The Australian Energy Regulator today issued its final decision on the transmission determination to apply to ElectraNet's electricity transmission network for the regulatory control period 1 July 2008 to 30 June 2013.
ElectraNet is the principal electricity transmission network service provider in South Australia.
The AER proposes to set the maximum allowed revenue for ElectraNet of $226 million in 2008–09. The allowed revenue will increase to $304 million in
2012–13. The increase in the revenue allowance in 2008–09 represents a 20 per cent increase over 2007–08. The total revenue allowance over the regulatory control period is $1319 million.
"The total revenue allowance for the regulatory control period has increased by $124 million since the AER's draft decision," AER Chairman, Mr Steve Edwell, said. "This increase is mainly driven by the significant rise in the cost of debt due to the deterioration of the global credit market since November 2007 and the resultant increase in the weighted average cost of capital from 9.66 per cent to 10.65 per cent.
"The AER also made some further adjustments to the operating and capital expenditure allowances provided in the draft decision, following analysis of additional information provided by ElectraNet.
"The final decision provides for investment of $650 million in ElectraNet's electricity transmission network over the next five years, an increase of more than 45 per cent from the investment over the past five years," he said. "A further investment allowance of $894 million is provided should defined project triggers occur.
"ElectraNet's investment expenditure will require increases in average transmission charges in nominal terms of eight per cent per year over the regulatory control period," Mr Edwell said. "Given that transmission charges represent about 10 per cent of the average cost of final delivered energy to households, this equates to approximately an increase of $9.20 to the average residential customer's annual bill in South Australia. This increase is primarily due to the need for increased investment associated with ageing assets and the new reliability standards specified in the South Australian Electricity Transmission Code*, high construction materials and labour costs, higher cost of borrowing as a result of the ongoing global credit crisis, and increased operating expenditure to maintain an expanding network.
"While South Australian consumers will face higher charges as a result of the decision, they will also benefit from a more reliable network," he said. "Further, given the scope of new infrastructure that is proposed for South Australia over the coming years, the investment by ElectraNet over the next regulatory control period should ensure the electricity network is well placed to meet the potential increase in demand without jeopardising reliability."
The AER's final decision also approves ElectraNet's negotiating framework and negotiating criteria for negotiated transmission services and pricing methodology.
In making its final decision, the AER took into account submissions from interested parties and advice from independent experts. These documents will be available on the AER's website.
Background
*The ETC is determined by the Essential Services Commission of South Australia under the Essential Services Commission Act 2002 (SA).
Under the National Electricity Law and the National Electricity Rules, the Australian Energy Regulator is responsible for the economic regulation of electricity transmission services provided by transmission network service providers (TNSPs) in the National Electricity Market. Before 1 July 2005, the ACCC was responsible for regulating ElectraNet's revenues. ElectraNet's current revenue cap expires on 30 June 2008.
The AER makes determinations according to chapter 6A of the NER in respect of certain services provided by transmission businesses. The AER's principal task is to set the revenues that a TNSP can receive from the provision of prescribed transmission services.
On 31 May 2007, ElectraNet submitted a revenue proposal, proposed negotiating framework and proposed pricing methodology to the AER in accordance with chapter 6A of the NER.
On 9 November 2008, the AER made its draft decision on ElectraNet's transmission determination.
On 14 December 2007, ElectraNet submitted its revised proposed pricing methodology. This was in accordance with the requirements of the AER's draft decision.
On 18 January 2008, ElectraNet submitted its revised revenue proposal to the AER in accordance with chapter 6A of the NER.
ElectraNet's transmission network spans more than 1000 km from the Victorian border near Mount Gambier to Port Lincoln on the Eyre Peninsula. It operates radial extensions of over 200 km each from the main network to Leigh Creek, the Yorke Peninsula and Woomera. It connects major generation sources at Port Augusta, Torrens Island and the eastern states via the Heywood and Murraylink interconnectors. Additional generation sources are connected in the south east of the State and on the Eyre and Yorke Peninsulas.
ElectraNet operates over 5611 circuit kilometres of transmission lines that function at nominal voltages of 275 kV, 132 kV and 66 kV. Further, it operates and maintains 76 substations which include 8828 mega volts ampere (MVA) of installed transformer capacity throughout South Australia. Transmission from the main network to country areas of South Australia is characterised by long radial 132 kV lines.