Electricity price challenge

Related Project: Energy + Water

June 10, 2016

Photo: Gemma Pearce

Since May 2015, PIAC has been in a $7.1 billion battle with 12 electricity network businesses and the Australian Energy Regulator (AER), in relation to the amount that electricity networks are able to charge for their services.

In NSW electricity prices have risen dramatically. Since 2008, electricity prices have doubled, mainly due to inefficiencies in the way the network businesses operate, as well as massive overspending on infrastructure in an environment where demand for electricity is declining. This ‘gold-plating’ appears to be particularly prevalent in NSW, where it costs twice as much to get electricity from a power station to a home as it does in Victoria.

In April 2015, the AER made five-year revenue determinations for three NSW electricity networks (Ausgrid, Endeavour Energy and Essential Energy). For the first time in many years, the AER decided to cut the networks revenue allowances, which has resulted in a reduction in the average household bill by around $100 per year ($300 in regional areas).

While this decrease, which has been in effect since 1 July 2015, has been welcome, PIAC believes that the determinations still allow the networks to operate inefficiently when compared with other similar businesses, and keep electricity prices unnecessarily high.

That’s why, in May 2015, PIAC launched a landmark legal challenge to the AER’s decisions, calling for even greater price reductions. However, at the same time, the network businesses also challenged the AER’s determination, arguing that they should be able to collect even more revenue.

The Tribunal held three weeks of hearings in September 2015, in which PIAC represented the interests of the consumers. This was a first for a consumer organisation. Prior to reforms to the National Electricity Law in 2013, only the electricity networks were able to contest the AER’s determinations.

The Tribunal’s decision, which was eventually handed down in February 2016, was disappointing. The Tribunal’s approach meant that it did not decide on some of PIAC’s arguments, and instead it accepted the network businesses’ position that they should be allowed to collect even more money from consumers.

In March 2016, the AER announced that it is seeking judicial review of several aspects of the Tribunal’s decision. PIAC was granted leave to intervene in the case and a three-day hearing was held in September 2016. A decision is expected early in 2017. 

 

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