We’d like to see further evidence of why this represents efficient spending in the long term interests of consumers.

“The AER believes that TasNetworks can defer a number of its proposed replacement expenditure projects into the following 2024-29 regulatory period and still continue to maintain reliability for its consumers,” said Mr Cox.

TasNetworks will now have the opportunity to submit a revised proposal in response to this draft decision by 29 November 2018. Submissions from interested stakeholders on both the draft decision and revised proposal are invited by 11 January 2019.

Issued date: 
27 September 2018
AER reference: 
NR 29/18
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