The Australian Energy Regulator has released a decision regarding SA Power Networks’ application to pass through vegetation management costs arising from an unexpected increase in vegetation growth rates following the breaking of the drought in mid-2010.
SA Power Networks manages the South Australian electricity distribution network and is responsible for ensuring vegetation growth around its network assets is maintained in accordance with its vegetation clearance requirements under South Australian legislation.
In May 2010, the AER determined the prices that SA Power Networks may charge for the period 1 July 2010 to 30 June 2015 to provide distribution services for South Australian customers.
The vegetation management allowance the AER provided SA Power Networks in its distribution determination was based on SA Power Networks’ actual vegetation management expenditure in 2008-09, when South Australia had experienced an extended period of below average rainfall and above average temperatures.
The increase in vegetation growth rates which followed the breaking of the drought in mid-2010 imposed significant additional vegetation management costs on SA Power Networks, which had not been allowed for in the AER’s 2010 decision.
On 11 April 2013, SA Power Networks submitted an application to the AER for an amount of $40.53 million (2009-10) for a material increase in vegetation management costs due to this uncontrollable and unexpected increase in vegetation growth rates.
Although the AER considers that SA Power Networks’ application satisfies the National Electricity Rules, the AER has reduced SA Power Networks' proposed pass through amount by $5.5 million and approves a total pass through amount of $35.1 million.
“The AER did not accept SA Power Networks’ proposition that high vegetation growth rates will persist into the second half of 2013 or its forecast for vegetation clearance rates for years of average vegetation growth in bush fire risk areas,” AER Chairman Andrew Reeves said.
The effect of this pass through on the average residential customer bill is an increase of around 1.5 per cent in 2014-15.