The Australian Energy Regulator (AER) is seeking feedback on its draft decision that would reduce the amount TasNetworks can recover from electricity customers by 30 per cent from 1 July 2017.
The TasNetworks draft decision released today would result in average revenue of $223 million being recovered from consumers over each of the next two years, which is $93 million (in real 2016–17 dollar terms) less than revenue collected annually between 2012 and 2017.
Distribution charges represent 38 per cent of the average Tasmanian electricity bill. Therefore our decision would mean an estimated average saving of $163 per household in each of the next two years, relative to the existing level, if wholesale, transmission and retail costs remain constant. Similarly, our draft decision would mean an estimated average saving of $299 in each year for small business customers.
“TasNetworks has responded to the clear message from its customers that the cost of services is their greatest concern by proposing to reduce the revenue required to operate the electricity distribution network,” AER Board member James Cox said.
TasNetworks proposed the majority of savings in the draft decision. Additional reductions identified by the AER are primarily the result of lower interest rates and other financial adjustments.
“The AER has accepted TasNetworks’ rate of return proposal and updated it for prevailing market conditions. Other adjustments were made to ensure consumers are paying no more than necessary for safe and reliable electricity distribution. We have accepted TasNetworks’ proposed capital and operating expenditure forecasts,” Mr Cox said.
“TasNetworks has proposed operating expenditure forecasts that are 14.5 per cent lower than existing levels. This is effectively due to savings to be realised from the merger of TasNetworks’ transmission and distribution businesses. We have assessed these forecasts against our benchmarks and determined them to be efficient,” Mr Cox said.
The AER’s decision is 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.
The network tariff structures proposed will facilitate the introduction of greater choice for consumers by enabling the introduction of time of use demand tariffs by retailers if they decide to do so in the future.
The AER has consulted with stakeholders and consumers in making this draft decision and is seeking submissions until 1 December 2016. TasNetworks’ final decision will be made no later than 30 April 2017.