South Australian electricity consumers will see a reduction in their distribution network charges next year after the Australian Energy Regulator (AER) made its final decision for SA Power Networks’ 2020-25 revenues.
AER Chair Clare Savage said the decision will provide benefits to consumers, while ensuring networks have sufficient revenues to provide safe and reliable energy.
“We have largely supported what SA Power Networks proposed to us because of their strong consumer engagement. Consumers were clear in their support for lower prices, increased spending to accommodate more solar PV and new tariff structures,” said Ms Savage.
As a result of this decision, distribution network charges for residential consumers will drop by $40 (2.1 per cent) in the first year and then remain steady for the remaining four years.
For small business consumers, distribution network charges will drop by $166 (1.8 per cent) in the first year and then also remain stable for the remainder of the period.
SA Power Networks’ network charges make up about 30 per cent of a standard residential retail bill and 27 per cent for small businesses.
The AER’s decision allows SA Power Networks $3914.2 million in revenue over the 2020–25 regulatory control period.
SA Power Network’s distribution area represents 99 per cent of South Australia’s population, supplying electricity to 860,000 businesses and homes, with a network of poles and wires spanning over 178,000 kilometres.
Ms Savage said the decision supports SA Power Networks’ need to upgrade its operations to account for the impact the rapid uptake of rooftop solar is having on the network.
“Rooftop solar is now mainstream for South Australian households and businesses but that has an effect on the operation of the network. We’ve funded increased capability to help the network cope with this change.
“We’ve also approved discounted daytime tariffs to encourage consumers to use power when the sun is shining. The decision will allow SA Power Networks to come back to us for more funding if they need to further strengthen the network to cope with very low levels of grid demand during the day,” said Ms Savage.
Ms Savage said SA Power Networks had submitted a well-supported revised proposal, most of which the AER has accepted.
“There were some elements where we disagreed, like on the replacement of existing assets. We know SA Power Networks can better target and prioritise spending here to deliver greater savings for consumers,” said Ms Savage.
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 due to the volatility in the CPI series.
- 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.