The Australian Energy Regulator today released its final determination for the amount TasNetworks can recover from electricity customers over the next two years.
Electricity distribution network costs will fall by around 21% from 1 July, helping to offset the impact of rising wholesale electricity costs in Tasmania.
"TasNetworks consulted with its customers and proposed substantial savings in operating its distribution network. As a consequence, in our final decision we have been able to accept most of TasNetworks’ regulatory proposal, including its capital and operating expenditure forecasts," said AER Board Member Jim Cox.
"We also accepted the methodology proposed by TasNetworks to calculate its rate of return, which we have updated to reflect current market conditions," he added.
The decision allows TasNetworks to collect $230 million each year from its customers on average between 2017 and 2019. This is down by $63 million each year from the 2012-17 period in real 2016-17 dollar terms.
"Most of these savings were identified by TasNetworks in its proposal after consulting with its customers. The savings reflect ongoing efficiencies in the operation of the network," said Mr Cox.
"The AER is supportive of the approach taken by TasNetworks in the preparation of its regulatory proposal.
"TasNetworks' approach demonstrates a genuine desire to put the interests of its customers first. This customer focus has allowed for a constructive approach in our scrutiny of the proposal," Mr Cox said.
Mr Cox said distribution costs account for about 41% of an average Tasmanian household bill, and if these savings are passed on, they will result in an estimated saving of $133 for households in the first year, all things being equal. For small business customers, all things being equal, the estimated average saving would typically be $223 dollars in the first year. The final determination is slightly higher than the draft determination released in September 2016, primarily due to rising interest rates impacting the cost of capital in financial markets.
Mr Cox said Tasmania’s monopoly transmission and distribution networks contribute the largest amount to what consumers pay for a safe and reliable energy supply.
"This final determination provides network revenues that will still allow for appropriate investments in infrastructure without consumers having to pay more than necessary for safe and reliable electricity," Mr Cox said.
Mr Cox said the revenue allowed includes funding for network augmentation, asset replacement and capital expenditure on new technology.
The AER has also approved the introduction of the time of use demand tariffs for residential and low voltage business customers on an opt in basis, with existing tariffs to continue to be available in their current structure for at least the 2017–19 regulatory control period.
Mr Cox said both TasNetworks and stakeholders considered this to be a prudent approach, to avoid any sudden price movements for customers.
The determination is for two years instead of the usual five years following a request from TasNetworks to align the regulatory control periods of its distribution and transmission businesses.