The Australian Energy Regulator (AER) has appealed the Australian Competition Tribunal’s ruling that it must revisit its network pricing determination for the NSW and ACT distribution businesses.
In April 2015 the AER handed down to the NSW and ACT distribution businesses real cuts of between 17% and 31% in how much money they could charge to their customers for providing network services. This came after many years of above inflation price increases and reflected the belief held by the AER that these businesses were inefficient in delivering value to their customers.
Following an appeal by the networks in February of this year, the Australian Competition Tribunal ruled that whilst the AER had correctly applied its powers in some areas it had incorrectly applied them in others. Most significantly, the Tribunal instructed the AER to look again at how it had set the networks’ allowed operating expenditure, which is one of the largest components of the networks’ costs.
In the latest development, the AER is taking the matter to the Federal Court in an attempt to have its original determination re-instated. This latest development leaves electricity customers in NSW and the ACT facing an extended period during which they will not know whether the price cuts enacted in 2015/16 and currently in effect will be reversed or not.
Complicating the issue is that the AER’s original determination covered the five year period from 2014/15 to 2018/19. Because of the length of time taken to reach an outcome the cuts did not take effect until this year. With only just over three years of the five year period remaining, the AER is running out of time to allow the networks to recover their lost revenue should the Tribunal’s decision ultimately stand.
Energy Action will continue to keep the market informed as this issue continues to develop.