The Australian Competition Tribunal on 6 January 2012 made a decision in the review of the distribution determinations for the Victorian electricity distribution businesses (CitiPower, Powercor, Jemena Electricity Networks, SP AusNet and United Energy).
The Tribunal has allowed them to recover additional revenues above those allowed by the AER. This will result in some further increases to electricity distribution tariffs in 2013.
All five businesses applied for a review on a number of aspects of the AER’s October 2010 distribution determinations. Some aspects that were reviewed were specific to each business and there are also some common to all (e.g. the calculation of the cost of debt and the value of dividend imputation credits).
The Tribunal will make its final determination as to all the necessary changes to the AER’s distribution determinations by 5 April 2012. The final outcome in terms of additional revenue for each business will not be known until the Tribunal’s final determination and the AER’s further consideration of matters that have been remitted back to the AER.
The Tribunal’s decisions which have been made to date will increase allowed revenue across all of the businesses by around $300 million, or over three per cent of total allowed revenue of $8.8 billion over the 2011-15 regulatory period. As noted above, there may be further increases for each business when the Tribunal makes its final decision. The AER will report on the impact on individual businesses when the final decision is made.
The Tribunal affirmed some aspects of the AER’s distribution determination.
However, the Tribunal also disagreed with the AER’s methodology or approach in relation to a number of matters in applying the National Electricity Rules (i.e. the calculation of the cost of debt, indexation of the asset base for inflation, the disallowance of some operating costs for Jemena Electricity Networks and operating costs for CitiPower and Powercor related to safety regulations).
On other matters where the Tribunal rejected the AER approach, the AER had sought to give effect to rewards and penalties incurred under systems set in place by the previous Victorian’s Regulator. While the Tribunal acknowledged that the AER’s approach could be “supported by reasoned argument”, the Tribunal found that the AER did not have power to do so under the National Electricity Rules.
The Tribunal’s decision also reflects some grounds where the AER and the businesses resolved some matters, including a previous decision by the Tribunal in relation to the value of dividend imputation tax credits used to calculate tax liabilities that was concluded after the AER released its Victorian determination.
"Whilst the Tribunal’s decision has supported the proposals of the network businesses for a number of matters under review, its decision on other matters has affirmed the AER decision," AER chairman Andrew Reeves said.
“The AER is carefully reviewing the Tribunal’s decision. The AER will assess the implications of the Tribunal’s decision for future regulatory decisions, and will also examine their significance to the AER proposals for changes to the National Electricity Rules."