The AER is responsible for administering the f-factor incentive scheme that has been introduced by the Victorian Government. This scheme provides incentives for the Victorian Distribution Network Service Providers (DNSPs) to reduce the risk of fire starts due to electricity infrastructure, and to reduce the risk of loss or damage caused by fire starts. For the first four years of the scheme (2012-15), the legislation prescribes that DNSPs will be either rewarded or penalised at the incentive rate of $25,000 per fire for performing better or worse than their respective targets and also requires the target to be set at the average number of fire starts during the period 2006-10 for each business.
Having considered submissions received through public consultation, our final determination regarding 2013 fire start outcomes confirms the position adopted within our draft determination published on 14 June 2014.
Under this determination, all Victorian DNSPs, except SP AusNet, will receive a penalty because there were more fire starts than the respective benchmark targets. The penalties range from $65 000 for CitiPower to $2 405 000 for Powercor. SP AusNet receives a $2 020 000 reward as its fire start number was below its benchmark target.
The effect of this decision will result in a small increase in SP AusNet’s network tariff for 2015 (about $3.11 pa per customer) and a reduction in all other network tariffs of between $0.11 to $3.27 for the 2015 calendar year, depending on a customer’s distribution area. The table below provides further details of financial reward/penalty amounts and the average impact on customers' network charges for 2015.
The f-factor is an incentive scheme. DNSPs can only retain their rewards for sustained and continuous improvements. Once improvements are made, the benchmark fire start targets will be tightened in future years.
| DNSP | Pass through amount ($) | Approximate charge ($) per customer p.a. |
|---|---|---|
| CitiPower | (65 000) | (0.21) |
| Powercor | (2 405 000) | (3.27) |
| Jemena | (865 000) | (2.77) |
| SP AusNet | 2 020 000 | 3.11 |
| United Energy | (70 000) | (0.11) |
Numbers in brackets represent more fire starts than the benchmark targets, resulting in negative adjustment to the allowable revenue and reduction in network charges.