The Australian Energy Regulator (AER) today published its determination on TransGrid’s 2019–20 bushfire season cost pass through application.
Under the National Electricity Rules, the AER is required to assess cost pass through applications in relation to natural disaster events.
A cost pass through allows network businesses to recover their efficient costs associated with natural disasters such as bushfires, which are not accounted for in their current revenue determination.
The AER has approved a pass through amount of $49.8 million ($nominal) to reimburse TransGrid for emergency work to restore its network during the bushfire season and replacement of damaged infrastructure in southern New South Wales (NSW) and the Snowy Mountains.
The AER did not approve TransGrid’s proposed pass through amount of $55.5 million ($nominal) because it did not agree with TransGrid that all 2019–20 bushfires in NSW should be treated as a single natural disaster event for the purpose of assessing a cost pass through application under the National Electricity Rules.
The AER has determined that the bushfires in southern NSW and the Snowy Mountains should be treated as a separate natural disaster event from the rest of the bushfires in NSW. The AER did not consider the bushfires were all sufficiently related to each other, largely because of the considerable geographical distances between the bushfire regions.
The AER has determined that only the bushfires in southern NSW and the Snowy Mountains, which account for the majority of TransGrid’s bushfire-related costs, collectively constitute a positive change event and that its associated costs should be passed through to TransGrid’s customers.
The AER also made downward adjustments to TransGrid’s proposed costs pertaining to the bushfires in southern NSW and the Snowy Mountains because it was not satisfied that particular costs (labour support costs and vegetation management costs) were sufficiently justified.
The AER has approved the pass through amount to be recovered from customers over three years starting in 2022–23.
Over the three year period, in NSW, it is estimated that residential customers will pay in total an extra $7.50 and small business customers will pay an extra $33 on their electricity bills.
In the Australian Capital Territory, it is estimated that residential customers will pay an extra $6.30 in total over the three years, and small business customers $16.50 extra.