AER Ruling on Network Charges

by Energy Action | May 15, 2015
The Australian Energy Regulator (AER) has released its final revenue determination for NSW distribution network businesses and its preliminary revenue determination for the Queensland and South Australia distribution network businesses.

The Australian Energy Regulator (AER) has released its final revenue determination for NSW distribution network businesses and its preliminary revenue determination for the Queensland and South Australia distribution network businessesFor the NSW and South Australia networks these include real reductions ranging from 17.29% to 31.09% and somewhat less than this for the Queensland networks. The reductions that individual customers will receive will not be exactly the amounts stated in this briefing note. The actual reductions will be known when the network tariffs for FY 2015/16 are released. We are expecting these for all distribution businesses in the next few weeks for 1st July 2015 starts.

NSW and ACT Distribution Networks

On 30th April the Australian Energy Regulator (AER) delivered its final determination on NSW and ACT distribution network business cost recovery for the 2015/16 to 2018/19 period. This determination will directly affect the prices that business and residential customers in NSW and the ACT pay under network charges from 1st July 2015 onwards.
The determination relates to the amount of revenue that each of the networks can recover from its customer base for providing regulated network services. On average it has mandated that the networks reduce their total charges by 23% in real terms for 2015/16 although there is substantial variation within this. For most networks reductions in the following three years range from 2.0% to 6.0% although Essential Energy has been allowed a small real increase for each of these later years. The determination does not address explicitly the prices that the networks charge under their network tariffs. Each of the affected networks will now recalculate its network tariffs to recover the revenue allowed under this determination and we expect these to be published shortly for a 1st July 2015 start. The actual impact on any specific customer will only be known once the new network tariffs have been published and approved by the AER.The following table describes the real changes in allowable revenues for each of the next four years for each distribution network business as determined by the AER.

Annual Real Changes in Allowable Revenues, NSW & ACT

 

2015/16

2016/17

2017/18

2018/19

ActewAGL

-18.76%

-3.00%

-2.50%

-2.00%

Ausgrid

-24.77%

-6.00%

-3.00%

-3.00%

Endeavour Energy

-17.29%

-3.00%

-3.00%

-3.00%

Essential Energy

-31.09%

+0.50%

+1.00%

+1.50%

Source: AER: Final Decision NSW/ACT Distribution Determination 2015-16 to 2018-19

These reductions are significant and come after a very long period of increasing network charges for customers particularly in NSW. Under the previous revenue determination covering the period 2009/10 to 2013/14 the AER allowed average annual real increases of from 7.2% to 14.1% for the NSW distribution networks1. For a typical commercial customer network charges represent about 40-50% of the total bill.

Queensland and South Australia Distribution Networks

On 30th April the AER delivered its preliminary determination on Queensland and South Australia distribution network business cost recovery for the 2015/16 to 2018/19 period. The final determination for these networks will not be made until 30th October 2015. It is possible that the final determination will differ from the preliminary determination.
The preliminary determinations for Queensland include a number of revenue items relating to the current regulatory period and to cost recoveries for items outside of normal network activities. These include both under recovery of network costs during the current regulatory period and to the past and ongoing recovery of costs under the Queensland Solar Bonus scheme. In the table below these additional items are included in the figures for the Queensland networks.

Annual Real Changes in Allowable Revenues, Queensland & South Australia

 

2015/16

2016/17

2017/18

2018/19

2019/20

Energex2

-7.55%

-9.35%

-4.95%

-5.45%

-4.55%

Ergon2

-13.55%

-11.35%

-5.65%

-4.35%

-4.35%

SA Power Networks

-27.61%

-9.90%

-2.50%

-2.50%

-1.10%

Source: AER: Preliminary Decision Qld/SA Determination 2015-16 to 2018-19

The final determination for the Queensland and South Australia networks is not expected until 30th October 2015, four month after commencement of the network tariff year. We understand that in these states it is likely that network tariffs for financial year 2015/16 will be prepared on the basis of the preliminary determination and with any adjustment following publication of the final determination taking effect from 1st July 2016.

Victorian Distribution Networks

The next five year regulatory period for Victorian distribution network businesses commences 1st January 2016. Consultations are at a very early stage and the Victorian network businesses have not yet published their initial proposals for allowable revenues. It is currently anticipated that a final determination by the AER will not be made until 30th April 2016, four months after commencement of the network tariff year. As is the case for Queensland and South Australia, we understand that tariffs for calendar year 2016 will be prepared on the basis of the preliminary determination when it is published later this year and with any subsequent adjustment taking effect from 1st January 2017.

1. Source: AER statement on updates for NSW DNSPs distribution determination
2. Figures for Energex and Ergon quoted after deducting CPI estimated at 2.75%.


4 comments

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  1. Paul Pedersen | Dec 03, 2015
    It is double dipping...considering most of the meters are read remotely now
  2. Denis Kenny | Dec 01, 2015

    I have just received the following letter from Origin Energy regarding a meter reading fee for Green Energy.

    Hello Denis Your future bills will show a solar meter charge From 1 January 2016, your electricity charges will include a solar meter charge of 6.767c/day(excluding GST).We’ve made this change after the Australian Energy Regulator set distributor fees to include separatesolar meter charges. Previously, this charge was spread across all electricity customers, but will now bepassed through directly to customers with solar meters.This solar meter charge will appear as a separate item on your bills from this date.Have questions about these changes?You’ll find more on the solar meter charge at originenergy.com.au/solarmeterchargeOr, give us a call on 13 24 61 between 7am to 9pm weekdays, or 9am to 5pm Saturdays.

    Considering they only read the meter every 3 months and it takes 3 min to walk from the car to the meter read it and walk back I cannot see any justification for this charge. Especially when they are reading it at the same time to charge us for the power used already.

  3. Paul B | May 20, 2015

    My network charges are also 400% above my energy cost, which is common for Bulk energy buyers. The rort is the Demand Charge on our Bill ... fancy charging businesses a fixed fee for requiring certain power during any day in the month/year. When residential customers are not at home, businesses use the generated power. Otherwise, the power grid would be inefficient with no demand for the power produced...... But when residents arrive home , they have huge power demands - but NO Demand charge on their bill..... Why??? The Power industry is a complete JOKE, and all Businesses and Residential customers are the MUGS that pay the bills, and the AER is a Circus that panders to the Industry !!! 

  4. Gerald Banson | May 19, 2015
    my network charges are close to 400% above my energy consumption, so look forward to the day that solar can be captured and stored as is anticipated with Elon Musk announcing large commercial batteries are under development and close to production, it is disgusting how consumers have had to bear the cost of the gold plated network we now have, the decline in demand on the North Coast of NSW bears testament to the contempt for which the network providers are held 

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