The Australian Energy Regulator has issued its draft decision on SP AusNet’s revenue proposal for the three year regulatory period commencing 1 April 2014.
SP AusNet is the principal electricity transmission network service provider in Victoria. The AER’s draft decision sets the maximum revenue that SP AusNet can recover from its customers via the transmission network component of an electricity bill.
“Based on this draft decision, the AER estimates that the average transmission charges in Victoria will reduce by around seven per cent per annum over the next regulatory period,” AER Chairman Andrew Reeves said.
“Transmission charges are about 5 per cent of residential bills and the draft decision would not have much effect on most customers’ bills. However, transmission charges can account for a higher proportion of the bill for large industrial customers and the reductions in this draft decision may be significant for these larger customers.”
The total revenue that SP AusNet can recover from its customers under this draft decision is capped at $1528 million ($ nominal). This is a 4.4 per cent reduction to the total revenue proposed by SP AusNet.
The capex approved by the AER is needed for strengthening electricity supply into Melbourne, including the redevelopment of the Richmond terminal station. However, the draft decision rejects 30 per cent of SP AusNet’s proposed capital expenditure forecast, mainly due to the high level of uncertainty associated with the proposed rebuild of the West Melbourne terminal station.
The draft decision also rejects 11 per cent of SP AusNet’s proposed operating expenditure forecast. If the AER accepted the opex proposal, the Victorian consumer would be paying twice for works which were funded in the last regulatory decision, but which were not carried out.
“The draft decision maintains the incentives for SP AusNet to make efficient commercial decisions in managing the transmission network. Customers should share the benefits of these gains in efficiency,” Mr Reeves said.
The release of the AER’s draft decision follows six months of extensive consultation with stakeholders.