AER provides update on 2020-25 network revenue determinations

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The Australia Energy Regulator (AER) says it is making important regulatory decisions in an unprecedented economic environment and is taking steps to ensure its decisions best support consumers and the market during this time.

Following consultation with stakeholders, the AER delayed its release of the 2020-25 network revenue determinations that were scheduled for April 30, 2020 for the following businesses: SA Power Networks, Ergon Energy, Energex, Jemena Gas Networks (JGN) and Directlink. This was to incorporate the Reserve Bank of Australia’s (RBA) short-term inflation forecasts released on May 8, 2020.

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The AER says it has considered these forecasts and will adopt the trimmed mean inflation forecasts from the RBA for the first two years of its 2020-25 network revenue determinations. In the current and unique economic circumstances, the AER says it sees the use of the trimmed mean contributes to the best estimate of inflation over a 10-year period due to the volatility in the CPI series.

“This does not mean we will continue to use the trimmed mean for estimating long-term inflation in future determinations.” The AER said in a statement.

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“The AER recently announced a review into our approach of inflation – this review will consider what approach we may take in the future.”

To incorporate this revised approach to inflation, the AER will release the 2020-25 revenue determinations on June 5, 2020.

“We recognise this will impact on the first annual pricing proposals for the businesses. We are working with these businesses to incorporate our revised approach to inflation in reasonable timeframes,” the AER said.

“We acknowledge that this may affect some retailers who wish to release revised prices by July 1, 2020. We are working with network businesses to minimise the delay. Impacted retailers will receive more information on this soon.”