AER decision delivers stable transmission costs in SA

South Australian electricity customers can expect stable network transmission costs in the next five years after the Australian Energy Regulator (AER) released its final decision on the amount of revenue ElectraNet can recover from consumers.

The AER’s decision allows ElectraNet to recover $1603.2 million over the 2018-23 regulatory period, a reduction of 7.8 per cent ($135 million) on ElectraNet’s original proposal.

ElectraNet CEO Steve Masters said the AER’s decision to accept the company’s proposed expenditure forecasts would reduce the transmission component of the average electricity bill in 2018-19 by $17 for a residential customer and $33 for a typical small business customer.

“Throughout the regulatory process we have been focused on identifying ways we can deliver price reductions for customers while ensuring we provide a safe, secure and reliable power supply,” Mr Masters said.

“The final determination by the AER is great news for consumers because it approves our proposed reduction in transmission charges and associated expenditure reductions, while maintaining service levels for customers.

“This includes a 39 per cent reduction in our capital expenditure and a 9 per cent reduction in our operating expenditure.”

Mr Masters said comprehensive engagement with customer representatives and stakeholders throughout the regulatory process played a central role in helping develop ElectraNet’s revenue proposal.

“Throughout our engagement, South Australian power customers told us that they expected affordability, reliability and choice when it came to their power supply, which shaped our plans and proposals,” Mr Masters said.

“Over the next five years customers can be confident our power supply meets these expectations while also allowing us to manage the growing challenges of a changing electricity generation mix.”

Every five years ElectraNet submits a Revenue Proposal outlining the program of work and forecast revenue needed to operate and maintain South Australia’s electricity transmission network to the AER.

AER board member Jim Cox said the AER accepted most aspects of ElectraNet’s proposal, and welcomed the company’s engagement with its customers during the determination process.

“Affordability is a concern for households and businesses, and customers need to be confident that they are paying no more than needed for safe and reliable electricity,” Mr Cox said.

“We assessed ElectraNet’s original proposal as reasonable and this final decision bears out the value of the extensive consultation it undertook with its customers.”

The key differences between ElectraNet’s original proposal and the AER’s final determination revolve around technical financial matters where the AER applies a consistent approach across all network decisions: the rate of inflation and the value of imputation costs.

This determination is ElectraNet’s first since the “black system” event in South Australia on 28 September 2016, which resulted in a state-wide loss of electricity.

ElectraNet proposed an increase in capital expenditure (13 per cent) in response to the black system event to improve the security of the transmission network and increase its resilience to extreme weather events, which the AER accepted.

The new regulatory period commences on July 1.