The AER has published its decision on Essential Energy’s contingent project application for bushfire risk reclassification.
Following a detailed assessment of Essential Energy’s application, we have approved total project capital expenditure of $63.8 million. This is a $26.2 million or 29% reduction from the $90.0 million proposed by Essential Energy.
The AER has previously considered and approved investments proposed by Network Service Providers relating to bushfire mitigation. We acknowledge the importance of community safety by minimising bushfire risk on the network as far as reasonably practicable.
Our review found Essential Energy’s proposed expenditure to be prudent. However, our analysis concludes the proposed project’s costs are not efficient for the following reasons:
- the proposed expenditure includes contingency costs that are not efficient and in the long-term interests of consumers
- cost escalation is overstated as it applies a different and higher escalation approach than what was applied in the 2024–29 final determination
- additional labour costs are considerably more than the typical industry range
- the proposed costs did not account for a reduction in opex to reflect the reclassification to lower risk for some high-risk areas.
The bushfire risk reclassification costs approved by the AER will be added to Essential Energy’s total maximum allowed revenue for the 2024–29 period. This will be reflected in customer bills from 2026–27 onwards, with an estimated increase of $1 per annum in residential electricity bills in Essential Energy’s network over 2026–27 to 2028–29.