The Australian Energy Regulator (AER) has today approved the revised Tariff Structure Statement (TSS) for SA Power Networks (SAPN).
This is a key reform enabling South Australian consumers to change their electricity consumption patterns at times of high demand.
AER Board member Mr Jim Cox said the new tariffs, coupled with smart meters reforms commencing in December 2017, allow retailers to develop offers so consumers can choose how and when they use electricity, taking advantage of peak and off-peak network pricing to have more control over their bills.
“These changes to network tariffs allow retailers to develop offers that help consumers get better value from the energy choices they make.
“Choices about how and when they use electricity and what new technology they buy,” Mr Cox said.
“These tariff reforms will also help promote better use of the existing poles and wires by rewarding customers for shifting their electricity consumption to off-peak periods,” Mr Cox said.
“This will help reduce the need for future network upgrades and replacement, lowering prices for all customers in the long run,” he added.
Mr Cox said much of the cost of building the South Australian network is to deal with only a few days of very high electricity demand during the height of summer each year.
“South Australia stands to achieve bigger long term gains than other states and territories through lower network investment and lower prices for consumers if peak demand can be reduced,” he said.
Both the AER and SAPN have undertaken extensive consultation on SAPN’s proposals, with stakeholder feedback being considered prior to the final decision.
“Today’s decisions complement other reforms taking place in the electricity market, including the gradual rollout of smart meters and provisions enabling customers to have access to their own consumption data,” Mr Cox said.
Notes to Editors
- The electricity bills consumers pay are made up of three main components: 1) wholesale electricity costs 2) network [transmission and distribution] charges 3) retailer charges including costs associated with environmental and other policy costs.
- Distribution charges make up around 35 per cent of a customer’s electricity bill in South Australia.
- The AER decisions allow for the reforms to be phased in. It will be up to retailers to decide how and if they pass on the distribution network tariff structures and associated price signals to consumers. For example under tariff structure proposals consumers who use a high level of electricity at peak periods can save money by making small changes in their consumption choices.
- The AER’s role in reviewing tariff structure proposals is to ensure those tariffs proposed by the networks comply with the National Electricity Rules and effectively signal when the networks might be congested or constrained or when there is spare capacity. The AER also monitors compliance.
- The decision on TSS does not change how much revenue distributors may earn in total, which is currently the subject of a judicial appeal. Instead, it is the next step in the reform process and relates to how distributors divide up that total amount of revenue into network prices that apply to individual consumers.
- Peak and off-peak tariffs will apply to residential and small business customers on an ‘opt-in’ basis. This means the end customer can choose a retail tariff which is based on these new cost reflective network tariffs if offered by retailers. For small businesses who require a higher level of electricity supply (called a multi-phase connection), the demand based tariffs will apply on an ‘opt-out’ basis.
- Residential and small business customers who don’t take up the new tariffs will typically remain on their existing network tariffs.
- For large commercial and industrial customers, there are few changes to existing tariff structures where demand-based charging already exists.
About the AER
The Australian Energy Regulator regulates energy markets and networks under national legislation and rules in eastern and southern Australia, as well as networks in the Northern Territory. Its functions include:
- monitoring wholesale electricity and gas markets to ensure energy businesses comply with the legislation and rules, and taking enforcement action where necessary;
- setting the amount of revenue that network businesses can recover from customers for using networks (electricity poles and wires and gas pipelines) that transport energy;
- regulating retail energy markets in Queensland, New South Wales, South Australia, Tasmania (electricity only), and the ACT;
- operating the Energy Made Easy website, which provides a retail price comparator and other information for energy consumers;
- publishing information on energy markets, including the annual State of the energy market report, to assist participants and the wider community.