Federal Court dismisses SA Power Networks appeal

The Federal Court has dismissed an appeal by SA Power Networks (SAPN) to charge more for electricity distribution, which would have increased bills for all South Australians.

SAPN had proposed recovering $4.5 billion from consumers during the five-year regulatory period commencing on July 1, 2015, but the Australian Energy Regulator (AER) determined the distributor required $3.8 billion in order to deliver safe, secure and reliable power to South Australian households and businesses.

The ruling was made this week in Adelaide and upholds the previous determination against SA Power Networks made by the Australian Competition Tribunal, following appeals by the state government on behalf of households and businesses.

In dismissing the appeal, the Federal Court rejected each of the arguments put forward by SA Power Networks, including the cost of labour and return on debt, and ordered the company to pay costs.

“We welcome the decision in this long-running legal dispute, which means South Australian consumers will get the savings from our original 2015 decision,” AER chair Paula Conboy said.

The key effect of the AER decision was to reduce the “poles and wires” component of consumer bills by approximately 10 per cent in 2015-16, which then remains relatively stable in the following years to 2020.

Costs associated with SAPN’s poles and wires make up 30 per cent of the typical household power bill.

SAPN’s major areas of dispute related to the rate of return on investment and tax issues ($160 million difference between SAPN proposal and AER decision) and forecast labour costs ($20 million).

The Australian Government’s abolition of the Limited Merits Review process last year means there will be no more cases of this nature where a distributor disputes discrete elements of an AER’s revenue decision before the Competition Tribunal.

“We are happy to put this behind us and move forward with our commitment to develop a more collaborative approach to regulation that puts consumers at the heart of all our work,” Ms Conboy said.

“At a time when rising energy costs are a serious concern to households not just in South Australia but across the nation, the AER is working to make all Australian energy consumers better off now and in the future.”

The decision means that SA Power Networks will be able to raise $700 million less over the period to 2020 than they originally sought.

SA Energy Minister Tom Koutsantonis said the Federal Court decision was a win for South Australians against higher power bills.

“What SAPN was seeking to do was to charge hundreds of millions of dollars more for the use of poles and wires, which would have been added straight to the bill of every South Australian,” Mr Koutsantonis said.

“Our $550 million energy plan is adding competition to the market and putting downward pressure on power prices, and we have had a significant win in the Federal Court against increased charges.”