AER makes first decision since LMR abolition

energy consumers

The Australian Energy Regulator (AER) has made its first decision since the abolition of the Limited Merits Review process.

Essential Energy customers are set to benefit from the AER’s remade final decision for the current regulatory period (2014-2019), which confirms Essential will recover $1.7 billion less than it originally proposed.

This decision is consistent with the AER’s draft decision, issued in March, and means Essential Energy can recover total revenues of $5.1 billion from its customers over the five‑year period.

“We are satisfied this decision is in the long-term interests of consumers,” AER chair Paula Conboy said.

“At a time when affordability is a major concern it is more important than ever that consumers have confidence that the regulator is ensuring they pay no more than necessary.”

The remaking of the decision follows the end of the lengthy legal battles arising from the AER’s original 2015 decision and will maintain network distribution charges at current levels.

In 2015, Essential Energy originally proposed to recover $6.8 billion from consumers during the 2014-2019 regulatory period and disagreed with the AER’s determination and legal action followed.

Key elements of the dispute were $737 million for forecast operating expenditure and $277 million in return on debt.

The revised amount to be recovered from consumers is $100 million above what the AER approved in its 2015 decision; a decision that was set aside by the Australian Competition Tribunal.

Noting there has been some commentary around Essential Energy recovering revenue above its allowance, Ms Conboy assured consumers they would not be paying more than what the final decision has provided for.

Ms Conboy welcomed the highly collaborative approach taken by Essential Energy during the revised revenue setting process.

“Essential Energy consulted closely with consumers in formulating its proposal. Several consumer groups indicated their support for Essential Energy’s initiative and collaborative approach,” she said.

“This outcome is a great example of how engaging with consumers in a revenue setting process can benefit everyone, and it’s a process being applied more broadly to other network decisions.

“This is the type of approach the AER is keen to model with network businesses to drive a more efficient reset process across the National Energy Market.”

Energy Consumers Australia CEO Rosemary Sinclair said the decision was a win for consumers and puts more pressure on electricity retailers to announce prices reductions on July 1.

“We’re seeing the costs of electricity coming down across the whole supply chain from the wholesale market, to networks and gas prices are also falling which means retailers must pass these savings on to consumers on July 1,” Ms Sinclair said.

“With the cost of living pressures of Australians, lower electricity network costs are a necessary first step, but there needs to be continued and concerted efforts to bring about reductions in these costs to push electricity prices back down.”