Energy Users concerned by AER decision on power network profits

The Australian Energy Regulator (AER) has released its final guideline on the allowed rates of return for regulated electricity and gas network service providers operating in the National Electricity Market.

Energy Users Association of Australia (EUAA) chief executive Phil Barresi said he welcomes the increasing consultation taking place through the AER process, however, remains dismayed at this latest decision.

“The outcomes delivered through this process fall well short of the changes needed to ensure that energy network service providers act in the interests of their customers,” he said.

“Network assets are increasingly being under-utilised, yet the financial pain of past asset augmentation decisions based on flawed energy forecasting is still being felt by all energy users.

“And today, once again, users are called on to wear the cost of network investment decisions at a time when demand is declining, and the commercial and manufacturing sectors’ very survival is under threat.”

The AER Better Regulations Program has been a step in the right direction, according to Mr Barresi and completes a year-long project to revise economic regulation of networks. The EUAA has been actively involved in this work, with Mr Barresi commending the AER on the effort it made to engage with energy users throughout the process.

“But on most of the main regulatory parameters, including incentives and the allowed rates of return, [the] AER announcement continues to favour regulated network service providers, at energy users’ expense,” he said.

“Financial markets are telling us the regulated network businesses are continuing to be valued at a substantial premium to the underlying regulated assets. In other words, investors believe that the industry will continue to deliver very substantial profits in future as it has in the past.”

Mr Barresi said he had hoped the many reviews and promised changes to regulation would deliver urgently needed efficiency improvements and lower prices.

“In any other business model, it would not be the consumer who has to stump up the cash for failed investment decisions, but the shareholders,” he said.

“Publicly owned energy networks are continuing to be too highly relied on by their state Treasuries to prop up stressed budgets.”