Safe and reliable electricity services for Ergon Energy consumers

Ergon Energy will be able to upgrade and safely operate its vast network after the Australian Energy Regulator (AER) issued its final decision for the 2020-2025 regulatory period.

AER Deputy Chair Jim Cox said the decision will provide benefits to consumers while ensuring Ergon Energy has sufficient revenue to provide safe and reliable electricity.

“Consumers should pay no more than necessary for safe and reliable electricity. Ergon Energy now has the funds required to upgrade and maintain the network while meeting its regulatory and safety obligations.”

The AER’s decision allows Ergon Energy to recover $5925.9 million in revenue over the 2020-25 regulatory control period.

The AER did not agree to all of Ergon Energy’s proposed spending. The final decision includes $891.8 million for Ergon Energy’s replacement capital expenditure program. This is substantially less than the amount proposed by Ergon Energy.

“We have provided sufficient revenue to enable Ergon Energy to meet key safety requirements such as ensuring power lines and structures are free of hazards. However, we consider that they can meet these requirements at lower than the expenditure they proposed,” Mr Cox said.

Ergon Energy network charges make up about 35 per cent of a standard residential retail bill and 28 per cent for small businesses.

As a result of this decision, network charges for residential consumers will drop by $73 (4.6 per cent) in the first year and then rise on average by $3 a year (0.2 per cent) for the remaining four years.

For small business consumers, network charges will drop by $82 (3.7 per cent) in the first year and then rise on average by $3 a year (0.1 per cent) for the remaining four years.

These estimates exclude amounts that will be passed on to customers under the Queensland Government’s solar bonus scheme. The solar bonus scheme is outside our determination but will be included in the network’s annual pricing proposal.

Mr Cox said the decision also allows Ergon Energy to upgrade its low voltage network but that businesses should be considering distributed energy resources as part of their future planning to support system integration and outcomes for consumers.

“Ergon Energy’s original proposal on distributed energy resources was not well supported, and our draft decision reflected this, but in their revised proposal Ergon Energy provided better material to justify its proposed sending in this area,” he said.

“The decision allows Ergon Energy to invest in a management platform which will enable consumers to export energy to the grid without increasing voltage problems in the network.

“But Ergon Energy needs to integrate this investment with new tariffs that further encourage consumers to make the most of the technology. Pricing and these new technologies must, and will, evolve alongside each other.”

Notes to editors

The AER delayed its final decision which was originally scheduled for 30 April 2020. This was to incorporate the Reserve Bank of Australia’s (RBA) short term inflation forecasts released on 8 May 2020.

  • The AER has considered the RBA’s short term inflation and will adopt the trimmed mean inflation forecasts for the first two years of our 2020-25 determination. We consider that the use of the trimmed mean contributes to the best estimate of inflation over a ten year period.
  • Our future approach to inflation will be considered through our inflation approach review.

The AER recognises the delay in releasing this determination will impact on the first annual pricing proposals for this business. This may affect some retailers who wish to release revised prices by 1 July 2020.

The AER acknowledges COVID-19 is having an impact on consumers and the energy market. We are factoring this into our decisions through our approach to inflation. We have also acted through our Statement of Expectations, market monitoring and consideration of proposed rule changes.

The AER will continue to monitor the impact over the coming months to inform how we can deliver the best outcomes for households, businesses and industry.

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 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: 
5 June 2020
AER reference: 
NR 20/20
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