On Monday 2 May, the AER announced how it proposes to deal with one of the more imminent issues arising from its current Federal Court action involving the NSW and ACT networks.
By way of history, in May of 2015 the Australian Energy Regulator (AER) cut the annual revenues of these networks by between 17% and 30%. That cut was implemented in July 2015 and is currently in effect. Shortly afterwards the networks challenged the AER’s decision with this ultimately leading to the AER’s actions in the Federal Court. The timing for the Court’s decision is unclear, but could be any months in coming. Meanwhile, the start of the 2016/17 tariff year is fast approaching with the affected networks still tied up with the dispute over how much they can charge their customers.
To decouple the annual tariff setting process from the broader dispute over network revenues, the AER has proposed the following solution for the next financial year:
- The network tariffs for ActewAGL, Ausgrid and Endeavour Energy will increase by 1.5% over their 2015/16 values.
- The network tariffs for Essential Energy will be set according to the AER’s disputed revenue determination with Essential submitting a corresponding tariff proposal for the AER’s approval before the end of June. On average this would result in about a 2% average increase in prices although this could vary substantially between tariffs.
- The network tariffs for gas distribution business Jemena, which is also in dispute with the AER, will be frozen at their current levels.
In order to implement this solution, the AER will have to negotiate an enforceable undertaking with the networks which it hopes to have in place by the mid-May. If all goes to plan we should then know what the network tariffs will be for next financial year.
Going forwards there remains the issue of how the AER and the networks will implement the Federal Court’s ruling when it makes it. If the decision results in some or all of the cuts already implemented being reversed, this has the potential for very large increases in network tariffs for 2017/18 and 2018/19. We understand that the AER is aware of this issue and is working towards a solution that would allow any large increases in tariffs to be spread over several more years so as to avoid unreasonable bill shock to electricity customers.
Click here to read the full announcement from the AER.