Consumer spending on electricity network services is at its lowest in 10 years and consumers continue to experience fewer network outages, according to a new report by the Australian Energy Regulator.
The 2021 Electricity Network Performance Report, published today, highlights key outcomes and trends in the national energy market’s monopoly transmission and distribution network services, offering greater transparency and insight into their performance.
AER Chair Clare Savage welcomed the report’s findings which show that market regulation is improving outcomes for consumers while still offering attractive conditions and incentives for investors.
“Our report indicates that network services are costing consumers less, driven in large part by lower capital costs, so that’s good news when they open their electricity bills,” Ms Savage said.
“But it is also pleasing to see that networks are still able to generate sufficient returns on assets, allowing them to attract new investment.”
“In 2020, consumers spent around $12 billion on network services. This is down by $3.8 billion since a peak in 2015, and is at the lowest level we’ve seen in 10 years,” Ms Savage said.
“At the same time, profitability measures indicated that networks continued to generate profits above our forecasts.
“Recently we have seen investors acquire a stake in Transgrid at a premium to the value of its regulated assets, and we are seeing other investors seeking to acquire network assets.
“This report shows we are striking a healthy balance in our regulation activities between protecting the consumer and encouraging new capital spending,” she said.
The total regulated asset base of transmission and distribution services in the national energy market is now worth $100 billion, made up of 796,000kms of poles and wires, servicing more than 10 million customers.
The report also analyses performance in network outputs such as frequency of outages, loss of supply, and network utilisation.
Results showed that consumers are experiencing, on average, one network outage a year with more and longer outages occurring in summer than winter.
Innovating for better consumer outcomes
This report is part of the AER’s work to make network regulation and its outcomes more transparent for consumers.
Alongside this work, the AER is now turning its attention to its release of a proposed new approach to revenue determinations for network businesses.
Revenue determinations, often referred to as ‘resets’, is a regulatory process in which the AER confirms how much a network distribution or transmission business can recover from its customers over a five-year period.
Ms Savage said the draft Better Resets Handbook – Towards consumer centric network proposals, published for consultation yesterday (Tuesday 21 September), is placing greater emphasis on consumer engagement and gives more clarity to network businesses on what the AER considers would be in a revenue proposal that could be capable of acceptance.
“We want to be innovative in our regulatory approach and create a more efficient process that is better for consumers now and in the long-term,” Ms Savage said.
“The Better Resets Handbook outlines our expectations in the key areas of tariffs, forecast expenditure, and depreciation.
“It also makes clear what genuine consumer engagement looks like in a reset process and how it can lead to well-justified revenue proposals and a more efficient process that will enable network businesses to get on with the job of delivering better outcomes for consumers,” she said.
“We will see the results of this in future electricity network performance reports.”
The draft Handbook is currently open for public comment.