Revenues for Queensland’s Powerlink electricity transmission network and Tasmania’s TasNetworks electricity distribution network would be around 30 per cent lower than the existing level from 1 July 2017 under draft decisions released today by the Australian Energy Regular (AER).
“The draft decisions reflect reductions to revenue sought by the networks, with additional savings primarily the result of lower interest rates and other financial adjustments,” AER Board member James Cox said.
Powerlink proposed a 25.4 per cent revenue reduction on its existing revenue. TasNetworks proposed a reduction of 16.3 per cent on its existing revenue.
Under this draft decision, Powerlink would be able to recover average revenue of $744 million from consumers each year from 2017 to 2022. This is $281 million (in real 2016–17 dollar terms) less than the revenue collected annually between 2012 and 2017. This translates to an estimated average saving of $40 per household in each of the next five years, relative to the existing level, as transmission costs account for around 9 per cent of the average Queensland customer’s electricity bill.
TasNetworks’ draft decision allows it to recover average revenue of $223 million over each of the next two years. This is $93 million (in real 2016–17 dollar terms) less than the revenue collected annually between 2012 and 2017. Distribution charges represent 38 per cent of the average Tasmanian electricity bill, so the change would mean an average estimated saving of $163 per household in each of the next two years relative to the existing level.
“Both businesses consulted with consumers to understand their willingness to pay for different levels of service, and put forward proposals which reflected consumer needs,” Mr Cox said.
“The key difference between the proposals and the draft decisions relates to the rate of return for the businesses to service interest on loans and provide a return on investment to shareholders,” Mr Cox said.
“The current low interest-rate environment means the cost of debt and the returns required to attract equity are now lower than at the time the proposals were submitted to us. We will update our rate of return when we make our final decisions. This may impact the revenues that the businesses will ultimately be able to recover from consumers”
Mr Cox said the draft decisions in relation to the rate of return and gamma allowances are consistent with those made in other recent decisions.
The AER has undertaken a thorough review and analysis of these proposals, drawing on technical expertise within the AER, and has consulted with stakeholders and consumers in making these draft decisions. The AER is seeking submissions until 1 December 2016 and will make its final decisions by 30 April 2017.