The Australian Competition Tribunal on 19 May 2011 handed down its decision on the appeals by the South Australian (ETSA Utilities) and Queensland electricity distribution network operators (Energex and Ergon Energy), and has allowed them to recover additional revenues.
These appeals were against the AER’s May 2010 distribution determinations for these businesses. All three businesses applied for a review of the AER’s decision on the estimated cost of corporate income tax. ETSA Utilities and Ergon Energy also applied for a review of other aspects of the AER’s determination.
The Tribunal’s decision allows the three network operators to recover additional revenues of about $850 million. This is about a 5 per cent increase to total revenues over the five year regulatory period. Specifically, ETSA Utilities, Energex and Ergon Energy have been permitted to recover an additional $301 million, $298 million, and $243 million respectively.
Distribution network charges make up around 40 per cent of the typical residential customer's electricity bill. The impact of the Tribunal’s decision varies between the businesses. The table below indicates the approximate magnitude of the decision if the operators recover all of the additional revenue permitted by the Tribunal.
The largest contributor to the additional revenues is the Tribunal’s decision on the estimate of corporate income tax. The Tribunal determined that the value adopted by the AER for tax imputation credits in estimating the corporate income tax allowance was incorrect.
The Tribunal also found that the AER made errors in relation to ETSA Utilities easements valuation, and Ergon Energy’s non system capital expenditure, labour cost escalation rates and the control mechanism for alternative control quoted services.
"Whist the Tribunal has found error on the part of the AER regarding some of the matters under review, its decision on a number of other matters have affirmed the AER decision and provided its view on a number of issues that are relevant in applying the current regulatory framework," AER chairman Andrew Reeves said.
"The AER will study the Tribunal’s decision and assess its implications for future regulatory decisions," Mr Reeves said.
| Indicative average annual changes in real network charges (% increase) | |
| 2011-15 | |
| Energex | |
| AER decision | 7.90 |
| Post Tribunal decision | 8.64 |
| Ergon Energy | |
| AER decision | 5.10 |
| Post Tribunal decision | 6.09 |
| ETSA Utilities | |
| AER decision | 5.75 |
| Post Tribunal decision | 8.25 |